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# Cost Accounting Calculations

Question 1 XYZ Tire Company has gotten an order for its manufacturing business segment of 30,000 tires. Below is the standard cost and quantity of materials needed to make one tire.

Rubber in one tire: 8 pounds of rubber

Cost per pound of rubber: \$1.50

Steel used in tire: 2 pounds of steel

Cost per pound of steel: \$2.50

After some time, the price or rubber has gone up to \$1.75 a pound, and the price of steel has dropped to \$2.00 a pound. Find out the direct materials price variance.

Question 2: Many times in business, budgets play a huge role in planning for how the business will operate in the future. Sara's Cake Company has been looking at implementing a flexible budget. As a consultant at Sara's Cake Company, you need to explain to management the importance of flexible budgets. You need to use the information from the budget last month and compare this to the actual results (all listed in the table below) to find the direct material price variance, direct material quantity variance, direct labor rate variance, direct labor efficiency variance, variable overhead spending variance, and variable overhead efficiency variance. Make sure to analyze each variance to see if it is favorable or unfavorable.

Budgeted No. of Cakes Sold:
2500

Actual No. of Cakes Sold:
2700

Cake Production per Labor Hour:
2

Sales Price per Cake:
\$15

Budgeted Cost Per Cake:

Flour
\$1.25

Yeast
\$0.05

Sugar
\$0.25

Eggs
\$0.75

Butter
\$0.15

Frosting
\$0.95

Production Payroll
\$4.50

Actual Cost Per Cake:

Flour
\$1.05

Yeast
\$0.05

Sugar
\$0.25

Eggs
\$0.55

Butter
\$0.15

Frosting
\$0.75

Production Payroll
\$4.50

Budgeted Cost of Labor per Hour:
\$9.00

Budgeted Hours of Production:
1250 hours

Actual Cost of Labor per Hour
\$9.25

Actual Hours of Production:
1400 hours

Budgeted Variable Overhead Rate Per Labor Dollar:
\$0.25

Actual Variable Overhead
\$2,500

Question 3 In an activity-based costing system, activities are classified into five categories. List and define the five categories and give one example of each type of activity.

#### Solution Summary

This solution shows step-by-step calculations and brief instructions to answer cost accounting questions.

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