ACCT 349 Week 4 Midterm

1.(TCO 5) The following information is available from the Taylor Company.

Actual factory overhead	$15,000
Fixed overhead expenses, actual	$7,200
Fixed overhead expenses, budgeted	$7,000
Actual hours	3,500
Standard hours	3,800
Variable overhead rate per direct labor hour	$2.50

Assuming that Taylor uses a three-way analysis of overhead variances, what is the spending variance?

(Points : 11)

2. (TCO 5) In an activity-based costing system, what should be used to assign a department’s manufacturing overhead costs to products produced in varying lot sizes? (Points : 11)

3. (TCO 1) An examination of Boener Company’s past maintenance records disclosed the following costs and volume measures the following.

	Highest	Lowest
Cost per month	$39,200	$32,000
Machine hours	24,000	15,000

Using the high-low technique, estimate the annual fixed cost for maintenance expenditures.

(Points : 11)

4. (TCO 1) Serendipity Co. uses regression analysis to develop a model for prediction overhead costs. Two different cost drivers (machine hours and direct materials weight) are under consideration as the independent variable. Relevant data were run on a computer using one of the standard regression programs, with the following results.

Machine hours	Coefficient
Y intercept	2,500
B	5.0
r-squared = .70
Direct materials weight
Y intercept	4,600
B	2.6
r-squared = .50

Which regression equation should be used?

(Points : 11)

5. (TCO 2) Relevant or differential cost analysis (Points : 11)

6. (TCO 2) McConnell is a manufacturer of industrial components. One of its products that is used as a subcomponent in auto manufacturing is JC-46. This product has the following financial structure per unit.

Selling price	$150
Direct materials	20
Direct labor	15
Variable manufacturing overhead	12
Fixed manufacturing overhead	30
Shipping and handling	3
Fixed selling and administrative	10
Total costs	$ 90

McConnell has received a special, one-time order for 1,000 JC-46 parts. Assuming McConnell has excess capacity, the minimum price that is acceptable for this one-time special order must be greater than

(Points : 11)

7. (TCO 5) Janice Foeld Company manufactures part Z for use in its production cycle. The costs per unit for 10,000 units of part Z are as follows.

Direct materials	$3
Direct labor	15
Variable overhead	6
Fixed overhead	8
TOTAL	$32

Baloney Company has offered to sell Janice Foeld 10,000 units of part Z for $30 per unit. If Janice Foeld accepts Baloney’s offer, the released facilities can be used to save $45,000 in relevant costs in the manufacture of part A. In addition, $5 per unit of the fixed overhead applied to part Z would be totally eliminated.

The total relevant costs to buy part Z are

(Points : 11)

8. (TCO 2) Bieber Company has excess capacity on two machines, 24 hours on Machine 105 and 16 hours on Machine 107. To use this excess capacity, the company has two products, known as Product D and Product F, that must use both machines in manufacturing. Both have excess product demand, and the company can sell as many units as it can manufacture. The company’s objective is to maximize profits.

Product D has an incremental profit of $6 per unit, and each unit utilizes 2 hours of time on Machine 105 and then 2 hours of time on Machine 107. Product F has an incremental profit of $7 per unit, and each unit utilizes 3 hours of time on Machine 105 and then 1 hour of time on machine 107. Let D be the number of units for Product D, F be the number of units for product F, and P be the company’s profit.

A feasible solution for Bieber Company is (Points : 11)

9. (TCO 4) Which of the following criteria would be most useful to a sales department manager in evaluating the performance of the manager’s customer service group? (Points : 11)

10. (TCO 6) The sales quantity variance equals (Points : 11)

11. (TCO 6) The following are relevant data for calculating sales variances for Lumber Co., which sells its sole product in two countries.

	John	Quincy	Total
Budgeted selling price per unit	$6.00	$10.00	NA
Budgeted variable cost per unit	3.00	7.50	NA
Budgeted contribution margin per unit	$3.00	$ 2.50	NA
Budgeted unit sales	300	200	500
Budgeted mix percentage	60%	40%	100%
Actual units sold	260	260	520
Actual selling price per unit	$6.00	$9.50	NA

The sales volume variance for John and Quincy is

(Points : 11)

12. (TCO 4) Nonfinancial performance measures are important to engineering and operations managers in assessing the quality levels of their products. Which of the following indicators can be used to measure product quality?

I. Returns and allowances
II. Number and types of customer complaints

III. Production cycle time (Points : 11)

13. (TCO 6) For a single-product company, the sales volume variance is (Points : 11)

14. (TCO 5) Variable factory overhead is applied on the basis of standard direct labor hours. If, for a given period, the direct labor efficiency variance is unfavorable, the variable factory overhead efficiency variance will be (Points : 11)

15. (TCO 1) Bubba company has developed a learning (improvement) curve for one of its newer processes from its accounting and production records. Management asked for an internal audit to review the curve. Which of the following events tend to mitigate the effects of the learning curve? (Points : 11)

1.(TCO 3) How do companies determine target costs? (Points : 15)

2. (TCO 2) How and why are capacity constraints relevant when trying to decide which products to produce? (Points : 35)

3. (TCO 1) Outline the six steps involved in estimating a cost function using quantitative analysis. (Points : 35)