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Accounting & MIS 3300
Exam II
Autumn 2015
Instructions:
1.
Read each question carefully and answer fully. Ignore income tax
unless instructed to consider it. Variances are isolated at earliest
possible point.
2.
Problems not supported by relevant and readable computations are
subject to point loss. Where appropriate, terms like “unfavorable,”
“favorable,” “better off,” “worse off,” etc. must be included with number
answers. Dollar amounts should include a dollar sign; unit amount
should include an indication of the unit.
3.
Budget your time carefully. It is generally better to finish half of each
problem than to complete all of half the problems. Students who start
early or continue to work on exams after instructed to stop will receive
penalties as outlined in the syllabus.
4.
It is the student's responsibility to verify that all the listed problems
and pages are contained is this booklet. Unanswered questions
receive zero points regardless of reason.
Problem
I
II
III
IV
Total
Pages
2
3
4-5
6
Approximate
Points
35
20
35
10
Approximate
Time
14 – 19 minutes
8 – 11 minutes
14 – 19 minutes
4 – 6 minutes
100
40 – 55 minutes
Page 2 of 6
PROBLEM I
Annika Company has the following per-unit standards for 20x1:
Direct Materials
Direct Labor
Variable Manu. Overhead
Fixed Manu. Overhead
3 kg @ $4.25 per kg
6 direct-labor hours @ $17.00 per direct-labor hour
2.5 machine hours @ $8.50 per machine hour
2.5 machine hours @ $12.20 per machine hour
Annika used a denominator level of 22,000 units. Actual production was 20,000 units using
47,500 machine hours, and the following occurred:
Direct Materials:
Direct Labor:
Manu. Overhead:
Purchased 64,000 kg for $ 259,200and used 67,500 kg
Paid $2,066,400 for 123,000 direct-labor hours
Incurred $1,068,000 of total manufacturing overhead
Required: Compute the seven (7) variances requested and place in boxes below.
Direct Material Price
Variance
Direct Labor Price
Variance
Manufacturing
Overhead Spending
Variance
Manufacturing OH
Production-Volume
Variance
Direct Material
Efficiency Variance
Direct Labor
Efficiency Variance
Manufacturing
Overhead Efficiency
Variance
X
X
Page 3 of 6
PROBLEM II
The Barnes Company produced 18,000 units including the following standards:
Direct Materials
Direct Labor
Variable Manu. OH
$8.50 per kilo
4.4 hours @ $16.80 per hr.
$9.30 per direct-labor hour
and the following results:
Direct Materials Price Variance
Direct Materials Efficiency Variance
Average Actual Price per kilo
Kilos Used
Direct Labor Efficiency Variance
Average Actual Wage Rate per hour
Actual Fixed Manufacturing Overhead
Fixed Manu. Overhead Spending Variance
Fixed Manufacturing Overhead
Total Manu. Overhead Flex. Budget Variance
$15,750 U
$3,400 U
$8.75
58,000
$24,360 F
$16.50
$563,000
$12,000 F
$83,875 overallocated
$1,440 U
Calculate the ten (10) items requested below:
Standard Kilos
Var. Manu. OH
Allowed per unit
Spending Variance
Kilos Purchased
Var. Manu. OH
Efficiency Variance
Direct Labor Hours
Actual Total
Used
Variable Manu. OH
Direct Labor Price
Budgeted Fixed
Variance
Manu. Overhead
Denominator Level
Production Volume
in Units
Variance
Page 4 of 6
PROBLEM III
The Carson Company began operations in January of 20x1 and decided to use FIFO. The
following is known:
January 20x1
February 20x1
Production
2,000 units
1,600 units
Sales ($180 per unit)
1,600 units
2,000 units
Budgeted Variable Manufacturing
$80 per unit
$80 per unit
Budgeted Fixed Manufacturing
$86,400 per month
$86,400 per month
Variable Operating Costs
$18 per unit sold
$18 per unit sold
Fixed Operating Costs
$20,000 per month
$20,000 per month
Part A. Carson uses a normal absorption costing system and a denominator level of 1,800
each month. Carson had no price, spending, or efficiency variances. Production-volume
variances, if any, are closed to cost of goods sold. Required: produce the January and
February income statements in good form (point loss for poor form).
Page 5 of 6
PROBLEM III CONTINUED
Part B. Assume Carson uses actual variable costing. Required: calculate the net income
for each of the two months.
January:
$
February:
$
Part C. Required: present below a succinct, properly labeled, and professional schedule
that starts with the actual variable net income numbers in part B and arrives at the net
income numbers under actual absorption costing for the each of the two months (point loss
for poor form). Note you can still get full points for this part even if you don’t know or have
wrong answers for part B.
Page 6 of 6
PROBLEM IV
The Drake Company has the opportunity to make an investment. The payoff depends on
two factors: the weather on August 15 (with a 70% of “good” and a 30% chance of “bad”)
and which contract they select (if they do the project). On April 10 the following matrix
shows the possible states and the net income from the project:
Weather
"Good"
"Bad"
Contract
Fixed Fee Variable Fee
$
30,000 $
24,000
$ (10,000) $
(3,000)
On April 10 they only know the above and must reject the investment or invest and select
between the two contracts. The choice cannot be changed prior to the event in August.
Required: Determine and present the following (have them easy to find and labelled
properly): what should Drake do on April 10 given the original data and what is the value
of perfect information on April 10.