Variable Manufacturing

Grant’s Kitchens is approached by Ms. Tammy Wang, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers: Direct materials$455 Direct labor300 Variable manufacturing support45 Fixed manufacturing support100 Total manufacturing costs900 Markup (60%)540 Targeted selling price$1440 Grant’s Kitchens has excess capacity. Ms. Wang wants the cabinets in cherry rather than oak, so direct material costs will increase by per unit.

2. For Grant’s Kitchens, what is the minimum acceptable price of this one-time-only special order? a. $830 b. $930 c. $785 d. $1440 $455 + $300 + $45 + $30 = $830 73. Other than price, what other items should Grant’s Kitchens consider before accepting this one-time-only special order? a. Reaction of shareholders b. Reaction of existing customers to the lower price offered to Ms. Wang c. Demand for cherry cabinets d. Price is the only consideration. Answer:b 74. If Ms. Wang wanted a long-term commitment for supplying this product, this analysis .

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would definitely be different. b. may be different. c. would not be different. d. does not contain enough information to determine if there would be a difference. Answer:a 75. If there was limited capacity, all of the following amounts would change EXCEPT a. opportunity costs. b. differential costs. c. variable costs. d. the minimum acceptable price. Answer:c THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 48 THROUGH 51. White Corporation manufactures football jerseys and uses budgeted machine-hours to allocate variable manufacturing overhead.

The following information pertains to the company’s manufacturing overhead data.

Budgeted output units20,000 units Budgeted machine-hours30,000 hours Budgeted variable manufacturing overhead costs for 20,000 units$360,000 Actual output units produced18,000 units Actual machine-hours used28,000 hours Actual variable manufacturing overhead costs$342,000 48. What is the budgeted variable overhead cost rate per output unit? a. $12. 00 b. $12. 21 c. $18. 00 d. $19. 00 $360,000/20,000 = $18. 00 49. What is the flexible-budget amount for variable manufacturing overhead? a. $324,000 b. $342, 000 . $380,000 d. none of the above 18,000 x ($360,000/20,000)] = $324,000 50. What is the flexible-budget variance for variable manufacturing overhead? a. $18,000 favorable b. $18,000 unfavorable c. zero d. none of the above $342,000 – [18,000 x ($360,000/20,000)] = $18,000 unfavorable 51. Variable-manufacturing overhead costs were __________ for actual output. a. higher than expected b. the same as expected c. lower than expected d. unable to be determined Answer:a THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 57 AND 58. Kellar Corporation manufactured 1,500 chairs during June.

The following variable overhead data pertain to June. Budgeted variable overhead cost per unit $ 12. 00 Actual variable manufacturing overhead cost $16,800 Flexible-budget amount for variable manufacturing overhead$18,000 Variable manufacturing overhead efficiency variance$360 unfavorable 57. What is the variable overhead flexible-budget variance? a. $1,200 favorable b. $360 unfavorable c. $1,560 favorable d. $1,200 unfavorable $16,800 – $18,000 = $1,200 (F) 58. What is the variable overhead spending variance? a. $840 unfavorable b. $1,200 favorable c. $1,200 unfavorable . $1,560 favorable $1200 (F) – $360 (U) = $1,560 (F) THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 39 THROUGH 42. Yakima Manufacturing purchases trees from Cascade Lumber and processes them up to the splitoff point where two products (paper and pencil casings) are obtained. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of November: Trees processed:50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap) Production:paper30,000 sheets encil casings30,000 Sales:paper29,000 at $0. 04 per page pencil casings30,000 at $0. 10 per casing Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500. Yakima’s accounting department reported no beginning inventories and ending inventory of 1,000 sheets of paper. 39. What is the sales value at the splitoff point for paper? a. $120 b. $1,160 c. $1,200 d. $1,950 Paper: 30,000 sheets x $0. 04 = $1,200. 00 40. What is the sales value at the splitoff point of the pencil casings? a. 300 b. $1,480 c. $3,000 d. $3,750 Pencils: 30,000 casings x $0. 10 = $3,000. 00 41. If the sales value at splitoff method is used, what are the approximate joint costs assigned to ending inventory for paper? a. $14. 29 b. $50. 00 c. $435. 00 d. $750. 00 $1,200/($1,200 + $3,000) = 28. 57% 28. 57% x $1,500 x 1,000/30,000 = $14. 29 42. If the sales value at splitoff method is used, what is the approximate production cost for each pencil casing? a. $0. 0250 b. $0. 0255 c. $0. 0335 d. $0. 0357 $3,000/($1,200 + $3,000) x $1,500 = $1,071 $1,071/30,000 casings = $0. 0357