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Question
Herriot Co. has total fixed costs of $180,000 and a contribution margin ratio of 40%. Assume that an additional advertising expenditure of $4,000 would increase sales by $8,000. Should the company spend this additional amount on advertising? (Support your answer with calculations.)
Answer
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Related questions
Q:
What are the four steps in the effective management of variance analysis?
Q:
Cabot Company collected the following data regarding production of one of its products. Compute the direct materials cost variance. Direct materials standard (6 lbs. @ $2/lb.)
$12 per finished unit Actual direct materials used
243,000 lbs. Actual finished units produced
40,000 units Actual cost of direct materials used
$483,570 A. $6,000 favorable.
B. $3,570 unfavorable.
C. $2,430 favorable.
D. $6,000 unfavorable.
E. $3,570 favorable.
Q:
Brewer Company specializes in selling used cars. During the month, the dealership sold 22 cars at an average price of $15,000 each. The budget for the month was to sell 20 cars at an average price of $16,000. Compute the dealerships sales price variance for the month.
A. $22,000 unfavorable.
B. $10,000 favorable.
C. $22,000 favorable.
D. $32,000 unfavorable.
E. $32,000 favorable.
Q:
When recording the journal entry for labor, the Goods in Process Inventory account is
A. Debited for standard labor cost.
B. Debited for actual labor cost.
C. Credited for standard labor cost.
D. Credited for actual labor cost.
E. Not used.
Q:
Adams, Inc. uses the following standard to produce a single unit of its product: overhead (2 hrs. @ $3/hr.) $ 6. The flexible budget for overhead is $100,000 plus $1 per direct labor hour. Actual data for the month show overhead costs of $150,000, and 24,000 units produced. The overhead volume variance is:
A. $10,000 favorable.
B. $12,000 favorable.
C. $ 4,000 unfavorable.
D. $16,000 unfavorable.
E. $36,000 unfavorable.
Q:
Montaigne Corp. has the following information about its standards and production activity for November. The volume variance is: Actual total factory overhead incurred.
$28,175 Standard factory overhead: Variable overhead ...
$3.10 per unit produced Fixed overhead ($12,000/6,000 estimated units to be produced)
$2 per unit Actual units produced ..
4,800 units A. $1,295U.
B. $1,295F.
C. $2,400U.
D. $2,400F.
E. $3,695U.
Q:
The following information describes a company's usage of direct labor in a recent period. The direct labor rate variance is: Actual hours used .
45,000 Actual rate per hour ..
$15 Standard rate per hour ..
$14 Standard hours for units produced ...
47,000 A. $28,000 favorable.
B. $28,000 unfavorable.
C. $45,000 unfavorable.
D. $45,000 favorable.
E. $17,000 unfavorable.
Q:
The following information describes a company's usage of direct labor in a recent period. The direct labor efficiency variance is: Actual hours used .
45,000 Actual rate per hour ..
$15 Standard rate per hour ..
$14 Standard hours for units produced ...................
47,000 A. $28,000 unfavorable.
B. $28,000 favorable.
C. $45,000 unfavorable.
D. $45,000 favorable.
E. $17,000 unfavorable.
Q:
A company has established 5 pounds of Material M at $2 per pound as the standard for the material in its Product A. The company has just produced 1,000 units of this product, using 5,200 pounds of Material M that cost $9,880. The direct materials quantity variance is:
A. $400 unfavorable.
B. $120 favorable.
C. $400 favorable.
D. $520 favorable.
E. $520 unfavorable.
Q:
Bradford Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units. What is the direct materials quantity variance?
A. $ 400 unfavorable.
B. $ 450 unfavorable.
C. $2,500 unfavorable.
D. $2,550 unfavorable.
E. $2,950 unfavorable.
Q:
A company is trying to decide which of two new product lines to introduce in the coming year. The predicted revenue and cost data for each product line follows: Product A
Product B Sales............................................................
$80,000
$96,000 Direct materials............................................................
3,000
6,000 Direct labor............................................................
30,000
45,000 Other cash operating expenses............................................................
7,500
9,000 New equipment costs............................................................
75,000
100,000 Estimated useful life (no salvage)............................................................
5 years
5 years The company has a 30% tax rate, it uses the straight-line depreciation method, and it predicts that cash flows will be spread evenly throughout each year. Calculate each product's payback period. If the company requires a payback period of three years or less, which, if either, product should be chosen?
Q:
Jorgensen Department Store has three departments: Clothing, Toys, and Jewelry. The most recent income statement, showing the total operating profit and departmental results is shown below: Total
Clothing
Toys
Hardware Sales.........................................
$2,100,000
$1,000,000
$600,000
$500,000 Cost of goods sold.........................................
(1,260,000)
(500,000)
(400,000)
(360,000) Gross profit.........................................
