1. Anderson Ltd. manufacture gearboxes for use in cars. At the start of the year, the management of Anderson Ltd. estimated that its costs would be:
% of sales value
Direct labour
Direct material
Variable production overhead
Fixed production overhead
Administration overhead
8
50
8
12
5
This was based on the following:
80 employees
2000 hours worked by each employee
40 000 gearboxes manufactured in the year as budgeted production £200 unit selling price.
You have recently been employed by the company to establish a standard costing system. At the end of the year you were able to extract the following information:
labour costs £4.40/hour
32 000 units sold
£210/unit selling price
160 000 hours were worked
variable production overheads were £640 000
fixed production overheads were £810 000
administration costs were £350 000
raw material prices were 10% higher than expected
total expenditure on raw material was £3.696 M
there were no opening or closing stocks of raw materials.
(Budgeted) Costs
Unit cost
£
Direct labour 16.00
Direct materials 100.00
Variable overhead 16.00
Fixed overhead 24.00
156.00
Admin. Overhead 10.00
Total 166.00
Selling price 200
Standard profit (per unit) 34
Budgeted profit 136000
Sales price variance 320000
Sales quantity variance -1680000
Variable overheads
Standard cost =
Actual cost =
Expenditure variance =
Efficiency variance =
Fixed overheads
Expenditure variance =
Volume variance =
Admin overhead (treat as fixed)
Expenditure variance =
Volume variance =
I currently have the answers to Labour and Material Variances. I require help on Fixed , Variable and Admin Overheads?
1. Anderson Ltd. manufacture gearboxes for use in cars. At the start of the year, the management of Anderson Ltd. estimated that its costs would be:
| % of sales value | |
| Direct labour Direct material Variable production overhead Fixed production overhead Administration overhead | 8 50 8 12 5 |
This was based on the following:
80 employees
2000 hours worked by each employee
40 000 gearboxes manufactured in the year as budgeted production £200 unit selling price.
You have recently been employed by the company to establish a standard costing system. At the end of the year you were able to extract the following information:
labour costs £4.40/hour
32 000 units sold
£210/unit selling price
160 000 hours were worked
variable production overheads were £640 000
fixed production overheads were £810 000
administration costs were £350 000
raw material prices were 10% higher than expected
total expenditure on raw material was £3.696 M
there were no opening or closing stocks of raw materials.
(Budgeted) Costs
Unit cost
£
Direct labour 16.00
Direct materials 100.00
Variable overhead 16.00
Fixed overhead 24.00
156.00
Admin. Overhead 10.00
Total 166.00
Selling price 200
Standard profit (per unit) 34
Budgeted profit 136000
Sales price variance 320000
Sales quantity variance -1680000
Variable overheads
Standard cost =
Actual cost =
Expenditure variance =
Efficiency variance =
Fixed overheads
Expenditure variance =
Volume variance =
Admin overhead (treat as fixed)
Expenditure variance =
Volume variance =
I currently have the answers to Labour and Material Variances. I require help on Fixed , Variable and Admin Overheads?
Related questions
| [The following information applies to the questions displayed below.] |
| Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: |
| Direct material: 6 pounds at $9.00 per pound | $ | 54.00 |
| Direct labor: 5 hours at $13.00 per hour | 65.00 | |
| Variable overhead: 5 hours at $3.00 per hour | 15.00 | |
| Total standard variable cost per unit | $ | 134.00 |
| The company also established the following cost formulas for its selling expenses: |
| Fixed Cost per Month | Variable Cost per Unit Sold | |||||
| Advertising | $ | 260,000 | ||||
| Sales salaries and commissions | $ | 120,000 | $ | 11.00 | ||
| Shipping expenses | $ | 4.00 | ||||
| The planning budget for March was based on producing and selling 20,000 units. However, during March the company actually produced and sold 25,000 units and incurred the following costs: |
| a. | Purchased 180,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production. |
| b. | Direct-laborers worked 115,000 hours at a rate of $14.00 per hour. |
| c. | Total variable manufacturing overhead for the month was $350,250. |
| d. | Total advertising, sales salaries and commissions, and shipping expenses were $267,000, $350,750, and $105,000, respectively. |
1. What raw materials cost would be included in the companyâs flexible budget for March?
2. What is the materials quantity variance for March? (Input the amount as a positive value. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
3.What is the materials price variance for March? (Input the amount as a positive value. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
4. If Preble had purchased 185,000 pounds of materials at $8 per pound and used 180,000 pounds in production, what would be the materials quantity variance for March? (Input the amount as a positive value. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
| 9. | Johnson Company manufactures widgets. Old Ham Company has approached Jones with a proposal to sell the company one of the components used to make widgets at a price of $100,000 for 50,000 units. Jones is currently making these components in its own factory. The following costs are associated with this part of the process when 50,000 units are produced:
The manufacturing overhead consists of $32,000 of costs that will be eliminated if the components are no longer produced by Jones. The remaining manufacturing overhead will continue whether or not Jones makes the components. What is the amount of avoidable costs if Jones buys rather than makes the components? | |||||||||
| A) | $60,000 | |||||||||
| B) | $96,000 | |||||||||
| C) | $124,000 | |||||||||
| D) | $100,000 | |||||||||
10. Below is a performance report that compares budgeted and actual profit of Famous Beer
for the month of April:
| Budget | Actual | Difference | |
| Sales | $200,000 | $202,000 | $2,000 |
| Less: | |||
| Cost of ingredients | $162,000 | $166,000 | $4,000 |
| Salaries | $31,000 | $31,200 | $200 |
| Controllable Profit | $47,000 | $44,800 | -$2,200 |
In evaluating the department in terms of its increase in sales and expenses, what will be
most important to investigate?
