The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable
factory overhead and $1.30 for fixed factory overhead) based on 100% of normal
capacity of 80,000 machine hours. The standard cost and the actual cost of factory
overhead for the production of 15,000 units during August were as follows:
What is the amount of the fixed factory overhead volume variance?
a. $12,000 unfavorable
b. $12,000 favorable
c. $14,000 unfavorable
d. $26,000 unfavorable
The denominator of the rate of return on total assets ratio is the average total assets.
a. True
b. False
Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000
units of Y. Related data are:
Assuming that last year’s fixed costs totaled $675,000. What was Rusty Co.’s breakÂ-
even point in units?
a. 16,875 units
b. 30,100 units
c. 30,000 units
d. 11,250 units
The management of Wyoming Corporation is considering the purchase of a new
machine costing $375,000. The company’s desired rate of return is 6%. The present
value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the
foregoing information, use the following data in determining the acceptability of this
investment:
The present value index for this investment is a. 1.00
b. 0.95
c. 1.25
d. 1.05
Miramar Industries manufactures two products: A and B. The manufacturing operation
involves three overhead activities’”production setup, material handling, and general
factory activities. Miramar uses activityÂbased costing to allocate overhead to
products. An activity analysis of the overhead revealed the following estimated costs
and activity bases for these activities:
Each product’s total activity in each of the three areas are as follows:
What is the total overhead allocated to Product A using activity-based costing?
a. $194,500
b. $162,500
c. $32,000
d. $224,000
If divisional income from operations is $75,000, invested assets are $737,500, and the
minimum rate of return on invested assets is 6%, the residual income is $36,750.
a. True
b. False
Baker’s wages
The following are some of the costs incurred by Cupcake Company. Identify them as
either:
a. Prime costs
b. Conversion costs
c. Both prime and conversion costs
d. Neither prime or conversion costs
It is correct to rely exclusively on past cost data when establishing standards.
a. True
b. False
Budgeting supports the planning process by encouraging all of the following activities
except
a. requiring all organizational units to establish their goals for the upcoming period
b. increasing the motivation of managers and employees by providing agreed-upon
expectations
c. directing and coordinating operations during the period
d. improving overall decision making by considering all viewpoints, options, and cost
reduction possibilities
Activity rates are computed by dividing the cost budgeted for each activity pool by the
estimated activity base for that pool.
a. True
b. False
Because variable costs are assumed to change in direct proportion to changes in the
activity level, the graph of the variable costs when plotted against the activity level
appears as a circle.
a. True
b. False
Blaser Corporation had $275,000 in invested assets, sales of $330,000, income from
operations amounting to $33,000 and a desired minimum rate of return of 7.5%. The
rate of return on investment for Blaser Corporation is
a. 8.3%
b. 10%
c. 12%
d. 7.5%
With the aid of computer software, managers can vary assumptions regarding selling
prices, costs, and volume, and can immediately see the effects of each change on the
break-even point and profit. This is called
a. “what if” or sensitivity analysis
b. vary the data analysis
c. computer aided analysis
d. data gathering
All of the following qualitative considerations may impact upon capital investment
analysis except
a. time value of money
b. employee morale
c. the impact on product quality
d. manufacturing flexibility
The Aleutian Company produces two products, Rings and Dings. They are
manufactured in two departments’”Fabrication and Assembly. Data for the products
and departments are listed below.
All of the machine hours take place in the Fabrication Department, which has an
estimated overhead of $90,000. All of the labor hours take place in the Assembly
Department, which has an estimated total overhead of $105,000.
The Aleutian Company uses departmental overhead rates. The Fabrication Department
uses machine hours for an allocation base, and the Assembly Department uses labor
hours.
What is the Fabrication Department overhead rate per machine hour?
a. $10.50
b. $9.00
c. $8.12
d. $3.75
Which of the following are the two most common allocation bases for factory
overhead?
a. Total overhead dollars and machine hours
b. Direct labor hours and machine hours
c. Direct labor hours and factory expenses
d. Machine hours and factory expenses