Question

The Fortise Corporation manufactures two types of vacuum​ cleaners, the Victor for commercial building use and the House−Mate for residences. Budgeted and actual operating data for the year 2017 were as​ follows:
Static Budget
Victor
​House-Mate
Total
Number sold
​ 6,000
​24,000
​30,000
Contribution margin
$1,600,000
$3,120,000
$4,720,000
Actual Results
Victor
​House-Mate
Total
Number sold
​5,000
​35,000
​40,000
Contribution margin
$1,580,000
$4,180,000
$5,760,000
What is the total static−budget variance in terms of the contribution​ margin?
A.
$1,080,000 favorable
B.
$1,040,000 unfavorable
C.
$1,040,000 favorable
D.
$1,080,000 unfavorable

^Kori^:
Goldfarb's Book and Music Store has two service​ departments, Warehouse and Data Center. Warehouse Department costs of $400,000are allocated on the basis of budgeted warehouse−hours. Data Center Department costs of $200,000 are allocated based on the number of computer log−on hours. The costs of operating departments Music and Books are $150,000 and $180,000​, respectively. Data on budgeted warehouse−hours and number of computer log−on hours are as​ follows:
                                                                                                                        
Support Departments
Production Departments
Warehouse Department
Data Center Department
Music
Books
Budgeted costs
$400,000
$200,000
$150,000
$180,000
Budgeted warehouse−hours
NA
510
1,050
1,550
Number of computer hours
300
NA
890
1,050
Using the direct​ method, what amount of Warehouse Department costs will be allocated to Department​ Books? (Do not round any intermediary​ calculations.)
A.
$180,000
B.
$238,462
C.
$199,357
D.
$161,538

^Kori^:
Capity Tea Products has an exclusive contract with British Distributors. Calamine and Capity are two brands of teas that are imported and sold to retail outlets. The following information is provided for the month of​ March:
Actual
Budget
Calamine
Capity
Calamine
Capity
Sales in pounds
3,800 lbs.
3,990 lbs.
​4,400 lbs.
​3,300 lbs.
Price per pound
$3.00
$3.10
​$2.00
​$3.00
Variable cost per pound
1.30
2.10
1.00
1.50
Contribution margin
$1.70
$1.00
​$1.00
​$1.50
Budgeted and actual fixed corporate−sustaining costs are​ $1,850 and​ $2,300, respectively. What is the contribution margin for the flexible​ budget?
A.
$9,785
B.
$8,760
C.
$10,450
D.
$12,300

^Kori^:
Taunton Company uses the high−low method to estimate its cost function. The information for 2017 is provided​ below:
Machine−hours
Labor Costs
Highest observation of cost driver
3,000
$276,000
Lowest observation of cost driver
2,000
$200,000
What is the estimated cost function for the above​ data?
A.
y​ = 48,000 ​+ 76X
B.
y​ = 95.2X
C.
y​ = 276,000 ​+ 92X
D.
y​ = 200,000 ​+ 100X

^Kori^:
Torid Company processes 18,175 gallons of direct materials to produce two​ products, Product X and Product Y. Product X sells for $6 per gallon and Product​ Y, the main​ product, sells for $170 per gallon. The following information is for​ December:
Beginning
Ending
Production
Sales
Inventory
Inventory
Product​ X:
5,650
5,500
0
150
Product​ Y:
10,375
10,470
125
30

The manufacturing costs totalled $35,000.
The production method will report Product X in the balance sheet at​ ________.
A.
$25,500
B.
$5,100
C.
$900
D.
​$0

Answer 1

	Fortise Corporation:
	Total static−budget variance=Actual contribution margin-Contribution margin as per static budget
	If the answer is positive,variance is favorable.Otherwise unfavorable.
	Total static−budget variance=5760000-4720000=1040000=$ 1040000 Favorable
	Answer is
	C.	$1,040,000 favorable
	Goldfarb's Book and Music Store:
	Warehouse Department costs of $400,000 are allocated on the basis of budgeted warehouse at 1050:1550 or 21:31 to Music and Books.
	Warehouse Department costs allocated to Department​ Books=400000*31/(21+31)=400000*(31/52)=$ 238462
	Answer is
	B.	$238,462
	Capity Tea Products:
	Contribution margin for the flexible​ budget=Actual sales in pounds*Budgeted contribution margin per pound
						Calamine	Capity	Total
	Actual sales in pounds				a	3800	3990
	Budgeted contribution margin per pound				b	1	1.5
	Contribution margin for the flexible​ budget				a*b	3800	5985	9785
	Answer is
	A.	$9,785
	Taunton Company:
	Under High low method,Consider the Highest and Lowest activity and then apply the following equation
	Variable cost per unit=Change in Total cost/Change in machine hours=(276000-200000)/(3000-2000)=76000/1000=$ 76 per unit
	Fixed cost=Total cost-(Machine hours*Variable cost per unit)
	You can cosider either of the observations
	Let's consider highest observation
	Fixed cost=276000-(3000*76)=$ 48000
	Cost function,y=Fixed cost+(Variable cost per unit*X)=48000+(76*X)=48000+76X
	Answer is
	A.	y​ = 48,000 ​+ 76X
	Torid Company:
	Product X reporting amount=Ending inventory of product X*Selling price=150*6=$ 900
	Answer is
	C.	$900