Question

1. Dermody Snow Removal's cost formula ...

Dermody Snow Removal's cost formula for its vehicle operating cost is $2,910 per month plus $321 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $8,320. The spending variance for vehicle operating cost in December would be closest to:

Multiple Choice

• $274 U

• $274 F

• $916 U

• $916 F

2.

Canniff Air uses two measures of activity, flights and passengers ...

Canniff Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $57,460 per month plus $2,654 per flight plus $10 per passenger. The company expected its activity in February to be 77 flights and 290 passengers, but the actual activity was 76 flights and 291 passengers. The actual cost for plane operating costs in February was $261,080. The plane operating costs in the planning budget for February would be closest to:

Multiple Choice

• $264,718

• $263,734

• $262,074

• $261,080

3. A total of 6,850 kilograms of a raw material ...

A total of 6,850 kilograms of a raw material was purchased at a total cost of $21,920. The materials price variance was $1,370 favorable. The standard price per kilogram for the raw material must be:

Multiple Choice

• $0.20

• $3.00

• $3.20

• $3.40

4. Milar Corporation makes a product with ...

4. Milar Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate
Direct materials		11.0	pounds	$	10.50	per pound
Direct labor		0.8	hours	$	34.00	per hour
Variable overhead		0.8	hours	$	16.00	per hour

In January the company produced 3,450 units using 13,800 pounds of the direct material and 2,880 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $14,560. The actual direct labor cost was $97,506 and the actual variable overhead cost was $44,188.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The labor rate variance for January is:

Multiple Choice

• $414 F

• $414 U

• $3,666 U

• $3,666 F

5.

Cabell Products is a division of a major...

Cabell Products is a division of a major corporation. Last year the division had total sales of $18,690,000, net operating income of $934,500, and average operating assets of $5,233,200. The company's minimum required rate of return is 20%.

The division's margin is closest to:

Multiple Choice

• 5.0%

• 17.9%

• 25.0%

• 28.0%

Answer 1

Solution to QUESTION-1

The spending variance for vehicle operating cost in December

Actual Results

The Actual vehicle operating cost = $8,320

Flexible Budget

Vehicle operating cost = Fixed element per month + Variable element per month

= Fixed element per month + (Actual level of activity x Variable cost per snow-day)

= $2,910 + [14 Snow days x $321 per snow-day]

= $2,910 + $4,494

= $7,404

The spending variance for vehicle operating cost in December

Since the vehicle operating cost Expense under flexible budget ($7,404) is lower than actual vehicle operating cost expenses ($8,320), the Spending variance for vehicle operating cost in December be $916 Unfavourable [$8,320 - $7,404]

“Hence, the spending variance for vehicle operating cost in December would be closest to $916 U”