2. It takes 1.5 feet of leather material to make one purse. The cost of the material is $20 per foot. The company plans to make 600 purses in May and 800 purses in June. They would like the inventory of leather material at the end of a month to be 20% of the following months production needs. What would be the budgeted cost to purchase leather material in May?

a. $16,800 b. $19,200 c. $22,800

3. At Johnson Lighting, the number of mosaic table lamps to be produced in December is 20,000. Each lamp requires 2 hours of hands-on labor, and the standard rate of pay for these laborers is $18 per hour. What will be the budgeted direct labor cost at Johnson for the month of December?

a. $720,000 b. $360,000 c. $620,000

4. At Jackson Co. the budgeted direct labor hours for the 2^nd quarter are 4,250 hours. Variable overhead is budgeted to be $2.54 per hour and fixed overhead is budgeted to be $18,400. What is the total budgeted overhead cost for the 2^nd quarter?

a. $18,400 b. $10,795 c. 29,195

5. Wasteful usage of variable overhead costs such as indirect materials and utilitiesi.e., misplacing or spilling indirect materials or leaving machines running and doors to refrigerated areas open will cause which of the following variances to be unfavorable?

a. Materials Price Variance

b. Materials Quantity Variance

c. Variable Overhead Rate (Spending) Variance

d. Variable Overhead Efficiency Variance

6. If the labor mix at a company is changed by placing new untrained personnel in positions formerly held by senior technicians, the expected impact on the labor variances would be:

a. The labor rate variance would be more favorable, but the labor efficiency variance would be less favorable.

b. The labor rate variance would be less favorable, but the labor efficiency variance would be more favorable.

c. Both the labor rate and labor efficiency variances would be more favorable.

d. Both the labor rate and labor efficiency variances would be less favorable.

Questions 7 - 13 refer to the following:

ABC Company has set the following standards for the production of one case of product:

Usage Cost Total per unit

Direct Materials .6 yards $3 per yard $1.80

Direct Labor .5 hours $18 per hour $9.00

Variable Overhead .5 hours $4 per hour $2.00

Fixed Overhead .5 hours $5 per hour $2.50

$15.30

• Purchased 2,000 yards at a cost of $6,600
• Used 1,750 yards to make 3,000 good units
• Paid $27,690 for 1,560 hours of labor.
• Actual variable OH costs were $6,396.
• Budgeted Fixed Overhead was $8,750 for 1,750 budgeted hours.
• Actual Fixed Overhead was $9,100.

7. The materials price variance for March is:

a. $600 U c. $300 U

b. $600 F d. $300 F

8. The material quantity variance for March is:

a. $150 U c. $900 U

b. $150 F d. $900 F

9. The labor rate variance for March is:

a. $470U c. $390 U

b. $470 F d. $390 F.

10. The labor efficiency variance for March is:

a. $1,080 U c. $1,920 U

b. $1,080 F d. $1,920 F

11. The variable overhead efficiency variance for March is:

a. $240 U c. $360 U

b. $240 F d. $360 F

12. Compute the fixed overhead budget variance:

a. $440 U c. $350 U

b. $440 F d. $350 F

13. Compute the fixed overhead volume variance:

a. $1,250 U c. $2,400 U

b. $1,250 F d. $2,400 F

14. An unfavorable fixed overhead volume variance would indicate that:

a. more labor hours were worked during the period than had been budgeted

b. fewer units were made during the period than had been budgeted

c. more units were made during the period than had been budgeted

d. fewer labor hours were worked during the period than had been budgeted