# Business Finance : Week 5 accounting homework 5 questions

Requirement 1

Wyckam Manufacturing Inc. has provided the following information concerning its manufacturing costs:

 Fixed Cost per Month Cost per Machine-Hour Direct materials \$ 5.40 Direct labor \$ 42,100 Supplies \$ 0.20 Utilities \$ 1,300 \$ 0.15 Depreciation \$ 15,400 Insurance \$ 11,900

For example, utilities should be \$1,300 per month plus \$0.15 per machine-hour. The company expects to work 4,200 machine-hours in June. Note that the company’s direct labor is a fixed cost.

Required:

Prepare the company’s planning budget for June.

Requirement 2

Via Gelato is a popular neighborhood gelato shop. The company has provided the following cost formulas and actual results for the month of June:

 Fixed Element per Month Variable Element per Liter Actual Total for June Revenue \$ 18.00 \$ 110,530 Raw materials \$ 5.25 \$ 33,730 Wages \$ 6,200 \$ 2.00 \$ 18,900 Utilities \$ 2,230 \$ 0.80 \$ 7,550 Rent \$ 3,200 \$ 3,200 Insurance \$ 1,950 \$ 1,950 Miscellaneous \$ 710 \$ 0.95 \$ 6,670

While gelato is sold by the cone or cup, the shop measures its activity in terms of the total number of liters of gelato sold. For example, wages should be \$6,200 plus \$2.00 per liter of gelato sold and the actual wages for June were \$18,900. Via Gelato expected to sell 6,200 liters in June, but actually sold 6,400 liters.

Required:

Calculate Via Gelato revenue and spending variances for June. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Requirement 3

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:

 Cost Formula Actual Cost in March Utilities \$16,500 plus \$0.21 per machine-hour \$ 22,710 Maintenance \$38,300 plus \$1.90 per machine-hour \$ 72,000 Supplies \$0.50 per machine-hour \$ 10,300 Indirect labor \$94,100 plus \$2.00 per machine-hour \$ 137,000 Depreciation \$68,000 \$ 69,700

During March, the company worked 19,000 machine-hours and produced 13,000 units. The company had originally planned to work 21,000 machine-hours during March.

Required:

1. Calculate the activity variances for March.

2. Calculate the spending variances for March.

Calculate the activity variances for March. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Calculate the spending variances for March. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Question 4

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,075 hours each month to produce 2,150 sets of covers. The standard costs associated with this level of production are:

 Total Per Set of Covers Direct materials \$ 54,825 \$ 25.50 Direct labor \$ 10,750 5.00 Variable manufacturing overhead (based on direct labor-hours) \$ 5,375 2.50 \$ 33.00

During August, the factory worked only 800 direct labor-hours and produced 2,500 sets of covers. The following actual costs were recorded during the month:

 Total Per Set of Covers Direct materials (12,500 yards) \$ 58,750 \$ 23.50 Direct labor \$ 13,000 5.20 Variable manufacturing overhead \$ 7,000 2.80 \$ 31.50

At standard, each set of covers should require 3.0 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

 1. Materials price variance Materials quantity variance 2. Labor rate variance Labor efficiency variance 3. Variable overhead rate variance Variable overhead efficiency variance

Question 5

Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows:

 Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 2.50 ounces \$ 19.00 per ounce \$ 47.50 Direct labor 0.70 hours \$ 15.00 per hour 10.50 Variable manufacturing overhead 0.70 hours \$ 4.00 per hour 2.80 Total standard cost per unit \$ 60.80

During November, the following activity was recorded related to the production of Fludex:

• Materials purchased, 12,500 ounces at a cost of \$223,125.
• There was no beginning inventory of materials; however, at the end of the month, 3,250 ounces of material remained in ending inventory.
• The company employs 21 lab technicians to work on the production of Fludex. During November, they each worked an average of 150 hours at an average pay rate of \$12.50 per hour.
• Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled \$5,100.
• During November, the company produced 3,500 units of Fludex.

Required:

1. For direct materials:

a. Compute the price and quantity variances.

b. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract?

2. For direct labor:

a. Compute the rate and efficiency variances.

b. In the past, the 21 technicians employed in the production of Fludex consisted of 4 senior technicians and 17 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would you recommend that the new labor mix be continued?

3. Compute the variable overhead rate and efficiency variances.

For direct materials, compute the price and quantity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

 Materials price variance Materials quantity variance

For direct materials, the materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract?

 Yes No

For direct labor, compute the rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

 Labor rate variance Labor efficiency variance

In the past, the 21 technicians employed in the production of Fludex consisted of 4 senior technicians and 17 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would you recommend that the new labor mix be continued?

