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Chapter 13
165. Favorable volume variances may be harmful when:
a.
machine repairs cause work stoppages.
b.
supervisors fail to maintain an even flow of work.
c.
production in excess of normal capacity cannot be sold.
d.
there are insufficient sales orders to keep the factory operating at normal capacity.
166. Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive
capacity is indicated by the:
a.
factory overhead cost volume variance.
b.
direct labor cost time variance.
c.
direct labor cost rate variance.
d.
factory overhead cost controllable variance.
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167. Which of the following doesn't result in an unfavorable fixed overhead volume variance?
a.
Sales orders at a low level
b.
Machine breakdowns
c.
Employee inexperience
d.
Increase in utility costs
168. Prepare a monthly flexible selling expense budget for Podism Company for sales volumes of $270,000, $350,000,
and $480,000, based on the following data:
Sales commissions
7% of sales
Sales manager's salary
$62,000 per month
Advertising expense
$70,000 per month
Shipping expense
2% of sales
Miscellaneous selling expense
$2,500 per month plus 1/2% of sales
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169. Based on the following production and sales data of Jackson Co. for March of the current year, prepare (a) a sales
budget and (b) a production budget.
Product T
Product X
Estimated inventory, March 1
26,000 units
18,000 units
Desired inventory, March 31
32,000 units
15,000 units
Expected sales volume:
Area I
320,000 units
260,000 units
Area II
190,000 units
130,000 units
Unit sales price
$4
$12
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170. Microfix Company manufactures two models of Television, AR30 and AR33. Based on the following production
data for April of the current year, prepare a production budget for April.
AR30
AR33
Estimated inventory (units), April 1
2,500
3,700
Desired inventory (units), April 30
3,700
3,700
Expected sales volume (units):
Eastern zone
8,200
11,500
Midwest zone
13,000
17,500
Western zone
7,300
9,100
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171. Brown Inc.'s production budget for Product X for the year ended December 31 is as follows:
Product X
Sales
640,000 units
Plus desired ending inventory
85,000
Total
725,000
Less estimated beginning inventory, Jan. 1
90,000
Total production
635,000
In Brown's production operations, Materials A, B, and C are required to make Product X. The quantities of direct
materials expected to be used for each unit of product are as follows:
Product X
Material A .50 pound per unit
Material B 1.00 pound per unit
Material C 1.20 pound per unit
The prices of direct materials are as follows:
Material A $0.60 per pound
Material B $1.70 per pound
Material C $1.50 per pound
Prepare a direct materials purchases budget for Product X.
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172. The treasurer of Unisyms Company has accumulated the following budget information for the first two months of the
coming year:
March
April
Sales
$450,000
$520,000
Manufacturing costs
290,000
350,000
Selling and administrative expenses
41,400
46,400
Capital additions
250,000
—-
The company expects to sell about 35% of its merchandise for cash. Of sales on account, 80% are expected to be collected
in full in the month of the sale and the remainder in the month following the sale. One-fourth of the manufacturing costs
are expected to be paid in the month in which they are incurred and the other three-fourths in the following month.
Depreciation, insurance, and property taxes represent $6,400 of the probable monthly selling and administrative expenses.
Insurance is paid in February, and a $40,000 installment on income taxes is expected to be paid in April. Of the remainder
of the selling and administrative expenses, one-half are expected to be paid in the month in which they are incurred, with
the balance paid in the following month. Capital additions of $250,000 are expected to be paid in March.
Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000. Current liabilities as of
March 1 are composed of accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for operating
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expenses). Management desires to maintain a minimum cash balance of $20,000.
Prepare a monthly cash budget for March and April.
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173. Trapp Co. was organized on August 1 of the current year. Projected sales for the next three months are as follows:
August
$100,000
September
185,000
October
225,000
The company expects to sell 40% of its merchandise for cash. Of the sales on account, one third are expected to be
collected in the month of the sale and the remainder in the following month.
Prepare a schedule indicating cash collections of accounts receivable for August, September, and October.
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174. Standard and actual costs for direct materials for the manufacture of 1,000 units of product were as follows:
Actual costs
1,450 lbs. @ $8.10
Standard costs
1,500 lbs. @ $8.00
Determine the (a) quantity variance, (b) price variance, and (c) total direct materials cost variance.
175. Compute the standard cost for one hat, based on the following standards for each hat:
Standard Material Quantity:
3/4 yard of fabric at $4.00 per yard
Standard Labor:
1 hour at $5.75 per hour
Factory Overhead:
$2.90 per direct labor hour
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176. Standard and actual costs for direct materials for the manufacture of 2,000 units of product were as follows:
Actual costs
2,750 lbs. @ $8.10
Standard costs
2,800 lbs. @ $8.00
Determine the (a) quantity variance, (b) price variance, and (c) total direct materials cost variance.
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177. Standard and actual costs for direct labor for the manufacture of 1,500 units of product were as follows:
Actual costs
450 hours @ $17.00
Standard costs
455 hours @ $16.50
Determine the (a) time variance, (b) rate variance, and (c) total direct labor cost variance.
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178. The following information is given for a company:
Process A
Process B
Units passing inspection
8,800 units
3,000 units
Units entering process
10,000 units
5,000 units
Calculate the (a) process yield for Process A, (b) process yield for Process B, and (c) overall process yield.
179. The standard factory overhead rate is $12 per machine hour ($10 for variable factory overhead and $2 for fixed
factory overhead) based on 100% capacity of 42,000 machine hours. The standard cost and the actual cost of factory
overhead for the production of 2,000 units were as follows:
Actual: Variable factory overhead
$350,500
Fixed factory overhead
84,000
Standard: 35,000 hours @ $12
420,000
Determine the (a) volume variance, (b) controllable variance, and (c) total factory overhead cost variance.
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