Question 1

Comparing the standard variable manufacturing overhead costs based on standard hours with the standard variable manufacturing overhead based on actual hours provides:

Accepted Answer

The answer of Comparing the standard variable manufacturing overhead costs...

Question 2

The difference between the amount of money actually incurred for variable manufacturing overhead and the amount that should have been incurred for the actual activity level achieved, measured in terms of direct labor hours, is:

Accepted Answer

The difference between the actual variable overhead cost and the budgeted variable overhead cost based on the actual activity level is known as variable manufacturing overhead spending variance. The variable manufacturing overhead efficiency variance is the difference between the budgeted variable overhead cost and the actual amount that is incurred based on the actual activity level achieved. The total variable manufacturing overhead variance is the sum of both the efficiency and the spending variances.

Question 3

When direct labor is the best cost driver for variable manufacturing overhead, a favorable direct labor efficiency variance would result in:

Accepted Answer

When direct labor is the best cost driver for variable manufacturing overhead, a favorable direct labor efficiency variance indicates that less direct labor was used than anticipated to produce a given level of output. Since direct labor is the best cost driver for variable manufacturing overhead, using less direct labor also means that less of the variable manufacturing overhead cost should have been incurred. Therefore, a favorable direct labor efficiency variance would result in a favorable variable manufacturing overhead efficiency variance.

Question 4

A variance that provides an opportunity for control over individual overhead items by highlighting the differences between standard and actual costs is the:

Accepted Answer

The Variable manufacturing overhead spending variance compares the actual costs of variable overhead with the standard costs, which provides an opportunity for control over individual overhead items by highlighting the differences. The other choices do not provide the same level of visibility or control over individual overhead items.

Question 5

Exhibit 19-7 The following figures represent 100% capacity for Starr Manufacturing:
 Starr Manufacturing normally produces at 100% capacity. During the month of October, the company started and completed 10,000 units of product, using variable manufacturing overhead costs of $20,000. The company used 6,400 direct labor hours in October instead of the 6,000 hours expected for the activity level achieved.
-Refer to Exhibit 19-7. Based on the information above, the standard variable manufacturing overhead cost in terms of standard direct labor hours is:

Accepted Answer

The answer of Exhibit 19-7 The following figures represent 100%...

Question 6

Frank Company, which has total assets of $300,000, has an opportunity to invest $80,000 in a new project that will generate a return of $16,000 per year. Given this information, what is the return on this investment?

Accepted Answer

To determine the return on this investment, we can calculate the annual return as a percentage of the investment amount.

Annual return = $16,000 
Investment amount = $80,000

Return on investment = Annual return / Investment amount 
Return on investment = $16,000 / $80,000 
Return on investment = 0.2

Therefore, the return on this investment is 20%, which corresponds to answer choice B.

Question 7

Frank Company, which has total assets of $300,000, has an opportunity to invest $80,000 in a new project that will generate a return of $16,000 per year. Given this information, if Frank Company uses 15% as a minimum rate of return, how much residual income will result from this project?

Accepted Answer

The answer of Frank Company, which has total assets of...

Question 8

Exhibit 19-5 Ridgeline Corporation has the following operating data for the year:
 
-Refer to Exhibit 19-5. Given the above data for Ridgeline Company, what is the ROI assuming the minimum rate of return on assets is 10%?

Accepted Answer

The answer of Exhibit 19-5 Ridgeline Corporation has the following...

Question 9

Exhibit 19-5 Ridgeline Corporation has the following operating data for the year:
 
-Refer to Exhibit 19-5. Given the above data for Ridgeline Company, what is the residual income assuming the minimum rate of return on assets is 10%?

Accepted Answer

Residual income = Net operating income - (Minimum rate of return x Total assets)
Residual income = $399,000 - (0.10 x $3,660,000)
Residual income = $399,000 - $366,000
Residual income = $33,000

Therefore, the residual income assuming the minimum rate of return on assets is 10% is $33,000. The closest answer choice to this calculation is C ($213,000), which is incorrect. None of the answer choices reflect the correct residual income calculation, so none of them are the best choice.

