Question

16. Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the

              a. fixed factory overhead volume variance

b. direct labor time variance

c. direct labor rate variance

d. variable factory overhead controllable variance

17.A company records its inventory purchases at standard cost but also records purchase price variances. The company purchased 5,000 widgets at $8.00 each, and the standard cost for the widgets is $7.60. Which of the following would be included in the journal entry?

              a. debit Accounts Payable, $38,000

b. credit Direct Materials Price Variance, $2,000

c. debit Accounts Payable, $2,000

d. debit Direct Materials Price Variance, $2,000

18. Which of the following is not a disadvantage of decentralized operation?

1. competition among managers
2. duplication of operations
3. price cutting by departments that are competing in the same product market
4. top management freed from everyday tasks to do strategic planning

19.  Which of the following is a measure of a cost center manager’s performance?

a. budget performance report

           b. rate of return and residual income measures

           c. divisional income statements

d. balance sheet

The following financial information was summarized from the accounting records of Train Corporation for thecurrent year ended December 31:

	Rails Division	Locomotive Division	Corporate Total
Cost of goods sold	$  47,200	$30,720
Direct operating expenses	27,200	20,040
Sales	108,000	78,000
Interest expense			$  2,040
General overhead			18,160

20.    The income from operations for the Rails Division is

a. $60,800

b. $33,600

c. $8,700

d. $21,150

ABC Corporation has three service departments with the following costs and activity base:

Service Department	Cost	Activity Base forAllocation
Graphics Production	$200,000	number of copies
Accounting	500,000	number of invoices processed
Personnel Department	400,000	number of employees

ABC has three operating divisions, Micro, Macro and Super.  Their revenue, cost and activity information are asfollows:

	Micro	Macro	Super
Direct revenues	$700,000	$850,000	$650,000
Direct operating expenses	50,000	70,000	100,000
Number of copies made	20,000	30,000	50,000
Number of invoices processed	700	800	500
Number of employees	130	145	125

21. What is the service department charge rate for the Accounting Department?

a. $714

b. $250

c. $625

d. $0.004

22. How much service department cost will be allocated to the Micro Division?

a. $200,000

b. $145,000

c. $60,000

d. $345,000

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%.

23. What is Clydesdale Company's profit margin?

a. 20%

b. 80%

c. 44.4%

d. 18%

24. What is Clydesdale Company's investment turnover?

a. 1.80

b. 2.25

c. 1.25

d. 1.4

25. What is Clydesdale Company's rate of return on investment?

a. 56%

b. 20%

c. 45%

d. 25%

Answer 1

16. a. fixed factory overhead volume variance

17. d. debit Direct Materials Price Variance, $2,000

Material Purchase Dr. 38,000

Price Variance Dr. $ 2,000

Accounts Payable Cr. $40,000

18. b. duplication of operations

19. budget performance report

Budgeted cost will be compared against actual cost

20. b. $ 33,600

Sales	$108,000
Cost of goods sold	($47,200)
Direct operating expenses	($27,200)
Income from Operation	$33,600

21. b. $ 250

Accounting	$        500,000
Total invoices	2,000
Charge Rate	$                250

22.d. $ 345,000

	Cost	Cost Driver	Activity Pool	Charge Rate
Graphics Production	$        200,000	copies	100,000.00	$                  2
Accounting	$        500,000	Invoices	2,000.00	$              250
Personnel Department	$        400,000	employees	400.00	$          1,000
Total	$    1,100,000
	Micro
Graphics Production	$          40,000
Accounting	$        175,000
Personnel Department	$        130,000
Allocated	$        345,000

23. a. 20%

Sales	4,500,000
Operating Exp	3,600,000
Profit	900,000
Profit Margin	20%

24. b. 2.25

Sales	4,500,000
Investment	2,000,000
Investment Turnover	2.25

25. c. 45%

Profit	900,000
Investment	2,000,000
Rate of Return	45%