840,000
500,000
200,000
140,000 Direct expenses.........................................
(420,000)
(200,000)
(100,000)
(120,000) Allocated expenses.........................................
(350,000)
(100,000)
(75,000)
(175,000) Net income (loss).........................................
$ 70,000
$ 200,000
$ 25,000
$(155,000) Based on this income statement, management is planning on eliminating the hardware department, as it is generating a net loss. If the hardware department is eliminated, the toy department will expand to fill the space, but sales will not change in total, nor will direct expenses. None of the allocated expenses will be avoided, but they will be reallocated. Clothing will be allocated $200,000 of these expenses, and Toys will be allocated $150,000 of these expenses. Prepare a new income statement for Jorgensen Department Store, showing the results if the Hardware Department is eliminated. Should the Hardware Department be eliminated?
Q:
A company has just received a special, one-time order for 1,000 units. Producing the order will have no effect on the production and sales of other units. The buyer's name will be stamped on each unit, at a total cost of $2,000. Normal cost data, excluding stamping, follows:
Direct materials $ 10 per unit
Direct labor.. 16 per unit
Variable overhead 4 per unit
Allocated fixed overhead. 12 per unit
Allocated fixed selling expense 8 per unit What selling price per unit will this company require to earn $3,000 on the order?
Q:
Identify at least three reasons for managers to favor the internal rate of return (IRR) over other capital budgeting approaches.
Q:
At the end of the accounting period, immaterial variances are closed to _____________.
Q:
If actual price per unit of materials is greater than the standard price per unit of materials, the direct materials price variance is _______________________.
Q:
A favorable variance for a cost means that when compared to the budget, the actual cost is ____________________ than the budgeted cost.
Q:
A standard that takes into account the reality that some loss usually occurs with any process under normal application of the process is known as a _______________ standard.
Q:
Companies promoting continuous improvement strive to achieve _____________ standards by eliminating inefficiencies and waste.
Q:
Chips Co. assigned direct labor cost to its products in May for 1,300 standard hours of direct labor at the standard $8 per hour rate. The direct labor rate variance for the month was $200 favorable and the direct labor efficiency variance was $150 favorable. Prepare the journal entry to charge Goods in Process Inventory for the standard labor cost of the goods manufactured in May and to record the direct labor variances. Assuming that the direct labor variances are immaterial, prepare the journal entry that Chips would make to close the variance accounts.
Q:
Cheshire, Inc. allocates fixed overhead at a rate of $18 per direct labor hour. This amount is based on 90% of capacity or 3,600 direct labor hours for 6,000 units. During May, Cheshire produced 5,500 units. Budgeted fixed overhead is $66,000, and overhead incurred was $67,000. Required: Determine the volume variance for May.
Q:
The following information describes production activities of the Central Corp.: Raw materials used
16,000 lbs. at $4.05 per lb. Factory payroll ...
5,545 hours for a total of $72,085 30,000 units were completed during the year
Budgeted standards for each unit produced:
1/2 lb. of raw material at $4.15 per lb.
10 minutes of direct labor at $12.50 per hour Compute the direct materials price and quantity and the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.
Q:
Stanton Co. produces and sells two lines of t-shirts, Deluxe and Mega. Stanton provides the following data. Compute the sales price and the sales volume variances for each product. Budget
Actual Unit sales price Deluxe .
$15
$16 Unit sales priceMega .
$20
$19 Unit salesDeluxe
2,400
2,500 Unit salesMega ..
2,000
1,900
Q:
Cycle time is calculated by process time plus inspection time plus move time plus _____________.
Q:
A retail store has three departments, A, B, and C, each of which has four full-time employees. The store does general advertising that benefits all departments. Advertising expense totaled $90,000 for the current year, and departmental sales were: Department A $356,250
Department B 641,250
Department C 427,500 How much advertising expense should be allocated to each department?
Q:
Leontif Corporation has a Parts Division that does work for other Divisions in the company as well as for outside customers. The company's Equipment Division has asked the Parts Division to provide it with 2,000 special parts each year. The special parts would require $17.00 per unit in variable production costs. The Equipment Division has a bid from an outside supplier for the special parts at $28.00 per unit. In order to have time and space to produce the special part, the Parts Division would have to cut back production of another part-the J789 that it presently is producing. The J789 sells for $34.00 per unit, and requires $22.00 per unit in variable production costs. Packaging and shipping costs of the J789 are $4.00 per unit. Packaging and shipping costs for the new special part would be only $0.50 per unit. The Parts Division is now producing and selling 10,000 units of the J789 each year. Production and sales of the J789 would drop by 10% if the new special part is produced for the Equipment Division. Required: a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 2,000 special parts per year from the Parts Division to the Equipment Division?
b. Is it in the best interests of Leontif Corporation for this transfer to take place? Explain.