ACCTG 231 Lecture 20: Tuesday 3-27 Notes variances
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The? Sudbury, South? Carolina, plant of Shannon Sports Companyhas the following standards for its soccer ball? production:
Standards: | 0.1 yard |
Material (leather) per soccer ball | $21 |
Material price per yard | 0.40 Hour |
Direct labor hours per soccer ball | $11 per hour |
Wage rate per direct labor hour | $12 per direct labor hour |
Variable support cost rate | |
Actual results for October: | |
Used 13500 yards of raw material, purchased for $280,530.00. Paid for 8,200 direct labor hours at $11.30 per hour. Incurred $82,000 of variable support costs Manufactured 25,000 soccer balls |
Requirements
Determine the following variances for? October:
?(a) | Total direct material cost variance and indicate whether thevariance is favorable or unfavorable |
?(b) | Total direct labor cost variance |
?(c) | Total variable support cost variance |
?(d) | Direct material price variance |
?(e) | Direct material quantity variance |
?(f) | Direct labor rate variance |
?(g) | Direct labor efficiency variance |
?(h) | Variable support rate variance |
?(i) | Variable support efficiency variance |
AH? = Actual number of direct labor hours
AP? = Actual price per unit of materials
AQ? = Actual quantity of materials used
AR? = Actual wage rate
SH? = Number of direct labor hours allowed given the level ofoutput achieved
SP? = Estimated or standard price per unit of materials
SQ? = Standard quantity of materials allowed for the productionlevel achieved
SR? = Standard wage rate
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
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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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