1. Assume Division A makes a part that could be used by Division B. Division A has a capacity of 30,000 parts. They are currently selling 20,000 parts to outside customers. Divsion B needs 10,000 parts. The highest acceptable transfer price (per part) for Division B would be:

A. Variable cost of producing one part

B. Full absorption cost of producing one part

C. The selling price to ouside customers

D. The lowest price charged by competitors of Division A

2. A manufacturer generally wants to set a standard that______________.

A. Can be achieved only under the most efficient operating conditions

B. Is high enough to provide motivation and promote efficiency, but is still attainable

C. Makes no allowance for normal waste or spoilage

D. Will always result in favorable variances

3.If the actual number of pounds of materials used exceeds the standard pounds allowed but the actual cost was less than the standard cost, the quantity variance will be (favorable/unfavorable) and the price variance will be (favorable/unfavorable).

4. A company budgeted $100,000 in fixed manufacturing overhead costs. Manufacturing overhead was based on machine hours (2 MH per unit). Expected production for the year was 10,000 units.

The company actually spent $110,000 in fixed manufacturing overhead and made 9,800 units.

Match the following amounts to the appropriate variance:

Overall FMOH variance: (12,000 / 110,000 / 98,000 / 10,000 / 2,000 / 100,000)

FMOH budget (spending variance): (12,000 / 110,000 / 98,000 / 10,000 / 2,000 / 100,000)

FMOH volume variance: (12,000 / 110,000 / 98,000 / 10,000 / 2,000 / 100,000)

5. Identify whether the statement is true or false.

Cream is most likely to be accounted for as one of the primary products at a dairy. (T/F)

If variable manufacturing costs are applied based on direct labor hours and direct labor has an unfavorable efficiency variance, variable manufacturing overhead will also have an unfavorable efficiency variance. (T/F)