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Question
At the beginning of the year, Folsom Company had the following standard cost sheet for one of its food products:
Direct materials (10 lb @ 3.20) $32.00
Direct labor (4 hr @ $9.00) 36.00
Fixed overhead (4 hr @ $4.00) 16.00
Variable overhead (4 hr @ $0.75) 3.00
Standard cost per unit $87.00
Folsom computes its overhead rates using practical capacity, which is 72,000 units. The actual results for the year are:
Units produced 70,000
Direct labor hours 290,000
Actual wage per hour $9.05
Fixed overhead $1,160,000
Variable overhead $218,000
A. Compute the fixed overhead spending and volume variances.
B. Compute the variable overhead spending and efficiency variances.
Answer
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Related questions
Q:
Presented below are selected data from the financial statements of eMonstore.com for the last three years.
Year 3 Year 2 Year 1
Total assets $650,000 $821,000 $800,000
Net credit sales 800,000 650,000 720,000
Accounts receivable 85,000 79,000 74,000
A. Calculate eMonstore.com's accounts receivable turnover ratio for years 2 and 3.
B. Calculate the number of days the average balance of receivables is outstanding before being converted into cash (turnover in days) for years 2 and 3.
C. What problems do you see with the company's credit policy if the terms are net 30 days? Explain.
Q:
Presented below are selected data from the financial statements of Harper Company for the last three years.
Year 3 Year 2 Year 1
Total assets $1,205,000 $952,000 $945,000
Cost of goods sold 360,000 420,000 440,000
Inventory 56,000 64,000 53,000
Net income 65,000 25,000 16,000
A. Calculate Harper's inventory turnover ratio for years 2 and 3.
B. Calculate the number of days in inventory at December 31, year 3 and year 2. Assume 365 days in a year.
C. Explain the implications of your calculations with respect to inventory management.
Q:
The following items were taken from the financial statements of Ritz Inc., over a 4-year period:
Item Year 4 Year 3 Year 2 Year 1
Net Sales $800,000 $700,000 $550,000 $500,000
Cost of Goods Sold 560,000 500,000 420,000 400,000
Gross Margin $240,000 $200,000 $130,000 $100,000
Required: Using horizontal analysis and Year 1 as the base year, compute the trend percentages for net sales, cost of goods sold, and gross profit. Explain whether the trends are favorable or unfavorable for each item.
Q:
Chaney Inc. wants to measure the relationship between profitability and the investment made by stockholders. Chaney should use
a. return on common stockholders' equity.
b. earnings per share.
c. return on sales.
d. the statement of retained earnings.
Q:
______________________ is a prerequisite for assigning responsibility.
Q:
Bogart Company has 40,000 shares of common stock outstanding. The book value per share of this stock was $60 and the market value per share was $75 at the end of the year. Net income for the year was $400,000. Interest on long-term debt was $40,000. Dividends paid to common stockholders were $3 per share. The tax rate was 30%. The company's price-earnings ratio at the end of the year was
a. 7.5.
b. 20.
c. 25.
d. 6.
Q:
Refer to the information taken from a company's financial records for the current year:
Earnings per share $5.00
Market price per share $60.00
Dividend per share $4.00
Book value per share $40.00
The price-earnings ratio is:
a. 12.
b. 10.
c. 18.
d. 20.
Q:
_______________ often means the difference between success and failure or between above-average profits and lesser profits.
Q:
If a company has an acid-test ratio of 1.2, what respective effects will the borrowing of cash by short-term debt and the collection of accounts receivable have on the ratio?
Short-term Collection of
Borrowing Receivable
a. Increase No effect
b. Increase Increase
c. Decrease No effect
d. Decrease Decrease
Q:
Lisa's Dress Company, a retailer, had cost of goods sold of $180,000 last year. The beginning inventory balance was $13,000 and the ending inventory balance was $18,000. The company's average inventory turnover in days was closest to
a. 36.50 days.
b. 26.36 days.
c. 31.44 days.
d. 62.86 days.
Q:
Jackson Company, a retailer, had cost of goods sold of $140,000 last year. The beginning inventory balance was $8,000 and the ending inventory balance was $11,000. The company's inventory turnover ratio was closest to
a. 12.73.
b. 14.74.
c. 7.37.
d. 17.50.
Q:
Phillips Company had $300,000 in sales on account last year. The beginning accounts receivable balance was $25,000 and the ending accounts receivable balance was $18,000. The company's accounts receivable turnover ratio was closest to
a. 16.67.
b. 12.00.
c. 3.85.
d. 13.95.
Q:
Emerald Company has $20,000 in cash, $10,000 in marketable securities, $40,000 in accounts receivables, $45,000 in inventories, and $50,000 in current liabilities. The company's quick ratio is closest to:
a. 1.20.
b. 1.40.
c. 2.35.
d. 0.60.
Q:
Nickel Store had net credit sales of $15,000,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $875,000 and $375,000 respectively. The accounts receivable turnover ratio was:
a. 15 times.
b. 10 times.
c. 11 times.
d. 24 times.
Q:
The accounts receivable turnover ratio is calculated by dividing:
a. average credit sales by ending accounts receivable.
b. average inventory by beginning accounts receivable.
c. net sales by average accounts receivable.
d. net profit by total accounts receivable.
Q:
The liquidity position of a company is analyzed using its _____.
a. times-interest-earned ratio
b. inventory turnover ratio
c. dividend yield ratio
d. debt-to-equity ratio
Q:
An aircraft company would most likely have
a. a high inventory turnover.
b. a low profit margin.
c. high volume.
d. a low inventory turnover.
