1. An unfavorable materials quantity variance would occur if A) more materials were purchased than were used. B) actual pounds of materials used were less than the standard pounds allowed. C) actual labor hours used were greater than the standard labor hours allowed. D) actual pounds of materials used were greater than the standard pounds allowed. 2. Tools-N-Time has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, Tools-N-Time used 3,100 pounds of materials at a total cost of $12,090. Tools-N-Times total material variance is A) $300 F. B) $90 U. C) $310 U. D) $400 U. 3. Tools-N-Time has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, Tools-N-Time used 3,100 pounds of materials at a total cost of $12,090. Tools-N-Time's materials price variance is A) $90 U. B) $310 F. C) $400 F. D) $700 F. 4. Tools-N-Time has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, Tools-N-Time used 3,100 pounds of materials at a total cost of $12,090. Tools-N-Time's materials quantity variance is A) $90 F. B) $310 U. C) $400 U. D) $700 U. 5. Tools-N-Time has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Tools-N-Time used 3,850 hours of labor at a total cost of $46,970. Tools-N-Time's total labor variance is A) $770 U. B) $800 U. C) $1,030 F. D) $1,930 F. 6. Tools-N-Time has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Tools-N-Time used 3,850 hours of labor at a total cost of $46,970. Tools-N-Time's labor price variance is A) $770 U. B) $800 U. C) $1,030 F. D) $1,930 F. 7. Tools-N-Time has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Tools-N-Time used 3,850 hours of labor at a total cost of $46,970. Tools-N-Time's labor quantity variance is A) $770 U. B) $1,030 F. C) $1,800 F. D) $1,930 F. 8. Stiner Company has a materials price standard of $2.00 per pound. Five thousand pounds of materials were purchased at $2.20 per pound. The actual quantity of materials used was 5,000 pounds, although the standard quantity allowed for the output was 4,500 pounds. Stiner Company's materials price variance is A) $100 U. B) $1,000 U. C) $900 U. D) $1,000 F. 9. Stiner Company has a materials price standard of $2.00 per pound. Five thousand pounds of materials were purchased at $2.20 per pound. The actual quantity of materials used was 5,000 pounds, although the standard quantity allowed for the output was 4,500 pounds. Stiner Company's materials quantity variance is A) $1,000 U. B) $1,000 F. C) $1,100 F. D) $1,100 U. 10. The standard quantity allowed for the units produced was 6,500 pounds, the standard price was $2.50 per pound, and the materials quantity variance was $375 favorable. Each unit uses 1 pound of materials. How many units were actually produced? A) 6,350 B) 6,500 C) 15,875 D) 6,650 11. A company developed the following per-unit standards for its product: 2 gallons of direct materials at $6 per gallon. Last month, 3,000 gallons of direct materials were purchased for $17,100. The direct materials price variance for last month was A) $17,100 favorable. B) $450 favorable. C) $900 favorable. D) $900 unfavorable. 12. The per-unit standards for direct materials are 2 pounds at $4 per pound. Last month, 11,200 pounds of direct materials that actually cost $42,400 were used to produce 6,000 units of product. The direct materials quantity variance for last month was A) $3,200 favorable. B) $2,400 favorable. C) $3,200 unfavorable. D) $5,600 unfavorable. 13. The standard number of hours that should have been worked for the output attained is 10,000 direct labor hours and the actual number of direct labor hours worked was 10,500. If the direct labor price variance was $10,500 unfavorable, and the standard rate of pay was $15 per direct labor hour, what was the actual rate of pay for direct labor? A) $14 per direct labor hour B) $12 per direct labor hour C) $16 per direct labor hour D) $15 per direct labor hour 14. A company purchases 15,000 pounds of materials. The materials price variance is $6,000 favorable. What is the difference between the standard and actual price paid for the materials? A) $2.00 B) $.40 C) $2.50 D) $10.00 15. A company uses 40,000 gallons of materials for which it paid $9.00 a gallon. The materials price variance was $80,000 favorable. What is the standard price per gallon? A) $2.00 B) $7.00 C) $10.00 D) $11.00 16. Blue Fin Co. produces a product requiring 10 pounds of material at $1.50 per pound. Blue Fin produced 10,000 units of this product during 2009 resulting in a $30,000 unfavorable materials quantity variance. How many pounds of direct material did Blue Fin use during 2011? A) 120,000 pounds B) 100,000 pounds C) 200,000 pounds D) 145,000 pounds 17. The standard number of hours that should have been worked for the output attained is 6,000 direct labor hours and the actual number of direct labor hours worked was 6,300. If the direct labor price variance was $3,150 unfavorable, and the standard rate of pay was $9 per direct labor hour, what was the actual rate of pay for direct labor? A) $8.50 per direct labor hour B) $7.50 