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Ex. 187 Lapp Manufacturing uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $200,000 to $240,000. Variable costs and their percentage relationships to sales are: Sales commissions6% Advertising4% Traveling5% Delivery1% Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment $10,000. Instructions Prepare a flexible budget for increments of.
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S-A E  222(Ethics) Dixon Corporation evaluates its managers based on return on investment (ROI). Kathryn Bricker and Lindsey Allan, managers of the electronics and housewares departments respectively, have recently suffered from declining profits in their departments. Over lunch, they discuss the problem, and how they could improve performance. Most of the.
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Ex. 195 The Deluxe Division, a profit center of Riley Manufacturing Company, reported the following data for the first quarter of 2012: Sales$6,000,000 Variable costs4,200,000 Controllable direct fixed costs800,000 Noncontrollable direct fixed costs530,000 Indirect fixed costs200,000 Instructions (a)Prepare a performance report for the manager of the Deluxe Division. (b)What is the best measure of the manager's performance?  Why? (c)How would.
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Ex. 189 A flexible budget graph for the Assembly Department shows the following: 1.At zero direct labor hours, the total budgeted cost line intersects the vertical axis at $60,000. 2.At normal capacity of 50,000 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $180,000. Instructions Develop the.
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Ex. 181 Beal Manufacturing Co.'s static budget at 6,000 units of production includes $36,000 for direct labor and $6,000 for direct materials. Total fixed costs are $24,000. Instructions a.Determine how much would appear on Beal's flexible budget for 2012 if 9,000 units are produced and sold. b.How would this comparison differ if a static.
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COMPLETION STATEMENTS               205.The use of budgets in controlling operations is known as ________________.               206.A major aspect of budgetary control is the use of budget reports that compare _____________________ with _______________________.               207.In analyzing differences from planned objectives, management may take ___________________, or it could decide to modify ___________________.               208.The master budget.
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BRIEF EXERCISES BE 168 Devlin Manufacturing makes a single product. Expected manufacturing costs are as follows: Variable costs Direct materials$5.50 per unit Direct labor2.40 per unit Manufacturing overhead1.10 per unit Fixed costs per month Supervisory salaries$13,600 Depreciation3,500 Other fixed costs2,200 Instructions Determine the amount of manufacturing costs for a flexible budget level of 3,200 units per month. BE 169 Wind Productions uses flexible budgets..
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128.An investment center generated a contribution margin of $200,000, fixed costs of $100,000 and sales of $1,000,000. The center’s average operating assets were $500,000. How much is the return on investment? a.20% b.140% c.40% d.60% 129. Rhein Manufacturing recorded operating data for its auto accessories division for the year. Sales$375,000 Contribution margin75,000 Total direct fixed costs45,000 Average total operating.
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Ex. 193 Data concerning manufacturing overhead for Wilson Industries are presented below. The Mixing Department is a cost center. An analysis of the overhead costs reveals that all variable costs are controllable by the manager of the Mixing Department and that 50% of supervisory costs are controllable at the department level. Ex. 193(Cont.) The.
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BE 195 In October, Glazier Inc. reports 42,000 actual direct labor hours, and it incurs $196,000 of manufacturing overhead costs. Standard hours allowed for the work done is 40,000 hours. Glazier’s predetermined overhead rate is $5.00 per direct labor hour. Instructions Compute the total manufacturing overhead variance. BE 196 Overhead data for Glazier Inc. are.
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              69.The total standard cost to produce one unit of product is shown a.at the bottom of the income statement. b.at the bottom of the balance sheet. c.on the standard cost card. d.in the Work in Process Inventory account.               70.An unfavorable materials quantity variance would occur if a.more materials were purchased than were used. b.actual pounds.
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Ex. 200 Perez Corp. reported the following: Beginning of year operating assets$2,200,000 End of year operating assets2,000,000 Contribution margin1,000,000 Sales5,000,000 Controllable fixed costs643,000 Its required return is 10%. Instructions Compute the company’s ROI. Ex. 201 Lombard, Inc. has two investment centers and has developed the following information: Department ADepartment B Departmental controllable margin$200,000? Average operating assets?$500,000 Sales800,000250,000 ROI10%16% Instructions Answer the following questions about Department A and Department.
