Question

59.

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	$	4.30			$	8,600
Direct Labor 2 hrs. @ $2.50		5.00				10,500
Factory Overhead:
Variable		1.70				3,570
Fixed		5.00				10,500
	$	16.00			$	33,170

Variances:
Material price	330.00		unfavorable
Material quantity	860.00		unfavorable
Labor rate	600.00		favorable
Labor efficiency	2,200.00		unfavorable

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

$4.45.

$4.90.

$4.69.

$4.30.

60.

Martin Company currently manufactures all component parts used in the manufacture of various hand tools. The Extruding Division produces a steel handle used in three different tools. The budget for these handles is 136,000 units with the following unit cost.

Direct material	$	0.92
Direct labor		0.56
Variable overhead		0.58
Fixed overhead		0.20
Total unit cost	$	2.26

Polishing Division purchases 15,000 handles from the Extruding Division and completes the hand tools. An outside supplier, Venture Steel, has offered to supply 15,000 units of the handle to Polishing Division for $2.18 per unit. The Extruding Division currently has idle capacity that cannot be used.

What is the cost impact to Martin as a whole of purchasing from Venture Steel? (CMA adapted)

decrease the handle unit cost by $0.70.

increase the handle unit cost by $0.08.

increase the handle unit cost by $0.12.

decrease the handle unit cost by $0.12.

74.

Reyes Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $271,150, budgeted machine-hours were 18,700. Actual factory overhead was $239,830, actual machine-hours were 17,350. How much overhead would be applied to production?

$251,575.

$271,150.

$258,491.

$239,830.

75.

The following information was presented by User-Friendly Industries Company for an asset purchased at the beginning of the previous year.

Original cost of the asset	$	22,000
Useful life of the asset		10	years
Annual operating profit, including depreciation	$	4,800
Salvage value	$	-0-

What is the return on investment (ROI) assuming User-Friendly (a) uses the straight-line method for depreciation and (b) beginning-of-year net book values to compute ROI?

27.9%.

21.8%.

24.2%

11.1%.

Answer 1

Ans 59
Material Qty variance
(4.3*AQ)-8600=860
AQ=(8600+860)/4.3	2200
Material Price varaince
(AQ*AR)-(2200*4.3)=330
AR=(330+9460)/2200	4.45
Option A $4.45 is correct
ans 60
Outside supplier	$2.18
Less: Relevant cost (.92+.56+.58)	2.06
Increase the handle unit cost	$0.12
Option C
Increase the handle unit cost	$0.12
ans 74
Budgeted Overhead rate per hour	14.5
271150/18700
Applied overhead	251575
17350*14.5
Option A $251575
ans 75
ROI= 4800/19800*100	24.2
Depreciation per year
22000/10	2200
Beginnning book value 22000-2200	19800
Option C 24.2%
If any doubt please comment.