1.

The following standards have been established for a raw material used in the production of product G13:

 

Required:

a. What is the materials price variance for the month?

b. What is the materials quantity variance for the month?

c. Prepare journal entries to record the purchase and use of the raw material during the month. (All raw materials are purchased on account.)

 

 

2.

The following direct labor standards have been established for product N30A:

 

Required:

a. What was the labor rate variance for the month?

b. What was the labor efficiency variance for the month?

c. Prepare a journal entry to record direct labor costs during the month, including the direct labor variances.

 

 

3.

Rintharamy Corporation's management reports that its average delivery cycle time is 25.2 days, its average throughput time is 7.6 days, its manufacturing cycle efficiency (MCE) is 0.25, its average move time is 0.9 day, and its average queue time is 4.0 days.

 

Required:

a. What is the wait time?

b. What is the process time?

c. What is the inspection time?

 

 

4.

Eban Wares is a division of a major corporation. The following data are for the latest year of operations:

 

Required:

a. What is the division's margin?

b. What is the division's turnover?

c. What is the division's return on investment (ROI)?

d. What is the division's residual income?

 

 

5.

Boa Mining Company currently is operating at less than 50% of practical capacity. The management of the company expects sales to drop below the present level of 10,000 tons of ore per month very soon. The sales price per ton is $3 and the variable cost per ton is $2. Fixed costs per month total $10,000.

 

Management is concerned that a further drop in sales volume will generate a loss and accordingly is considering temporarily suspending operations until demand in the metals markets rebounds and prices once again rise. Management has implemented a cost reduction program over the past year, but at this point suspension of operations appears to be the only viable alternative. Management estimates that suspension of operations would reduce fixed costs from $10,000 to $4,000 per month.

 

Required:

a. Why does management believe that the fixed costs will persist at $4,000 even though the mine is temporarily closed?

b. At what sales volume per month will the company be indifferent between continuing to operate the mine and closing it?

 

 

6.

Bulan Inc. makes a range of products. The company's predetermined overhead rate is $20 per direct labor-hour, which was calculated using the following budgeted data:

 

 

An outside supplier has offered to supply component T6 for $101 each. The outside supplier is known for quality and reliability. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by this decision. Bulan chronically has idle capacity.

 

Required:

Is the offer from the outside supplier financially attractive? Why?

 

 

7.

Pilgrim Corporation makes a range of products. The company's predetermined overhead rate is $23 per direct labor-hour, which was calculated using the following budgeted data:

 

 

If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.

 

Required:

If the special order were accepted, what would be the impact on the company's overall profit?

 

 

8.

Wright, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below:

 

 

Fixed costs are applied to the products on the basis of direct labor hours.

Demand for the three products exceeds the company's productive capacity. The tapping machine is the constraint, with only 2,400 minutes of tapping machine time available this week.

 

Required:

a. Given the tapping machine constraint, which product should be emphasized? Support your answer with appropriate calculations.

b. Assuming that there is still unfilled demand for the product that the company should emphasize in part (a) above, up to how much should the company be willing to pay for an additional hour of tapping machine time?