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a159.If a company incurs direct labor cost of $41,000 when the standard cost is $42,000, it will a.debit Labor Price Variance for $1,000. b.credit Labor Price Variance for $1,000. c.debit Labor Quantity Variance for $1,000. d.credit Labor Quantity Variance for $1,000.               a160.If a company assigns factory labor to production at a cost of $42,000.
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Ex. 194 Strickland Corp.'s manufacturing overhead budget for the first quarter of 2012 contained the following data: Variable Costs Indirect materials$24,000 Indirect labor12,000 Utilities14,000 Maintenance6,000 Ex. 194(Cont.) Fixed Costs Supervisor's salary$40,000 Depreciation8,000 Property taxes4,500 Actual variable costs for the first quarter were: Indirect materials$23,300 Indirect labor13,200 Utilities14,900 Maintenance5,300 Actual fixed costs were as expected except for property taxes which were $4,800. All costs are considered controllable by.
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Ex. 186 Webb, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: Indirect labor$6.00 Indirect materials2.50 Maintenance.80 Utilities.30 Fixed overhead costs per month are: Supervision$600 Insurance200 Property taxes300 Depreciation900 The company believes it will normally operate in a range of 2,000 to 4,000 machine hours per month. During.
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139.Which of the following is true? a.The form, content, and frequency of variance reports vary considerably among companies. b.The form, content, and frequency of variance reports do not vary among companies. c.The form and content of variance reports vary considerably among companies, but the frequency is always weekly. d.The form and content of variance.
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Ex. 203 Engines Done Right Co. is trying to establish the standard labor cost of a typical engine tune-up. The following data have been collected from time and motion studies conducted over the past month. Actual time spent on the tune-up1.0 hour Hourly wage rate$12 Payroll taxes10% of wage rate Setup and downtime10% of actual.
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MATCHING 217.Match the items below by entering the appropriate code letter in the space provided. A.Budgetary control              G.              Responsibility reporting system B.Static budget              H.              Return on Investment C.Flexible budget              I.              Profit center D.Responsibility accounting              J.              Investment center E.Controllable costs              K.              Indirect fixed costs F.Management by exception              L.              Direct fixed costs ____              1.The review of budget reports by top.
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a179.The following information was taken from the annual manufacturing overhead cost budget of Fergie Manufacturing. Variable manufacturing overhead costs$69,300 Fixed manufacturing overhead costs$41,580 Normal production level in labor hours23,100 Normal production level in units5,775 Standard labor hours per unit4 During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was.
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Ex. 184 Berne, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: Indirect labor$6.00 Indirect materials2.50 Maintenance.80 Utilities.30 Fixed overhead costs per month are: Supervision$600 Insurance200 Property taxes300 Depreciation900 The company believes it will normally operate in a range of 2,000 to 4,000 machine hours per month. Instructions Prepare a.
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BRIEF Exercises BE 191 Seven Manufacturing Corporation uses both standards and budgets. The company estimates that production for the year will be 200,000 units of Product Fast. To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor. Instructions Compute the estimates for (a) a standard.
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Ex. 183 Copper Manufacturing has prepared the following monthly flexible manufacturing overhead budget for its Mixing Department: COPPER MANUFACTURING Monthly Flexible Manufacturing Overhead Budget Mixing Department Activity level Direct labor hours3,0004,000 Variable costs Indirect materials$  1,500$  2,000 Indirect labor15,00020,000 Factory supplies    4,500    6,000 Total variable  21,000  28,000 Fixed costs Depreciation20,00020,000 Supervision10,00010,000  Property taxes  15,000  15,000 Total fixed  45,000  45,000 Total costs$66,000$73,000 Instructions Prepare a flexible budget at the 5,000.
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MULTIPLE CHOICE QUESTIONS               39.What is a standard cost? a.The total number of units times the budgeted amount expected b.Any amount that appears on a budget c.The total amount that appears on the budget for product costs d.The amount management thinks should be incurred to produce a good or service               40.A standard cost is a.a cost.
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              99.A company uses 8,400 pounds of materials and exceeds the standard by 400 pounds. The quantity variance is $1,200 unfavorable. What is the standard price? a.$1.00 b.$2.00 c.$3.00 d.Cannot be determined from the data provided.               100.A company purchases 20,000 pounds of materials. The materials price variance is $3,000 favorable. What is the difference.
