Problem 8-18B Comprehensive Variance Analysis [LO8-4, LO8-5, LO8-6] Michiana Company's Benton Harbor Plant produces precast ingots for industrial use. Angelo Lorenzo, who was recently appointed general manager of the Benton Harbor Plant, has just been handed the plant’s contribution format income statement for October. The statement is shown below: Budgeted Actual Sales (5,000 ingots) $ 235,000 $ 235,000 Variable expenses: Variable cost of goods sold* 71,350 86,370 Variable selling expenses 13,000 13,000 Total variable expenses 84,350 99,370 Contribution margin 150,650 135,630 Fixed expenses: Manufacturing overhead 62,000 62,000 Selling and administrative 77,000 77,000 Total fixed expenses 139,000 139,000 Net operating income (loss) $ 11,650 $ (3,370) *Contains direct materials, direct labor, and variable manufacturing overhead. Mr. Lorenzo was shocked to see the loss for the month, particularly because sales were exactly as budgeted. He stated, "I sure hope the plant has a standard cost system in operation. If it doesn't, I won't have the slightest idea of where to start looking for the problem." The plant does use a standard cost system, with the following standard variable cost per ingot: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 3.8 pounds $ 2.20 per pound $ 8.36 Direct labor 0.7 hours $ 6.80 per hour 4.76 Variable manufacturing overhead 0.5 hours* $ 2.30 per hour 1.15 Total standard variable cost $ 14.27 *Based on machine-hours. During October the plant produced 5,000 ingots and incurred the following costs: a. Purchased 24,000 pounds of materials at a cost of $2.65 per pound. There were no raw materials in inventory at the beginning of the month. b. Used 18,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 4,100 direct labor-hours at a cost of $6.50 per hour. d. Incurred a total variable manufacturing overhead cost of $7,560 for the month. A total of 2,800 machine-hours was recorded. It is the company’s policy to close all variances to cost of goods sold on a monthly basis. Required: 1. Assume that the company recognizes price variances when materials are purchased. Compute the following variances for October: a. Direct materials price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) b. Direct labor rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) c. Variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) 2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for October. (Input all amounts as positive values. Indicate the effect of variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) 3. Pick out the two most significant variances that you computed in (1) above. (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) Materials price variance Materials quantity variance Variable overhead efficiency variance Labor rate variance Variable overhead rate variance Labor efficiency variance

Reliable company specializes in homemade biscuits and receives all income from sales. The sales estimates (in million$) for the four quarters for the company are as follows: 01 = 600, Q2 = 500, Q3 = 550, Q4 = 640. The average collection period for accounts receivables is 45 days. Beginning receivables (Q1 beginning) is $300 million. The purchases are 50, of next quarter sales. Beginning payables (Q1 beginning) is $100 million. The accounts payable period is 45 days. The beginning cash balance (Q1 beginning) is $50 million so how much will be the cash balance at the end of Quarter 2

Reliable company specializes in homemade biscuits and receives all income from sales. The sales estimates (in million$) for the four quarters for the company are as follows: 01 = 600, Q2 = 500, Q3 = 550, Q4 = 640. The average collection period for accounts receivables is 45 days. Beginning receivables (Q1 beginning) is $300 million. The purchases are 50, of next quarter sales. Beginning payables (Q1 beginning) is $100 million. The accounts payable period is 45 days. The beginning cash balance (Q1 beginning) is $50 million so how much will be the cash balance at the end of Quarter 2

1. Published data show that during the previous quarter (3 months) employment has risen that demand-pull inflation is rising. These indicators suggest that the growth of GDP is likely to increase in this or the next quarter.

Indicate     T   F    #

Explanation: [Limit 40 words: 2 marks]

2. A good leading indicator of changes in the rate of inflation during economic cycles is the change in the growth rate of the money supply.

Indicate     T   F    #

Explanation: [Limit 40 words: 2 marks]

3. In Australia the index of consumer sentiment is usually a leading indicator.

Indicate     T   F    #

Explanation: [Limit 40 words: 2 marks]

Consider the quarterly demand of 3500, 2600, 5500, 4400, for quarters 1,2,3,4, respectively. Let the production standard be 250 items/quarter. Let the carrying cost be $5/item/quarter.

If the beginning annual inventory is 500 but the ending annual inventory objective is 620,

then what is the total annual carrying cost for the aggregate planning strategies listed?

A young engineer decides to save $240 per year toward retirement in 40 years.

1. If he invests this sum at the end of every year at 9%, then how much will be accumulated by retirement time?
2. If by astute investing the interest rate could be raised to 12%, then what sum could be saved?
3. If he deposits one fourth of this annual amount each quarter ($60 per quarter) in an interest bearing account earning a nominal annual interest rate of 12%, compounded quarterly, how much could be saved by retirement time?
4. In part (c), then what annual effective interest rate is being earned?

Do in excel please.

Sales Budget (Learning Objective 2)

Jefferson Sports Medicine, Inc., offers two types of physical exams for students: the basic physical and the extended physical. The charge for the basic physical is $60, while the charge for the extended physical is $135. Jefferson expects to perform 220 basic physicals and 190 extended physicals in July, 235 basic and 200 extended in August, and 105 basic and 110 extended in September. Prepare the sales budget for the service revenue expected from the physical exams performed for the second quarter (July through September), with a column for each month and for the quarter in total.

At an emergency room at one hospital, the nurses are convinced that the number of patients that they see during the midnight shift is affected by the phases of the moon. The doctors think this is an old wives’ tale. The nurses decide to test their theory at the 0.10 level of significance by recording the number of patients they see during the midnight shift for each moon phase over the course of one lunar cycle. The results are summarized in the table below. Perform a test for goodness of fit.

ER Patients During the Midnight Shifts :Number of Patients: New Moon 85 ,1st Quarter 66 ,Full Moon 97, 3rd Quarter 68

4. You want to test whether the quarter of birth affects grades at university. Assuming that births are randomly distributed throughout the year (this might not be correct in real life) you collect data on a sample of 100 students and get the following: Quarter birth Q1 Q2 Q3 Q4 Average grade 65 62 63 58 N 25 27 28 20 Compute the appropriate test using a 5% significance level Hint: Don’t forget to reweight the test of each category by the number of observations, as each cell represents the mean Xi for m observations.