Question

1. The starting point for the Direct Labor Budget is:

Multiple Choice

• the materials to be purchased from the direct materials budget.

• the units to be sold from the sales budget.

• the ending inventory from the budgeted balance sheet.

• the units to be produced from the production budget.

2. Leaf Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $117,000, variable manufacturing overhead of $2.00 per machine-hour, and 30,000 machine-hours. The company has provided the following data concerning Job P978 which was recently completed:

Number of units in the job		20
Total machine-hours		80
Direct materials	$	500
Direct labor cost	$	2,640

The predetermined overhead rate is closest to:

Multiple Choice

• $3.90 per machine-hour

• $5.90 per machine-hour

• $4.90 per machine-hour

• $2.00 per machine-hour

3. A $2.00 increase in a product's variable expense per unit will:

Multiple Choice

• increase the contribution margin.

• decrease the units sold needed to earn a target profit.

• have no effect on the contribution margin ratio.

• increases the units sold needed to breakeven.

3. Bracken Clinic uses client-visits as its measure of activity. During September, the clinic budgeted for 2,140 client-visits, but its actual level of activity was 2,100 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for September:

Data used in budgeting:

	Fixed element per month			Variable element per client-visit
Revenue				$	44.50
Personnel expenses	$	26,100		$	12.60
Medical supplies		600			7.20
Occupancy expenses		6,500			2.40
Administrative expenses		3,100			0.10
Total expenses	$	36,300		$	22.30

Actual results for September:

Revenue	$	93,240
Personnel expenses	$	50,754
Medical supplies	$	15,328
Occupancy expenses	$	11,646
Administrative expenses	$	3,394

The revenue variance for September would be closest to:

Multiple Choice

• $1,990 F

• $210 F

• $210 U

• $1,990 U

Answer 1

1

The starting point for the Direct Labor Budget is the units to be produced from the production budget.

Units to be produced are used to determine the labor hours required for production.

Option D is correct

2
Predetermined overhead rate	5.90	=2+(117000/30000)
Option B $5.90 per machine-hour is correct

3

A $2.00 increase in a product's variable expense per unit will increase the units sold needed to breakeven.

Increase in variable expense per unit will decrease the contribution margin,as a result breakeven units will increase.

Option D is correct

4
Actual Revenue	93240
Less: Revenue in Flexible budget	93450	=2100*44.50
Revenue variance for September	210	U
Option C $210 U is correct