AC 612 - Accounting Master - Forecasting And Budgeting Exam
Questions And Accurate Answers
ChemKing uses a standard costing system in the manufacture of its single product. The
35,000 units of direct materials in inventory were purchased for $105,000, and two units
of direct materials are required to produce one unit of final product. In November, the
company produced 12,000 units of product. The standard allowed for materials was
$60,000, and the unfavorable quantity variance was $2,500.
The materials price variance for the units used in November was:
A. $2,500 unfavorable
B. $11,000 unfavorable
C. $12,500 unfavorable
D. $2,500 favorable - ANSWER C. $12,500 unfavorable
The materials price variance is typically calculated using the actual quantity of goods
purchased, which is given as 35,000. However, this problem asks for the materials price
variance for the units used, rather than the units purchased.
Therefore, we first need to calculate the actual number of units used. In this problem,
we are given the quantity variance ($2,500 unfavorable) and we can calculate the
standard quantity and the standard price per unit:
Standard quantity = 12,000 units produced × 2 units of raw materials per unit produced
= 24,000 units of raw materials
Standard price per unit = Total standard price / Standard quantity = $60,,000 =
$2.50
We can then use this information to calculate the Actual Quantity Used using the formula
for the materials quantity usage variance.
,DM quantity usage variance = Standard price × (Actual quantity used − Standard
quantity used)
$2,500 = $2.50 × (Actual quantity used − 24,000)
Actual quantity used = 25,000
Once the actual quantity used is known, we can calculate the price variance for the
units used as follows:
DM price variance for units used = Actual quantity used × (Actual price − Standard
price)
DM price variance for units used = 25,000 × [($105,,000) − $2.50] = 25,000 ×
($3.00 − $2.50) = $12,500
Because actual price was greater than standard price, the variance is unfavorable.
The production budget process usually begins with the:
A. Direct labor budget
B. Direct materials budget
C. Sales budget
D. Ending inventory budget - ANSWER C. Sales budget
The production budget process usually begins with sales budget and then adds in the
effect of any changes in inventory levels
Jordan Auto has developed the following production plan.
month / units
,Jan - 10,000
Feb - 8,000
Mar - 9,000
Apr - 12,000
Each unit contains three pounds of raw material. The desired raw material ending
inventory each month is 120 percent of the next month's production, plus 500 pounds.
(The beginning inventory meets this requirement.) Jordan has developed the following
direct labor standards for production of these units.
dept 1 / dept 2
hours per unit: 2..5
hourly rate: $6.75 / $12.00
How much raw material should Jordan Auto purchase in March?
A. 32,900 pounds
B. 36,000 pounds
C. 37,800 pounds
D. 43,700 pounds - ANSWER C. 37,800 pounds
3/1
Begin bal. (9,000 × 120% × 3) + 500 =
32,900
Purchases (squeeze)
37,800
, Subtotal
70,700
Transfer out (9,000 × 3)
(27,000)
3/31
End bal. (12,000 × 120% × 3) + 500 =
$43,700
A favorable material price variance coupled with an unfavorable material usage
variance would most likely result from:
A. Machine efficiency problems
B. Product mix production changes
C. The purchase and use of higher than standard quality material
D. The purchase of lower than standard quality material - ANSWER D. The purchase of
lower than standard quality material
The purchase of lower than standard quality material will often result in an unfavorable
material usage variance (the inferior material causes more waste) and a favorable
material price variance (the inferior material costs less).
HL Co. uses the high-low method to derive a total cost formula. Using a range of units
produced from 5,000 to 7,500, and a range of total costs from $35,000 to $45,000,
producing 2,000 units will cost HL:
Questions And Accurate Answers
ChemKing uses a standard costing system in the manufacture of its single product. The
35,000 units of direct materials in inventory were purchased for $105,000, and two units
of direct materials are required to produce one unit of final product. In November, the
company produced 12,000 units of product. The standard allowed for materials was
$60,000, and the unfavorable quantity variance was $2,500.
The materials price variance for the units used in November was:
A. $2,500 unfavorable
B. $11,000 unfavorable
C. $12,500 unfavorable
D. $2,500 favorable - ANSWER C. $12,500 unfavorable
The materials price variance is typically calculated using the actual quantity of goods
purchased, which is given as 35,000. However, this problem asks for the materials price
variance for the units used, rather than the units purchased.
Therefore, we first need to calculate the actual number of units used. In this problem,
we are given the quantity variance ($2,500 unfavorable) and we can calculate the
standard quantity and the standard price per unit:
Standard quantity = 12,000 units produced × 2 units of raw materials per unit produced
= 24,000 units of raw materials
Standard price per unit = Total standard price / Standard quantity = $60,,000 =
$2.50
We can then use this information to calculate the Actual Quantity Used using the formula
for the materials quantity usage variance.
,DM quantity usage variance = Standard price × (Actual quantity used − Standard
quantity used)
$2,500 = $2.50 × (Actual quantity used − 24,000)
Actual quantity used = 25,000
Once the actual quantity used is known, we can calculate the price variance for the
units used as follows:
DM price variance for units used = Actual quantity used × (Actual price − Standard
price)
DM price variance for units used = 25,000 × [($105,,000) − $2.50] = 25,000 ×
($3.00 − $2.50) = $12,500
Because actual price was greater than standard price, the variance is unfavorable.
The production budget process usually begins with the:
A. Direct labor budget
B. Direct materials budget
C. Sales budget
D. Ending inventory budget - ANSWER C. Sales budget
The production budget process usually begins with sales budget and then adds in the
effect of any changes in inventory levels
Jordan Auto has developed the following production plan.
month / units
,Jan - 10,000
Feb - 8,000
Mar - 9,000
Apr - 12,000
Each unit contains three pounds of raw material. The desired raw material ending
inventory each month is 120 percent of the next month's production, plus 500 pounds.
(The beginning inventory meets this requirement.) Jordan has developed the following
direct labor standards for production of these units.
dept 1 / dept 2
hours per unit: 2..5
hourly rate: $6.75 / $12.00
How much raw material should Jordan Auto purchase in March?
A. 32,900 pounds
B. 36,000 pounds
C. 37,800 pounds
D. 43,700 pounds - ANSWER C. 37,800 pounds
3/1
Begin bal. (9,000 × 120% × 3) + 500 =
32,900
Purchases (squeeze)
37,800
, Subtotal
70,700
Transfer out (9,000 × 3)
(27,000)
3/31
End bal. (12,000 × 120% × 3) + 500 =
$43,700
A favorable material price variance coupled with an unfavorable material usage
variance would most likely result from:
A. Machine efficiency problems
B. Product mix production changes
C. The purchase and use of higher than standard quality material
D. The purchase of lower than standard quality material - ANSWER D. The purchase of
lower than standard quality material
The purchase of lower than standard quality material will often result in an unfavorable
material usage variance (the inferior material causes more waste) and a favorable
material price variance (the inferior material costs less).
HL Co. uses the high-low method to derive a total cost formula. Using a range of units
produced from 5,000 to 7,500, and a range of total costs from $35,000 to $45,000,
producing 2,000 units will cost HL:
