Chapter 21: Summary Cheat Sheet

Multiple-Choice Quiz Solutions 1. Budgeted Fixed and Variable Costs A company expects to produce and sell 24,000 units, with fixed costs of $300,000 and variable costs of $246,000. If production drops to 20,000 units, what will be the budgeted fixed and variable costs? o Fixed Costs remain constant at $300,000 regardless of production levels. o Variable Costs need adjustment based on the new activity level: Variable Cost per Unit=246,00024,000=10.25 o Variable Costs at 20,000 units=20,000×10.25=205,000 o Answer: (c) Fixed, $300,000; variable, $205,000 2. Total Actual Cost of Direct Materials Used Given: o Direct materials standard cost: 5 lbs. × $2 per lb. = $10 per unit. o Total direct materials variance: $15,000 unfavorable. o Actual direct materials used: 300,000 lbs. o Actual units produced: 60,000 units. To find Total Actual Cost of Direct Materials: Budgeted Cost of Direct Materials for 60,000 units: 60,000×10=600,00060,000 \times 10 = 600,00060,000×10=600,000 o Adding the Unfavorable Variance: 600,000+15,000=615,000600,000 + 15,000 = 615,000600,000+15,000=615,000 o Answer: (e) $615,000 3. Direct Labor Rate Variance Given: o Direct labor per unit: 4 hours. o Standard labor cost per hour: $20. o Units produced: 20,000. o Actual labor hours used: 84,160 hours. o Total direct labor cost: $1,599,040. o Direct Labor Rate Variance: Rate Variance=(Actual Hours×Actual Rate)−(Actual Hours×Standard Rate =(Actual Hours×Actual Rate)−(Actual Hours×Standard Rate) =1,599,040−(84,160×20)=1,599,040−1,683,200=84,160 Answer: (c) $84,160 F 4. Volume Variance Given: o Standard Overhead Applied: $24,000. o Flexible Budget Overhead: $19,200. o o Actual Overhead: $24,100. Volume Variance calculation: Volume Variance=Budgeted (Flexible) Overhead−Standard Overhead Appli ed =19,200−24,000=4,800 (Favorable)= 19,200 - 24,000 = 4,800 Answer: (b) $4,800 F 5. Total Variable Overhead Variance Given: o Standard Variable Overhead: $6 per unit (4 MH x $1.50 per hour). o Actual Variable Overhead Costs: $150,000. o Units Produced: 24,000. o Calculate Total Variable Overhead Applied: Variable Overhead Applied=24,000×6=144,000 o o Total Variable Overhead Variance: =Actual Variable Overhead−Variable Overhead Applied=150,000−14 4,000=6,000 Answer: (b) $6,000 U