Accounting Week 7

| September 28, 2018

1) Which of the following
is one of the reasons why companies use standard costs?
a. to enhance customer loyalty
b. to set performance targets
c. to share best practices with other companies
d. to ensure the accuracy of the financial
records
2) Which of the following does the efficiency
variance measure?
a. the difference between the quantity used by
the company and the quantity used by its competitors
b. the change in quantities used over time
c. the difference between actual and standard
quantity used
d. how quickly materials are processed into
finished goods
3) The production manager of a company was
experiencing a high defect rate on the assembly line, which was slowing
production and causing wastage of valuable materials. He decided to recruit
some highly skilled production workers from another company to bring down the
defect rate, but was worried that the higher wages of these workers might
negatively affect operating income. This situation would have produced a(n):
a. unfavorable direct materials cost variance.
b. unfavorable direct labor cost variance.
c. unfavorable direct labor efficiency variance.
d. unfavorable direct materials efficiency
variance.
4) Which of the following is used to charge the
cost of direct labor to the production?
a. Debit for standard quantity for actual
production times standard cost per hour
b. Credit for standard quantity usage for actual
production times actual cost per hour
c. Debit for actual quantity times standard cost
per hour
d. Credit for standard quantity for actual
production times standard cost per hour
5) Brad, one of the managers of a multi-national
company, is responsible to generate revenues and control costs in order to
increase the operating income of his division. However, he is not concerned
with investment-related decisions. Brad is most likely to be the manager of
a(n):
a. cost center.
b. investment center.
c. profit center.
d. revenue center.
6) If fixed costs are $1,000, variable cost per
unit is $2.00 and budgeted units of output is 1,000 unites, what is the
budgeted production costs?
a. $3,000
b. $4,000
c. $0
d. $2,000
Problems (10 pts each) (please show your work
for partial credit)
1) Wood Designs Company, a custom cabinet
manufacturing company, is setting standard costs for one of its products. The
main material is cedar wood, sold by the square foot. The current cost of cedar
wood is $4.00 per square foot from the supplier. Delivery costs are $0.25 per
board foot. Carpenters’ wages are $25.00 per hour. Payroll costs are $3.60 per
hour and benefits are $5.00 per hour. How much is the direct labor cost
standard (per hour)?
2) Emerald Marine Stores Company manufactures
decorative fittings for luxury yachts that require highly skilled labor, and
special metallic materials. Emerald uses standard costs to prepare its flexible
budget. For the first quarter of 2015, direct material and direct labor
standards for one of their popular products were as follows:
Direct materials: 3 pounds per unit; $4 per
pound
Direct labor: 4 hours per unit; $15 per hour
During the first quarter, Emerald produced 5,000
units of this product. Actual direct materials and direct labor costs were
$65,000 and $325,000, respectively.
For the purposes of preparing the flexible
budget, calculate the total standard direct materials cost at a production
volume of 5,000 units.
The total standard direct labor cost at a
production volume of 5,000 units = 5000*4*15
The total standard direct labor cost at a
production volume of 5,000 units = 300,000
Answer $300,000
3) Emerald Marine Stores Company manufactures
decorative fittings for luxury yachts that require highly skilled labor, and
special metallic materials. Emerald uses standard costs to prepare its flexible
budget. For the first quarter of 2015, direct material and direct labor standards
for one of their popular products were as follows:
Direct materials: 1 pound per unit; $12 per
pound
Direct labor: 4 hours per unit; $15 per hour
Emerald produced 5,000 units during the quarter.
At the end of the quarter, an examination of the materials records showed that
the company used 7,000 pounds of materials and actual total material costs were
$98,000.
Calculate the direct materials cost variance.
4) Accurate Tax Returns budgets 2 direct labor
hours for every tax return that it prepares, at a standard cost of $32 an hour.
During the most recent year, 500 returns were completed with the labor cost
totaling $18,000. The actual labor cost was $36 per hour during that period.
The actual number of labor hours was 1,000. What was the direct labor cost variance?
5) Elite Brands Company uses standard costs for
their manufacturing division. Standards specify 0.1 direct labor hours per unit
of product. At the beginning of the year, the static budget for variable
overhead costs included the following data:
Production volume6) From the following particulars of Rose Mary Company, calculate the total direct materials variance.7) Recreation Equipment Company has several divisions that are investment centers. Data for the Boat Division and the Trailer Division are shown here:Boat Division Trailer DivisionOperating income $90,000 $36,000Total assets at Jan 1 $670,000 $230,000Total assets at Dec 31 $710,000 $220,000With regard to the efficient use of assets, which division has a higher ROI (show your calculations)

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