1. Budgeted overhead for Haft, Inc. at normal capacity of 30,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $155,000 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed. The overhead volume variance is
- $4,000 favorable.
- $5,500 favorable.
- $5,000 favorable.
- $2,500 favorable.
2. It costs Ross Co. $24 of variable and $10 of fixed costs to produce one bathroom scale which normally sells for $70. A foreign wholesaler offers to purchase 2,000 scales at $30 each. Ross would incur special shipping costs of $2 per scale if the order were accepted. Ross has sufficient unused capacity to produce the 2,000 scales. If the special order is accepted, what will be the effect on net income?
- $8,000 decrease
- $12,000 decrease
- $60,000 increase
- $8,000 increase
3. Carter, Inc. can make 100 units of a necessary component part with the following costs:
Direct Materials $120,000
Direct Labor 20,000
Variable Overhead 60,000
Fixed Overhead 40,000
If Carter can purchase the component externally for $220,000 and only $10,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?
- Buy and save $30,000
- Make and save $10,000
- Buy and save $10,000
- Make and save $30,000
4. Allan Co. can produce 100 units of a component part with the following costs:
Direct Materials $60,000
Direct Labor 26,000
Variable Overhead 64,000
Fixed Overhead 44,000
If Allan Co. can purchase the units externally for $160,000, by what amount will its total costs change?
- An increase of $160,000
- A decrease of $44,000
- An increase of $10,000
- An increase of $34,000
5. Tram Manufacturing is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $160 and Tram would sell it for $360. The cost to assemble the product is estimated at $72 per unit and Tram believes the market would support a price of $464 on the assembled unit. What is the correct decision using the sell or process further decision rule?
- Process further, the company will be better off by $104 per unit.
- Process further, the company will be better off by $32 per unit.
- Sell before assembly, the company will be better off by $72 per unit.
- Sell before assembly, the company will be better off by $104