Multiple Choice

1. The unemployment rate is high in the city in which a company has a factory. The company finds that they are able to pay new employees a lower wage per hour than when the unemployment rate was lower a year ago. Which variance is directly impacted?
   1. Materials price variance
   2. Materials efficiency variance
   3. Labour price variance
   4. Labour efficiency variance

2. Thomas Corporation produces stopwatches. According to company standards, it should take 1 hour of direct labour to produce a stopwatch. Thomas' standard labour cost is $18 per hour. During June, Thomas produced 5,000 stopwatches and used 5,150 hours of direct labour at a total cost of

$102,500. What is Thomas' direct labour price variance for June?

1. $9,800 favourable
2. $9,515 unfavourable
3. $9,515 favourable
4. $9,800 unfavourable

3. Which of the following best describes a "relevant cost"?
   1. A factor that restricts production or sales of a product
   2. Cost of developing, producing, and delivering a product or service
   3. Expected future costs that differs among alternatives
   4. Costs that were incurred in the past and cannot be changed

Use the information below to answer the following question(s):

Clear Sky Sailmakers manufactures sails for sailboats. The company has the capacity to produce 15,000 sails per year, but is currently producing and selling 10,000 sails per year. The following information relates to current production:

Sale price per unit	$250
Variable costs per unit:
Manufacturing	$165
Marketing and administrative	$50
Total fixed costs:
Manufacturing	$750,000
Marketing and administrative	$200,000

4. If Clear Sky Sailmakers accepts a special order for 5,000 sails at a price of $225 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)
   1. Increase by $1,125,000
   2. Increase by $50,000
   3. Decrease by $50,000
   4. Increase by $150,000

5. If Clear Sky Sailmakers accepts a special order for 3,000 sails at a price of $215 per unit, fixed costs remain unchanged, and no variable marketing and administrative costs will be incurred for this order, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)
   1. Increase by $50,000
   2. Increase by $150,000
   3. Increase by $0
   4. Decrease by $50,000

Use the information below to answer the following question(s).

Western Technologies Inc. produces dashboard displays. Actual fixed manufacturing overhead is the same as the budgeted amount, $687,500. Production in September increased by 10% over the previous month's production. August production was 25,000 displays. The production level is the same as the budgeted denominator level. At the end of September, 2,000 displays remained in stock. In August, all of the displays were sold by the end of the month and there was no remaining work in process inventory.

6. What are Western Technologies' appropriate period costs for September if variable costing is used? a. $668,380

b. $726,500

c. $632,500

d. $687,500

e. $637,500

7. What is the Western Technologies' September cost of goods sold amount if absorption costing is used?

a. $668,380

b. $726,500

c. $632,500

d. $687,500

e. $637,500

8. Helton Company has the following information for the current year:

Beginning fixed manufacturing overhead in inventory	$95,000
Fixed manufacturing overhead in production	375,000
Ending fixed manufacturing overhead in inventory	25,000
Beginning variable manufacturing overhead in inventory	$10,000
Variable manufacturing overhead in production	50,000
Ending variable manufacturing overhead in inventory	15,000

What is the difference between operating incomes under absorption costing and variable costing? a. $65,000

b. $50,000

c. $40,000

d. $5,000

e. $70,000

9. Which of the following is an example of a drawback of using absorption costing?
   1. It allows management the ability to manipulate operating income via production schedules.
   2. An inventoried cost will eventually become part of cost of goods sold.
   3. The company's sales level drives the production schedules.
   4. A manager may increase maintenance activities above the budgeted level for the current period.
   5. Expensing fixed costs as period costs reducing operating income.

10. Zany Brainy projected current year sales of 50,000 units at a unit sale price of $20.00. Actual current year sales were 55,000 units at $22.00 per unit. Variable costs were budgeted at $14.00 per unit and actually totaled $15.00 per unit. Budgeted fixed costs totaled $400,000, while actual fixed costs amounted to $420,000.

What is the Zany Brainy's sales volume variance for total revenue?

1. $110,000 favourable
2. $100,000 unfavourable
3. $110,000 unfavourable
4. $100,000 favourable