Question

40. TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product.

	Standard					Standard			Standard
	Quantity					Price			Cost
Direct Materials		8	pounds			$	1.80	per pound		$	14.40
Direct Labor		.20	hour			$	9.00	per hour			1.80
										$	16.20

During November, TaskMaster purchased 200,000 pounds of direct materials at a total cost of $400,000. The total factory wages for November were $44,000, 90% of which were for direct labor. TaskMaster manufactured 23,000 units of product during November using 182,000 pounds of direct materials and 5,000 direct labor hours.

What is the direct materials efficiency (quantity) variance for November?

$28,800.

$3,600.

$36,400.

$40,000.

41. In 2016, Evans Corporation had an operating profit of $764,000 and a residual income of $307,000. If Evans' cost of capital is 10%, what is the amount of the invested capital?

$3,070,000.

$2,613,000.

$7,640,000.

$4,570,000.

42.

Denominator hours for May		22,500
Actual hours worked during May		21,500
Standard hours allowed for May		19,500
Flexible budget fixed overhead cost	$	67,500
Actual fixed overhead costs for May	$	72,000

Danske Company had total underapplied overhead of $22,500. Additional information is as follows:

Variable Overhead:
Applied based on standard direct labor hours allowed	$	57,000
Budgeted based on standard direct labor hours		45,500
Fixed Overhead:
Applied based on standard direct labor hours allowed	$	45,000
Budgeted based on standard direct labor hours		34,500

What is the actual total overhead for the period?

$57,500.

$102,500.

$124,500.

$67,500.

Answer 1

Solution:
40.	Answer is 2nd option $3,600
Working Notes:
Direct material quantity Variance = ( AQ of input for actual output x SP ) - ( SQ for actual input x SP )
	=( 182,000 pounds x $ 1.80 ) - ( 23,000 units x 8 pound per unit x $ 1.80 per pound )
	=( $327,600) - ( 331,200 )
	= -$3,600
	=$3,600 F
	F for Favorable
	Direct materials efficiency (quantity) variance = $3,600 F
Notes:	-ve sign shows actual quantity used is lower than standard quantity required, which is favorable to the company .
41.	Answer is 4th option $4,570,000
Working Notes:
	Residual income = Operating profit - (cost of capital x Invested capital)
	$307,000 = $764,000 - (10% x Invested capital)
	Invested capital = ($764,000 - $307,000)/10%
	Invested capital = $457,000/10%
	Invested capital = $4,570,000
42.	Answer is 3rd option $124,500
Working Notes:
	Actual total overhead = Applied Variable Overhead + Applied Fixed Overhead + underapplied overhead
	Actual total overhead = $57,000+$45,000 + $22,500
	Actual total overhead = $124,500
Please feel free to ask if anything about above solution in comment section of the question.