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Module 7 Review Questions_Costing_Solutions

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Question;Module 7 Review;Questions;I.;Preparation of flexible budgets;Mesa Company's fixed budget for the first;quarter of calendar year 2014 reveals the following.;Sales (10,000;units).................. $3,000,000;Cost of prods sold;Direct materials.................. $320,000;Direct labor...................... 680,000;Production supplies............... 264,000;Plant manager salary............... 60,000 1,324,000;Gross profit........................ l, 676,000;Selling Expenses;Sales commissions................. 120,000;Packaging........................ 210,000;Advertising...................... 100,000 430,000;Administrative Expenses;Administrative salaries............. 60,000;Deprecation?office;equip.......... 30,000;Insurance........................ 13,000;Office rent....................... 24,000 152.000;Income from operations.............. $1,094,000;========;Prepare flexible budgets, following the;format of Exhibit 8.3, that show variable costs per unit, fixed costs, and;three different flexible budgets for sales volumes of 7,500, 10,000, and 12,500;units.;II.;Computation and interpretation of labor variances;After evaluating Zero Company's;manufacturing process, management decided to establish standards of 1.5 hours;of direct labor per unit of product and $11 per hour for the labor rate. During;October, the company used 3,780 hours of direct labor at $45,360 total cost to;produce 2,700 unit of product. In November, the company used 4,480 hours of;direct labor at a $47,040 total cost to produce 2,800 units of product.;1.;Compute the labor rate variance, the labor efficiency variance, and the;total direct labor cost variance for October and for November.;2. Interpret the October direct labor;variances.;Computation and interpretation of;materials variances;BTS Company made 6,000 bookshelves using;88,000 board feet of wood costing $607,200. The company's direct materials;standards for one bookshelf are 16 board feet of wood at $7 per board foot.;1.;Compute the direct material variances incurred in manufacturing these;bookshelves.;2.;Interpret the direct materials variances;IV.;Computation of total overhead rate and total overhead variance;Tuna Company set the following standard;unit costs for its single product.;Direct materials (25 lbs. @ $4 per;Ib.)................. $100.00;Direct labor (6 hrs. @ $6 per;hr.)..................... 48.00;Factory overhead?variable (6 hrs. @ $5;per hr.)........ 30.00;Factory overhead?fixed (6 hrs. @ $7 per;hr.).......... 42.00;Total standard cost................................. $220.00;The predetermined overhead rate is based;on a planned operating volume of 80% of the productive capacity of 60,000 units;per quarter. The following flexible budget information is available.;Operating Levels;70% 80% 90%;Production in units................ 42,000 48,000 54,000;Standard direct labor hours......... 252,000 288,000 324,000;Budgeted overhead;Fixed factory overhead........... $2,016,000 $2,016,000 $2,016,000;Variable factory overhead......... $1,260,000 $1,440,000 $1,620,000;During the current quarter, the company;operated at 70% of capacity and produced 42,000 units of product, actual direct;labor totaled 250,000 hours. Units produced were assigned the following;standard costs;Direct materials (1,050,000 lbs. @ $4 per;Ib.)......... $4,200,000;Direct labor (252,000 hrs. @ $8 per;hr.)............. 2,016,000;Factory overhead (252,000 hrs. @ $12 per;hr.)........ 3,024,000;Total standard;cost...............................;$9,240.000;Actual costs incurred during the current;quarter follow;Direct materials (1,000,000 lbs. @ $4.25)............ $4,250,000;Direct labor (250,000 hrs. @ $7.75)................ 1,937.500;Fixed factory Overhead costs...................... 1,960,000;Variable factory overhead costs.................... 1,200,000;Total actual;costs................................;$9,347,500;========;1.;Compute the direct materials cost variances, including its price and;quantity variances.;2.;Compute the direct labor variances, including its rate and efficiency;variances.;3.;Compute the overhead controllable and volume variances.;4.;Compute the variable overhead spending and efficiency variance;5. Compute the fixed overhead spending and;volume variance.

 

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