51. Klaren Corporation is comprised of two divisions: X and Y. X currently produces and sells a gear assembly used by the automotive industry in electric window assemblies. X is currently selling all of the units it can produce (25,000 per year) to external customers for $25 per unit. At this level of activity, X's per unit costs are:
Variable:
Production $7
SG&A $2
Fixed:
Production $6
SG&A $5
Y Division wants to purchase 5,000 gear assemblies per year from X Division. Y Division currently purchases these units from an outside vendor at $22 each.
What is the minimum price per unit that X Division could accept from Y Division for 5,000 units of the gear assembly and be no worse off than currently?
a. $15
b. $25
c. $7
d. $9
52. Packaging Solutions Corporation manufactures and sells a wide variety of packaging products. Performance reports are prepared monthly for each department. The planning budget and flexible budget for the Production Department are based on the following formulas, where q is the number of labor-hours worked in a month:
The actual costs incurred in March in the Production Department are listed below:
Direct labor............................... $134,730
Indirect labor………………....... $19,860
Utilities..................................... $14,570
Equipment depreciation........... $54,080
Factory rent............................. $8,700
The company actually worked 8,400 labor-hours in March Calculate total spending variance (chapter 2)?
a. $30F
b. 0
c. $1,980U
d.$1,310U
53. Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual Income Instead of ROI is:
a. Residual income can be computed without having to measure operating assets
b. Managers are more likely to accept projects that are beneficial to the company
c. A minimum rate of return does not have to be specified when the residual income approach is used
d. ROI does not take into account both turnover and margin
54. Roberts Company manufactures home cleaning products. One of the products, Quickclean, requires 2 pounds of Material A and 5 pounds of Material B per unit manufactured. Material A can be purchased from the supplier for $0.30 per pound and Material B can be purchased for $0.50 per pound. The finished goods inventory on hand at the end of each month must be equal to 4,000 units plus 25% of the next month's sales. The raw materials inventory on hand at the end of each month (for either Material A or Material B) must be equal to 80% of the following month's production needs.
Assume that the production budget calls for 26,000 units of Quickclean to be manufactured in June and 32,000 units to be manufactured in July. On May 31 there will be 104,000 pounds of Material B in inventory. The number of pounds of Material B to be purchased during June would be:
a. 154,000
b. 130,000
c. 128,000
d. 160,000
55. Which of the following will increase a company's manufacturing cycle efficiency (MCE)?
a.
b.
c.
d.
56. A variable overhead spending variance is caused by
a. Using more or fewer actual hours than the standard hours allowed for the production 30. achieved
b. both b and c are causes
c. Paying a higher/lower average actual overhead price per unit of the activity base than the 0. standard price allowed per unit of the activity base
d. Larger/smaller waste and shrinkage associated with the resources involved than expected
57. The following July information is for Mickey Company:
Standards:
Material Labor: 3,0 feet per unit @ $4.20 per foot
Actual: 2.5 hours per unit @ $7.50 per hour
Actual:
Production: 2,750 units produced during the month
Material: 8,700 feet used; 9,000 feet purchased @ $4.50 per foot
Labor: 7,000 direct labor hours @ $7.90 per hour
What is the material price variance (calculated at point of purchase)? (Round all answers to the nearest dollar.)
a. 2,610F
b. 2,610U
c. 2,700U
d. 2,700F
58. Sunrise Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for August when Sunrise made 4,500 units:
Standard:
DLH per unit: 2.5
Variable overhead per DLH: $1.75
Fixed overhead per DLH: $3.1
Budgeted variable overhead: $21,875
Budgeted fixed overhead: $38,750750
Actual:
Direct labor hours: 10,000
Variable overhead: $26,250
Fixed overhead: $38,000
Using the two-variance approach, what is the controllable variance?
a. $5,812.50 F
b. $5,812.50 U
c. $4,375.00 F
d. $4,375.00 U
59. Sunrise Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for August when Sunrise made 4,500 units:
Standard:
DLH per unit: 2.5
Variable overhead per DLH: $1.75
Fixed overhead per DLH: $3.1
Budgeted variable overhead: $21,875
Budgeted fixed overhead: $38,750750
Actual:
Direct labor hours: 10,000
Variable overhead: $26,250
Fixed overhead: $38,000
Using the four-variance approach, what is the volume variance?
a. $3.125 F
b. $6,063 U
c. $3,875 F
d. $3,875 U
60. Computer Solutions Corporation manufactures and sells various high-tech office automation products, Two divisions of Office Products Inc. are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a "super chip," that can be used by both the Computer Division and other external customers. The following information is available on this month's operations in the Computer Chip Division:
Selling price per chip: $50
Variable costs per chip: $20
Fixed production costs: $60,000
Fixed SG&A costs: $90,000
Monthly capacity: 10,000 chips
External sales: 6,000 chips
Internal sales: 0 chips
Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays $45 to an external supplier for the 4,000 chips it needs each month.
Assume that next month's costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the minimum of the transfer price range for a possible transfer of the super chip from one division to the other?
a. 35
b. 45
c. 20
d. 50
Variable:
Production $7
SG&A $2
Fixed:
Production $6
SG&A $5
Y Division wants to purchase 5,000 gear assemblies per year from X Division. Y Division currently purchases these units from an outside vendor at $22 each.