Question 10

The variance computed by comparing the standard costs at the budgeted activity level with the standard costs at the actual activity level is:

Accepted Answer

The answer of The variance computed by comparing the standard...

Question 11

Exhibit 19-5 Ridgeline Corporation has the following operating data for the year:
 
-Refer to Exhibit 19-5. Given the above data for Ridgeline Company, what is the asset turnover assuming the minimum rate of return on assets is 10%?

Accepted Answer

The answer of Exhibit 19-5 Ridgeline Corporation has the following...

Question 12

Exhibit 19-7 The following figures represent 100% capacity for Starr Manufacturing:
 Starr Manufacturing normally produces at 100% capacity. During the month of October, the company started and completed 10,000 units of product, using variable manufacturing overhead costs of $20,000. The company used 6,400 direct labor hours in October instead of the 6,000 hours expected for the activity level achieved.
-Refer to Exhibit 19-7. Based on the information above, the overhead rate used to apply variable manufacturing overhead to Work-in-Process is:

Accepted Answer

The answer of Exhibit 19-7 The following figures represent 100%...

Question 13

Exhibit 19-7 The following figures represent 100% capacity for Starr Manufacturing:
 Starr Manufacturing normally produces at 100% capacity. During the month of October, the company started and completed 10,000 units of product, using variable manufacturing overhead costs of $20,000. The company used 6,400 direct labor hours in October instead of the 6,000 hours expected for the activity level achieved.
-Refer to Exhibit 19-7. Based on the information above, the standard variable manufacturing overhead cost in terms of actual direct labor hours is:

Accepted Answer

To find the standard variable manufacturing overhead cost per actual direct labor hour, we need to use the following formula: 
Standard variable overhead rate = Total variable overhead cost / Total standard hours allowed 
Total standard hours allowed = Expected direct labor hours * 100% capacity

Expected direct labor hours = 6,000 
100% capacity = 8,000 direct labor hours (as shown in Exhibit 19-7) 
Total standard hours allowed = 6,000 * (8,000 / 6,000) = 8,000

Standard variable overhead rate = $20,000 / 8,000 = $2.50 per standard hour

To find the standard variable overhead cost in terms of actual direct labor hours, we need to multiply the standard overhead rate by the actual direct labor hours used:

Standard variable overhead cost = Standard variable overhead rate * Actual direct labor hours 
= $2.50 * 6,400 
= $16,000

Therefore, the correct answer is B.

Question 14

Walnut Company has sales of $1,000,000 and total expenses of $900,000. If operating assets are $500,000, the return on investment is:

Accepted Answer

The formula for return on investment is (Net Income / Operating Assets) x 100%. In this case, the net income is $100,000 ($1,000,000 in sales - $900,000 in expenses), and the operating assets are $500,000. Therefore, the return on investment is (100,000 / 500,000) x 100% = 20%. Therefore, the correct answer is B).

Question 15

Frank Company, which has total assets of $300,000, has an opportunity to invest $80,000 in a new project that will generate a return of $16,000 per year. Given this information, if Frank Company's acceptable return on investment is 22%, it will probably:

Accepted Answer

The answer of Frank Company, which has total assets of...

Question 16

Exhibit 19-6 Kentucky Corporation has the following operating data for 2011:
 
-Refer to Exhibit 19-6. Given the information above, Kentucky's return on investment is:

Accepted Answer

Kentucky's return on investment (ROI) can be calculated by dividing operating income by average invested assets. 
ROI = Operating Income / Average Invested Assets 
= $300,000 / (($1,400,000 beginning assets + $1,100,000 ending assets) / 2) 
= $300,000 / $1,250,000 
= 0.24 or 24% 
Therefore, the correct answer is C) 18.75%.

Question 17

Walnut Company has sales of $1,000,000 and total expenses of $900,000. If operating assets are $500,000, and a minimum required return of 15%, the residual income is:

Accepted Answer

The answer of Walnut Company has sales of $1,000,000 and...

