PART ONE:

Shoemaker Perkins Company uses a standard cost system and had 400 pounds of raw material X15 on hand on September 1. The standard cost of X15 is $10.00 per pound. The production standard calls for 2 pounds of material X15 for each unit of product manufactured. The company manufactured 600 units of the product in September, and had 500 pounds of material X-15 in stock on September 30. The actual price for material X-15 purchased during the month was $1 per pound below the standard cost. The material usage variance in September was $3,000 unfavorable. What is the purchase-price variance for material X in September, rounded to the nearest dollar?

Multiple Choice

• $1,600 favorable.

• $1,100 favorable.

• $1,500 favorable.

• $1,200 favorable.

• $1,300 favorable.

PART TWO:

All the following are limitations of short-term financial performance indicators except:

Multiple Choice

• Focusing on individual cost variances can result in optimum local but not global (i.e., firm-wide) performance.

• Senior managers typically find non-financial performance indicators more useful than summary financial-performance indicators.

• Operating personnel may not readily understand or be able to interpret financial-performance indicators.

• Employees and managers can take actions that improve short-term financial performance at the expense of long-term performance.