ACCT 212 Quiz 3 Master and Flexible Budgeting and Responsibility Accounting solutions answers

ACCT 212 Quiz 3 Master and Flexible Budgeting and Responsibility Accounting solutions complete answers 

 

Tarnish Industries produces miniature models of farm equipment. These collectibles are in great demand. It takes two operations, molding and finishing, to complete the miniatures. Next year's expected activities are shown in the following table:

Tarnish Industries uses departmental overhead rates and is planning on a $2.30 per machine hour overhead rate for the Molding department. Compute the budgeted manufacturing overhead cost for the Molding department given the information shown in the table.

 

Vista Company reports the following information.

Compute its product cost per unit under variable costing.

 

Gage Company reports the following information for its first year of operations:

If the company's cost per unit of finished goods using variable costing is $63, what is total variable overhead?

 

Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct materials requirement per unit is 2 ounces (oz.). The company requires to have safety stock of direct materials on hand at the end of each month to complete 20% of the units of budgeted production in the following month. There was 3,160 ounces of direct material in inventory at the start of July. The total ounces of direct materials to be purchased in July is:

 

Zhang Industries sells a product for $700 per unit. Unit sales for May were 400, and each month's unit sales are expected to grow by 3%. Zhang pays a sales manager a monthly salary of $3,000 and a commission of 2% of sales. Compute the budgeted selling expense for the manager for the month ended June 30.

 

Cameroon Corporation manufactures and sells electric staplers for $16 each. If 10,000 units were sold in December, and management forecasts 4% growth in sales each month, the number of units of electric stapler sales budgeted for March should be:

 

Cameroon Corporation manufactures and sells electric staplers for $16 each. If 10,000 units were sold in December, and management forecasts 4% growth in sales each month, the number of units of electric stapler sales budgeted for February should be:

 

On its December 31 prior year balance sheet, Calgary Industries reports equipment of $370,000 and accumulated depreciation of $74,000. During the current year, the company plans to purchase additional equipment costing $80,000 and expects depreciation expense of $30,000. Additionally, it plans to dispose of equipment that originally cost $42,000 and had accumulated depreciation of $5,600. The balances for equipment and accumulated depreciation, respectively, on its December 31 current year budgeted balance sheet are:

 

Zhang Industries sells a product for $700. Unit sales for May were 400 and each month's sales are expected to exceed the prior month's results by 3%. Compute the total budgeted sales dollars for the month ended June 30.

 

Georgia, Incorporated has collected the following data on one of its products. The direct materials price variance is:

 

Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead spending variance.

 

Based on a predicted level of production and sales of 12,000 units, a company anticipates reporting income of $26,000 after deducting variable costs of $72,000 and fixed costs of $10,000. Based on this information, the budgeted amounts of fixed and variable costs for 15,000 units would be:

 

A company provided the following direct materials cost information. Compute the direct materials quantity variance.

 

Fletcher Company collected the following data regarding production of one of its products. Compute the total direct materials variance.

 

A company's flexible budget for 12,000 units of production showed total contribution margin of $24,000 and fixed costs, $16,000. The income expected if the company produces and sells 15,000 units is:

 

A company’s flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The variable costs expected if the company produces and sells 16,000 units is:

 

Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are:

 

A company rents a building with a total of 50,000 square feet, which are evenly divided between two floors. The total monthly rent for the building is $30,000. The company allocates $20,000 of total rent expense to the first floor and $10,000 of total rent expense to the second floor.How much of the monthly rental expense should be allocated to a department that occupies 10,000 square feet on the first floor?

 

An investment center has income of $13,500,000 and average assets of $60,000,000. Return on investment is:

 

A lumber mill bought a shipment of logs for $40,000. When cut, the logs produced 1,000,000 board feet of lumber in the following grades. Compute the cost to be allocated to Type 1 and Type 2 lumber, respectively, if the value basis is used.

 

Costs that are not within a manager’s control or influence are:

 

The difference between a profit center and an investment center is that:

 

The Radio division of a car company makes radios for use in its Assembly division. The Radio division incurs variable costs of $100 per radio and the market price is $225 per radio. If the Radio division is operating at full capacity, it should accept any transfer price over $100.

 

Investment center managers are evaluated on their use of assets to generate income.

 

Based on predicted production of 48,000 units, a company budgets $600,000 of fixed costs and $492,000 of variable costs. If the company actually produces 40,000 units, the flexible budget amount of fixed costs is $600,000.

