ACG 2071 Managerial Accounting Fall 2018 Exam #5 Review Problems

Transcription

1 ACG 2071 Managerial Accounting Fall 2018 Exam #5 Review Problems This is an independent effort. Do your own work! The ACE tutors and the SI may not assist you on these review problems prior to 2:45 PM on November 14. DUE DATE: November 14 DIRECTIONS: Print a hard copy of these review problems on the FRONT side of the paper only. Write your name and class meeting times/days in the space provided. Complete the problems showing all calculations. If you have not completed the work in advance, you will run into two issues.1) You will not get much out of the concepts we go over these problems, and 2) you will only earn participation points if you have the correct answers. It is possible that I may collect a particular problem so you MUST have a hard copy. Problem 1. Lawn-a-Rama produces lawn pockets. Its cost driver for overhead is the number of pockets. The following information was provided concerning the company s cost system: Actual Data Standard and Budgeted Data Produced 3,240 cases Budgeted units 3,350 units Materials purchased 1,510 lbs. for a total of $6,946 Budgeted materials 0.44 $4.40 per lb. Materials used 1,494 lbs. Budgeted labor 0.65 $14.00 per hour Labor worked 2,100 hrs. costing $29,820 Budgeted variable overhead $18,559 Total fixed overhead $9,084 Budgeted fixed overhead $2.74 per case Total variable overhead $17,900 In good form, prepare a direct material variance analysis, Within your variance matrix, provide the following for each of the three variances: (1) the respective unabbreviated variance name (2) the amount of each variance (3) a designation of favorable (F) or unfavorable (U) for each variance

2 Problem 2. Diagnol Products sells stools for $42 each. Budgeted amounts for the first 3 months of 2019 appear below: January 17,400 units February 18,200 units March 16,300 units The company wants to have enough wood for stools on hand at the end of each month equal to 12% of the following month s production material needs, along with 9% of the next month s budgeted unit stool sales. Each stool requires 7.45 linear feet of wood. The wood costs $1.24 per linear foot. Each stool produced requires 18 minutes of direct labor. Employees are paid $13.25 per hour and an additional $1.15 per hour is incurred for fringe benefits. Manufacturing overhead is applied at $1.17 per direct labor dollar. Prepare each of the following for February in good form. A. Sales budget. B. Production budget C. Direct labor budget D. MOH budget.

3 Problem 3. Lawn-a-Rama produces lawn pockets. Its cost driver for overhead is the number of pockets. The following information was provided from the company s standard cost system information: Actual Data Standard and Budgeted Data Produced 3,240 cases Budgeted units 3,350 units Materials purchased 1,510 lbs. for a total of $6,946 Budgeted materials 0.44 $4.40 per lb. Materials used 1,494 lbs. Budgeted labor 0.65 $14.00 per hour Labor worked 2,100 hrs. costing $29,820 Budgeted variable overhead $18,559 Total fixed overhead $9,084 Budgeted fixed overhead $2.74 per case Total variable overhead $17,900 In good form, prepare a direct labor variance analysis, Within your variance matrix, provide the following for each of the three variances: (1) the respective unabbreviated variance name (2) the amount of each variance (3) a designation of favorable (F) or unfavorable (U) for each variance

4 Problem 4. Selected variances appear below. Variances A. favorable materials price variance H. favorable labor efficiency variance B. unfavorable materials price variance J. unfavorable labor efficiency variance C. favorable materials quantity variance K. favorable overhead controllable variance D. unfavorable materials quantity variance L. unfavorable overhead controllable variance E. favorable labor rate variance M. favorable overhead volume variance G. unfavorable labor rate variance O. unfavorable overhead volume variance Select the most likely variance that would result from each of the cases presented below by printing the CAPITAL letter of the most likely variance in the answer space provided. Select only the ONE best answer for each. If no variance would likely result directly from any case listed, print None in the answer space. Case 1. Employees worked less quickly than expected. Answer 2. The company produced fewer widgets than budgeted. 3. The factory janitor was paid more per hour than budgeted. 4. The company purchased fewer materials than it used during the period. 5. Employees used less indirect materials than expected. Problem 5. Paw Patrol produces nylon fiber dog collars and sells them for $17 each. Budgeted amounts for the first 3 months of 2019 appear below. Sales Production January 1,550 units 1,540 units February 1,470 units 1,488 units March 1,620 units 1,611 units Paw Patrol desires to have dog collars on hand at the end of each month equal to 12% of the following month s budgeted unit sales, and enough nylon fiber on hand to equal 14% of the material needs for the following month. Each dog collar requires 0.35 linear yards of nylon fiber. The cost of nylon fiber is $3.56 per linear yard. In good form, prepare a direct materials purchases budget for February in the space provided. (Omit the heading.) Show ALL calculations. Label line items clearly. Calculations: Show the calculation of the amount of Raw Materials Inventory on the February 28 balance sheet. Circle your answer.

