ACC 406 Lecture Notes - Lecture 7: Negative Number
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| P11-2A Computevariances, and prepare income statement | ||||||||||||
| Ayala Corporation accumulatesthe following data relative to jobs started and finished during themonth of June 2017. | ||||||||||||
| Cost and Production Data | Actual | Standard | ||||||||||
| Raw materials unit cost | $2.30 | $2.10 | ||||||||||
| Raw materials units used | 11,000 | 10,000 | ||||||||||
| Direct labor payroll | $120,960 | $120,000 | ||||||||||
| Direct labor hours worked | 14,400 | 15,000 | ||||||||||
| Manufacturing overheadincurred | $189,500 | |||||||||||
| Manufacturing overheadapplied | $189,000 | |||||||||||
| Machine hours expected to beused at normal capacity | 42,500 | |||||||||||
| Budgeted fixed overhead forJune | $55,250 | |||||||||||
| Variable overhead rate permachine hour | $3.00 | |||||||||||
| Fixed overhead rate permachine hour | $1.30 | |||||||||||
| Overhead is applied on thebasis of standard machine hours. Three hours of machine timeare | ||||||||||||
| required for each directlabor hour. The jobs were sold for $400,000. Selling andadministrative | ||||||||||||
| expenses were $40,000. Assumethat the amount of raw materials purchased equaled the amount | ||||||||||||
| used. | ||||||||||||
| Instructions | ||||||||||||
| (a) Compute all of thevariances for (1) direct materials and (2) direct labor. | ||||||||||||
| (b) Compute the total overheadvariance. | ||||||||||||
| (c) Prepare an incomestatement for management. (Ignore income taxes.) | ||||||||||||
| NOTE: Enter a number in cellsrequesting a value; enter either a number or a formula in cellswith a "?" . | ||||||||||||
| (a)(1) | Total Materials Variance: | ||||||||||
| ( | AQ | X | AP | ) | minus | ( | SQ | X | SP) | ) | |
| ( | Value | X | Value | ) | minus | ( | Value | X | Value | ) | |
| = | ? | minus | ? | = | Value | ||||||
| Materials price variance: | |||||||||||
| ( | AQ | X | AP | ) | minus | ( | AQ | X | SP | ) | |
| ( | Value | X | Value | ) | minus | ( | Value | X | Value | ) | |
| = | ? | minus | ? | = | Value | ||||||
| Materials quantity variance: | |||||||||||
| ( | AQ | X | SP | ) | minus | ( | SQ | X | SP | ) | |
| ( | Value | X | Value | ) | minus | ( | Value | X | Value | ) | |
| = | ? | minus | ? | = | Value | ||||||
| (a)(2) | Total Labor Variance: | ||||||||||
| ( | AH | X | AR | ) | minus | ( | SH | X | SR | ) | |
| ( | Value | X | Value | ) | minus | ( | Value | X | Value | ) | |
| = | ? | minus | ? | = | Value | ||||||
| Labor Price variance: | |||||||||||
| ( | AH | X | AR | ) | minus | ( | AH | X | SR | ) | |
| ( | Value | X | Value | ) | minus | ( | Value | X | Value | ) | |
| = | ? | minus | ? | = | Value | ||||||
| Labor quantity variance: | |||||||||||
| ( | AH | X | SR | ) | minus | ( | SH | X | SR | ) | |
| ( | Value | X | Value | ) | minus | ( | Value | X | Value | ) | |
| = | ? | minus | ? | = | Value | ||||||
| (b) | Total Overhead Variance: | ||||||||||
| = | Actual | minus | Overhead | ||||||||
| Overhead | Applied | ||||||||||
| = | Value | minus | Value | = | Value | ||||||
| (c ) | AYALA CORPORATION | ||||||||||
| Income Statement | |||||||||||
| For the Month Ended June 30, 2017 | |||||||||||
| Sales revenue | Value | ||||||||||
| Cost of goods sold (at standard) | ? | ||||||||||
| Gross profit (at standard) | ? | ||||||||||
| Variances | |||||||||||
| Material price | Value | ||||||||||
| Materials quantity | Value | ||||||||||
| Labor price | Value | ||||||||||
| Labor quantity | Value | ||||||||||
| Overhead | Value | ||||||||||
| Totalvariance - favorable | ? | ||||||||||
| Gross profit (actual) | ? | ||||||||||
| Selling and administrative expenses | Value | ||||||||||
| Net income | ? | ||||||||||
1. Tommy's Toys produces two types of toys: trains and dolls.Tommy's uses stainless steel to manufacture the trains and plasticto manufacture the dolls. Information regarding the usage of steeland plastic for the past year follows:
Product Names | Steel | Plastic |
Direct materials information | ||
Standard pounds per unit | 2 lb. | 1.0 lb. |
Standard Price (SP) per pound | $3.00 | ? |
Actual Quantity (AQ) used per unit | 3.0 lb. | 3.00 lb. |
Actual Price (AP) paid for material | $1.75 | $2.25 |
Actual Quantity Purchased (AQP) and used | 2,800 lb. | 800 lb. |
Price variance | ? | $1,200 F |
Quantity variance | $900 U | ? |
Flexible budget variance | ? | $412 F |
Number of units produced | 300 | 525 |
What is the direct materials flexible budget variance for steelused to manufacture the trains?
