Cost variances
Profit centers
Investment centers
Comprehensive review
Grab-bag
100
It's how we evaluate the use of materials by the production manager.
What is a materials quantity variance?
100
This is the only cost that variable costing and absorption costing treat differently.
What is fixed overhead?
100
It's the cost investors bear by choosing one investment over another.
What is the opportunity cost of capital?
100
It's how a pre-determined overhead application rate is calculated.
What is estimated total overhead divided by estimated total level of the allocation base?
100
It's the fear of the number 13.
What is triskadekaphopia?
200
They're the two things any variance answer must include.
What are a dollar sign and favorable or unfavorable label?
200
Product costs incurred during the year are shown in which accounts, and on which financial statements, at the end of the year?
What are inventory on the balance sheet and cost of goods sold on the income statement?
200
EVA is a copyrighted version of it.
What is residual income.
200
Jones Company applies overhead based on direct labor hours. At the beginning of the year, Jones estimates Overhead to be $480,000, Machine Hours to be 120,000, and Direct Labor hours to be 80,000. During January, Jones has 6,700 direct labor hours and 11,000 machine hours.

This is the predetermined overhead application rate.

What is $6 per labor hour?

Predetermined overhead rate = $480,000/80,000 = $6 per direct labor hour

200
They are the three "Baltic states."
What are Estonia, Latvia, and Lithuania?
300
It's what "standard quantity" means.
What is the standard quantity of the input allowed for the actual level of output?
300
It's how absorption costing net income differs from variable costing net income, if production is greater than sales.
What is greater?
300
It's the major complaint against ROI, resulting from the use of percentages in the calculation.
What is ROI's tendency to encourage managers to reject investments that earn an ROI that is profitable for the entire company, yet is lower than the manager's current ROI?
300
Jones Company applies overhead based on direct labor hours. At the beginning of the year, Jones estimates Overhead to be $480,000, Machine Hours to be 120,000, and Direct Labor to be 80,000.

During January, Jones has 6,700 direct labor hours and 11,000 machine hours.

This is theapplied overhead for January.

What is $40,200?

Predetermined overhead rate = $480,000/80,000 = $6 per direct labor hour

Applied overhead = $6 × 6,700 = $40,200

300
It's a series of essays published in 1787 and 1788, defending the proposed Constitution of the United States.
What is "The Federalist?"
400
Gardener’s Market manufactures hedgers. During the year, it manufactured 5,000 hedgers, using 4.2 hours of direct labor per hedger at a rate of $8.

The materials and labor standards for manufacturing the hedgers are as follows:

Direct materials: 10 units @ $2 each

Direct labor: 4 hours @ $7.50 per hour

Gardener’s Market actually used 53,000 units of direct materials at a price of $2.25 per unit.

This is the materials price variance.

What is $13,250U

MPV = (AP - SP)AQ = ($2.25 - $2.00)53,000 = $13,250 U

400
Last year, Delbert Company produced 10,000 units and sold 9,000 units at a price of $9. Costs for last year were as follows:

Direct materials $10,000

Direct labor 15,000

Variable factory overhead 5,000

Fixed factory overhead 20,000

Variable selling expense 7,200

Fixed selling expense 5,000

Fixed administrative expense 12,000

Fixed factory overhead is applied based on expected production. Last year, Delbert expected to produce 10,000 units. Assuming that beginning inventory was zero, this is the value of ending inventory under absorption costing.

What is $5,000?

Unit product cost = ($10,000 + $15,000 + $5,000 + $20,000)/10,000 = $5

Ending inventory = $5 × 1,000 = $5,000

400
The manager of Alpha Division projects the following for next year:

Sales $100,000

Operating income $30,000

Operating assets $200,000

The manager can invest in an additional project that would require $30,000 of investment in additional assets.

The new project would generate $4,200 of additional income.

The company’s minimum rate of return is 12%.

