In: Accounting
1. Tommy's Toys produces two types of toys: trains and dolls.
Tommy's uses stainless steel to manufacture the trains and plastic
to manufacture the dolls. Information regarding the usage of steel
and plastic for the past year follows:
Product Names |
Steel |
Plastic |
Direct materials information |
||
Standard pounds per unit |
2 lb. |
1.0 lb. |
Standard Price (SP) per pound |
$3.00 |
? |
Actual Quantity (AQ) used per unit |
3.0 lb. |
3.00 lb. |
Actual Price (AP) paid for material |
$1.75 |
$2.25 |
Actual Quantity Purchased (AQP) and used |
2,800 lb. |
800 lb. |
Price variance |
? |
$1,200 F |
Quantity variance |
$900 U |
? |
Flexible budget variance |
? |
$412 F |
Number of units produced |
300 |
525 |
What is the direct materials flexible budget variance for steel used to manufacture the trains?
A. $4,400 favorable | |
B. $2,600 unfavorable | |
C. $2,600 favorable | |
D. $4,400 unfavorable |
2. Sparky the Electrician specializes in rewiring historic houses. Sparky recently purchased a new wire-pulling device that will decrease the time needed to complete each job and increase total revenues. The device will cost $5,577 and will increase net cash flows by $1,690 per year. The new device has a useful life of 7 years and a residual value of $0. What is the payback period for the new wire-pulling device?
A. 3.12 years | |
B. 2.80 years | |
C. 3.48 years | |
D. 3.30 years |
3. Sharon Corporation collects 10% in the second month following sale, 40% in the month following sale, and 40% of a month's sales in the month of sale. The company has found that 10% of their sales are uncollectible. Budgeted sales for the upcoming four months are:
August budgeted sales |
$280,000 |
September budgeted sales |
$350,000 |
October budgeted sales |
$380,000 |
November budgeted sales |
$240,000 |
The amount of cash that will be collected in November is budgeted to be
A. $316,000 | |
B. $96,000 | |
C. $283,000 | |
D. $216,000 |
4. Suppose Whole Foods is considering investing in warehouse-management software that costs $900,000; has $40,000 residual value; and should lead to cash cost savings of $180,000 per year for its 5-year life. In calculating the ARR, which of the following figures should be used as the equation's denominator?
A.$220,000 | |||||||||
B. $180,000 | |||||||||
C. $40,000 | |||||||||
D. $900,000 5. All of the following budgets are prepared by merchandising companies except
|
6. The Stallard Corporation manufactures Product X that consumes a large amount of overhead. For the month of October, Stallard produced 14,200 units of Product X and incurred actual overhead costs of $269,000. The standard costs developed for Product X by Stallard follow:
Standard direct labor hours per unit |
4 |
Standard direct labor rate per hour |
$11.00 |
Standard overhead hours per unit |
8 |
Standard overhead rate per hour |
$4.80 |
What was the total variable overhead variance for Product X in October?
$276,280 favorable | |
$200,840 favorable | |
$276,280 unfavorable | |
$200,840 unfavorable |
ANS:C =2600Favourable
1)Direct material flexible budget veriance=
Direct material quantity veriance +Direct material price veriance
=900U+3500F
=2600Favourable
Direct material price veriance=actual quantity of material used*(standerd price-actual price)
=2800lb"s*(3-1.75)
=3500F
2)D 3.3Years
pay back period=Initial Investment/Cash Inflow per Period
=5577/1690
=3.3yeras
this formula is used when cash inflows are even
3)ans: C 2,83,000$ Cash collected in november
4)ANS D 9,00,000$ Accounting Rate of Return is calculated using the following formula: Average Accounting Profit /Initial Investment 5) C DIRECT MATERIAL
total variable overhead variance for Product X in October= Actual units produced*(standerd oh rate per unit - Actual oh rate per unit) |
||||||||||
14200units*(8hr*4.8$ - 18.94$)=$276,280 favorable note: Actual oh rate per unit=269000$/14200units |