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Archangel Corporation prepared the following variance report.

F

ill in the blanks.

 

Price

Price

 

ARCHANGEL CORPORATION

Variance Report-Purchasing Department Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper

for Week Ended January 9, 2013

Type of

Quantity

Actual

Standard

Price

Materials

Purchased

Variance

Explanation

Rogue11

lbs

$ 5.20

$5.00

$5,200

Price increase

Storm17

7,000 oz.

3.25

1,050

U

Rush order

Beast27

22,000 units

0.45

440

F

Bought larger quantity

Rondello Corporation manufactures a single product. The standard cost per unit of product is shown below.

 

Direct materials-1 pound plastic at $9.10 per pound

$ 9.10

 

Direct labor-1.5 hours at $15.60 per hour

23.40

 

Variable manufacturing overhead

14.63

 

Fixed manufacturing overhead

4.88

 

Total standard cost per unit

$52.01

The predetermined manufacturing overhead rate is $13 per direct labor hour ($19.50 ÷ 1.5). It was computed from a master manufacturing overhead budget based on normal production of 9,750 direct labor hours (6,500 units) for the month. The master budget showed total variable costs of $73,125 ($9.75 per hour) and total fixed overhead costs of $24,375 ($3.25 per hour). Actual costs for October in producing 4,920 units were as follows.

 

Direct materials (5,150 pounds)

$ 48,874

 

Direct labor (7,000 hours)

113,750

 

Variable overhead

73,021

 

Fixed overhead

25,584

 

  

  

Total manufacturing costs

$261,229

The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

Materials price variance

$

Materials quantity variance

$

Total labor variance

$

Labor

price variance

$

Labor quantity variance

$

Compute all of the materials and labor variances. Total materials variance

$

Compute the total overhead variance. $

Innova Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing

20,000

golf discs is:

Materials

Variable overhead

Fixed overhead

		$10,000
	Labor	30,000
20,000
40,000
Total	$100,000

Innova also incurs 5

%

sales commission ($0.35) on each disc sold.

Mudd Corporation offers Innova $4.75 per disc for 5,000 discs. Mudd would sell the discs under its own brand name in foreign markets not yet served by Innova. If Innova accepts the offer, its fixed overhead will increase from $50,000 to $55,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order.

Complete the incremental analysis for the special order.
(If an amount is blank enter 0, all boxes must be filled to be correct. If the impact on net income is a decrease use either a negative sign in front of the number, e.g. -45 or parenthesis, e.g. (45). Enter all other numbers as positive and subtract as necessary.)

$

$

$

Materials

Labor

Variable overhead

$

$

$

Reject Order	Accept Order	Net Income Increase (Decrease)
Revenues
Fixed Overhead
Sales commission
Net income

Should Innova accept the special order?

Carleton Service Center just purchased an automobile hoist for $15,000.The hoist has a 5-year life and an estimated salvage value of $1,080. Installation costs were $2,900, and freight charges were $820. Carleton uses straight-line depreciation.
      The new hoist will be used to replace mufflers and tires on automobiles. Carleton estimates that the new hoist will enable his mechanics to replace four extra mufflers per week. Each muffler sells for $65 installed. The cost of a muffler is $35, and the labor cost to install a muffler is $10.

Compute the payback period for the new hoist.
(Round to 1 decimal place, e.g. 5.1.)

years

Compute the annual rate of return for the new hoist.
(Round to 1 decimal place, e.g. 5.1.)

%

Omega Company is considering three capital expenditure projects. Relevant data for the projects are as follows.

 

 

 

    

 

 

 

 

 

 

Project	Investment	Annual Income	Life of Project
	22A	$240,000	$13,300	6 years
23A	270,000	21,000	9 years
24A	288,000	20,000	8 years

Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Omega Company uses the straight-line method of depreciation.

Determine the internal rate of return for each project.
(Round the internal rate of return factor to three decimals, e.g. 2.225 and your answer to 0 decimal places, e.g. 2,510.)

Project 22A %
Project 23A %
Project 24A %

If Omega Company’s minimum required rate of return is 11%, which projects are acceptable?