This is the residual income for Alpha Division without the additional investment.

What is $6,000?

Residual income = $30,000 - (0.12)($200,000) = $6,000

400
Jones Company applies overhead based on direct labor hours. At the beginning of the year, Jones estimates Overhead to be $480,000, Machine Hours to be 120,000, and Direct Labor hours to be 80,000.

During the year, Jones uses 135,000 machine hours, 78,000 direct labor hours, and actually spends $472,000 on overhead.

This is Jones' under- or over-applied overhead for the year.

What is $4,000 underapplied?

Predetermined overhead rate = $480,000/80,000 = $6 per direct labor hour

Total overhead applied: $6 per labor hour x 78,000 hours = $468,000 applied.

Actual spending = $472,000

Applied OH = $468,000

OH = $4,000 underapplied

400
An exploration of absurdism and possibly existentialism, it is Albert Camus' best known novel.
What is The Stranger?
500
Gardener’s Market manufactures hedgers. During the year, it manufactured 5,000 hedgers, using 4.2 hours of direct labor per hedger at a rate of $8 per hour.

The materials and labor standards for manufacturing the hedgers are as follows:

Direct materials: 10 units @ $2 each

Direct labor: 4 hours @ $7.50 per hour

Gardener’s Market actually used 53,000 units of direct materials at a price of $2.25 per unit.

This is the labor quantity (efficiency) variance.

What is $7,500U?

LEV = (AH - SH)SR

= (21,000 - 20,000)$7.50

= $7,500 U

500
Last year, Delbert Company produced 10,000 units and sold 9,000 units at a price of $9. Costs for last year were as follows:

Direct materials $10,000

Direct labor 15,000

Variable factory overhead 5,000

Fixed factory overhead 20,000

Variable selling expense 7,200

Fixed selling expense 5,000

Fixed administrative expense 12,000

Fixed factory overhead is applied based on expected production. Last year, Delbert expected to produce 10,000 units.

Assuming that beginning inventory was zero, this is the difference between absorption and variable costing net income.

What is $2,000?

FOH per unit = $20,000 / 10,000 units = $2 per unit.

Units produced and put into ending inventory = 10,000 - 9,000 = 1,000 units.

1,000 units x $2 = $2,000

Proof:

Sales $81,000

- COGS 45,000

Gross margin $36,000

- Selling expense 12,200

- Administrative expense 12,000

Operating income $11,800

Sales $81,000

- Var. COGS 27,000

- Var. Selling expense 7,200

Contribution margin $46,800

- Fixed factory overhead 20,000

- Fixed selling expense 5,000

- Administrative expense 12,000

Operating income $9,800

500
The manager of Alpha Division projects the following for next year:

Sales $100,000

Operating income $30,000

Operating assets $200,000

The manager can invest in an additional project that would require $30,000 of investment in additional assets.

The new project would generate $4,200 of additional income.

The company’s minimum rate of return is 12%.

This is what the manager would do with the opportunity to invest in the additional project and why, assuming the manager is evaluated using ROI.

What is reject, because the additional product would earn a lower ROI than the current ROI.
500
McCallen Company expects to produce and sell 500 units next month. Data on costs follows:

Per unit amounts:

Selling price $8

Variable manufacturing costs $2.75

Variable selling costs $0.25

Total costs:

Fixed manufacturing costs $1,000

Fixed selling costs $125

This is the expected margin of safety in dollars.

What is $2,200?

Break-even units = $1,125/$5 = 225 units x $8 = $1,800

OR

CM = $8 - VC ($2.75 + $0.25 = $3) = $5 per unit

CM ratio = $5 / $8 = 0.625

Break-even sales dollars = $1,125/0.625 = $1,800

Expected sales = 500 units x $8/unit = $4,000.

Expected margin of safety in dollars = $4,000 - $1,800 = $2,200

500
He is the only US President to serve two non-consecutive terms.
Who is Grover Cleveland?
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