Questions -
Q1. An unfavorable materials quantity variance would occur if
A) more materials were purchased than were used.
B) actual pounds of materials used were less than the standard pounds allowed.
C) actual labor hours used were greater than the standard labor hours allowed.
D) actual pounds of materials used were greater than the standard pounds allowed.
Q2. Fleck's standard quantities for 1 unit of product include 2 pounds of materials and 1.5 labor hours. The standard rates are $3 per pound and $10 per hour. The standard overhead rate is $12 per direct labor hour. The total standard cost of Fleck's product is
A) $21.
B) $25.
C) $33
D) $39.
Q3. Tools-N-Time has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, Tools-N-Time used 3,100 pounds of materials at a total cost of $12,090.
Tools-N-Time's total material variance is
A) $300 F.
B) $90 U.
C) $310 U.
D) $400 U.
Q4. Tools-N-Time has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, Tools-N-Time used 3,100 pounds of materials at a total cost of $12,090.
Tools-N-Time's materials price variance is
A) $90 U.
B) $310 F.
C) $400 F.
D) $700 F.
Q5. Tools-N-Time has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, Tools-N-Time used 3,100 pounds of materials at a total cost of $12,090.
Tools-N-Time's materials quantity variance is
A) $90 F.
B) $310 U.
C) $400 U.
D) $700 U.
Q6. Tools-N-Time has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Tools-N-Time used 3,850 hours of labor at a total cost of $46,970.
Tools-N-Time's total labor variance is
A) $770 U.
B) $800 U.
C) $1,030 F.
D) $1,930 F.
Q7. Tools-N-Time has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Tools-N-Time used 3,850 hours of labor at a total cost of $46,970.
Tools-N-Time's labor price variance is
A) $770 U.
B) $800 U.
C) $1,030 F.
D) $1,930 F.
Q8. Tools-N-Time has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Tools-N-Time used 3,850 hours of labor at a total cost of $46,970.
Tools-N-Time's labor quantity variance is
A) $770 U.
B) $1,030 F.
C) $1,800 F.
D) $1,930 F.
Q9. Stiner Company has a materials price standard of $2.00 per pound. Five thousand pounds of materials were purchased at $2.20 per pound. The actual quantity of materials used was 5,000 pounds, although the standard quantity allowed for the output was 4,500 pounds.
Stiner Company's materials price variance is
A) $100 U.
B) $1,000 U.
C) $900 U.
D) $1,000 F.
Q10. Stiner Company has a materials price standard of $2.00 per pound. Five thousand pounds of materials were purchased at $2.20 per pound. The actual quantity of materials used was 5,000 pounds, although the standard quantity allowed for the output was 4,500 pounds.
Stiner Company's materials quantity variance is
A) $1,000 U.
B) $1,000 F.
C) $1,100 F.
D) $1,100 U.
Q11. Stiner Company has a materials price standard of $2.00 per pound. Five thousand pounds of materials were purchased at $2.20 per pound. The actual quantity of materials used was 5,000 pounds, although the standard quantity allowed for the output was 4,500 pounds.
Stiner Company's total materials variance is
A) $2,000 U.
B) $2,000 F.
C) $2,100 U.
D) $2,100 F.
Q12. The standard quantity allowed for the units produced was 6,500 pounds, the standard price was $2.50 per pound, and the materials quantity variance was $375 favorable. Each unit uses 1 pound of materials. How many units were actually produced?
A) 6,350
B) 6,500
C) 15,875
D) 6,650
Q13. The per-unit standards for direct labor are 1.5 direct labor hours at $12 per hour. If in producing 2,400 units, the actual direct labor cost was $36,800 for 3,000 direct labor hours worked, the total direct labor variance is
A) $1,920 unfavorable.
B) $6,400 favorable.
C) $4,000 unfavorable.
D) $6,400 unfavorable.
Q14. The standard number of hours that should have been worked for the output attained is 10,000 direct labor hours and the actual number of direct labor hours worked was 10,500. If the direct labor price variance was $10,500 unfavorable, and the standard rate of pay was $15 per direct labor hour, what was the actual rate of pay for direct labor?
A) $14 per direct labor hour
B) $12 per direct labor hour
C) $16 per direct labor hour
D) $15 per direct labor hour
Q15. A company purchases 15,000 pounds of materials. The materials price variance is $6,000 favorable. What is the difference between the standard and actual price paid for the materials?