5 Problem 6. Lawn-a-Rama produces lawn pockets. Its cost driver for overhead is the number of pockets. The following information was provided concerning the company s standard cost system: Actual Data Standard and Budgeted Data Produced 3,240 cases Budgeted units 3,350 units Materials purchased 1,510 lbs. for a total of $6,946 Budgeted materials Materials used 1,494 lbs. Budgeted labor Labor worked 2,100 hrs. costing $29,820 Total fixed overhead $9,084 Total variable overhead $17,900 Budgeted variable overhead Budgeted fixed overhead 0.44 $4.40 per lb $14.00 per hour $18,559 $2.74 per case In good form, prepare an overhead variance analysis, Within your variance matrix, provide labels for the three overhead variances including: (1) the respective unabbreviated variance name (2) the amount of each variance (3) a designation of favorable (F) or unfavorable (U) for each variance

6 Problem 7. Rantower Rockers provided the following information for the next 5 months: April May June July August Projected sales $107,000 $114,000 $106,000 $129,000 $124,000 Projected merchandise purchases 51,000 46,000 44,000 48,000 52,000 All sales are on account. Collections are estimated as follows: 28% during the month of sale; 53% in the month after the sale; 17% in the second month following the sale. Two percent of all sales are estimated to be bad debts. Uncollectible accounts are written off at 80 days after the end of the month in which the sales were recognized. The company pays 47% in the month acquired and the balance during the month after. The cash balance on June 1 is $17,400. The gross profit rate is 58%. General operating expenses are budgeted to be $37,000 in May, and will increase by $850 per month for the foreseeable future. Included in the budgeted amount is depreciation of $2,400. The company pays operating expenses 48% in the month incurred and the balance in the following month. The company make a $432 loan payment each month consisting of principal of $400 and $32 of interest. Income taxes are $5,960 for May and $6,443 for June. A. Show the calculation of budgeted cash disbursements during June. B. Show the calculation of the amount of cash that Rantower is expected to receive during June from customers. C. Show the calculation of the amount of cash that Rantower is expected to have on tis June 30 balance sheet.

7 Problem 8. Use the data from the previous problem. Show the calculation of the budgeted net income that Rantower is expected to report during June.

8 Problem 9. TechAll reported the following amounts for 2019: Actual labor cost $144,600 Flexible budget labor cost $142,200 Labor efficiency variance $1,876 F Static budget labor cost $142,700 TechAll employs management by exception and has a 1.26% materiality threshold. A. Interpret the labor efficiency variance as it applies to TechAll and whomever is responsible. B. Should the labor efficiency variance be investigated? Support your answer with calculations, and briefly justify why or why not. Problem 10. Seeko is manufacturing costs during April when the company harvested and packed 7,900 cases of limes appears below: Direct material per case $3.25 Direct labor per case 9 $14.20 per hour Factory supervisory salaries $0.32 per case Total variable overhead $1,185 Total factory occupancy 1,738 Total of other fixed factory costs 3,555 Show the calculation of the total flexible budget production cost when 7,600 cases are harvested and packed. Circle your answer.

9 Problem 11. Answer the following: A. Which variance is never investigated (do not abbreviate)? B. Concisely state why the variance in part A is never investigated. C. What causes the variance in part A to exist? D. What is meant by padding the budget? E. Why is the point of purchase the best time to compute material price variances? F. Which budgets are the responsibility of the production manager? G. Describe a standard cost. H. If a company utilizes management by exception, what occurs? I. What does an unfavorable labor efficiency variance coupled with a favorable material price variance often indicate?

10 Problem 12. Answer the following: A. When is a static budget most appropriate when evaluating a manager's performance? B. Name the costing method by which a company may develop a standard material price variance, a standard material quantity variance, a standard labor rate standard, and a standard labor price standard? C. Why budget is prepared first and why? Which is prepared last and why? D. Why does the amount of total operating expenses on a budgeted income statement not equal the cash paid for total operating expenses on a cash disbursements budget? E. Name the three basic types of budgets and the nature of each. F. Identify 5 characteristics of budgets. G. Name 4 aspects of managing of which budgets help managers? H. Name three items other than financial amounts that can be budgeted. I. For what is the budget committee responsible?

11 Problem 13. Answer the following: A. Describe the difference between top down and bottom up budgeting. B. What is the relationship between budget time period and the level of detail? C. What is unique to zero-based budgeting compared to other budget methods? D. Describe kaizen budgeting. E. What is goal incongruence and from what does it arise? F. What is income shifting and from what does it occur? G. Why is the production supervisor considered to be the one responsible for the labor efficiency variance?