Question

1)A company’s flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The variable costs expected if the company produces and sells 16,000 units is:

Multiple Choice

$48,000.

$64,000.

$40,000.

$24,000.

$18,000.

2)A company’s flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The contribution margin expected if the company produces and sells 16,000 units is:

Multiple Choice

$48,000.

$64,000.

$40,000.

$24,000.

3) =

Hassock Corp. produces woven wall hangings. It takes 2 hours of direct labor to produce a single wall hanging. Hassock’s standard labor cost is $12 per hour. During August, Hassock produced 10,000 units and used 21,040 hours of direct labor at a total cost of $250,376. What is Hassock’s labor efficiency variance for August?

Multiple Choice

$12,480 favorable.

$10,376 unfavorable.

$14,584 unfavorable.

$4,160 favorable.

$12,480 unfavorable.

4)=

Use the following data to find the direct labor rate variance if the company produced 3,500 units during the period.

Direct labor standard (4 hrs. @ $7/hr.)	$	28	per unit
Actual hours worked		12,250
Actual rate per hour	$	7.50

Multiple Choice

$6,125 unfavorable.

$7,000 unfavorable.

$7,000 favorable.

$12,250 favorable.

$6,125 favorable.

Answer 1

1)

For 12,000 units, variable cost is $18,000

Hence, variable cost per unit = 18,000/12,000

= $1.5

Hence, variable cost at 16,000 units = 16,000 x 1.5

= $24,000

Correct option is (d)

2)

At 12,000 units, sales is $48,000

Hence, selling price per unit = 48,000/12,000

= $4

For 12,000 units, variable cost is $18,000

Hence, variable cost per unit = 18,000/12,000

= $1.5

Contribution margin per unit = Selling price per unit - Variable cost per unit

= 4 - 1.5

= $2.5

Hence, contribution margin at 16,000 units = 16,000 x 2.5

= $40,000

Correct option is (c)

3)

Direct labor efficiency variance = Standard rate x (Standard time - Actual time)

Standard rate = $12 per hour

Standard time to produce 1 unit = 2 hours

Actual production = 10,000 units

Hence, standard time to produce 10,000 units = 10,000 x 2

= 20,000 hours

Actual hours = 21,040

= 12 x (20,000 - 21,040)

= - 12 x 1,040

= 12,480 (unfavorable)

Correct option is (e)

4)

Direct labor rate variance = Actual time x (Standard rate - Actual rate)

Standard rate = $7 per hour

Actual rate = $7.5 per hour

Actual time = 12,250 hours

= 12,250 x (7 - 7.50)

= -12,250 x 0.5

= $6,125 unfavorable

Correct option is (a)

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