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    Accounting:Variance analysis,break-even estimation etc

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    1. Budgeted overhead for Harrington Company at normal capacity of 30,000 direct labor hours is $4.50 per hour variable and $3 per hour fixed. In May, $232,500 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed. The overhead controllable variance is

    $3,750 F

    $1,500 F

    $7,500 F

    $7,500 U

    2. Vektek, Inc. thinks machine hours is the best activity base for its manufacturing overhead. The estimate of annual overhead costs for its jobs was $615,000. The company used 1,000 hours of processing on Job No. B12 during the period and incurred overhead costs totaling $630,000. The budgeted machine hours for the year totaled 20,000. How much overhead should be applied to Job No. B12?





    3. A company desires to sell a sufficient quantity of products to earn a profit of $180,000. If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $360,000, how many units must be sold to earn net income of $180,000?

    101,250 units

    67,500 units

    54,000 units

    40,500 units

    4. Norman Company manufactures customized desks. The following pertains to Job No. 953:
    Direct materials used $8,400
    Direct labor hours worked 300
    Direct labor rate per hour $16.00
    Machine hours used 200
    Applied factory overhead rate per machine hour $30.00
    What is the total manufacturing cost for Job No. 953?





    5. The master budget of Benedict Company shows that the planned activity level for next year is expected to be 50,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:
    Indirect labor $240,000
    Machine supplies 60,000
    Indirect materials 70,000
    Depreciation on factory building 50,000
    Total manufacturing overhead $420,000
    A flexible budget for a level of activity of 60,000 machine hours would show total manufacturing overhead costs of





    6. Sonoma Winery has fixed costs of $10,000 per year. Its warehouse sells wine with variable costs of 80% of its unit selling price. How much in sales does Sonoma need to break even per year?





    7. Sportly, Inc. completed Job No. B14 during 2008. The job cost sheet listed the following:
    Direct materials $33,000
    Direct labor $18,000
    Manufacturing overhead applied $12,000
    Units produced 3,000 units
    Units sold 1,800 units
    How much is the cost of the finished goods on hand from this job?





    8. Barnes and Miller Manufacturing is trying to determine the equivalent units for conversion costs with 3,000 units of endingwork in process at 80% completion and 14,000 physical units. There are no beginning units in the department. Conversion costs occur evenly throughout the entire production period. What are the equivalent units for conversion costs for the current period?





    9. Honrad Company's Assembly Department has materials cost at $4 per unit and conversion cost at $8 per unit. There are 9,000 units in ending work in process, all of which are 70% complete as to conversion costs. How much are total costs to be assigned to inventory?





    10. McNally Manufacturing Company reported the following year-end information:
    Beginning work in process inventory $ 46,000
    Beginning raw materials inventory 24,000
    Ending work in process inventory 50,000
    Ending raw materials inventory 20,000
    Raw materials purchased 680,000
    Direct labor 240,000
    Manufacturing overhead 100,000
    How much is McNally Manufacturing's cost of goods manufactured for the year?





    11. Wynne Company's high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November. Machine maintenance costs were $78,000 in May and $30,000 in November. Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,000 units.





    12. The per-unit standards for direct labor are 2 direct labor hours at $15 per hour. If in producing 1,200 units, the actual direct labor cost was $32,000 for 2,000 direct labor hours worked, the total direct labor variance is

    $1,200 U

    $4,000 F

    $2,500 U

    $4,000 U

    13. Use the following table.
    Present Value of an Annuity of 1
    Period 8% 9% 10%
    1 .926 .917 .909
    2 1.783 1.759 1.736
    3 2.577 2.531 2.487
    A company has a minimum required rate of return of 9% and is considering investing in a project that costs $175,000 and is expected to generate cash inflows of $70,000 at the end of each year for three years. The net present value of this project is





    14. Timex Corporation recorded operating data for its Cheap division for the year. Timex requires its return to be 10%.
    Sales $ 700,000
    Controllable margin 80,000
    Total average assets 2,000,000
    Fixed costs 50,000
    What is the ROI for the year?





    15. If a company had a contribution margin of $500,000 and a contribution margin ratio of 40%, total variable costs must have been





    16. In the month of April, a department had 500 units in the beginning work in process inventory that were 60% complete. These units had $20,000 of materials costs and $15,000 of conversion costs. Materials are added at the beginning of the process and conversion costs are added uniformly throughout the process. During April, 10,000 units were completed and transferred to the finished goods inventory and there were 2,000 units that were 25% complete in the ending work in process inventory on April 30. During April, manufacturing costs charged to the department were: Materials $460,000; Conversion costs $510,000.

    The cost assigned to the units transferred to finished goods during April was





    17. Wayman Company uses flexible budgets. At normal capacity of 8,000 units, budgeted manufacturing overhead is: $48,000 variable and $135,000 fixed. If Wayman had actual overhead costs of $187,500 for 9,000 units produced, what is the difference between actual and budgeted costs?

    $1,500 unfavorable

    $1,500 favorable

    $4,500 unfavorable

    $6,000 favorable

    18. There are no units in process at the beginning of the period, 1,000 units in process at the end of the period that are 40% complete, and 10,000 units transferred out during the period. Based on this information, there were 9,600 equivalent units of production during the period.



    19. Materials costs of $200,000 and conversion costs of $214,200 were charged to a processing department in the month of September. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. There were no units in beginning work in process, 100,000 units were started into production in September, and there were 8,000 units in ending work in process that were 40% complete at the end of September.
    What was the total amount of manufacturing costs assigned to those units that were completed and transferred out of the process in September?





    20. Use the following information.
    Raw materials inventory, January 1 $ 20,000
    Raw materials inventory, December 31 40,000
    Work in process, January 1 18,000
    Work in process, December 31 12,000
    Finished goods, January 1 40,000
    Finished goods, December 31 32,000
    Raw materials purchases 1,000,000
    Direct labor 460,000
    Factory utilities 150,000
    Indirect labor 50,000
    Factory depreciation 400,000
    Selling and administrative expenses 420,000
    Direct materials used is





    21. Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales must be 90%.



    22. Doris Co. is considering purchasing a new machine which will cost $200,000, but which will decrease costs each year by $40,000. The useful life of the machine is 10 years. The machine would be depreciated straight-line with no residual value over its useful life at the rate of $20,000/year. The cash payback period is

    4 years

    4.5 years

    5 years

    10 years

    23. Eminen Music produces 60,000 CDs on which to record music. The CDs have the following costs:
    Direct Materials $11,000
    Direct Labor 15,000
    Variable Overhead 3,000
    Fixed Overhead 7,000
    Eminem could avoid $4,000 in fixed overhead costs if it acquires the CDs externally. If cost minimization is the major consideration and the company would prefer to buy the 60,000 units externally, what is the maximum external price that Eminem would expect to pay for the units?





    24. Raylight Products planned to use 1 yard of plastic per unit budgeted at $81 a yard. However, the plastic actually cost $80 per yard. The company actually made 2,600 units, although it had planned to make only 2,200 units. Total yards used for production were 2,640. How much is the total materials variance?

    $32,400 U

    $3,240 U

    $2,640 F

    $600 U

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    Solution Summary

    The problem set deal with issues in accounting: break-even estimation, variance analysis, etc.