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Ex. 192 Campbell Clothing produces men's ties. The following budgeted and actual amounts are for 2011: CostBudget at 5,000 UnitsActual Amounts at 5,800 Units Direct materials$55,000$65,000 Direct labor70,00081,000 Equipment depreciation5,0005,000 Indirect labor7,5008,600 Indirect materials9,0009,600 Rent and insurance12,00013,000 Instructions Prepare a performance budget report for Campbell Clothing for the year.         .
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              11.Once set, normal standards should not be changed during the year. 12.In developing a standard cost for direct materials, a price factor and a quantity factor must be considered.               13.A direct labor price standard is frequently called the direct labor efficiency standard.               14.The standard predetermined overhead rate must be based.
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`TRUE-FALSE STATEMENTS               1.Inventories cannot be valued at standard cost in financial statements.               2.Standard cost is the industry average cost for a particular item.               3.A standard is a unit amount, whereas a budget is a total amount.               4.Standard costs may be incorporated into the accounts in the general ledger.               5.An advantage.
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Ex. 188 Cadiz Co. uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $300,000 to $360,000. Variable costs and their percentage relationships to sales are: Sales commissions5% Advertising4% Traveling7% Delivery1% Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment $10,000. The actual selling expenses incurred in February,.
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EXERCISES Ex. 180 Clark Company's master budget reflects budgeted sales information for the month of June, 2012, as follows: Budgeted QuantityBudgeted Unit Sales Price Product A20,000$7 Product B24,000$9 During June, the company actually sold 19,000 units of Product A at an average unit price of $7.20 and 24,500 units of Product B at an average unit.
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138.Return on investment is calculated by dividing a.contribution margin by sales. b.controllable margin by sales. c.contribution margin by average operating assets. d.controllable margin by average operating assets.               139.Which one of the following will not increase return on investment? a.Variable costs are increased b.An increase in sales c.Average operating assets are decreased d.Variable costs are decreased               140.If an investment.
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Ex. 203 Data for the following subsidiaries of Olive Manufacturing, which are operated as investment centers, are as follows: Fleming CompanyOak Company Sales$3,000,000$2,000,000 Controllable margin(1)(3) Average operating assets(2)6,000,000 Contribution margin800,000990,000 Controllable fixed costs200,000150,000 Return on Investment10%(4) Instructions Compute the missing amounts using the ROI formula. Ex. 204 The data for an investment center is given below.     1/1/11    12/31/11  Current assets$   300,000$   500,000 Plant assets3,000,0004,000,000 Idle.
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119.A company purchases 15,000 pounds of materials. The materials price variance is $6,000 favorable. What is the difference between the standard and actual price paid for the materials? a.$2.00 b.$.40 c.$2.50 d.$10.00               120.A company uses 40,000 gallons of materials for which they paid $9.00 a gallon. The materials price variance was $80,000 favorable.  What.
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              49.Using standard costs a.can make management planning more difficult. b.promotes greater economy. c.does not help in setting prices. d.weakens management control.               50.If standard costs are incorporated into the accounting system, a.it may simplify the costing of inventories and reduce clerical costs. b.it can eliminate the need for the budgeting process. c.the accounting system will produce information.
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149.In Zero Company’s income statement, they report actual gross profit of $47,500 and the following variances: Materials price $   420F Materials quantity600F Labor price420U Labor quantity 1,000F Overhead900F Zero would report gross profit at standard of a.$41,660. b.$42,500. c.$45,000. d.$48,340.               150.The balanced scorecard a.incorporates financial and nonfinancial measures in an integrated system. b.is based on financial measures. c.is based on nonfinancial measures. d.does not.
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a169.If the standard hours allowed are less than the standard hours at normal capacity, a.the overhead volume variance will be unfavorable. b.variable overhead costs will be underapplied. c.the overhead controllable variance will be favorable. d.variable overhead costs will be overapplied.               a170.Which of the following statements about overhead variances is false? a.Standard hours allowed are used.
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              21.The overhead controllable variance relates primarily to fixed overhead costs.               22.The overhead volume variance relates only to fixed overhead costs.               23.If production exceeds normal capacity, the overhead volume variance will be favorable.               24.There could be instances where the production department is responsible for a direct materials price variance.               25.The.
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              59.The two levels that standards may be set at are a.normal and fully efficient. b.normal and ideal. c.ideal and less efficient. d.fully efficient and fully effective.               60.The most rigorous of all standards is the a.normal standard. b.realistic standard. c.ideal standard. d.conceivable standard.               61.Most companies that use standards set them at a.the normal level. b.a conceivable level. c.the ideal level. d.last year's.
