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Managerial Accounting

Please see the attachment.

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?):


Solution Summary

The solution explains some questions relating to managerial accounting