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Question
A selling department is usually evaluated as a profit center.
Answer
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Related questions
Q:
Part of the decision to accept additional business should be based on a comparison of the incremental (differential) costs of the added production with the additional revenues to be received.
Q:
Wren Company determined that in the production of their products last period; they had a favorable price variance and an unfavorable quantity variance for direct materials. What might be the cause(s) of this pattern of variances?
It is possible that the production department found ways to reduce material waste and the purchasing department was able to reduce the cost of materials at the same time. However, the company's purchasing manager may have purchased inferior materials to save costs that might have caused production to waste more materials than expected. The favorable price variance may not be worth what it cost if materials were wasted.
Q:
Explain variance analysis. Describe how variance analysis assists managers.
Q:
Define standard costs. How do they assist management?
Q:
A management process to focus on significant variances and give less attention to areas where performance is close to the standard. Quantity variance
Q:
Ship Co. produces storage crates that require 1.2 meters of material at $.85 per meter and 0.1 direct labor hours at $15.00 per hour. Overhead is assigned at the rate of $9 per direct labor hour. What is the total standard cost for one unit of product that would appear on a standard cost card?
A. $25.02.
B. $11.52.
C. $2.40.
D. $2.52.
E. $3.42.
Q:
Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead spending variance.
Direct labor standard (2 hrs. @ $12.75/hr.) $25.50 per finished unit
Actual direct labor hours 81,500 hrs.
Budgeted units 42,000 units
Actual finished units produced 40,000 units
Standard variable OH rate (2 hrs. @ $14.30/hr.) $28.60 per finished unit
Standard fixed OH rate ($336,000/42,000 units) $8.00 per unit
Actual cost of variable overhead costs incurred $1,140,000
Actual cost of fixed overhead costs incurred $338,000
A. $25,450 favorable.
B. $4,000 favorable.
C. $4,000 unfavorable.
D. $21,450 favorable.
E. $21,450 unfavorable.
Q:
Fletcher Company collected the following data regarding production of one of its products. Compute the fixed overhead cost variance.
Direct labor standard (2 hrs. @ $12.75/hr.) $25.50 per finished unit
Actual direct labor hours 81,500 hrs.
Budgeted units 42,000 units
Actual finished units produced 40,000 units
Standard variable OH rate (2 hrs. @ $14.30/hr.) $28.60 per finished unit
Standard fixed OH rate ($336,000/42,000 units) $8.00 per unit
Actual cost of variable overhead costs incurred $1,140,000
Actual cost of fixed overhead costs incurred $338,000
A. $18,300 favorable.
B. $18,000 favorable.
C. $18,000 unfavorable.
D. $18,300 unfavorable.
E. $14,300 unfavorable.
Q:
Fletcher Company collected the following data regarding production of one of its products. Compute the direct labor efficiency variance.
Direct labor standard (2 hrs. @ $12.75/hr.) $25.50 per finished unit
Actual direct labor hours 81,500 hrs.
Actual finished units produced 40,000 units
Actual cost of direct labor $1,100,250
A. $19,125 favorable.
B. $80,250 favorable.
C. $61,125 favorable.
D. $19,125 unfavorable.
E. $80,250 unfavorable.
Q:
Fletcher Company collected the following data regarding production of one of its products. Compute the direct materials quantity variance.
Direct materials standard (6 lbs. @ $2/lb.) $12 per finished unit
Actual direct materials used 243,000 lbs.
Actual finished units produced 40,000 units
Actual cost of direct materials used $483,570
A. $2,430 unfavorable.
B. $3,570 unfavorable.
C. $2,430 favorable.
D. $6,000 unfavorable.
E. $3,570 favorable.
Q:
Claremont Company specializes in selling refurbished copiers. During the month, the company sold 180 copiers for total sales of $540,000. The budget for the month was to sell 175 copiers at an average price of $3,200. The sales price variance for the month was.
A. $20,000 unfavorable.
B. $20,000 favorable.
C. $36,000 unfavorable.
D. $32,000 unfavorable.
E. $36,000 favorable.
Q:
Milltown Company specializes in selling used cars. During the month, the dealership sold 22 cars at an average price of $15,000 each. The budget for the month was to sell 20 cars at an average price of $16,000. Compute the dealership's sales volume variance for the month.
A. $22,000 unfavorable.
B. $10,000 favorable.
C. $22,000 favorable.
D. $32,000 unfavorable.
E. $32,000 favorable.
Q:
Sanchez Company's output for the current period was assigned a $400,000 standard direct labor cost. The direct labor variances included a $10,000 unfavorable direct labor rate variance and a $4,000 favorable direct labor efficiency variance. What is the actual total direct labor cost for the current period?
