1. Budgeted overhead for Haft, Inc. at normal capacity of 30,000 direct labor ho
ID: 2503583 • Letter: 1
Question
1. Budgeted overhead for Haft, Inc. at normal capacity of 30,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $155,000 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed. The overhead volume variance is
$4,000 favorable.
$5,500 favorable.
$5,000 favorable.
$2,500 favorable.
2. It costs Ross Co. $24 of variable and $10 of fixed costs to produce one bathroom scale which normally sells for $70. A foreign wholesaler offers to purchase 2,000 scales at $30 each. Ross would incur special shipping costs of $2 per scale if the order were accepted. Ross has sufficient unused capacity to produce the 2,000 scales. If the special order is accepted, what will be the effect on net income?
$8,000 decrease
$12,000 decrease
$60,000 increase
$8,000 increase
3. Carter, Inc. can make 100 units of a necessary component part with the following costs:
Buy and save $30,000
Make and save $10,000
Buy and save $10,000
Make and save $30,000
An increase of $160,000
A decrease of $44,000
An increase of $10,000
An increase of $34,000
5. Tram Manufacturing is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $160 and Tram would sell it for $360. The cost to assemble the product is estimated at $72 per unit and Tram believes the market would support a price of $464 on the assembled unit. What is the correct decision using the sell or process further decision rule?
Process further, the company will be better off by $104 per unit.
Process further, the company will be better off by $32 per unit.
Sell before assembly, the company will be better off by $72 per unit.
Sell before assembly, the company will be better off by $104 per unit.
$4,000 favorable.
Explanation / Answer
a) overhead volume variance = -(31,500-32,000)*5 = 2500 favorable
b)since there was 2000 unused capacity, hence fixed costs are irrelevant.
hence net change = (30-24-2)*2000 = 8000 increase
c)if he makes, cost = 120+20+60+40 thousand = 240,000
if he purchases cost = 220,000+30,000(unavoidable fixed cost) = 250,000
hence make and save 10,000
d)if he makes,
cost = 60+26+64+44 thousand =194,000
if he purchases
cost = 160,000+44,000 = 204,000
hence cost will increase by 10,000
e)if he sells unassembled profit
= (360-160) = 200 per unit
if he assembles
profit = (464-160-72) = 232 per unit.
hence Process further, the company will be better off by $32 per unit
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