per direct labor hour C) $9.50 per direct labor hour D) $9.00 per direct labor hour 18. The predetermined overhead rate for Weed-R-Gone is $8, comprised of a variable overhead rate of $5 and a fixed rate of $3. The amount of budgeted overhead costs at normal capacity of $240,000 was divided by normal capacity of 30,000 direct labor hours, to arrive at the predetermined overhead rate of $8. Actual overhead for June was $15,800 variable and $9,100 fixed, and standard hours allowed for the product produced in June was 3,000 hours. The total overhead variance is A) $4,900 F. B) $900 F. C) $900 U. D) $4,900 U. 19. The following information was taken from the annual manufacturing overhead cost budget of Coen Company. Variable manufacturing overhead costs $46,200 Fixed manufacturing overhead costs $27,720 Normal production level in labor hours 23,100 Normal production level in units 5,775 Standard labor hours per unit 4 During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $75,600. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Coen's total overhead rate is A) $1.20. B) $2.00. C) $3.20. D) $3.27. 20. The following information was taken from the annual manufacturing overhead cost budget of Coen Company. Variable manufacturing overhead costs $46,200 Fixed manufacturing overhead costs $27,720 Normal production level in labor hours 23,100 Normal production level in units 5,775 Standard labor hours per unit 4 During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $75,600. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Coen's total overhead variance is A) $840 U. B) $3,080 U. C) $3,920 U. D) $11,200 U. 21. The following information was taken from the annual manufacturing overhead cost budget of Coen Company. Variable manufacturing overhead costs $46,200 Fixed manufacturing overhead costs $27,720 Normal production level in labor hours 23,100 Normal production level in units 5,775 Standard labor hours per unit 4 During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $75,600. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Coen's controllable overhead variance is A) $840 U. B) $3,080 U. C) $3,920 U. D) $11,200 U. 22. The following information was taken from the annual manufacturing overhead cost budget of Coen Company. Variable manufacturing overhead costs $46,200 Fixed manufacturing overhead costs $27,720 Normal production level in labor hours 23,100 Normal production level in units 5,775 Standard labor hours per unit 4 During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $75,600. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Coen's volume overhead variance is A) $840 U. B) $3,080 U. C) $3,920 U. D) $11,200 U. 23. In incremental analysis, A) only costs are analyzed. B) only revenues are analyzed. C) both costs and revenues may be analyzed. D) both costs and revenues that stay the same between alternate courses of action will be analyzed. 24. It costs Garner Company $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 2,000 scales at $15 each. Garner would incur special shipping costs of $1 per scale if the order were accepted. Garner has sufficient unused capacity to produce the 2,000 scales. If the special order is accepted, what will be the effect on net income? A) $4,000 increase B) $4,000 decrease C) $6,000 decrease D) $30,000 increase 25. Baden Company manufactures a product with a unit variable cost of $50 and a unit sales price of $88. Fixed manufacturing costs were $240,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $70 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows: A) Income would decrease by $4,000. B) Income would increase by $4,000. C) Income would increase by $70,000. D) Income would increase by $20,000. 26. Miley, Inc. has excess capacity. Under what situations should the company accept a special order for less than the current selling price? A) Never B) When additional fixed costs must be incurred to accommodate the order C) When the company thinks it can use the cheaper materials without the customer's knowledge D) When incremental revenues exceed incremental costs 27. Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: Direct Materials $60,000 Direct Labor 10,000 Variable Overhead 30,000 Fixed Overhead 20,000 If Tex's Manufacturing Company can purchase the component externally for $110,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision? A) Make and save $5,000 B) Buy and save $5,000 C) Make and save $15,000 D) Buy and save $15,000 28. NF Toy Company is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $30 and NF Toy would sell it for $65. The cost to assemble the product is estimated at $21 per unit and the company believes the market would support a price of $85 on the assembled unit. What decision should NF Toy make? A) Sell before assembly, the company will be better off by $1 per unit. B) Sell before assembly, the company will be better off by $20 per unit. C) Process further, the company will be better off by $29 per unit. D) Process further, the company will be better off by $14 per unit. 29. Pratt Company has old inventory on hand that cost $12,000. Its scrap value is $16,000. The inventory could be sold for $40,000 if manufactured further at an additional cost of $12,000. What should Pratt do? A) Sell the inventory for $16,000 scrap value B) Dispose of the inventory to avoid any further decline in value C) Hold the inventory at its $12,000 cost D) Manufacture further and sell it for $40,000 30. Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine New Machine Price $250,000 $500,000 Accumulated Depreciation 75,000 -0- Remaining useful life 10 years -0- Useful life -0- 10 years Annual operating costs $200,000 $150,500 If the old machine is replaced, it can be sold for $20,000. The net advantage (disadvantage) of replacing the old machine is A) $15,000 B) $20,000 C) $(5,000) D) $(50,000) 31. Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Wood Aluminum Hard Rubber Total Sales $500,000 $200,000 $65,000 $765,000 Variable expenses 325,000 140,000 58,000 523,000 Contribution margin 175,000 60,000 7,000 242,000 Fixed expenses 75,000 35,000 22,000 132,000 Net income (loss) $100,000 $ 25,000 $(15,000) $110,000 Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped? A) $125,000 B) $103,000 C) $105,000 D) $140,000 32. Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Wood Aluminum Hard Rubber Total Sales $500,000 $200,000 $65,000 $765,000 Variable expenses 325,000 140,000 58,000 523,000 Contribution margin 175,000 60,000 7,000 242,000 Fixed expenses 75,000 35,000 22,000 132,000 Net income (loss) $100,000 $ 25,000 $(15,000) $110,000 Assume all of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped? A) $125,000 B) $103,000 C) $105,000 D) $140,000 33. A company can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $16 and takes two machine hours to make and Product B has a unit contribution margin of $30 and takes three machine hours to make. If there are 1,000 machine hours available to manufacture a product, income will be A) $2,000 more if Product A is made. B) $2,000 less if Product B is made. C) $2,000 less if Product A is made. D) the same if either product is made. 34. A company is considering purchasing factory equipment that costs $320,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are expected to be $90,000 and annual operating expenses exclusive of depreciation expense are expected to be $38,000. The straight-line method of depreciation would be used. If the equipment is purchased, the annual rate of return expected on this equipment is A) 32.5%. B) 3.8%. C) 7.5%. D) 16.3%. 35. A company is considering purchasing factory equipment that costs $320,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are expected to be $90,000 and annual operating expenses exclusive of depreciation expense are expected to be $38,000. The straight-line method of depreciation would be used. The cash payback period on the equipment is A) 13.3 years. B) 8.0 years. C) 6.2 years. D) 3.1 years. 36. Benaflek Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(450). Annual cost savings were: $5,000 for year 1; $4,000 for year 2; and $3,000 for year 3. The amount of the initial investment was Present Value PV of an Annuity Year of 1 at 12% of 1 at 12% 1 .893 .893 2 .797 1.690 3 .712 2.402 A) $10,239. B) $9,158. C) $10,058. D) $9,339. 37. Fehr Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Blue Project Gray Initial investment $400,000 $600,000 Annual net income 20,000 42,000 Net annual cash inflow 100,000 142,000 Estimated useful life 5 years 6 years Salvage value 0 0 The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 Periods 9% 10% 11% 12% 5 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 The net present value for Project Gray is A) $618,410. B) $182,912. C) $100,000. D) $18,410. 38. Fehr Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Blue Project Gray Initial investment $400,000 $600,000 Annual net income 20,000 42,000 Net annual cash inflow 100,000 142,000 Estimated useful life 5 years 6 years Salvage value 0 0 The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 Periods 9% 10% 11% 12% 5 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 The internal rate of return for Project Gray is approximately A) 10%. B) 11%. C) 12%. D) 9%. 39. Humphrey, Inc. is considering purchasing equipment costing $30,000 with a 6-year useful life. The equipment will provide cost savings of $7,300 and will be depreciated straight-line over its useful life with no salvage value. Humphrey, Inc. requires a 10% rate of return. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate internal rate of return for this investment? A) 9% B) 10% C) 11% D) 12% 40. Use the following table, Present value of an Annuity of 1 Period 8% 9% 10% 1 .926 .917 .909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $227,790 and is expected to generate cash inflows of $90,000 each year for three years. The approximate internal rate of return on this project is A) 8%. B) 9%. C) 10%. D) The IRR on this project cannot be approximated