Question

1. Which of the following costs are always irrelevant in decision making?

   	A.	avoidable costs
   	B.	sunk costs
   	C.	fixed costs
   	D.	opportunity costs

2. Lee Company's standards for the most recent period are given below. Fixed and variable manufacturing overhead costs are applied to products on the basis of machine hours. The denominator volume of machine hours is 9,000.

   	Standard Quantity or Hours per unit	Standard Price or Rate per unit	Standard Cost per unit
   Direct Materials	3 feet	$6 per foot	$18
   Direct Labor	1.5 direct labor hours	$10 per direct labor hour	$15
   Variable Overhead	2 machine hours	$12 per machine hour	$24
   Fixed Overhead	2 machine hours	$15 per machine hour	$30

   Actual costs for the most recent period, during which 5,000 units of output were actually produced and used 9,600 machine hours, are given below:

   Direct Materials	The firm purchased 16,000 feet at $6.30 per foot, but only used 14,500 feet in production.
   Direct Labor	The firm used 7,150 direct labor hours and paid $11 per direct labor hour.
   Variable Overhead	Actual variable overhead costs were $122,880.
   Fixed Overhead	Actual fixed overhead costs were $142,000.

   What was the company’s fixed overhead budget variance?

   	A.	$7,000 unfavorable
   	B.	$7,000 favorable
   	C.	$2,000 favorable
   	D.	$2,000 unfavorable

3. Division A of XYZ Co. produces units that can either be sold to outside customers or transferred to XYZ’s Division B. The following data are available from the last year:

               Division A

                           Production capacity in units                                             20,000

                           Selling price per unit to outside customers                   $25

                           Variable cost per unit   $15

                           Total fixed production and selling costs        $80,000

               Division B

                           Number of units needed annually   4,000

                           Price per unit paid to an outside supplier $18

   Suppose that the Division A can only sell 16,000 units annually to outside customers. If 4,000 units are transferred internally at a transfer price of $17, how much better off or worse off would the company as a whole be?

   	A.	$4,000 worse off
   	B.	$12,000 better off
   	C.	$4,000 better off
   	D.	$12,000 worse off

4. The amount of selling and administrative expenses for  A&A Co. is budgeted at $2,500 for June. These expenses include deprecation of $500 and other selling and administrative expenses that are expected to be paid in cash. What should be the amount of selling and administrative expense reported on the budgeted income statement for June?

   	A.	$3,500.
   	B.	$2,000.
   	C.	$3,000.
   	D.	$2,500.

Answer 1