Sales
Cost of ingredients
Salaries
All three components have equal importance.
| 11. | Fatimaâs Diner has a contribution margin ratio of 17%. If fixed costs are $176,800, how many dollars of revenue must Fatimaâs generate in order to reach the break-even point? | |
| A) | $282,880 | |
| B) | $1,040,000 | |
| C) | $1,060,800 | |
| D) | $1,105,000 | |
| 12. | New Visions, Inc. is looking to achieve a net income of 15 percent of sales. Hereâs the firmâs profile: Unit sales price is $10; variable cost per unit is $6; total fixed costs are $40,000. What is the level of sales in units required to achieve a net income of 15 percent of sales? | |
| A) | 12,000 units | |
| B) | 21,000 units | |
| C) | 16,000 units | |
| D) | 20,000 units | |
| 13. | At Zikâs Apparel, the break-even point is 2,400 units. If fixed costs total $300,000 and variable costs are $25 per unit, what is the selling price per unit? | |
| A) | $210 | |
| B) | $180 | |
| C) | $5 | |
| D) | $150 | |
14. Which of the following situations will most likely violate cost-volume-profit
assumptions about fixed costs?
| A) | When production volume increases beyond the capacity of the plant, a second shift will be added instead of building a new plant. |
| B) | The companyâs raw material supplier typically allows volume discounts when larger amounts of the raw material are purchased. |
| C) | Fixed costs per unit decrease as volume increases. |
| D) | As volume increases, per unit fixed manufacturing overhead remain constant. |
15. Neighborhood Grill Company is a start up with the following profile:
Unit selling price = $200; Variable cost per unit = $100; Fixed Costs = $36,000;
Tax rate = 25%. How many units should Neighborhood Grill sell to achieve an
after-tax target income of $6,000?
| A) | 200 |
| B) | 460 |
| C) | 440 |
| D) | 300 |
| 16. | Northern Apparel Company owns two stores and management is considering eliminating the South store due to declining sales. Segmented contribution income statements are as follows and common fixed costs are allocated on the basis of sales.
Northern feels that if they eliminate the South store, sales in the North store will decline by 20%. If they close the South store, overall company net income will: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| A) | decline by $90,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| B) | decline by $85,625. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| C) | decline by $62,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| D) | decline by $20,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17. | Forest Park, a best-selling toy has a selling price of $15. If the contribution margin ratio is 40% and if the fixed costs are $60,000, how many Forest Parks must the company sell to realize a profit of $450,000? | |
| A) | 30,000 | |
| B) | 34,000 | |
| C) | 85,000 | |
| D) | 100,000 | |
Information for Questions 18
Anderson Manufacturing makes a single product. Budget information regarding the current period is given below:
|
| Revenue (100,000 units at $8.00) | $800,000 |
| Direct materials | 150,000 | |
| Direct labor | 125,000 | |
| Variable manufacturing overhead | 235,000 | |
| Fixed manufacturing overhead | 110,000 | |
| Net income | $180,000 |
Dye Company approaches Anderson with a special order for 15,000 units at a price of $7.50 per unit. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company's orders. However, Anderson is operating at capacity and will incur an additional $50,000 in fixed manufacturing overhead if the order is accepted.
| 18. | What is the incremental income (loss) associated with accepting the special order? | |
| A) | ($14,000) | |
| B) | $36,000 | |
| C) | ($23,500) | |
| D) | $27,000 | |
| 19. | Auto Zone believes it can sell 3,500,000 of a new vehicle charger for $8 each. There will be $3,000,000 in fixed costs associated with the charger. If the company desires to make a profit of $2,000,000 on the charger, what is the target variable cost per charger? | |
| A) | $7.25 | |
| B) | $9.00 | |
| C) | $6.57 | |
| D) | $9.40 | |
| 20. | On July 26, 2012, Radio Shack announced disappointing 2nd quarter earnings that caused the stock to fall 29% to all time lows. Although sales were up 1.2% to $953.2 million gross profit fell 16.6% to $360.3 million. Assuming Radio Shackâs store count and fixed costs were the same in the 2nd quarter of 2011 and 2012, which of the following statements is the best explanation for the decrease in the firmâs profitability? | |
| A) | Opportunity costs decreased. | |
| B) | Margin of safety decreased. | |
| C) | Contribution margin decreased. | |
| D) | Selling price decreased. | |
| 21 | Paul's Pizza produced and sold 2,000 pizzas last month and had fixed costs of $6,000. If production and sales are expected to increase by 10% next month, which of the following statements is true? | |
| A) | Total fixed costs will decrease. | |
| B) | Fixed cost per unit will decrease. | |
| C) | Total fixed costs will increase. | |
| D) | Fixed cost per unit will increase. | |
| 22. | The Synergy Company uses cost-plus pricing with a 50% mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in fixed costs annually. If demand falls to 80,000 units and the company wants to continue to earn a 50% return, what price should the company charge? | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| A) | $13.50 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| B) | $14.55 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| C) | $12.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| D) Use the following to answer question 23: Taylor's Treasures has collected the following information over the last six months.
| $10.95 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
