Question

1.

Finch Company began its operations on March 31 of the current year. Finch has the following projected costs:

	April	May	June
Manufacturing costs (1)	$157,000	$191,000	$210,000
Insurance expense (2)	1,070	1,070	1,070
Depreciation expense	1,970	1,970	1,970
Property tax expense (3)	410	410	410

(1) Of the manufacturing costs, three-fourths are paid for in the month they are incurred and one-fourth is paid for in the following month.
(2) Insurance expense is $1,070 a month; however, the insurance is paid four times yearly, in the first month of the quarter (i.e., January, April, July, and October).
(3) Property tax is paid once a year in November.

The cash payments expected for Finch Company in the month of June are

a.$157,500

b.$47,750

c.$205,250

d.$253,000

2.

Below is budgeted production and sales information for Flushing Company for the month of December.

	Product XXX	Product ZZZ
Estimated beginning inventory	28,800 units	18,500 units
Desired ending inventory	35,000 units	14,200 units
Region I, anticipated sales	308,000 units	252,000 units
Region II, anticipated sales	193,000 units	144,000 units

The unit selling price for product XXX is $7 and for product ZZZ is $14.

Budgeted sales for the month are

a.$9,786,000

b.$9,051,000

c.$6,279,000

d.$12,558,000

3.

If the expected sales volume for the current period is 7,200 units, the desired ending inventory is 272 units, and the beginning inventory is 374 units, the number of units set forth in the production budget, representing total production for the current period, is

a.7,472

b.7,200

c.7,098

d.6,826

4.

The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% of normal capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows:

Standard:	25,000 hours at $10	$250,000
Actual:	Variable factory overhead	$202,500
	Fixed factory overhead	60,000

What is the variable factory overhead controllable variance?

a.$10,000 favorable

b.$2,500 favorable

c.$2,500 unfavorable

d.$10,000 unfavorable

Answer 1

1	Cash payments expected for Finch Company in the month of June
	Manufacturing costs	($)
	- For June = 3/4 * 210,000	157,500
	- For May = 1/4 * 191,000	47,750
	Cash Payments for June	205,250
	Notes:
1	Manufacturing costs for april will be paid in April and May hence not included in june
2	No Insurance payment in June
3	Depreciation is not a cash expense
4	Property tax is paid in November
	Ans: c. $205,250

2. Budgeted sales for the month of December

	Product XXX	Product ZZZ	Total
Unit Selling Price ($)	7	14
Region I, anticipated sales (units)	308,000	252,000
Region II, anticipated sales (units)	193,000	144,000
Budgeted Sales ($) (Sales units * selling price)	3,507,000	5,544,000	9,051,000
Ans: b. $9,051,000

3. Total production for the current period

	Units
Sales Volume	7,200
Add: Desired Ending Inventory	272
Less: Beginning Inventory	374
Production for the current period	7,098
Ans: c. 7,098

4. Variable factory overhead controllable variance

	($)
Actual Variable factory overhead	202,500
Standard: 25,000 hours at $10	250,000
Less: Fixed Overhead ($2.00 * 25,000 hrs)	50,000
Standard Variable overhead for 25000 hrs	200,000
Controllable Variance (std - actual) (U)	-2,500
Ans: c. $2,500 unfavorable