Question 18

Frank Company, which has total assets of $300,000, has an opportunity to invest $80,000 in a new project that will generate a return of $16,000 per year. Given this information, if Frank Company was earning 25% before, then accepts this project, its new return on investment will be approximately:

Accepted Answer

The answer of Frank Company, which has total assets of...

Question 19

Exhibit 19-6 Kentucky Corporation has the following operating data for 2011:

- Refer to Exhibit 19-6. Given the information above, if Kentucky's net income increased to $306,000, the return on investment would be:

Accepted Answer

The answer of Exhibit 19-6 Kentucky Corporation has the following...

Question 20

Exhibit 19-5 Ridgeline Corporation has the following operating data for the year:

- Refer to Exhibit 19-5. Given the above data for Ridgeline Company, what is the profit margin assuming the minimum rate of return on assets is 10%?

Accepted Answer

Profit margin = Net income / Total revenue

Minimum rate of return on assets = Net income / Total assets

We can rearrange the formula for the minimum rate of return on assets to solve for net income:

Net income = Minimum rate of return on assets x Total assets

Net income = 0.1 x $960,000 = $96,000

Using this net income, we can calculate the profit margin:

Profit margin = $96,000 / $375,000 = 0.256 or 25.6%

Quiz 19: Controlling Cost and Profit

Comparing the standard variable manufacturing overhead costs based on standard hours with the standard variable manufacturing overhead based on actual hours provides:

The difference between the amount of money actually incurred for variable manufacturing overhead and the amount that should have been incurred for the actual activity level achieved, measured in terms of direct labor hours, is:

When direct labor is the best cost driver for variable manufacturing overhead, a favorable direct labor efficiency variance would result in:

A variance that provides an opportunity for control over individual overhead items by highlighting the differences between standard and actual costs is the:

Frank Company, which has total assets of $300,000, has an opportunity to invest $80,000 in a new project that will generate a return of $16,000 per year. Given this information, what is the return on this investment?

Frank Company, which has total assets of $300,000, has an opportunity to invest $80,000 in a new project that will generate a return of $16,000 per year. Given this information, if Frank Company uses 15% as a minimum rate of return, how much residual income will result from this project?

Exhibit 19-5 Ridgeline Corporation has the following operating data for the year: -Refer to Exhibit 19-5. Given the above data for Ridgeline Company, what is the ROI assuming the minimum rate of return on assets is 10%?

Exhibit 19-5 Ridgeline Corporation has the following operating data for the year: -Refer to Exhibit 19-5. Given the above data for Ridgeline Company, what is the residual income assuming the minimum rate of return on assets is 10%?

The variance computed by comparing the standard costs at the budgeted activity level with the standard costs at the actual activity level is:

Exhibit 19-5 Ridgeline Corporation has the following operating data for the year: -Refer to Exhibit 19-5. Given the above data for Ridgeline Company, what is the asset turnover assuming the minimum rate of return on assets is 10%?

Walnut Company has sales of $1,000,000 and total expenses of $900,000. If operating assets are $500,000, the return on investment is:

Frank Company, which has total assets of $300,000, has an opportunity to invest $80,000 in a new project that will generate a return of $16,000 per year. Given this information, if Frank Company's acceptable return on investment is 22%, it will probably:

Exhibit 19-6 Kentucky Corporation has the following operating data for 2011: -Refer to Exhibit 19-6. Given the information above, Kentucky's return on investment is:

Walnut Company has sales of $1,000,000 and total expenses of $900,000. If operating assets are $500,000, and a minimum required return of 15%, the residual income is:

Frank Company, which has total assets of $300,000, has an opportunity to invest $80,000 in a new project that will generate a return of $16,000 per year. Given this information, if Frank Company was earning 25% before, then accepts this project, its new return on investment will be approximately:

Exhibit 19-6 Kentucky Corporation has the following operating data for 2011: - Refer to Exhibit 19-6. Given the information above, if Kentucky's net income increased to $306,000, the return on investment would be:

Exhibit 19-5 Ridgeline Corporation has the following operating data for the year: - Refer to Exhibit 19-5. Given the above data for Ridgeline Company, what is the profit margin assuming the minimum rate of return on assets is 10%?