Accounting Seven Problems Set. Problem
1. Standard and actual costs for direct materials for the manufacture of 1,000 units of product were as follows:
| Actual costs | 1,550 lbs. @ $9.10 |
| Standard costs | 1,600 lbs. @ $9.00 |
Determine the (a) quantity variance, (b) price variance, and (c) total direct materials cost variance.
2. Standard and actual costs for direct labor for the manufacture of 1,000 units of product were as follows:
| Actual costs | 950 hours @ $37.00 |
| Standard costs | 975 hours @ $36.00 |
Determine the (a) time variance, (b) rate variance, and (c) total direct labor cost variance.
3. A department store apportions payroll costs on the basis of the number of payroll checks issued. Accounting costs are apportioned on the basis of the number of reports. The payroll costs for the year were $231,000 and the accounting costs for the year totaled $75,500. The departments and the average cost of store equipment and average cost of inventory for each are as follows:
| Number of
Payroll Checks |
Number
of Reports |
|
| Department R | 483 | 70 |
| Department S | 1,470 | 85 |
| Department T | 147 | 345 |
Determine the amount of (a) payroll cost and (b) accounting cost to be apportioned to each department.
4. The sales, income from operations, and invested assets for each division of Grosbeak Company are as follows:
|
Sales |
Income from
Operations |
Invested
Assets |
|
| Division E | $5,000,000 | $550,000 | $2,400,000 |
| Division F | 4,800,000 | 860,000 | 2,500,000 |
| Division G | 7,000,000 | 860,000 | 2,900,000 |
| (a) | Using the expanded expression, determine the profit margin, investment turnover, and rate of return on investment for each division. Round to one decimal place. |
| (b) | Which is (are) the most profitable per dollar invested? |
5. The sales, income from operations, and invested assets for each division of Wren Company are as follows:
|
Sales |
Income from
Operations |
Invested
Assets |
|
| Division C | $5,000,000 | $630,000 | $4,000,000 |
| Division D | 6,800,000 | 760,000 | 3,900,000 |
| Division E | 3,750,000 | 750,000 | 7,500,000 |
Management has established a minimum rate of return for invested assets of 10%.
| (a) | Determine the residual income for each division. |
| (b) | Based on residual income, which of the divisions is the most profitable? |
6. Snipe Company has been purchasing a component, Part Q, for $19.20 a unit. Snipe is currently operating at 70% of capacity and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q, determined by absorption costing methods, is estimated as follows:
| Direct materials | $11.50 |
| Direct labor | 4.50 |
| Variable factory overhead | 1.12 |
| Fixed factory overhead | 3.15 |
| Total | $20.27 |
Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Q.
7.
Schedule of Activity Costs
| Quality Control Activities | Activity Cost |
| Process audits | $55,000 |
| Training of machine operators | 26,000 |
| Processing returned products | 18,000 |
| Scrap processing (disposal) | 29,000 |
| Rework | 8,000 |
| Preventative maintenance | 30,000 |
| Product design | 46,000 |
| Warranty work | 12,000 |
| Finished goods inspection | 22,000 |
From the above schedule, determine:
a. the value added costs ___________________________
b. the nonvalue added costs ________________________
c. the internal failure costs ________________________
d. the external failure costs _________________________
