Question

1. Holo Company reported the following financial numbers for one of its divisions for the year; average total assets of $6,600,000; sales of $7,775,000; cost of goods sold of $4,025,000; and operating expenses of $1,467,000. Compute the division's return on investment:

• 18.9%

• 27.7%.

• 34.6%.

• 32.0%.

• 29.36%.

2. A granary allocates the cost of unprocessed wheat to the production of feed, flour, and starch. For the current period, unprocessed wheat was purchased for $260,000, and the following quantities of product and sales revenues were produced.

Product	Pounds		Price per Pound
Feed	150,000		$	2.20
Flour	44,000			2.60
Starch	14,000			7.00

How much of the $260,000 cost should be allocated to feed if the value basis is used?

• $330,000.

• $158,600.

• $200,000.

• $260,000.

• $0.

3. A company uses the following standard costs to produce a single unit of output.

Direct materials	8 pounds at $1.2 per pound	=	$	9.60
Direct labor	0.20 hour at $8.00 per hour	=	$	1.60
Manufacturing overhead	0.20 hour at $3.10 per hour	=	$	.62

During the latest month, the company purchased and used 78,000 pounds of direct materials at a price of $1.40 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $13,575 based on 1,810 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $3,200 and fixed manufacturing overhead incurred was $15,000. Based on this information, the direct materials quantity variance for the month was:

• $2,400 unfavorable

• $2,000 favorable

• $2,400 favorable

• $15,600 favorable

• $15,600 unfavorable

4. Fletcher Company collected the following data regarding production of one of its products. Compute the total direct materials cost variance.

Direct materials standard (4 lbs. @ $6/lb.)	$	24		per finished unit
Actual direct materials used		82,000		lbs.
Actual finished units produced		20,000		units
Actual cost of direct materials used	$	483,920

• $3,920 favorable.

• $12,000 unfavorable.

• $3,920 unfavorable.

• $12,000 favorable.

• $8,080 favorable.

Answer 1

1) Net income = 7775000-4025000-1467000 = 2283000

Return on investment = Net income/Operating assets = 2283000/6600000 = 34.59%

So answer is c) 34.6%

2) Allocation Rate = 330000/542400 = 61%

Joint Cost allocated to Feed on value based = 260000*61% = 158600

So answer is b) $158600

3) Direct material quantity variance = (SQ-AQ)SP = (10000*8-78000)*1.2 = 2400 F

So answer is c) $2400 F

4) Direct material Cost variance = (20000*24-483920) = 3920 U

So answer is c) $3920 Unfavorable