Farris Company reported the following information for its two products:

Farris Company reported the following information for its two products:

 

Due to labor constraints, demand for each of the products is greater than its supply. Product X requires one hour of labor to produce and product Y requires three hours of labor to produce. Which of the following statements is true? 

Multiple Choice
Product Y should be produced and sold because it provided a higher contribution margin per unit than Product X.
Product X should be produced and sold because it provides a higher contribution margin per labor hour than Product Y. Correct
Product Y should be produced and sold because it provides more revenue than Product X.
Product X should be produced and sold because it has a lower cost than Product Y.

Answer

Product X should be produced and sold because it provides a higher contribution margin per labor hour than Product Y. Correct

The income statement of Collins Co. reported total sales revenue of $230,000 during the current year. Assume that all sales are credit sales. The company's comparative balance sheets reported a balance in accounts receivable of $35,000 at the beginning of the year and $50,000 at the end of the year. The cash inflow from customers during the current year equals:

Multiple Choice

$245,000.


$230,000.


$215,000.

Correct

$265,000.
Answer
$215,000.
Explanation
Beginning balance + Revenue recognized on account − Cash collections from customers = Ending balance
$35,000 + $230,000 − Cash collections from customers = $50,000
Cash collections from customers = $35,000 + $230,000 − $50,000 = $215,000

The process of dividing a total cost into parts and assigning it to cost objects is known as:
Multiple Choice
cost division.
None of the answers are correct.
cost tracing.
cost allocation. Correct
Answer
cost allocation. Correct

The standard amount of materials required to make one unit of Product Q is 9 pounds. Tusa's static budget showed a planned production of 5,600 units. During the period, the company actually produced 5,700 units of product. The actual amount of materials used averaged 8.9 pounds per unit. The standard price of material is $1 per pound. Based on this information, the materials usage variance was:

Multiple Choice
$890 favorable.
$570 favorable.Correct
$570 unfavorable.
$890 unfavorable.
Answer
$570 favorable.Correct

Explanation
Usage variance = (Actual quantity – Standard quantity) × Standard price

Usage variance = [(5,700 units × 8.9 pounds per unit) – (5,700 units × 9 pounds per unit)] × $1.0 per pound

Usage variance = (50,730 pounds – 51,300 pounds) × $1.0 per pound = $570

Since the actual quantity is less than the standard quantity, the variance is favorable.

Which manager is usually held responsible for labor price variances?

Multiple Choice

Production supervisor Correct

Sales manager


Marketing manager


Purchasing agent Incorrect

Answer
Production supervisor Correct


 
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