A) $2.00
B) $.40
C) $2.50
D) $10.00
Q16. 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
Q17. 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.
Q18. The following information was taken from the annual manufacturing overhead cost budget of Coen Company.
Variable manufacturing overhead costs - $46,200
Fixed manufacturing overhead costs - $27,720
Normal production level in labor hours - 23,100
Normal production level in units - 5,775
Standard labor hours per unit - 4
During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $75,600. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours.
Coen's total overhead variance is
A) $840 U.
B) $3,080 U.
C) $3,920 U.
D) $11,200 U.
Q19. The following information was taken from the annual manufacturing overhead cost budget of Coen Company.
Variable manufacturing overhead costs - $46,200
Fixed manufacturing overhead costs - $27,720
Normal production level in labor hours - 23,100
Normal production level in units - 5,775
Standard labor hours per unit - 4
During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $75,600. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours.
Coen's controllable overhead variance is
A) $840 U.
B) $3,080 U.
C) $3,920 U.
D) $11,200 U.
Q20. The following information was taken from the annual manufacturing overhead cost budget of Coen Company.
Variable manufacturing overhead costs - $46,200
Fixed manufacturing overhead costs - $27,720
Normal production level in labor hours - 23,100
Normal production level in units - 5,775
Standard labor hours per unit - 4
During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $75,600. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours.
Coen's volume overhead variance is
A) $840 U.
B) $3,080 U.
C) $3,920 U.
D) $11,200 U.
Q21. Budgeted overhead for Harrington Company at normal capacity of 30,000 direct labor hours is $4.50 per hour variable and $3 per hour fixed. In May, $232,500 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed.
The overhead controllable variance is
A) $3,750 favorable.
B) $1,500 favorable.
C) $7,500 favorable.
D) $7,500 unfavorable.
Q22. Budgeted overhead for Harrington Company at normal capacity of 30,000 direct labor hours is $4.50 per hour variable and $3 per hour fixed. In May, $232,500 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed.
The overhead volume variance is
A) $6,000 favorable.
B) $8,250 favorable.
C) $3,750 favorable.
D) $7,500 favorable.
Q23. It costs Garner Company $12 of variable unit cost to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 2,000 scales at $15 each. Garner would incur special shipping costs of $1 per scale if the order were accepted. Garner has sufficient unused capacity to produce the 2,000 scales. If the special order is accepted, what will be the effect on net income?
A) $4,000 increase
B) $4,000 decrease
C) $6,000 decrease
D) $30,000 increase
Q24. 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.
Q25. 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?
A) $10.10
B) $5.30
C) $3.60
D) $8.40
Q26. 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
Q27. Bell's Shop can make 1,000 units of a necessary component with the following costs:
Direct Materials - $72,000
Direct Labor - 18,000
Variable Overhead - 9,000
Fixed Overhead - ?
The company can purchase the 1,000 units externally for $117,000. The avoidable fixed costs are $6,000 if the units are purchased externally. An analysis shows that at this external price, the company is indifferent between making or buying the part. What are the fixed overhead costs of making the component?
A) $24,000
B) $18,000
C) $12,000
D) Cannot be determined.
Q28. 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.
Q29. 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?
A) $125,000
B) $103,000
C) $105,000
D) $140,000
Q30. 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 all of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?
A) $125,000
B) $103,000
C) $105,000
D) $140,000
Q31. A company can produce and sell only one of the following two products:
|
|
Machine Hours Required
|
Contribution 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?
A) $20,000
B) $24,000
C) $25,000
D) $16,000
Q32. A company is considering purchasing factory equipment that costs $320,000 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 $90,000 and annual operating expenses exclusive of depreciation expense are expected to be $38,000. The straight-line method of depreciation would be used.
If the equipment is purchased, the annual rate of return expected on this equipment is
A) 32.5%.
B) 3.8%.
C) 7.5%.
D) 16.3%.
Q33. A company is considering purchasing factory equipment that costs $320,000 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 $90,000 and annual operating expenses exclusive of depreciation expense are expected to be $38,000. The straight-line method of depreciation would be used.
The cash payback period on the equipment is
A) 13.3 years.
B) 8.0 years.
C) 6.2 years.
D) 3.1 years.
