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Problem 1: Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Eastern Polymers, Inc., processes a base chemical into plastic. Standard costs and actual

Problem 1:

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Eastern Polymers, Inc., processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 5,600 units of product were as follows:

Standard Costs Actual Costs
Direct materials 7,800 lbs. at $4.60 7,700 lbs. at $4.50
Direct labor 1,400 hrs. at $16.70 1,430 hrs. at $16.90
Factory overhead Rates per direct labor hr.,
based on 100% of normal
capacity of 1,460 direct
labor hrs.:
Variable cost, $3.90 $5,410 variable cost
Fixed cost, $6.20 $9,052 fixed cost

Each unit requires 0.25 hour of direct labor.

Required: Fill out the oxes in blank:

a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

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Problem 2:

Differential Analysis for Sales Promotion Proposal

L'Essence Cosmetics Company is planning a one-month campaign for June to promote sales of one of its two cosmetics products. A total of $80,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:

Moisturizer Perfume
Unit selling price $47 $52
Unit production costs:
Direct materials $ 8 $11
Direct labor 3 4
Variable factory overhead 2 3
Fixed factory overhead 5 5
Total unit production costs $18 $23
Unit variable selling expenses 15 14
Unit fixed selling expenses 8 6
Total unit costs $41 $43
Operating income per unit $ 6 $ 9

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 19,000 additional units of moisturizer or 16,000 additional units of perfume could be sold without changing the unit selling price of either product.

Required: Fill out the oxes in blank

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Problem 3:

The capital investment committee of Cross Continent Trucking Inc. is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows:

Warehouse Tracking Technology
Year Income from Operations Net Cash Flow Income from Operations Net Cash Flow
1 $33,000 $102,000 $69,000 $163,000
2 33,000 102,000 53,000 138,000
3 33,000 102,000 26,000 97,000
4 33,000 102,000 12,000 66,000
5 33,000 102,000 5,000 46,000
Total $165,000 $510,000 $165,000 $510,000

Each project requires an investment of $440,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis.

Present Value of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 0.890 0.826 0.797 0.756 0.694
3 0.840 0.751 0.712 0.658 0.579
4 0.792 0.683 0.636 0.572 0.482
5 0.747 0.621 0.567 0.497 0.402
6 0.705 0.564 0.507 0.432 0.335
7 0.665 0.513 0.452 0.376 0.279
8 0.627 0.467 0.404 0.327 0.233
9 0.592 0.424 0.361 0.284 0.194
10 0.558 0.386 0.322 0.247 0.162

Required: Fill out the oxes in blank

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Problem 4:

Alabama Paper Company manufactures three products (computer paper, newsprint, and specialty paper) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:

Activity Activity Cost Pool
Production $394,200
Setup 282,800
Moving 65,700
Shipping 127,100
Product Engineering 64,500
Total $934,300

The activity bases identified for each activity are as follows:

Activity Activity Base
Production Machine hours
Setup Number of setups
Moving Number of moves
Shipping Number of customer orders
Product Engineering Number of test runs

The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

Machine Hours Number of Setups Number of Moves Number of Customer Orders Number of Test Runs Units
Computer Paper 3,210 180 180 820 50 8,025
Newsprint 2,040 270 270 2,260 320 5,100
Specialty Paper 2,050 250 450 1,020 130 5,125
Total 7,300 700 900 4,100 500 18,250

Each product requires 0.9 machine hour per unit.

Required: Fill out the oxes in blank

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