Question

In: Accounting

1. Tommy's Toys produces two types of toys: trains and dolls. Tommy's uses stainless steel to...


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

A.cost of goods sold, inventory and purchases.
B. operating expense.
C. direct materials.

D. sales.

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

Solutions

Expert Solution

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

COLLECTIONS OUT OF amount $
sales of september 3,50,000*10% 35,000
sales of october    3,80,000*40% 1,52,000
sales of november    2,40,000*40% 96,000
Total 2,83,000

​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

  • Merchendiseing companies purchase finished goods from manifactures and sold in retail market with profit margin
  • they prepare only sales,opareting expense,cogs,purchases,inventory
  • no need of direct material budget


6)ans $276,280 favorable

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


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