ACC 405- Lubriderm Corporation has the following budgeted sales for the next six-month

| March 29, 2017

ACC 405 Cost Management Systems Exam # 2 (Chapters 6-9) Name___________________________________ 1) Lubriderm Corporation has the following budgeted sales for the next six-month period: Month Unit Sales June 90,000 July 120,000 August 210,000 September 150,000 October 180,000 November 120,000 There were 30,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory

of finished products that equal 20% of the unit sales for the next month.

Five pounds of materials are required for each unit produced. Each pound of material costs $8. Inventory levels

for materials are equal to 30% of the needs for the next month. Materials inventory on June 1 was 15,000



a . Prepare production budgets in units for July, August, and September. b. Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month. 2) Picture Pretty manufactures picture frames. Sales for August are expected to be 10,000 units of various sizes.

Historically, the average frame requires four feet of framing, one square foot of glass, and two square feet of

backing. Beginning inventory includes 1,500 feet of framing, 500 square feet of glass, and 500 square feet of

backing. Current prices are $0.30 per foot of framing, $6.00 per square foot of glass, and $2.25 per square foot of

backing. Ending inventory should be 150% of beginning inventory. Purchases are paid for in the month



a . Determine the quantity of framing, glass, and backing that is to be purchased during August. b. Determine the total costs of direct materials for August purchases. 3) Shamokin Manufacturing produces two products, Big and Bigger. Shamokin expects to sell 20,000 units of Big

and 10,000 units of Bigger. Shamokin plans on having an ending inventory of 4,000 units of Big and 2,000 units

of Bigger. Currently, Shamokin has 1,000 units of Big in its inventory and 800 units of Bigger. Each product

requires two labor operations: molding and polishing. Product Big requires one hour of molding time and one

hour of polishing time. Product Bigger requires one hour of molding time and two hours of polishing time. The

direct labor rate for molders is $20 per molding hour, and the direct labor rate for polishers is $25 per polishing



Prepare a direct labor budget in hours and dollars for each product. 1

4) The following information pertains to Amigo Corporation:

Month Sales Purchases July $30,000 $10,000 August 34,000 12,000 September 38,000 14,000 October 42,000 16,000 November 48,000 18,000 December 60,000 20,000 ยท Cash is collected from customers in the following manner: Month of sale (2% cash discount) 30% Month following sale 50% Two months following sale 15% Amount uncollectible 5% ยท 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.


a . Prepare a summary of cash collections for the 4th quarter. b. Prepare a summary of cash disbursements for the 4th quarter. 5) The president of the company, Gregory Peters, has come to you for help. Use the following data to prepare a

flexible budget for possible sales/production levels of 10,000, 11,000, and 12,000 units. Show the contribution

margin at each activity level. Sales price $24 per unit Variable costs: Manufacturing $12 per unit Administrative $ 3 per unit Selling $ 1 per unit Fixed costs: Manufacturing $60,000 Administrative $20,000 6) Bach Table Company manufactures tables for schools. The 2011 operating budget is based on sales of 40,000

units at $50 per table. Operating income is anticipated to be $120,000. Budgeted variable costs are $32 per unit,

while fixed costs total $600,000.

Actual income for 2011 was a surprising $354,000 on actual sales of 42,000 units at $52 each. Actual variable

costs were $30 per unit and fixed costs totaled $570,000.


Prepare a variance analysis report with both flexible-budget and sales-volume variances. 2

7) Wilson’s Winter Woolens manufactures jackets and other wool clothing. A certain designed ski parka requires

the following:

Direct materials standard 2 square yards at $13.50 per yard Direct manufacturing labor standard 1.5 hours at $20.00 per hour During the third quarter, the company made 1,500 parkas and used 3,150 square yards of fabric costing $39,375.

Direct labor totaled 2,100 hours for $45,150.


a . Compute the direct materials price and efficiency variances for the quarter. b. Compute the direct manufacturing labor price and efficiency variances for the quarter. 8) The following data for the Lewgrow Garden Supplies Company pertains to the production of 2,500 garden

spades during March. The spade consists of a wooden handle and a metal forged tool that comes in contact with

the ground.

Direct Materials (all materials purchased were used):

Standard cost: $1.00 per handle and $3.50 per metal tool.

Total actual cost: $11,350.

Materials flexible-budget efficiency variance was $650 unfavorable. Direct Manufacturing Labor:

Standard cost is 5 garden spades per hour at $20.00 per hour.

Actual cost per hour was $21.00.

Labor efficiency variance was $400 favorable. Required:

a . What is the standard direct material amount per garden spade? b. What is the standard cost allowed for all units produced? c. What is the total direct materials flexible-budget variance? d. What is the direct material flexible-budget price variance? e. What is the total actual cost of direct manufacturing labor? f . What is the labor price variance for direct manufacturing labor? 3

9) Jael Equipment uses a flexible budget for its indirect manufacturing costs. For 20X5, the company anticipated

that it would produce 18,000 units with 3,500 machine-hours and 7,200 employee days. The costs and cost drivers were to be as follows:Fixed Variable Cost driver Product handling $30,000 $0.40 per unit Inspection 8,000 8.00 per 100 unit batch Utilities 400 4.00 per 100 unit batch Maintenance 1,000 0.20 per machine-hour Supplies 5.00 per employee day During the year, the company processed 20,000 units, worked 7,500 employee days, and had 4,000

machine-hours. The actual costs for 20X5 were: Actual costs Product handling $36,000 Inspection 9,000 Utilities 1,600 Maintenance 1,200 Supplies 37,500 Required:

a . Prepare the static budget using the overhead items above and then compute the static-budget variances. b. Prepare the flexible budget using the overhead items above and then compute the flexible-budget variances. 10) Everjoice Company makes clocks. The fixed overhead costs for 20X5 total $720,000. The company uses direct

labor-hours for fixed overhead allocation and anticipates 240,000 hours during the year for 480,000 units. An equal number of units are budgeted for each month.

During June, 42,000 clocks were produced and $63,000 were spent on fixed overhead.


a . Determine the fixed overhead rate for 20X5 based on units of input. b. Determine the fixed overhead static-budget variance for June. c. Determine the production-volume overhead variance for June. 11) Jarvis Golf Company sells a special putter for $20 each. In March, it sold 28,000 putters while manufacturing

30,000. There was no beginning inventory on March 1. Production information for March was:

Direct manufacturing labor per unit 15 minutes Fixed selling and administrative costs $ 40,000 Fixed manufacturing overhead 132,000 Direct materials cost per unit 2 Direct manufacturing labor per hour 24 Variable manufacturing overhead per unit 4 Variable selling expenses per unit 2 Required:

a . Compute the cost per unit under both absorption and variable costing. b. Compute the ending inventories under both absorption and variable costing. c. Compute operating income under both absorption and variable costing. 4

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