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ACC102 Ch.6-8

which of the following is not a reason for a direct materials quantity variance?
a. spoilage of materials
b.purchasing of inferior raw materials
c.increased material cost per unit
d.malfunctioning equipment
c. increased material cost per unit
The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%.
What is Clydesdale Company’s profit margin?
Sales-operating expenses=income from operations
Profit Margin=income from operations/sales

PM=20%

Which of the following would be most effective in a small owner/manager-operated business?
a.centralization
b. investment centers
c. profit centers
d. cost centers
a. centralization
Production estimates for August are as follows:
Estimated inventory (units), August 1 12,000
Desired inventory (units), August 31 9,000 Expected sales volume (units), August 75,000

?For each unit produced, the direct materials requirements are as follows:
Material A ($5 per lb.) 3 lbs.
Material B ($18 per lb.) 1/2 lb.

?The number of pounds of Materials A and B required for August production is

216,000 lbs. of Material A;
36,000 lbs. of Material B
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. improving overall decision making by considering all viewpoints, options, and cost reduction possibilities
d. directing and coordinating operations during the period
d. directing and coordinating operations during the period
The St. Augustine Corporation originally budgeted for $360,000 of fixed overhead at 100% normal production capacity. Production was budgeted to be 12,000 units. The standard hours for production were 5 hours per unit. The variable overhead rate was $3 per hour. Actual fixed overhead was $360,000 and actual variable overhead was $170,000. Actual production was 11,700 units.

The fixed factory overhead controllable variance is

$170,000
-$175,500 (11,700*5*$3)
=$5,500 favorable
The budget that summarizes future plans for the acquisition of fixed assets is
a. production budget
b. sales budget
c. direct materials purchases budget
d. capital expenditures budget
d. capital expenditures budget
Heedy Company is trying to decide how many units of merchandise to produce each month. The 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 produced in September?
20,000*20%=4,000 beg. inventory
40,000*20%=8,000 end. inventory

20,000+8,000-4,000
=24,000

The budgetary unit of an organization which is led by a manager who has both the authority over and responsibility for the unit’s performance is known as a:
a. responsibility center
b. control center
c. budgetary area
d. managerial department
a. responsibility center
The following data is given for the Zoyza Company:

Budgeted production (at 100% of normal capacity) 26,000 units
Actual production 27,500 units
Materials:
Standard price per ounce $6.50
Standard ounces per completed unit 8
Actual ounces purchased and used in production 228,000
Actual price paid for materials $1,504,800
Labor:
Standard hourly labor rate $22 per hour
Standard hours allowed per completed unit 6.6
Actual labor hours worked 183,000
Actual total labor costs $4,020,000
Overhead:
Actual and budgeted fixed overhead $1,029,600
Standard variable overhead rate $24.50 per standard labor hour
Actual variable overhead costs $4,520,000

Overhead is applied on standard labor hours.

?The fixed factory overhead controllable variance is:

$4,520,000
-$4,446,750 (27500*6.6*24.50)
=$73,250 unfavorable
Which of the following is not a reason standard costs are separated into two components?
a. The price and quantity variances need to be identified separately to correct the actual major differences
b. Variances bring attention to discrepancies in the budget and require managers to revise budgets closer to actual results
c. Identifying variances determines which manager must find a solution to major discrepancies
d. If a negative variance is overshadowed by a favorable variance, managers may overlook potential corrections
b. Variances bring attention to discrepancies in the budget and require managers to revise budgets closer to actual results

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