MGMT-027 Q4 17. The purpose of a flexible budget is to: C. update the static planning budget to reflect the actual level of activity of the period. 21. Salyers Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below: The Inn's variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 53 guests? A. $7,159.20 Variable cost per guest for supplies = $148.20 57 guests = $2.60 per guest Variable cost per guest for laundry = $216.60 57 guests = $3.80 per guest
22. Stock Manufacturing Corporation has prepared the following overhead budget for next month. The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 6,600 machine-hours rather than 6,900 machine-hours? C. $84,860.00 Variable cost per MH for supplies = $21,390 6,900 MHs = $3.10 per MH Variable cost per MH for indirect labor = $41,400 6,900 MHs = $6.00 per MH
23. Gummer Hospital bases its budgets on patient-visits. The hospital's static budget for February appears below: The total overhead cost at an activity level of 10,800 patient-visits per month should be: D. $302,850 39. Sissac Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $470 per month plus $101 per job plus $24 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in May to be 12 jobs and 123 meals, but the actual activity was 9 jobs and 126 meals. The actual cost for catering supplies in May was $4,240. The spending variance for catering supplies in May would be closest to: C. $163 F Because the actual expense is less than the flexible budget, the variance is favorable (F).
42. Brayboy Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,360 square feet and the actual level of activity was 1,300 square feet. The company's owner budgets for supply costs, a variable cost, at $3.90 per square foot. The actual supply cost last month was $4,300. In the company's flexible budget performance report for last month, what would have been the spending variance for supply costs? A. $770 F Because the actual expense is less than the flexible budget; the variance is favorable (F). Bamba Corporation's cost formula for its selling and administrative expense is $47,900 per month plus $52 per unit. For the month of April, the company planned for activity of 6,000 units, but the actual level of activity was 5,960 units. The actual selling and administrative expense for the month was $364,490. 51. The selling and administrative expense in the planning budget for April would be closest to: B. $359,900 Cost = Fixed cost + Variable cost per unit q = $47,900 + $52 6,000 = $359,900 52. The selling and administrative expense in the flexible budget for April would be closest to: C. $357,820 Cost = Fixed cost + Variable cost per unit q = $47,900 + $52 5,960 = $357,820 53. The activity variance for selling and administrative expense in April would be closest to: B. $2,080 F Because the flexible budget is less than the planning budget, the variance is favorable (F).
54. The spending variance for selling and administrative expense in April would be closest to: C. $6,670 U Because the actual expense is greater than the flexible budget, the variance is unfavorable (U). 11. When computing standard cost variances, the difference between actual and standard price multiplied by actual quantity yields a(n): C. price variance. Materials price variance = AQ (AP - SP) 18. If the labor efficiency variance is unfavorable, then A. actual hours exceeded standard hours allowed for the actual output. Labor efficiency variance = (AH - SH) SR. An unfavorable variance occurs if AH > SH. 24. Last month 75,000 pounds of direct material were purchased and 71,000 pounds were used. If the actual purchase price per pound was $0.50 more than the standard purchase price per pound, then the materials price variance was: C. $37,500 U Materials price variance = (AQ AP) - (AQ SP) = AQ (AP - SP) = 75,000 pounds $0.50 per pound = $37,500 U 25. The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: What is the materials quantity variance for the month? D. $20,230 F SQ = 7.3 pounds per unit 1,000 units = 7,300 pounds Materials quantity variance = (AQ - SQ) SP = (5,900 pounds - 7,300 pounds) $14.45 per pound = (-1,400 pounds) $14.45 per pound = $20,230 F
30. The following labor standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: What is the labor efficiency variance for the month? B. $13,530 U SH = 1,500 units 4 hours per unit = 6,000 hours Labor efficiency variance = (AH - SH) SR = (7,100 hours - 6,000 hours) $12.30 per hour = (1,100 hours) $12.30 per hour = $13,530 U 13. Turnover is computed by dividing average operating assets into: D. sales. 16. Which of the following is not an operating asset? D. Common stock 21. The purpose of the Data Processing Department of Falena Corporation is to assist the various departments of the corporation with their information needs free of charge. The Data Processing Department would best be evaluated as a: A. cost center. 26. A company's current net operating income is $16,800 and its average operating assets are $80,000. The company's required rate of return is 18%. A new project being considered would require an investment of $15,000 and would generate annual net operating income of $3,000. What is the residual income of the new project? D. $300 27. Soderquist Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 11%. In April, the Commercial Products Division had average operating assets of $100,000 and net operating income of $9,400. What was the Commercial Products Division's residual income in April? A. -$1,600
28. In August, the Universal Solutions Division of Jugan Corporation had average operating assets of $670,000 and net operating income of $77,500. The company uses residual income, with a minimum required rate of return of 12%, to evaluate the performance of its divisions. What was the Universal Solutions Division's residual income in August? B. -$2,900 31. Galanis Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: The throughput time was: C. 14.1 hours Throughput time = Process time + Inspection time + Move time + Queue time = 1.4 hours + 0.4 hours + 3.6 hours + 8.7 hours = 14.1 hours Aide Industries is a division of a major corporation. Data concerning the most recent year appears below: 36. The division's margin is closest to: B. 5.0% Margin = Net operating income Sales = $870,000 $17,400,000 = 5.0% 37. The division's turnover is closest to: B. 4.35 Turnover = Sales Average operating assets = $17,400,000 $4,000,000 = 4.35