ACTG 2300 Lecture 18: Day 18 Notes

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7 Feb 2017

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Dl: rate variance, price variance, quantity variance. Revenue variance = flexible budget revenues actual revenues. Flexible budget answers the question (cid:498)what would have the budget been if i knew the actual volume? (cid:499) Flexible budget = budgeted cost * actual volume. Std moh cost rate = estimated moh cost rate: efficiency variance, efficiency variance, rate variance. ***std --- allowed = standard --- allowed by the actual volume. Spending variance dl cost = actual cost flexible budget cost. 4,000 meals * (. 75 / meal * . 25 dl hours) = ,750. The dl cost that we would expect to have if we knew the actual v of 4,000. Spending variance dl cost = ,750 - ,600 = favorable. Favorable because we planned for more and used less. Unfavorable because we are paying workers more than expected. Spending rate variance = ( / hour - . 75 / hour) * 960 hours = unfavor.

Related Questions

18. To calculate budgeted direct labor costs, multiply thenumber of units to be produced by the number of projected directlabor hours. Next, multiply that total by the average direct costper hour.

True

False

22. A flexible budget summarizes revenues and costs for variouslevels of sales volume within a relevant range.

True

False

29. A cost variance measures the difference in quantities ofactual inputs used and the standard quantity of inputs allowed forthe actual number of units produced.

True

False

32. Unfavorable variances are subtracted from each other toarrive at a favorable variance.

True

False

34. A direct labor cost variance is unfavorable if the employerpays workers more per hour than budgeted.

True

False

36. In a standard cost system, the manufacturing overheadallocated to production equals the standard overhead allocationrate multiplied by the standard quantity of the allocation baseallowed for expected output.

True

False

37. The direct materials cost and efficiency variances make upthe total direct materials variance.

True

False

41. Which of the following statements is true of absorptioncosting?

A) It considers variable selling and administrative costs asproduct costs.

B) It considers fixed selling and administrative costs asproduct costs.

C) It considers fixed manufacturing overhead cost as productcosts.

D) It considers variable manufacturing overhead cost as periodcosts.

42) Which of the following is true of the traditional format ofthe income statement?

A) It is prepared under the variable costing method.

B) It shows contribution margin as a line item.

C) It is not allowed under GAAP.

D) It is prepared under the absorption method.

43) Unit product cost calculations using absorption costing donot include ________.

A) fixed manufacturing overhead

B) variable manufacturing overhead

C) variable selling and administrative costs

D) direct materials

85. Provide responses to the following questions regarding thediscount rate.

Question? Your response

What does the discount rate represent?

What are other names for the discount rate?

Is the following statement true? Discuss the reason for yourresponse. "The higher the risk, the lower the discount rate."

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1. Which of the following is not part of theoperating budget?

A. Budgeted income statement

B. Sales budget

C. Direct materials budget

D. Cash budget

2. All of the following budgets are prepared by merchandisingcompanies except

A. cost of goods sold, inventoryand purchases.

B. operating expense.

C. direct materials.

D. sales.

3. Pro-Am Audio is a company contracted to DJ private events.Due to a recent increase in bookings, Pro-Am is considering thepurchase of another mobile DJ unit. Pro-Am uses the payback methodto evaluate its investments. The mobile DJ unit will cost $9,000,has a useful life of 12 years, and will generate $3,000 in net cashinflows per year. What is the payback period for the mobile DJunit?

A. 3.00 years

B. 2.63 years

C. 2.20 years

D. 3.37 years

4. How is the direct labor rate variance calculated?

	A. The difference between thestandard labor rate and the actual labor rate
	B. The difference between thestandard labor rate and the actual labor rate multiplied by theactual labor hours used
	C. The difference between thestandard labor hours and the allowable labor hours
	D. The difference between thestandard labor rate and the actual labor rate multiplied by thestandard allowable hours

5. 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

6. 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.

7. 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?

A. January $3,000; February$1,700

B. January $27,000; February$15,300

C. January $15,300; February$27,000

D. January $1,700; February $3,000

8. The ______ capital budgeting method uses accrual accountingincome.

A. internal rate of return

B. accounting rate of return

C. net present value

D. payback

9. 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?

	A. $276,280 favorable
	B. $200,840 favorable
	C. $276,280 unfavorable
	D. $200,840 unfavorable

10. 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

11. 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

12. Sharon Corporation collects 10% in the second monthfollowing sale, 40% in the month following sale, and 40% of amonth's sales in the month of sale. The company has found that 10%of their sales are uncollectible. Budgeted sales for the upcomingfour months are:

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

13. 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

bronzejellyfish275

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?

A. January $3,000; February$1,700

B. January $27,000; February$15,300

C. January $15,300; February$27,000

D. January $1,700; February $3,000

4. The ______ capital budgeting method uses accrual accountingincome.

A. internal rate of return

B. accounting rate of return

C. net present value

D. payback

5. 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?

	A. $276,280 favorable
	B. $200,840 favorable
	C. $276,280 unfavorable
	D. $200,840 unfavorable

6. 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

7. 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

8. 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

9. 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

10. All of the following budgets are prepared by merchandisingcompanies except

	A.cost of goods sold, inventory andpurchases.
	B. operating expense.
	C. direct materials.
	D. sales.

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ACTG 2300 Lecture 18: Day 18 Notes

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