 Yes No

Compute the variable overhead rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

### Related Questions

##### FIN 215 – You are trying to pick the least-expen...

You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost \$19,000 to purchase...

##### FIN 215 – Suppose you sell a fixed asset for ...

Suppose you sell a fixed asset for \$125,000 when its book value is \$145,000. If your company’s marginal tax rate is 35 percent, what will be the eff...

##### What should be the beta of a replacement stock...

What should be the beta of a replacement stock if an investor wishes to achieve a portfolio beta of 1.2 by replacing stock C in the following equally...

##### 1. To help finance a major expansion, Castro Chemi...

1. To help finance a major expansion, Castro Chemical Company sold a noncallable bond severalyears ago that now has 20 years to maturity. This bond ha...

##### 20.Income Statement Bullseye, Inc.’s 2008 income...

20.Income Statement Bullseye, Inc.’s 2008 income statement lists the following income and expenses: EBIT = \$906,000, Interest expense = \$94,000, and...

##### Metallic Engineering, Inc., a manufacturer of fabr...

Metallic Engineering, Inc., a manufacturer of fabricated aluminum products for aerospace,engineering, automotive, and custom industrial applications,...

##### FIN4801 ASSIGNMENTS...

QUESTION 1 [25 marks]Xelo Ltd, whose current sales consist of fixed operating costs of R140 000 andvariable operating costs equal to 22% of sales, has...

##### As an entrepreneur you started a tech company a de...

As an entrepreneur you started a tech company a decade ago to design apps for the retail clothing space. Your current balance sheet has \$750 million i...

##### You are considering to purchase a significant amou...

You are considering to purchase a significant amount of the common stock of MySpace. The stock has consistently paid a dividend of \$2.00/share and is...

##### Behavioral finance, and the Nobel Prize winner Ric...

We have talked a lot about behavioral finance, and the Nobel Prize winner Richard Thaler, most associated with research in the field. What would Thale...

##### MAN 3250 – In some sense, organization cultures...

In some sense, organization cultures may be considered to be substitutes for organization structures.a. What does this meanb. What are some of the ben...

##### One of the clothing retail firms which your friend...

One of the clothing retail firms which your friend from problem # 3 has for a client stock is trading this week at \$36/share. If there is a put option...

##### A savvy commodities investor and take a job on the...

After taking this class you fancy yourself a savvy commodities investor and take a job on the Chicago Mercantile Exchange. Your first day on the job y...

As a financial advisor one of your clients is considering an investment in a ‘small’ marketing firm in the region. The firm in question has equity...

##### An investor purchased a building in 1985 when the...

1. An investor purchased a building in 1985 when the building could be depreciated over 19 years. A few years later, a new investor was interested in...

##### Absolusia, an emerging economy, has just made an i...

Absolusia, an emerging economy, has just made an issue of coupon-paying bonds, each with 3 years to maturity, and a face value of \$1,000,000.Each bond...

##### FINANCE 702- You are contemplating a portfolio of...

You are contemplating a portfolio of two risky assets, comprising 75% in Deakin Ltd and 25% in Hall Ltd.Your broker’s analyst has predicted that, on...

##### Stock Valuation and Cash Flows Fincher Manufacturi...

Stock Valuation and Cash Flows Fincher Manufacturing has projected sales of \$135 million next year. Costs are expected to be \$76 million and net inves...

##### FPM 420 – Structuring the Deal – The property...

Structuring the DealThe property is a large mansion house on a main thoroughfare in a medium-sized city. It was constructed originally in 1917 to hous...

##### Suppose your 401(k) plan offers two investment...

Suppose your 401(k) plan offers two investment options: a fund that invests in the total stock market and a fund that invests in Treasury Bills. In y...

##### ECON 133 – Assume that markets are not efficient...

#1 ) Assume that markets are not efficient and that you can expect to earn the average return of an active investor if you pick stocks. How should you...

##### Suppose you hire an ecologist for a fixed fee of &...

Suppose you hire an ecologist for a fixed fee of \$25,000 to explore the plant site you intend to use for a project. If the ecologist finds an endanger...

##### The current stock price for a company is \$44 p...

The current stock price for a company is \$44 per share, and there are 8 million shares outstanding. The beta for this firms stock is 1.2, the risk-fre...

##### MATH 106 – Calculate the total interest paid on...

Calculate the total interest paid on a 30-year, 3.9% fixed-rate \$200,000 mortgage loan.Remember that number of compounding periods in a year n = numbe...