 

A company has budgeted variable costs of $1,500,000 and actual variable costs of $1,425,000. This results in an unfavorable variance of $75,000.

 

Employees that are affected by a budget should not be involved in preparing that budget.

 

The practice of continually revising budgets as time passes is called:

 

A written budget can effectively communicate management's specific action plans to all employees.

 

Cost-volume-profit analysis identifies and measures costs using their fixed and variable components.

 

A manufacturer uses machine hours to allocate overhead cost to products. Budgeted information for the current year follows.



Budgeted overhead cost
$ 108,800
 
Budgeted machine hours
1,280
machine hours
Overhead cost of $21.25 is allocated to a job that uses 4 machine hours.

 

A production cost report is a managerial accounting report that describes all but which of the following:

 

Equivalent units of production is the number of whole units that could have been started and completed given the costs incurred in a period.

 

A company applies overhead using direct labor hours as its activity base. If the company estimates total direct labor hours of 40,000 and total overhead costs of $1,200,000 for the year, then the company’s predetermined overhead rate would equal $30 per direct labor hour.

 

Direct materials and direct labor costs are debited to the Factory Overhead account in a job costing system.

 

Current information for the Stellar Corporation follows:
 

Beginning work in process inventory
$ 17,900
Ending work in process inventory
19,300
Direct materials used
147,000
Direct labor used
85,000
Total factory overhead
63,100
 
Stellar Corporation's cost of goods manufactured for the year is:

 

Performance evaluations are best done using:

Indirect expenses are costs incurred for the joint benefit of more than one department; they cannot be readily traced to only one department.

The master budget process usually ends with the:

The master budgeting process begins with the:

Product costs consist of direct labor, direct materials, and overhead costs.

The FIFO method computes equivalent units and cost per equivalent unit based only on production activity in the current period.

Conversion costs consist of direct labor and factory overhead.

 

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two operating departments using different allocation bases. The following information is available for the current period:
 

Office Expenses
Total
Allocation Base
Salaries
$ 30,000
Number of employees
Depreciation
20,000
Cost of goods sold
Advertising
40,000
Percentage of total sales
 

Department
Number of employees
Sales
Cost of goods sold
Drilling
1,000
$ 325,000
$ 75,000
Grinding
1,500
475,000
125,000
Total
2,500
$ 800,000
$ 200,000

The amount of depreciation that should be allocated to Grinding for the current period is:

 

A cost incurred to produce or purchase two or more products at the same time is a(n):

 

Performance evaluations are best done using:

 

A company processed raw milk for $120,000. This raw milk can be converted into the following types of milk with listed sales values:
 

Joint Products
Sales Value
Whole milk
$ 50,000
2% milk
80,000
Skim milk
70,000
Total
$ 200,000

Using the value basis, the total cost allocated to skim milk is:

 

A company has two operating departments: Mixing and Bottling. Mixing has 600 employees and Bottling has 400 employees. If office costs of $320,000 are allocated to operating departments based on the number of employees, then $128,000 of the office costs should be allocated to the Mixing department.

 

A responsibility accounting performance report displays:

 

A company’s division has sales of $6,000,000, income of $240,000, and average assets of $4,800,000. The division’s profit margin is:

 

Indirect expenses are costs incurred for the joint benefit of more than one department; they cannot be readily traced to only one department.

 

A company’s fixed budget (based on 7,000 units) follows. Compute total fixed costs.

 

A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased inferior materials.

 

A company's flexible budget for 10,000 units of production reflects sales of $200,000; variable costs of $40,000; and fixed costs of $75,000. Calculate the expected level of income if the company produces and sells 13,000 units.

 

Variable budget is another name for:

 

A flexible budget may be prepared:

 

Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead variance.

 

Fletcher Company collected the following data regarding production of one of its products. Compute the direct materials price variance.

 

The following company information is available for March. The direct materials price variance is:

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Based on a predicted level of production and sales of 12,000 units, a company anticipates reporting income of $26,000 after deducting variable costs of $72,000 and fixed costs of $10,000. Based on this information, the budgeted amounts of fixed and variable costs for 15,000 units would be:

 

Fletcher Company collected the following data regarding production of one of its products. Compute the direct labor rate variance.
 