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SHORT-ANSWER ESSAY QUESTIONS S-A E  218 The master budget and flexible budgets are important aids to management in performing the management functions of planning and control. Briefly describe how planning and control are facilitated by preparing a master budget and flexible budgets. How are these two types of budgets interrelated with planning.
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Exercises Ex 201 Sonic, Inc. is planning to produce 3,000 units of product in 2012. Each unit requires 3 pounds of materials at $6 per pound and a half hour of labor at $16 per hour. The overhead rate is 75% of direct labor. Instructions (a)Compute the budgeted amounts for 2012 for direct materials.
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Ex. 185 Telemark Production's manufacturing costs for July when production was 1,000 units appears below: Direct materials$10 per unit Factory depreciation$8,000 Variable overhead5,000 Direct labor2,000 Factory supervisory salaries5,800 Other fixed factory costs1,500 Instructions How much is the flexible budget manufacturing cost amount for a month when 1,100 units are produced?       .
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Ex. 198 The Pacific Division of Henson Industries reported the following data for the current year. Sales$4,000,000 Variable costs2,600,000 Controllable fixed costs800,000 Average operating assets6,000,000 Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the Pacific Division to submit plans to improve ROI in the next year. The.
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158.A static budget report is appropriate for a.fixed manufacturing costs. b.fixed selling and administrative expenses. c.variable selling and administrative expenses. d.both fixed manufacturing costs and fixed selling and administrative expenses. 159.Sydney, Inc. uses flexible budgets. At normal capacity of 8,000 units, budgeted manufacturing overhead is $64,000 variable and $180,000 fixed. If Sydney had actual overhead.
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              79.Which of the following statements is true? a.Variances are the differences between total actual costs and total standard costs. b.When actual costs exceed standard costs, the variance is favorable. c.An unfavorable variance results when actual costs are decreasing but standards are not changed. d.All of the above are true.               80.Unfavorable materials price and.
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BE 173 Moss Corp. reported the following items for 2012: Controllable fixed costs$  77,000 Contribution margin142,000 Interest expense20,000 Variable costs     80,000 Total assets$925,000 BE 173(Cont.) Instructions Compute the controllable margin for 2012. BE 174 The data for an investment center is given below. January 1, 2012December 31, 2012 Current Assets$   400,000$   800,000 Plant Assets3,000,0003,800,000 The controllable margin is $520,000. Instructions Compute the return on investment.
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Ex. 196 Danner Co. has three divisions which are operated as profit centers. Actual operating data for the divisions listed alphabetically are as follows.       Operating Data      Women's ShoesMen's ShoesChildren's Shoes Contribution margin$210,000(3)$200,000 Controllable fixed costs  100,000(4)      (5) Controllable margin     (1)$  90,000    96,000 Sales  600,000  480,000      (6) Variable costs     (2)  330,000  250,000 Instructions (a)Compute the missing amounts. Show computations. (b)Prepare.
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              31.In concept, standards and budgets are essentially the same.               32.Standards may be useful in setting selling prices for finished goods.               33.The materials price standard is based on the purchasing department's best estimate of the cost of raw materials.               34.The materials price variance is normally caused by the production department.              .
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              89.The standard rate of pay is $10 per direct labor hour. If the actual direct labor payroll was $58,800 for 6,000 direct labor hours worked, the direct labor price (rate) variance is a.$1,200 unfavorable. b.$1,200 favorable. c.$1,500 unfavorable. d.$1,500 favorable.               90.The standard number of hours that should have been worked for the output.
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a148.The following information is available for Halle Department Stores: Average operating assets$500,000 Controllable margin50,000 Contribution margin125,000 Minimum rate of return8% How much is Halle’s residual income? a.$85,000 b.$450,000 c.$10,000 d.$40,000 a149.What is the goal of residual income? a.To maximize the amount of costs which are controllable b.To maximize profits c.To maximize the total amount of residual income d.To maximize controllable margin a150.Which one of the.
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109.An unfavorable labor quantity variance may be caused by a.paying workers higher wages than expected. b.misallocation of workers. c.worker fatigue or carelessness. d.higher pay rates mandated by union contracts.               110.The investigation of materials price variance usually begins in the a.first production department. b.purchasing department. c.controller's office. d.accounts payable department.               111.The investigation of a materials quantity variance usually begins.
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