16. A company uses 40,000 gallons of materials for which it paid $9.00 a gallon. The materials price variance was $80,000 favorable. What is the standard price per gallon?
17. Debbie Co. manufactures a product requiring two pounds of direct material. During 2011, Debbie purchases 24,000 pounds of material for $74,400 when the standard price per pound is $3.00. During 2011, Debbie uses 22,000 pounds to make 12,000 products. The standard direct material cost per unit of finished product is
18. Blue Fin Co. produces a product requiring 10 pounds of material at $1.50 per pound. Blue Fin produced 10,000 units of this product during 2009 resulting in a $30,000 unfavorable materials quantity variance. How many pounds of direct material did Blue Fin use during 2011?
A) 120,000 pounds
B) 100,000 pounds
C) 200,000 pounds
D) 145,000 pounds
19. Wild West Inc. produces a product requiring 3 direct labor hours at $20.00 per hour. During January, 2,000 products are produced using 6,300 direct labor hours. Wild West's actual payroll during January was $122,850. What is the labor quantity variance?
A) $2,850 U
B) $6,000 F
C) $3,150 F
D) $6,000 U
20. The per-unit standards for direct labor are 2 direct labor hours at $15 per hour. If in producing 1,200 units, the actual direct labor cost was $32,000 for 2,000 direct labor hours worked, the total direct labor variance is
A) $1,200 unfavorable.
B) $4,000 favorable.
C) $2,500 unfavorable.
D) $4,000 unfavorable.
21. The standard rate of pay is $15 per direct labor hour. If the actual direct labor payroll was $88,200 for 6,000 direct labor hours worked, the direct labor price (rate) variance is
A) $1,800 unfavorable.
B) $1,800 favorable.
C) $2,250 unfavorable.
D) $2,250 favorable.
22. The standard number of hours that should have been worked for the output attained is 6,000 direct labor hours and the actual number of direct labor hours worked was 6,300. If the direct labor price variance was $3,150 unfavorable, and the standard rate of pay was $9 per direct labor hour, what was the actual rate of pay for direct labor?
A) $8.50 per direct labor hour
B) $7.50 per direct labor hour
C) $9.50 per direct labor hour
D) $9.00 per direct labor hour
23. A company uses 8,400 pounds of materials and exceeds the standard by 400 pounds. The quantity variance is $1,800 unfavorable. What is the standard price?
D) Cannot be determined from the data provided.
24. A company purchases 20,000 pounds of materials. The materials price variance is $3,000 favorable. What is the difference between the standard and actual price paid for the materials?
D) Cannot be determined from the data provided.
25. The predetermined overhead rate for Weed-R-Gone is $8, comprised of a variable overhead rate of $5 and a fixed rate of $3. The amount of budgeted overhead costs at normal capacity of $240,000 was divided by normal capacity of 30,000 direct labor hours, to arrive at the predetermined overhead rate of $8. Actual overhead for June was $15,800 variable and $9,100 fixed, and standard hours allowed for the product produced in June was 3,000 hours. The total overhead variance is
A) $4,900 F.
B) $900 F.
C) $900 U.
D) $4,900 U.
26. Baden Company manufactures a product with a unit variable cost of $50 and a unit sales price of $88. Fixed manufacturing costs were $240,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $70 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:
A) Income would decrease by $4,000.
B) Income would increase by $4,000.
C) Income would increase by $70,000.
D) Income would increase by $20,000.
27. Miley, Inc. has excess capacity. Under what situations should the company accept a special order for less than the current selling price?
B) When additional fixed costs must be incurred to accommodate the order
C) When the company thinks it can use the cheaper materials without the customer's knowledge
D) When incremental revenues exceed incremental costs
28. Martin Company incurred the following costs for 50,000 units:
Variable costs $180,000
Fixed costs 240,000
Martin has received a special order from a foreign company for 5,000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $8,500 for shipping.
If Martin wants to break even on the order, what should the unit sales price be?
29. Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs:
Direct Materials $60,000
Direct Labor 10,000
Variable Overhead 30,000
Fixed Overhead 20,000
If Tex's Manufacturing Company can purchase the component externally for $110,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?
A) Make and save $5,000
B) Buy and save $5,000
C) Make and save $15,000
D) Buy and save $15,000
30. NF Toy Company is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $30 and NF Toy would sell it for $65. The cost to assemble the product is estimated at $21 per unit and the company believes the market would support a price of $85 on the assembled unit. What decision should NF Toy make?
A) Sell before assembly, the company will be better off by $1 per unit.
B) Sell before assembly, the company will be better off by $20 per unit.
C) Process further, the company will be better off by $29 per unit.
D) Process further, the company will be better off by $14 per unit.
31. A company has a process that results in 15,000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $100,000 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?
A) Process further, the company will be better off by $10,000.
B) Sell now, the company will be better off by $10,000.
C) Process further, the company will be better off by $90,000.
D) Sell now, the company will be better off by $100,000.
32. Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows:
Wood Aluminum Hard Rubber Total
Sales $500,000 $200,000 $65,000 $765,000
Variable expenses 325,000 140,000 58,000 523,000
Contribution margin 175,000 60,000 7,000 242,000
Fixed expenses 75,000 35,000 22,000 132,000
Net income (loss) $100,000 $ 25,000 $(15,000) $110,000
Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?
33. A company can produce and sell only one of the following two products:
Hours Required Margin Per Unit
Product 1 3 $30
Product 2 2 $25
If the company has machine capacity of 2,000 hours, what is the total contribution margin of the product it should produce to maximize net income?
34. How is annual cash inflow determined?
A) Depreciation is subtracted from net income because it is an expense.
B) Depreciation is added back to net income because it is not an outflow of cash.
C) Depreciation is subtracted from net income because it is an outflow of cash.
D) Depreciation is added back to net income because it is an inflow of cash.
35. A company is considering purchasing factory equipment which costs $480,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are expected to be $225,000 and annual operating expenses exclusive of depreciation expense are expected to be $95,000. The straight-line method of depreciation would be used. If the equipment is purchased, the annual rate of return expected on this project is