Direct labor standard (2 hours @ $12.75/hour)
$ 25.50
per finished unit
Actual direct labor hours
81,500
hours
Actual finished units produced
40,000
units
Actual cost of direct labor
$ 1,100,250
 
 

Webster Corporation's monthly projected general and administrative expenses include $5,000 administrative salaries, $2,400 of other cash administrative expenses, $1,350 of depreciation expense on the administrative equipment, and 0.5% monthly interest on an outstanding bank loan of $10,000. Compute the total budgeted general and administrative expenses budget per month.

 

Webster Corporation's budgeted sales for February are $325,000. Webster pays sales representatives a commission of 6% of sales dollars. The company pays a sales manager a monthly salary of $4,400 and expects advertising expense of $2,000 per month. Compute the total budgeted selling expenses for February.

 

The master budget process usually ends with the:

 

If budgeted beginning inventory is $16,600, budgeted ending inventory is $18,800, and budgeted cost of goods sold is $20,520, budgeted purchases should be:

 

Junior Snacks reports the following information from its sales budget:

Expected sales:
 

October
$ 143,000
November
151,000
December
187,000

All sales are on credit and are expected to be collected 40% in the month of sale and 60% in the month following sale. The total amount of cash expected to be received from customers in November is:

 

A plan that reports the units or costs of merchandise to be purchased by a merchandising company during the budget period is called a:

 

The master budgeting process begins with the:

 

Garcia Company budgets the following sales in units for the coming two months.
 

 
June
July
Budgeted sales units
360
400

If each month’s ending inventory of finished units should be 60% of the next month’s sales, Garcia Company’s desired ending inventory in units for June is:

 

Production budgets always show both budgeted units of product and total costs for the budgeted units.

 

Schrank Company is trying to decide how many units of merchandise to order each month. Company policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be purchased in September?

 

Which of the following factors is least likely to be considered in preparing a sales budget?

 

Eastern Airlines reports the following cost data for the year. The company flew 100 private flights during the year. A group has offered Eastern $22,000 for a private flight to Chicago for its members. What is the contribution margin from accepting this offer?
 

Revenue
$ 40,000
per flight
Wages, salaries, and benefits
$ 14,000
per flight
Fuel and oil
$ 9,000
per flight
Food and beverages
$ 1,000
per flight
Depreciation
$ 600,000
per year
Rent
$ 500,000
per year
 

Wang Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit. Annual fixed costs are $801,000. Current sales volume is $4,200,000. Compute the current margin of safety in dollars.

 

A jeans maker is designing a new line of jeans. These jeans will sell for $410 per unit and cost $328 per unit in variable costs to make. Fixed costs total $120,000. Contribution margin per unit is:

 

Kay Company budgets overhead cost of $3,700,000 for the next year. The company uses direct labor hours as its overhead allocation base. If 80,000 direct labor hours are planned for the next year, how much overhead would be assigned to a product requiring 4 direct labor hours?

 

Product costs consist of direct labor, direct materials, and overhead costs.

 

The FIFO method computes equivalent units and cost per equivalent unit based only on production activity in the current period.

 

Conversion costs consist of direct labor and factory overhead.

 

A company that uses job order costing purchases $100,000 in raw materials for cash. The journal entry to record this transaction consists of a debit to Cash for $100,000 and a credit to Work in Process Inventory for $100,000.

 

Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000. During the year Adams incurred $418,000 in materials costs, $413,200 in overhead costs and $224,000 in direct labor costs. Compute the predetermined overhead rate.

 

Xia Company manufactures a single product. All raw materials used were direct materials. Current information for company follows:
 

Beginning raw materials inventory
$ 8,000
Ending raw materials inventory
11,000
Raw material purchases
85,000
Beginning work in process inventory
20,000
Ending work in process inventory
30,000
Direct labor
110,000
Total factory overhead
85,000
Beginning finished goods inventory
60,000
Ending finished goods inventory
40,000
 
The company's cost of direct materials used, cost of goods manufactured and cost of goods sold are:
 

 
Cost of Materials Used
Cost of Goods Manufactured
Cost of Goods Sold
Option A
$85,000
$267,000
$247,000
Option B
$88,000
$267,000
$287,000
Option C
$82,000
$287,000
$247,000
Option D
$82,000
$267,000
$287,000
Option E
$88,000
$287,000
$267,000
 

Using the information below, calculate gross profit for the period:
 

Sales
$ 1,304,000
Selling expenses
239,000
Finished Goods Inventory, beginning
36,000
Finished Goods Inventory, ending
41,000
Cost of goods manufactured
540,000