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    Managerial Accounting

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    Question #1?Multiple Choice Topics

    1. Circle the impact of the following situations on the applicable variances (NA=no affect)
    A. Laborers worked overtime.
    Labor Rate Variance: Fav Unfav NE Labor Efficiency Variance: Fav. Unfav. NE
    B. Inferior Materials were used.
    Materials Price Var.: Fav. Unfav NE Materials Quantity Variance Fav. Unfav. NE
    C. Indirect Materials cost more than anticipated.
    VOH Spending Var.: Fav. Unfav. NE VOH Efficiency Variance Fav. Unfav. NE
    D. Higher level of laborers were used.
    Labor Rate Variance: Fav Unfav NE Labor Efficiency Variance: Fav. Unfav. NE
    E. Actual fixed overhead costs exceed budgeted fixed overhead costs.
    Budget Variance: Fav. Unfav. NE
    F. An unfavorable labor efficiency variance was incurred
    VOH Spending Var.: Fav. Unfav. NE VOH Efficiency Variance Fav. Unfav. NE
    G. Standard machine hours allowed for actual units produced was greater than standard
    machine hours budgeted.
    FOH Budget Var: Fav. Unfav. NE FOH Volume Variance: Fav. Unfav. NE

    7. Identify what type of cost is listed below. You should pick from the following: sunk, common
    fixed, traceable fixed, incremental, avoidable, differential, opportunity.
    A. Customer service area at Walmart.
    B. Income lost by studying for this exam instead of working overtime.
    C. Direct labor in a make or buy decision
    D. Cost to rework product in a scrap or rework decision.
    E. Manager's salary at Macy's restaurant
    F. Price of equipment purchased in a previous year.

    Question #2?Materials and Labor Variances
    The following materials standards have been established for a particular product:
    Standard quantity per unit 5.3 meters
    Standard price $17.20 /meter

    The following data pertain to actual operations concerning the product for the last month:
    Meters of materials purchased 7,600
    Actual cost of materials purchased $129,960
    Meters of materials used 7,600
    Actual output 1,400 units
    The total materials variance is:
    Actual ___________
    The materials price variance is:
    Quantity Actual Standard Difference Price Favor./
    Purchased Price Price in Price Variance Unfavor

    The materials quantity variance is:
    Standard Actual Standard Difference Quantity Favor./
    Price Quantity Quantity in Quantity Variance Unfavor

    The following labor standards have been established for a particular product:
    Standard labor hours per unit 9.0 hours
    Standard labor rate $15.10 /hour

    The following data pertain to actual operations concerning the product for the last month:
    Actual hours worked 8,100 hrs.
    Actual total labor cost $119,880
    Actual output 800 units
    The total labor variance is:
    Actual ___________
    The labor rate variance is:
    Hours Actual Standard Difference Rate Favor./
    Worked Rate Rate in Rate Variance Unfavor

    The labor efficiency variance is:
    Standard Actual Standard Difference Efficiency Favor./
    Rate Hours Hours in Hours Variance Unfavor

    Part 3--Variable and Fixed Overhead Variances

    Davies Manufacturing Company showed the following information for its fiscal year ended 12/31/2008:
    Actual Budget
    # of units produced 53,000 50,000
    Machine Hours 88,000 80,000
    Variable overhead 360,800 320,000
    Fixed overhead 397,500 400,000
    Cost formula per
    machine hour ? ?

    Based upon the above information, complete the following schedule. Make sure to indicate if variances
    are favorable or unfavorable.
    Actual Budget Budget
    Cost Costs Based Based
    Formula Incurred on on Break-down of
    (per _________ _________ _________ the Total Variance
    Machine Machine Machine Machine Total Spending Efficiency
    Overhead Item Hour) Hours Hours Hours Variance Variance Variance
    Variable Costs

    Budget Volume
    Variance Variance
    Fixed Costs


    Question #4?Short-run Decisions

    A. Make or Buy
    1. A high school cafeteria is trying to decide whether it should continue to make its own food, or contract with an outside caterer. It currently incurs the following costs per meal (based upon 100,000 meals served): Direct Labor: $.60, Direct materials: $.82, Common fixed: $1.12, Traceable fixed: .20. The caterers will prepare meals at a cost of $2.50 per meal. Assuming that all traceable fixed costs are avoidable and that no one cares how the food tastes, what should the cafeteria do?

    Make Buy Cost
    Direct Materials
    Direct Labor
    Traceable Fixed Cost
    Common Fixed Cost

    2. How much will the total savings be for the decision you chose in "1."?

    B. Constrained Resource:
    1. A basket weaver is trying to decide which of two baskets to make. Potential sales of either basket is unlimited. The straw used for weaving the baskets comes from the Middle East and is limited in supply. Based upon the following information, which basket should be produced?

    Round Basket Oval Basket
    Selling Price $150 $190
    Variable expenses 100 120
    Fixed 6 10
    Yards of straw required 20 yards 35 yards

    Contribution margin per constrained resource:
    Round Basket Oval Basket
    Contribution margin

    ========== ==========
    2. Assume that there are 5,000 yards of straw available each month. How much profit will be realized for one month?
    C. Special Order
    1. A person makes coffee cups with famous people's pictures on them. She receives a special order for 30 cups with Donald Trump's face at $8 each. The cups normally sell for $20 each on eBay. Eighty cups can be produced each month and it is anticipated that 45 will be sold this month, without the special order. Given all of this information, should the special order be accepted?

    Costs per unit:
    Cup $4.50
    Picture Transfer 1.00
    Utility Cost 0.30
    Fixed overhead 4.00
    Total $9.80
    Analysis: List and total relevant costs here:


    D. Eliminate a Segment or Product Line
    Sears is considering dropping its paint department because it has been losing money as shown:
    Sales $500,000
    Variable expenses 313,000
    Contribution margin 187,000
    Supervisor Salary (only can do paint) 38,000
    Portion of the store's liability insurance
    Allocated to the paint department 30,000
    Paint Dept. Sales commission 20,000
    Wrong color paint mixes 14,000
    Cost of maintaining elevator for entire store
    as allocated to the paint department 12,000
    Purchasing department costs allocated 50,000
    Depreciation of paint mixing machines 40,000
    (relates to obsolescence only)
    Net operating loss: (17,000)

    List and total traceable fixed costs: List and total common fixed costs:

    Show computation of Segment Margin:
    Decision (should the department be dropped?):

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    Solution Summary

    The solution explains some questions relating to managerial accounting