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Exam 19: Flexible Budgets, Standard Costs, and Variance Analysis

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Question 1

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When recording the raw materials used in production in transaction (b) above, the Work in Process inventory account will increase (decrease) by:

A) ($1,158,810)
B) $1,158,810
C) ($1,159,760)
D) $1,159,760

E) All of the above
F) A) and D)

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Question 2

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Ferrero Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.The company has provided the following information: The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year: When the company closes its standard cost variances, the Cost of Goods Sold will increase (decrease) by:

A) $56,580
B) ($125,916)
C) ($56,580)
D) $125,916

E) C) and D)
F) A) and C)

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Question 3

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As defined it the text, the ending balance in retained earnings equals the beginning balance in retained earnings plus net operating income minus dividends.

When the purchase of raw materials is recorded in transaction (a) above, which of the following entries will be made?

When recording the raw materials used in production in transaction (b) above, the Raw Materials inventory account will increase (decrease) by:

Platko Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.There is no variable manufacturing overhead.The standard cost card for the company's only product is as follows: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $348,000 and budgeted activity of 24,000 hours.During the year, 38,900 units were started and completed.Actual fixed overhead costs for the year were $335,900. Assume that all transactions are recorded on a worksheet as shown in the text.On the left-hand side of the equals sign in the worksheet are columns for Cash, Raw Materials, Work in Process, Finished Goods, and PP&E (net) .All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings. When the fixed manufacturing overhead cost is recorded, which of the following entries will be made?

When the direct labor cost is recorded in transaction (c) above, which of the following entries will be made?

The ending balance in the Finished Goods account will be closest to:

Herriot Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.There is no variable manufacturing overhead.The standard cost card for the company's only product is as follows: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $598,500 and budgeted activity of 31,500 hours. During the year, the company applied fixed overhead to the 37,500 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed.Actual fixed overhead costs for the year were $609,000.Of this total, $549,000 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $60,000 related to depreciation of manufacturing equipment. Required: Completely record the transactions involving fixed overhead, including any variances, in the worksheet that appears below.Because of the width of the worksheet, it is in two parts.In your text, these two parts would be joined side-by-side to make one very wide worksheet.The beginning balances have been provided for each of the accounts, including the Property, Plant, and Equipment (net)account which is abbreviated as PP&E (net).

When recording the raw materials used in production in transaction (b) above, the Raw Materials inventory account will increase (decrease) by:

The ending balance in the Retained Earnings account at the end of the year is closest to:

When recording the raw materials used in production in transaction (b) above, the Work in Process inventory account will increase (decrease) by:

When recording the raw materials purchases in transaction (a) above, the Raw Materials inventory account will increase (decrease) by:

When recording the raw materials used in production in transaction (b) above, the Raw Materials inventory account will increase (decrease) by:

Newbery Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.There is no variable manufacturing overhead.The fixed manufacturing overhead standards for the company's only product specify 0.60 hours per unit at $9.50 per hour.The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $199,500 and budgeted activity of 21,000 hours.During the year, 44,000 units were started and completed.Actual fixed overhead costs for the year were $216,200. Assume that all transactions are recorded on a worksheet as shown in the text.On the left-hand side of the equals sign in the worksheet are columns for Cash, Raw Materials, Work in Process, Finished Goods, and PP&E (net) .All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings. When the fixed manufacturing overhead cost is recorded, which of the following entries will be made?

The adjusted Cost of Goods Sold after closing all of the variances to Cost of Goods Sold will be closest to:

Kellems Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.The company has provided the following information: The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year: The adjusted Cost of Goods Sold after closing all of the variances to Cost of Goods Sold will be closest to:

When recording the raw materials used in production in transaction (b) above, the Raw Materials inventory account will increase (decrease) by:

Shankland Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.There is no variable manufacturing overhead.The standard cost card for the company's only product is as follows: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $67,500 and budgeted activity of 7,500 hours.During the year, 24,600 units were started and completed.Actual fixed overhead costs for the year were $84,800. Assume that all transactions are recorded on a worksheet as shown in the text.On the left-hand side of the equals sign in the worksheet are columns for Cash, Raw Materials, Work in Process, Finished Goods, and PP&E (net) .All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings. When applying fixed manufacturing overhead to production, the Work in Process inventory account will increase (decrease) by:

Grafton Corporation manufactures one product.It does not maintain any beginning or ending inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.Its standard cost per unit produced is $38.85.During the year, the company produced and sold 28,200 units at a price of $50.10 per unit and its selling and administrative expenses totaled $120,000.The company does not have any variable manufacturing overhead costs.It recorded the following variances during the year: Required: Prepare an income statement for the year.