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AC 202 Unit 3 Homework Problems Solution,,,,,,,,,,,,,,




Question;Unit 3 ExamEach question is worth 5 points1. Standard costs may be used bya. universities.b. governmental agencies.c. charitable organizations.d. all of these.2. Which of the following statements is false?a. A standard cost is more accurate than a budgeted cost.b. A standard is a unit amount.c. In concept, standards and budgets are essentially the same.d. The standard cost of a product is equivalent to the budgeted cost per unit of product.3. Budget data are not journalized in cost accounting systems with the exception ofa. the application of manufacturing overhead.b. direct labor budgets.c. direct materials budgets.d. cash budget data.4. It is possible that a company's financial statements may report inventories ata. budgeted costs.b. standard costs.c. both budgeted and standard costs.d. none of these.5. A standard differs from a budget because a standarda. is a predetermined cost.b. contributes to management planning and control.c. is a unit amount.d. none of the above, a standard does not differ from a budget.6. Marburg Co. expects direct materials cost of $6 per unit for 100,000 units (a total of $600,000 of direct materials costs). Marburg?s standard direct materials cost and budgeted direct materials cost isStandard Budgeteda. $6 per unit $600,000 per yearb. $6 per unit $6 per unitc. $600,000 per year $6 per unitd. $600,000 per year $600,000 per year7. The standard direct materials quantity doesnot include allowances fora. unavoidable waste.b. normal spoilage.c. unexpected spoilage.d. all of the above are included.8. Allowances shouldnot be made in the direct labor quantity standard fora. wasted time.b. rest periods.c. cleanup.d. machine downtime.9. Thestandard predetermined overhead rate usedin setting the standard overhead cost is determined by dividinga. budgetedoverhead costs by an expected standard activity index.b. actualoverhead costs by an expected standard activity index.c. budgetedoverhead costs by actual activity.d. actualoverhead costs by actual activity.10. Hofburg?s standard quantities for 1 unit of product include 2 pounds of materials and 1.5 labor hours. The standard rates are $2 per pound and $7 per hour. The standard overhead rate is $8 per direct labor hour. The total standard cost of Hofburg?s product isa. $14.50.b. $17.00.c. $22.50.d. $26.50.11. All of the following are involved in the capital budgeting evaluation processexcept a company'sa. board of directors.b. capital budgeting committee.c. officers.d. stockholders.12. Most of the capital budgeting methods usea. accrual accounting numbers.b. cash flow numbers.c. net income.d. accrual accounting revenues.13. The first step in the capital budgeting evaluation process is toa. request proposals for projects.b. screen proposals by a capital budgeting committee.c. determine which projects are worthy of funding.d. approve the capital budget.14. The capital budgeting decision depends in part on thea. availability of funds.b. relationships among proposed projects.c. risk associated with a particular project.d. all of these.15. Capital budgeting is the processa. used in sell or process further decisions.b. of determining how much capital stock to issue.c. of making capital expenditure decisions.d. of eliminating unprofitable product lines.16. Net annual cash flow can be estimated bya. deducting credit sales from net income.b. adding depreciation expense to net income.c. deducting credit purchases from net income.d. adding advertising expense to net income.17. A company?s discount rate is based on thea. cost of capital and the internal rate of return.b. cost of capital and the risk element.c. cut-off rate and the risk element.d. cut-off rate and the internal rate of return.18. The discount rate that will result in the lowest net present value for a project isa. any rate lower that the cost of capital.b. any rate higher than the cost of capital.c. the lowest rate used to evaluate the project.d. the highest rate used to evaluate the project.19. The discount rate that will result in the highest net present value for a project isa. any rate lower that the cost of capital.b. any rate higher than the cost of capital.c. the lowest rate used to evaluate the project.d. the highest rate used to evaluate the project.20. Which of the following will increase the net present value of a project?a. An increase in the initial investmentb. A decrease in annual cash inflowsc. An increase in the discount rated. A decrease in the discount rateEach problem is worth 25 points21.Johnson Corp. has an 8% required rate of return. It?s considering a project that would provide annual cost savings of $50,000 for 5 years. The most that Johnson would be willing to spend on this project isPresent Value PV of an AnnuityYear of 1 at 8% of 1 at 8%1 .926 .9262 .857 1.7833 .794 2.5774 .735 3.3125 .681 3.993a. $125,910.b. $165,600.c. $199,650.d. $34,050.22.Corn Doggy, Inc. produces and sells corn dogs. The corn dogs are dipped by hand. Austin Beagle, production manager, is considering purchasing a machine that will make the corn dogs. Austin has shopped for machines and found that the machine he wants will cost $215,000. In addition, Austin estimates that the new machine will increase the company?s annual net cash inflows by $33,000. The machine will have a 12-year useful life and no salvage value.Instructions(a) Calculate the cash payback period.(b) Calculate the machine?s internal rate of return.(c) Calculate the machine?s net present value using a discount rate of 10%.(d) Assuming Corn Doggy, Inc.?s cost of capital is 10%, is the investment acceptable? Why or why not?23.Flagstaff, Inc. uses standard costing for its one product, baseball bats. The standards call for 3 board-feet of wood at $1.40 per board-foot, and 45 minutes of work at $12 per hour per bat. Total manufacturing overhead costs were estimated at $9,450, of which the variable portion was $0.50 per bat and the fixed portion was $1.00 per bat with an estimate of 6,300 bats to be produced. Flagstaff identifies price variances at the earliest possible point in time.During March, the company had the following results:Direct labor used = 4,800 hours at a cost of $56,400Actual manufacturing overhead fixed costs = $6,000Actual manufacturing overhead variable costs = $3,100Bats produced = 6,000InstructionsCompute the following variances for March.1. Labor quantity variance2. Total labor variancea3. Overhead controllable variancea4. Overhead volume variance24. Riggins, Inc. manufactures one product called tybos. The company uses a standard cost system and sells each tybo for $8. At the start of monthly production, Riggins estimated 9,500 tybos would be produced in March. Riggins has established the following material and labor standards to produce one tybo:Standard Quantity Standard PriceDirect materials 2.5 pounds $3 per poundDirect labor 0.6 hours $10 per hourDuring March 2013, the following activity was recorded by the company relating to the production of tybos:1. The company produced 9,000 units during the month.2. A total of 24,000 pounds of materials were purchased at a cost of $66,000.3. A total of 24,000 pounds of materials were used in production.4. 5,000 hours of labor were incurred during the month at a total wage cost of $55,000.InstructionsCalculate the following variances for March for Riggins, Inc.(a) Materials price variance(b) Materials quantity variance(c) Labor price variance(d) Labor quantity variance


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