The estimates of the variable and fixed components

Reference no: EM139596

Q1. If variable manufacturing overhead is applied based on direct labor-hours, it is impossible to have a favorable labor efficiency variance and unfavorable variable overhead efficiency variance for the same period.
a. True
b. False

Q2. To ensure comparability, all of the balanced scorecards of companies within a single industry should have the same performance measures.
a. True
b. False

Q3. A manufacturing cycle efficiency (MCE) of 0.3 means that 70% of throughput time is spent on non-value-added activities.
a. True
b. False

Q4. When more hours of labor time are necessary to complete a job than the standard allows, the labor rate variance is unfavorable.
a. True
b. False

Q5. A favorable materials quantity variance would appear as a debit in a journal entry.
a. True
b. False

Q6. For an automobile manufacturer, the cost of a driver's side air bag purchased from a supplier and installed in every automobile would best be described as a:
a. fixed cost.
b.mixed cost.
c.step-variable cost.
d. variable cost.

Q7. Vicuna Wool Company manufactures and sells sweaters. Last year, Vicuna operated at 100% of capacity and had the following cost formula for total manufacturing costs:
Y = $50,000 + $400X
Assuming no change in cost structure, what would Vicuna's cost formula have been last year if they only operated at 90% of production capacity?
a. Y = $45,000 + $360X
b.Y = $45,000 + $400X
c. Y = $50,000 + $360X
d.Y = $50,000 + $400X

Q8. The management of Hamano Corporation would like for you to analyze their repair costs, which are listed below:

	Machine-Hours	Repair-Hours
April	4,459	$98,523
May	4,426	$98,296
June	4,493	$98,781
July	4,417	$98,207
August	4,432	$98,349
September	4,446	$98,420
October	4,489	$98,749
November	4,475	$98,654

Management believes that repair cost is a mixed cost that depends on the number of machine-hours. Using the least-squares regression method, the estimates of the variable and fixed components of repair cost would be closest to:

a. $22.11 per machine-hour plus $98,497 per month

b. $7.37 per machine-hour plus $65,670 per month

c. $8.19 per machine-hour plus $62,015 per month

d. $7.55 per machine-hour plus $64,859 per month

Q9. During a recent lengthy strike at Morell Manufacturing Company, management replaced striking assembly line workers with office workers. The assembly line workers were being paid $18 per hour while the office workers are only paid $10 per hour. What is the most likely effect on the labor variances in the first month of this strike?

	Labor Rate Variance	Labor Efficiency Variance
A)	Unfavorable	No effect
B)	No effect	Unfavorable
C)	Unfavorable	Favorable
D)	Favorable	Unfavorable

a.Item A

b. Item B

c.Item C

d.Item D

Q10. The journal entry below

Work in Process	25,000
Direct Labor Efficiency Variance	1,200
Direct Labor Rate Variance	2,000
Accrued Wages Payable	24,200

indicates that:

A. the total labor variance was $800, unfavorable.

B. employees received an unexpected rate increase during the period.

C. more labor time was required to complete the output of the period than was allowed at standard.

D. responses a and b are both correct.

Reference no: EM139596

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