Q34. A company projects an increase in net income of $225,000 each year for the next five years if it invests $900,000 in new equipment. The equipment has a five-year life and an estimated salvage value of $300,000. What is the annual rate of return on this investment?
A) 25.0%
B) 37.5%
C) 50.0%
D) 57.5%
Q35. Benaflek Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(450). Annual cost savings were: $5,000 for year 1; $4,000 for year 2; and $3,000 for year 3. The amount of the initial investment was
|
Year
|
Present Value of 1 at 12%
|
PV of an Annuity of 1 at 12%
|
|
1
|
.893
|
.893
|
|
2
|
.797
|
1.690
|
|
3
|
.712
|
2.402
|
A) $10,239.
B) $9,158.
C) $10,058.
D) $9,339.
Q36. Fehr Company is considering two capital investment proposals. Estimates regarding each project are provided below:
|
Project Blue
|
Project Gray
|
|
Initial investment
|
$400,000
|
$600,000
|
|
Annual net income
|
20,000
|
42,000
|
|
Net annual cash inflow
|
100,000
|
142,000
|
|
Estimated useful life
|
5 years
|
6 years
|
|
Salvage value
|
0
|
0
|
The company requires a 10% rate of return on all new investments.
|
Present Value of an Annuity of 1
|
|
Periods
|
9%
|
10%
|
11%
|
12%
|
|
5
|
3.890
|
3.791
|
3.696
|
3.605
|
|
6
|
4.486
|
4.355
|
4.231
|
4.111
|
The annual rate of return for Project Blue is
A) 5%.
B) 10%.
C) 25%.
D) 50%.
Q37. Fehr Company is considering two capital investment proposals. Estimates regarding each project are provided below:
|
Project Blue
|
Project Gray
|
|
Initial investment
|
$400,000
|
$600,000
|
|
Annual net income
|
20,000
|
42,000
|
|
Net annual cash inflow
|
100,000
|
142,000
|
|
Estimated useful life
|
5 years
|
6 years
|
|
Salvage value
|
0
|
0
|
The company requires a 10% rate of return on all new investments.
|
Present Value of an Annuity of 1
|
|
Periods
|
9%
|
10%
|
11%
|
12%
|
|
5
|
3.890
|
3.791
|
3.696
|
3.605
|
|
6
|
4.486
|
4.355
|
4.231
|
4.111
|
The net present value for Project Gray is
A) $618,410.
B) $182,912.
C) $100,000.
D) $18,410.
Q38. Fehr Company is considering two capital investment proposals. Estimates regarding each project are provided below:
|
Project Blue
|
Project Gray
|
|
Initial investment
|
$400,000
|
$600,000
|
|
Annual net income
|
20,000
|
42,000
|
|
Net annual cash inflow
|
100,000
|
142,000
|
|
Estimated useful life
|
5 years
|
6 years
|
|
Salvage value
|
0
|
0
|
The company requires a 10% rate of return on all new investments.
|
Present Value of an Annuity of 1
|
|
Periods
|
9%
|
10%
|
11%
|
12%
|
|
5
|
3.890
|
3.791
|
3.696
|
3.605
|
|
6
|
4.486
|
4.355
|
4.231
|
4.111
|
The internal rate of return for Project Gray is approximately
A) 10%.
B) 11%.
C) 12%.
D) 9%.
Q39. Use the following table,
|
Present Value of an Annuity of 1
|
|
Period
|
8%
|
9%
|
10%
|
|
1
|
.926
|
.917
|
.909
|
|
2
|
1.783
|
1.759
|
1.736
|
|
3
|
2.577
|
2.531
|
2.487
|
A company has a minimum required rate of return of 10% and is considering investing in a project that requires an investment of $98,000 and is expected to generate cash inflows of $42,000 at the end of each year for three years. The present value of future cash inflows for this project is
A) $98,000.
B) $104,454.
C) $114,898.
D) $6,454.
40. Use the following table,
|
Present Value of an Annuity of 1
|
|
Period
|
8%
|
9%
|
10%
|
|
1
|
.926
|
.917
|
.909
|
|
2
|
1.783
|
1.759
|
1.736
|
|
3
|
2.577
|
2.531
|
2.487
|
A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $227,790 and is expected to generate cash inflows of $90,000 each year for three years. The approximate internal rate of return on this project is
A) 8%.
B) 9%.
C) 10%.
D) The IRR on this project cannot be approximated.