| A. $4,400 favorable | |
| B. $2,600 unfavorable | |
| C. $2,600 favorable | |
| D. $4,400 unfavorable |
2. Sparky the Electrician specializes in rewiring historichouses. Sparky recently purchased a new wire-pulling device thatwill decrease the time needed to complete each job and increasetotal revenues. The device will cost $5,577 and will increase netcash flows by $1,690 per year. The new device has a useful life of7 years and a residual value of $0. What is the payback period forthe new wire-pulling device?
| A. 3.12 years | |
| B. 2.80 years | |
| C. 3.48 years | |
| D. 3.30 years |
3. Sharon Corporation collects 10% in the second month followingsale, 40% in the month following sale, and 40% of a month's salesin the month of sale. The company has found that 10% of their salesare uncollectible. Budgeted sales for the upcoming four monthsare:
August budgeted sales | $280,000 |
September budgeted sales | $350,000 |
October budgeted sales | $380,000 |
November budgeted sales | $240,000 |
The amount of cash that will be collected in November isbudgeted to be
| A. $316,000 | |
| B. $96,000 | |
| C. $283,000 | |
| D. $216,000 |
4. Suppose Whole Foods is considering investing inwarehouse-management software that costs $900,000; has $40,000residual value; and should lead to cash cost savings of $180,000per year for its 5-year life. In calculating the ARR, which of thefollowing figures should be used as the equation's denominator?
| A.$220,000 | |||||||||
| B. $180,000 | |||||||||
| C. $40,000 | |||||||||
| D. $900,000 5. All of the following budgets are prepared by merchandisingcompanies except
|
6. The Stallard Corporation manufactures Product X that consumesa large amount of overhead. For the month of October, Stallardproduced 14,200 units of Product X and incurred actual overheadcosts of $269,000. The standard costs developed for Product X byStallard follow:
Standard direct labor hours per unit | 4 |
Standard direct labor rate per hour | $11.00 |
Standard overhead hours per unit | 8 |
Standard overhead rate per hour | $4.80 |
What was the total variable overhead variance for Product X inOctober?
| $276,280 favorable | |
| $200,840 favorable | |
| $276,280 unfavorable | |
| $200,840 unfavorable |
1. The following data relate to Logan Electric and its LightbulbDivision.
Lightbulb Division sales | $8,500,000 |
Lightbulb Division operating income | $510,000 |
Lightbulb Division total assets | $2,500,000 |
Lightbulb Division current liabilities | $560,000 |
Corporate target rate of return | 16% |
Corporate weighted average cost of capital | 13% |
Corporate effective tax rate | 45% |
What is the Lightbulb Division's capital turnover?
| A. 3.4 | |
| B. 4.5 | |
| C. 16.7 | |
| D. 4.9 |
2. A favorable direct labor efficiency variance might indicatethat
| A. higher skilled workers were usedthat performed the task faster than expected. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| B. higher skilled workers were usedthat performed the task slower than expected. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| C. lower skilled workers were paida higher wage than expected. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| D. lower skilled workers were paid a lower wage thanexpected. 3. Mockingbird Company expects to sell 5,100 bird perches inJanuary and 9,000 in February for $3 each. What will be the totalsales revenue reflected in the sales budget for those months?
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