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30.Assume that a company manufactures and sells a variety of products, one of which it refers to as Product A. The company is considering dropping Product A because the income statement for this product is reporting a net operating loss as shown below:

Sales				$	500,000
Variable expenses:
Variable manufacturing expenses	$	240,000
Sales commissions		75,000
Shipping		25,000
Total variable expenses					340,000
Contribution margin					160,000
Fixed expenses:
Salary of product-line manager	$	65,000
Advertising for this product		35,000
General factory overhead		25,000
Depreciation on equipment		20,000
Insurance on this products inventories		8,000
Purchasing department		15,000
Total fixed expenses					168,000
Net operating loss				$	(8,000	)

If Product A is dropped, the company would transfer its product-line manager to another department and discontinue a search for a new manager that the company anticipated paying a salary of $46,500. The general factory overhead and purchasing department expenses are common costs that the company allocates to all of its products using total sales dollars as the allocation base. The equipment used to manufacture Product A does not wear out through use and it has no resale value. What is the financial advantage (disadvantage) of dropping Product A?

Multiple Choice

• $(30,500)

• $(50,500)

• $8,000

• $(70,500)

31.

Assume a merchandising company provides the following information from its master budget for the month of May:

Sales	$	122,000
Cash paid for merchandise purchases	$	76,000
Selling and administrative expenses	$	16,000
Accounts payable, May 1st	$	10,800
Accounts payable, May 31st	$	17,000

If the company maintains no beginning or ending merchandise inventory and makes all of its inventory purchases on account, what is the budgeted net operating income for May?

Multiple Choice

• $23,800

• $17,000

• $40,800

• $47,600

32.

Assume the following information appears in the standard cost card for a company that makes only one product:

	Standard Quantity or Hours		Standard Price or Rate			Standard Cost
Direct materials	5	pounds	$	11.00	per pound	$	55.00
Direct labor	2	hours	$	18.40	per hour	$	36.80
Variable manufacturing overhead	2	hours	$	3.00	per hour	$	6.00

During the most recent period, the following additional information was available:

• 20,000 pounds of material was purchased at a cost of $10.50 per pound.
• All of the material that was purchased was used to produce 3,900 units.
• 8,000 direct labor-hours were recorded at a total cost of $132,000.

What is the direct labor efficiency variance?

Garrison 17e Rechecks 2020-09-29

Multiple Choice

• $3,680 F

• $3,300 F

• $3,680 U

• $3,300 U

33.

Assume that the amount of one of a companys variable expenses in its flexible budget is $40,000. The actual amount of the expense is $43,000 and the amount in the companys planning budget is $44,000. The spending variance for this expense is:

Multiple Choice

• $6,000 U.

• $3,000 F.

• $6,000 F.

• $3,000 U.

34.

Assume the following information:

		Amount
Selling price	$	30
Variable expense ratio		80	%
Fixed expenses	$	8,000	per month
Unit sales		3,400	per month

How many units need to be sold to achieve a target profit of $18,100?

Multiple Choice

• 6,424 units

• 3,017 units

• 1,045 units

• 4,350 units

35.

Assume that a company provided the following cost formulas for three of its expenses (where q refers to the number of hours worked):

Rent (fixed)		$3,000
Supplies (variable)		$4.00	q
Utilities (mixed)		$150 + $0.75	q

The companys planned level of activity was 2,160 hours and its actual level of activity was 1,850 hours. How much supplies expense would be included in the planning budget?

Multiple Choice

• $8,340

• $8,540

• $8,640

• $8,040

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