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# Accounting Problems

1.) A total of 6850 kilograms of raw material was purchased at a total cost of \$21,920. The material price variance was \$1370 favorable. The standard price per kilogram for the raw material must be:

A) \$0.20
B) \$3.00
C) \$3.20
D) \$3.40

2.) Merle Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month the company based its budget on 4,000 machine-hours. Budgeted and actual overhead costs for the month appear below:

Original Budget
Based on 4000 Machine-Hours Actual Costs
Supplies \$14,000 \$13,150
Indirect Labor 27,200 24,390
Supervision 19,900 19,540
Utilities 4,700 4,360
Factory Depreciation 8,800

The company actually worked 3,690 machine-hours during the month. The standard hours allowed for the actual output were 3,620 machine-hours for the month. What was the overall variable overhead efficiency variance for the month?

A.) \$721 unfavorable
B.) \$467 favorable
C.) \$254 unfavorable
D.) \$880 favorable

3.) Given the following data:

Return on Investment..................25%
Sales......................................\$100,000
Average Operating Assets.............\$40,000
Turnover.................................2.5
Minimum required rate of return......18%
Margin on Sales..........................10%

The residual income would be:
A.)\$2,800
B.)\$0
C.)\$6,000
D.)\$8,000

4.) Two products, LB and LH emerge from a joint process. Product LB has been allocated \$30,800 of the total joint costs of \$44,000. A total of 2,000 units of product LB are produced from the joint process. Product LB can be sold at the split-off point for \$13 per unit, or it can be processed further for an additional total cost of \$14,000 and then sold for \$15 per unit. If product LB is processed further and sold, what would be the effect on the overall profit of the company compared with sale in its unprocessed form directly after the split off point?

A.)\$16,000 more profit
B.)\$20,800 more profit
C.)\$40,800 less profit
D.)\$10,000 less profit

5.) Delta Company's long run average and actual machine hours for last year appear below:

Department A Department B
Machine Hours-Long Run Average
30,000 20,000
Machine Hours-Actual 25,000 15,000

Fixed maintenance costs of the company's maintenance service department are budgeted at \$60,000 per year. These fixed costs are incurred in order to support long-run average demand. How much of this cost should be allocated to Department B at the end of the year for performance based purposes?

A.) \$30,000
B.)\$22,500
C.)\$24,000
D.)\$18,000

See attached file for full problem description.

#### Solution Preview

1.) A total of 6850 kilograms of raw material was purchased at a total cost of \$21,920. The material price variance was \$1370 favorable. The standard price per kilogram for the raw material must be:

A) \$0.20
B) \$3.00
C) \$3.20
D) \$3.40

Materials price variance = actual quantity purchased x difference between actual and
standard costs per unit of input purchased
-1,370 = 6,850 kilo x (21,920/6,850 - X)
-1,370 = 6,850 kilo x (3.20 - X)
-1,370 = 21,920 - 6,850X
-23,290 = -6,850X
X = 3.40

2.) Merle Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month the company based its budget on 4,000 machine-hours. Budgeted and actual overhead costs for the month appear below:

Original Budget
Based on 4000 Machine-Hours ...

#### Solution Summary

This solution is comprised of a detailed explanation and calculation to answer the accounting problems.

\$2.19