Question

Accounting LU 40 Points Toints) 1) Archangel Manufacturing has overhead based on a pere 18 has finished production activities for the year 2015. The company allocates manufactu percentage of direct labor costs. The company has provided the following information: Total manufacturing overhead estimated at the beginning of the year Total direct labor costs estimated at the beginning of the year Total direct labor hours estimated at the beginning of the ye bor hours estimated at the beginning of the year Actual manufacturing overhead costs for the year Actual direct labor costs for the year Actual direct labor hours for the year $140,000 $350,000 12.000 direct labor houts $159,000 $362.000 12,400 direct labor hours Based on the above data, calculate the unadjusted ending balance in the Manufacturing Overhead account. A) $19,000 debit balance B) $19,000 credit balance C) $14,200 debit balance D) $14,200 credit balance 2) Variable cost per unit, within the relevant range, will A) decrease as production decreases B) decrease as production increases C) increase as production decreases D) remain the same as production levels change 3) Star Corporation management has budgeted the following amounts for its next fiscal year: $450,000 Total fixed expenses Selling price per unit Variable expenses per unit $25 If Star Corporation spends an additional $20,000 on advertising, sales volume should increase by 3,000 units. What effect will this have on operating income? A) Decrease of $75,000 B) Increase of $75,000 C) Increase of $55,000 D) Decrease of $55,000 4) Which of the following is an objective of management accounting? A) to generate financial statements of a company for tax reporting B) to ensure that the reports produced for internal and external business purposes are GAAP compliant C) to provide information to shareholders to assist them with their investment decisions D) to provide information to business managers to assist them in controlling their business

Answer 1

1. Predetermined overhead rate = 140,000/350,000 = 40% Debit (Credit) balance = Actual overhead - Applied = 159,000 - (362,000*40%) = $14,200 debit Option C is the answer

2. Option D is the answer

3. Contribution margin from additional sales = 3,000*50*50% = 75,000 Increase(Decrease) = CM from additional sales - increase in fixed costs = 75,000 - 20,000 = 55,000 increase Option C is the answer