A. $414,000.
B. $386,000.
C. $394,000.
D. $406,000.
E. $410,000.
Q:
When recording the journal entry for labor, the Work in Process Inventory account is
A. Debited for standard labor cost.
B. Debited for actual labor cost.
C. Credited for standard labor cost.
D. Credited for actual labor cost.
E. Not used.
Q:
Seafarer Company established a standard direct materials cost of 1.5 gallons at $2 per gallon for one unit of its product. During the past month, actual production was 6,500 units. The material quantity variance was $700 favorable and the material price variance was $470 unfavorable. The entry to charge Work in Process Inventory for the standard material costs during the month and to record the direct material variances in the accounts would include all of the following except:
A. A debit to Work in Process for $19,500.
B. A credit to Raw Materials for $19,270.
C. A debit to Direct Material Price Variance for $470.
D. A credit to Direct Material Quantity Variance for $700.
E. A debit to Cost of Goods Sold for $230.
Q:
Regarding overhead costs, as volume increases:
A. Total fixed cost increases, total variable cost remains constant.
B. Total fixed cost remains constant, total variable cost increases.
C. Total variable cost decreases, total fixed cost remains constant.
D. Both total fixed cost and total variable cost increase.
E. Both total fixed cost and total variable cost remain constant.
Q:
Super Grocery store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments:
Expense Basis for allocation Amount
Administrative Square feet of floor space $15,000
Advertising Amount of dollar sales $8,000
The following information is available for its three operating (sales) departments:
Department Square
Feet Dollar
Sales
Produce 1,000 $80,000
Bakery 800 $30,000
Meats 1,200 $42,000
Totals 3,000 $152,000
What is the total administrative expense allocated to the Meats department?
A. $6,000.
B. $9,000.
C. $4,145.
D. $1,200.
E. $3,000.
Q:
Flamingos, Inc. has four departments. The Administrative Department costs are allocated to the other three departments based on the number of employees in each and the Maintenance Department costs are allocated to the Assembly and Packaging Departments based on their occupied space. Data for these departments follows:
Admin. Maintenance Assembly Packaging
Operating costs $30,000 $15,000 $70,000 $45,000
No. of employees 2 6 4
Sq. ft. of space 2,000 3,000
The total amount of the Administrative Department's cost that would eventually be allocated to the Packaging Department is:
A. $4,800.
B. $12,000.
C. $10,000.
D. $18,000.
E. $13,000.
Q:
A company pays $15,000 per period to rent a small building that has 10,000 square feet of space. This cost is allocated to the company's three departments on the basis of the amount of the space occupied by each. Department One occupies 2,000 square feet of floor space, Department Two occupies 3,000 square feet of floor space, and Department Three occupies 5,000 square feet of floor space. If the rent is allocated based on the total square footage of the space, Department One should be charged rent expense for the period of:
A. $4,400.
B. $3,000.
C. $4,000.
D. $2,200.
E. $2,000.
Q:
Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period:
Office Expenses Total Allocation Basis
Salaries $30,000 Number of employees
Depreciation 20,000 Cost of goods sold
Advertising 40,000 Net sales
Item Drilling Grinding Total
Number of employees 1,000 1,500 2,500
Net sales $325,000 $475,000 $800,000
Cost of goods sold $75,000 $125,000 $200,000 The amount of the total office expenses that should be allocated to Grinding for the current period is:
A. $35,750.
B. $45,000.
C. $54,250.
D. $90,000.
E. $600,000.
Q:
Two investment centers at Marshman Corporation have the following current-year income and asset data:
Investment
Center A Investment
Center B
Investment center income $415,000 $525,000
Investment center average invested assets $2,400,000 $1,950,000
The return on investment (ROI) for Investment Center B is:
A. 371.4%
B. 26.9%
C. 24.1%
D. 39.2%
E. 21.7%
Q:
Wren Pork Company uses the relative market value method of allocating joint costs in its production of pork products. Relevant information for the current period follows:
Product Pounds Price/lb.
Loin chops 3,000 $5.00
Ground 10,000 2.00
Ribs 4,000 4.75
Bacon 6,000 3.50
The total joint cost for the current period was $43,000. How much of this cost should Wren Pork allocate to Loin chops?
A. $0.
B. $5,909.
C. $8,600.
D. $10,750.
E. $43,000.
Q:
Data pertaining to a company's joint production for the current period follows:
L M
Quantities produced 200 lbs. 150 lbs.
Market value at split-off point $8/lb. $16/lb.
Compute the cost to be allocated to Product L for this period's $660 of joint costs if the value basis is used.
A. $264.
B. $396.
C. $330.
D. $1,364.
E. $796.
Q:
Investment center managers are typically evaluated using performance measures that combine income and assets.
Q:
Joint costs can be allocated either using a physical basis or a value basis.
Q:
An example of a controllable cost is equipment depreciation expense.
Q:
No standard rule identifies the best basis of allocating expenses across departments, so it is impossible to allocate costs in a manner that will be perceived as fair.
Q:
The number of hours that a department uses equipment and machinery is a reasonable basis for allocating depreciation.
Q:
A profit center generates revenue, incurs costs, and has the authority to make significant investing decisions.
Q:
The __________ is a report of the amount of sales less direct expenses for a department. departmental contribution to overhead