What is the minimum price per unit that X Division could accept from Y Division for 5,000 units of the gear assembly and be no worse off than currently?
a. $15
b. $25
c. $7
d. $9
52. Packaging Solutions Corporation manufactures and sells a wide variety of packaging products. Performance reports are prepared monthly for each department. The planning budget and flexible budget for the Production Department are based on the following formulas, where q is the number of labor-hours worked in a month:
| Cost Formulas | |
| Direct labor | $15.80q |
| Indirect labor | $8,200+ $1.6q |
| Utilities | $6,400+ $0.8q |
| Equipment depreciation | $23,000+ $3.7q |
| Factory rent | $8,400 |
The actual costs incurred in March in the Production Department are listed below:
Direct labor............................... $134,730
Indirect labor………………....... $19,860
Utilities..................................... $14,570
Equipment depreciation........... $54,080
Factory rent............................. $8,700
The company actually worked 8,400 labor-hours in March Calculate total spending variance (chapter 2)?
a. $30F
b. 0
c. $1,980U
d.$1,310U
53. Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual Income Instead of ROI is:
a. Residual income can be computed without having to measure operating assets
b. Managers are more likely to accept projects that are beneficial to the company
c. A minimum rate of return does not have to be specified when the residual income approach is used
d. ROI does not take into account both turnover and margin
54. Roberts Company manufactures home cleaning products. One of the products, Quickclean, requires 2 pounds of Material A and 5 pounds of Material B per unit manufactured. Material A can be purchased from the supplier for $0.30 per pound and Material B can be purchased for $0.50 per pound. The finished goods inventory on hand at the end of each month must be equal to 4,000 units plus 25% of the next month's sales. The raw materials inventory on hand at the end of each month (for either Material A or Material B) must be equal to 80% of the following month's production needs.
Assume that the production budget calls for 26,000 units of Quickclean to be manufactured in June and 32,000 units to be manufactured in July. On May 31 there will be 104,000 pounds of Material B in inventory. The number of pounds of Material B to be purchased during June would be:
a. 154,000
b. 130,000
c. 128,000
d. 160,000
55. Which of the following will increase a company's manufacturing cycle efficiency (MCE)?
a.
| Decrease in Inspection Time | Decrease in Queue Time |
| Yes | Yes |
b.
| Decrease in Inspection Time | Decrease in Queue Time |
| No | Yes |
c.
| Decrease in Inspection Time | Decrease in Queue Time |
| No | No |
d.
| Decrease in Inspection Time | Decrease in Queue Time |
| Yes | No |
56. A variable overhead spending variance is caused by
a. Using more or fewer actual hours than the standard hours allowed for the production 30. achieved
b. both b and c are causes
c. Paying a higher/lower average actual overhead price per unit of the activity base than the 0. standard price allowed per unit of the activity base
d. Larger/smaller waste and shrinkage associated with the resources involved than expected
57. The following July information is for Mickey Company:
Standards:
Material Labor: 3,0 feet per unit @ $4.20 per foot
Actual: 2.5 hours per unit @ $7.50 per hour
Actual:
Production: 2,750 units produced during the month
Material: 8,700 feet used; 9,000 feet purchased @ $4.50 per foot
Labor: 7,000 direct labor hours @ $7.90 per hour
What is the material price variance (calculated at point of purchase)? (Round all answers to the nearest dollar.)
a. 2,610F
b. 2,610U
c. 2,700U
d. 2,700F
58. Sunrise Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for August when Sunrise made 4,500 units:
Standard:
DLH per unit: 2.5
Variable overhead per DLH: $1.75
Fixed overhead per DLH: $3.1
Budgeted variable overhead: $21,875
Budgeted fixed overhead: $38,750750
Actual:
Direct labor hours: 10,000
Variable overhead: $26,250
Fixed overhead: $38,000
Using the two-variance approach, what is the controllable variance?
a. $5,812.50 F
b. $5,812.50 U
c. $4,375.00 F
d. $4,375.00 U
59. Sunrise Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for August when Sunrise made 4,500 units:
Standard:
DLH per unit: 2.5
Variable overhead per DLH: $1.75
Fixed overhead per DLH: $3.1
Budgeted variable overhead: $21,875
Budgeted fixed overhead: $38,750750
Actual:
Direct labor hours: 10,000
Variable overhead: $26,250
Fixed overhead: $38,000
Using the four-variance approach, what is the volume variance?
a. $3.125 F
b. $6,063 U
c. $3,875 F
d. $3,875 U
60. Computer Solutions Corporation manufactures and sells various high-tech office automation products, Two divisions of Office Products Inc. are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a "super chip," that can be used by both the Computer Division and other external customers. The following information is available on this month's operations in the Computer Chip Division:
Selling price per chip: $50
Variable costs per chip: $20
Fixed production costs: $60,000
Fixed SG&A costs: $90,000
Monthly capacity: 10,000 chips
External sales: 6,000 chips
Internal sales: 0 chips
Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays $45 to an external supplier for the 4,000 chips it needs each month.
Assume that next month's costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the minimum of the transfer price range for a possible transfer of the super chip from one division to the other?
a. 35
b. 45
c. 20
d. 50