Q:
Total operating expenses on Pearl Company's income statement for last year totaled $300,000. During the year, the accounts payable stayed the same, the accrued liabilities stayed the same, and prepaid expenses stayed the same. Depreciation expense for the year was $29,000. Based on this information, operating expenses adjusted to a cash basis under the direct method on the statement of cash flows would be:
a. $341,000.
b. $271,000.
c. $100,000.
d. None of these.
Q:
Last year, Violet Company reported cost of goods sold of $120,000. Inventories decreased by $34,000 during the year, and accounts payable increased by $30,000. The company uses the direct method to determine net cash flow from operating activities on the statement of cash flows. The cost of goods sold adjusted to a cash basis would be:
a. $120,000.
b. $79,000.
c. $56,000.
d. $93,000.
Q:
In setting price standards for materials and labor,
a. the purchasing department must consider discounts, freight, and quality.
b. personnel must consider payroll taxes, fringe benefits, and qualifications.
c. it is the joint responsibility of operations, purchasing, personnel, and accounting.
d. All of these.
e. None of these.
Q:
The sources of quantitative standards include
a. historical experience.
b. engineering studies.
c. input from operating personnel.
d. historical experience, engineering studies, and input from operating personnel.
e. None of these.
Q:
For better control, the materials price variance is computed using actual quantity of materials purchased.
a. True
b. False
Q:
The total budget variance is the difference between the actual cost of the input and its planned cost.
a. True
b. False
Q:
The unit standard quantity of inputs is vital to the computation of total amount of inputs allowed for the actual output and efficiency variances.
a. True
b. False
Q:
The standard quantity of materials allowed can be calculated by multiplying the unit labor standard by the actual output.
a. True
b. False
Q:
Managers develop quantity standards when they decide what amount of input should be used per unit of output.
a. True
b. False
Q:
Gallant Company uses standard costing. Overhead is applied to products on the basis of standard direct labor hours for actual production. Data for Gallant follows:
Standard direct labor hours allowed for actual output 110,000
Actual direct labor hours 115,000
Direct labor hours budgeted in the master budget 120,000
Budgeted total variable overhead cost $360,000
Actual variable overhead cost $328,000
A. Calculate the variable overhead rate.
B. Calculate the total variable overhead applied to production.
C. Calculate the variable overhead spending variance.
D. Calculate the variable overhead efficiency variance.
E. Calculate the total variable overhead variance.
Q:
Mills Company uses standard costing for direct materials and direct labor. Management would like to use standard costing for variable and fixed overhead.
The following monthly cost functions were developed for overhead items:
Overhead Item Cost Function
Indirect materials $1.00 per DLH
Indirect labor $1.25 per DLH
Utilities $0.50 per DLH
Insurance $10,000
Depreciation $40,000
The cost functions are considered reliable within a relevant range of 20,000 to 40,000 direct labor hours. The company expects to operate at 25,000 direct labor hours per month.
Information for the month of June is as follows:
Actual overhead costs incurred:
Indirect materials $ 20,000
Indirect labor 30,000
Utilities 12,000
Insurance 11,000
Depreciation 40,000
Total $113,000
Actual direct labor hours worked: 24,000
Standard direct labor hours allowed for production achieved: 27,000
Required:
A. Calculate the following overhead rates based upon expected capacity:
1. Variable overhead
2. Fixed overhead rate
3. Total overhead rate
B. Calculate the following variances:
1. Variable overhead spending variance
2. Variable overhead efficiency variance
3. Fixed overhead spending variance
4. Fixed overhead volume variance
Q:
The following standard overhead costs were developed for one of the products of Mildey Company:
Variable overhead: 5 hours $4.00 per hour 20.00
Fixed overhead: 5 hours $15.00 per hour 75.00
Total standard overhead cost per unit $95.00
The following information is available regarding the company's operations for the period:
Units produced 20,000
Direct labor 115,000 hours
Overhead incurred:
Variable $437,500
Fixed $1,320,000
Budgeted fixed overhead for the period is $1,350,000, and the standard fixed overhead rate is based on expected capacity of 90,000 direct labor hours.
Required:
A. Calculate the variable overhead spending variance and indicate whether it is favorable or unfavorable.
B. Calculate the variable overhead efficiency variance and indicate whether it is favorable or unfavorable.
C. Calculate the fixed overhead spending variance and indicate whether it is favorable or unfavorable.
D. Calculate the fixed overhead volume variance and indicate whether it is favorable or unfavorable.
Q:
Littleton Company uses a standard costing system. The following monthly cost functions apply to its manufacturing overhead items:
Overhead Item Cost Function
Indirect materials $0.80 per DLH
Indirect labor $1.00 per DLH
Utilities $0.40 per DLH
Insurance $8,000
Depreciation $32,000
Information for the month of October is as follows:
Actual overhead costs incurred:
Indirect materials $20,800
Indirect labor 24,000
Utilities 9,600
Insurance 8,800
Depreciation 32,000
Total $95,200
Actual direct labor hours worked 24,000
Standard direct labor hours allowed for production achieved 27,000
Littleton uses expected capacity to calculate standard overhead rates. The monthly expected capacity is 25,000 hours.
A. Calculate the following standard overhead rates based upon expected capacity:
Variable overhead rate
Fixed overhead rate
Total overhead rate
B. Calculate the following variances:
Variable overhead spending variance
Variable overhead efficiency variance
Fixed overhead spending variance
Fixed overhead volume variance