Question

43. Reyes Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $273,020, budgeted machine-hours were 18,700. Actual factory overhead was $289,920, actual machine-hours were 19,250. How much overhead would be applied to production?

$281,637.

$289,920.

$273,020.

$281,050.

44. Dockside Enterprises, Inc., operates two divisions: (1) a management division that owns and manages bulk carriers on the Great Lakes and (2) a repair division that operates a dry dock in Tampa, Florida. The repair division works on company ships, as well as other large-hull ships. The repair division has an estimated variable cost of $31 per labor-hour. The repair division has a backlog of work for outside ships. They charge $71 per hour for labor, which is standard for this type of work. The management division complained that it could hire its own repair workers for $41 per hour, including leasing an adequate work area.

What is the maximum transfer price per hour that the management division should pay?

$31.

$40.

$71.

$41.

45. The following information summarizes the standard cost for producing one metal tennis racket frame at Spaulding Industries. In addition, the variances for one month's production are given. Assume that all inventory accounts have zero balances at the beginning of the month.

	Standard Cost Per Unit				Standard Monthly Costs
Materials	$	4.00			$	8,500
Direct Labor 3 hrs. @ $2.50		7.50				15,000
Factory Overhead:
Variable		1.60				3,200
Fixed		5.10				10,200
	$	18.20			$	36,900

Variances:
Material price	337.50		unfavorable
Material quantity	500.00		unfavorable
Labor rate	550.00		favorable
Labor efficiency	2,150.00		unfavorable

What was the actual price paid for the direct material during the month, assuming all materials purchased were put into production?

$4.39.

$4.15.

$4.00.

$4.22.

Answer 1

Solution 43:

Predetermined overhead rate = Budgeted overhead / Budgeted machine hours = $273,020 / 18700 = $14.60 per machine hour

Overhead applied = Actual machine hours * Overhead rate = 19250*$14.60 = $281,050

Hence last option is correct.

Solution 44:

Maximum transfer price that management division should pay is hiring cost of own repair workers = $41 per hour

Hence last option is correct.

Solution 45:

Actual cost of material = Standard cost + Unfavorable material price variance + Unfavorable material quantity variance

= $8,500 + $337.50 + $500 = $9,337.50

Standard Quantity of material = $8,500 / $4 = 2125 units

Material quantity variance = $500 U

(SQ - AQ) * SP = -$500

(2125 - AQ) * $4 = - $500

Actual quantity purchased and used = 2250 units

Actual price paid for direct material = $9,337.50 / 2250 = $4.15 per unit

Hence 2nd option is correct.