Managerial Accounting

1. Scorpion Production Company planned to use 1 yard of plastic per unit budgeted at $81 a yard. However, the plastic actually cost $80 per yard. The company actually made 3,900 units, although it had planned to make only 3,300 units. Total yards used for production were 3,960. How much is the total materials variance?

a.   $48,600 U

b.   $4,860 U

c.   $3,960 F

d.   $900 U

2. A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700. The direct materials price variance for last month was

a.   $5,700 favorable.

b.   $300 favorable.

c.   $150 favorable.

d.   $300 unfavorable.

3. The standard rate of pay is $20 per direct labor hour. If the actual direct labor payroll was $117,600 for 6,000 direct labor hours worked, the direct labor price (rate) variance is

a.   $2,400 unfavorable.

b.   $2,400 favorable.

c.   $3,000 unfavorable.

d.   $3,000 favorable.

Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value.  The straight-line method of depreciation will be used.  The machine is expected to generate net income of $6,000 each year.  The cash payback period on this investment is

a.   20 years.

b.   10 years.

c.   8 years.

d.   4 years.

A company is considering purchasing a machine that costs $280,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the machine is purchased, annual revenues are expected to be $100,000 and annual operating expenses exclusive of depreciation expense are expected to be $38,000. The straight-line method of depreciation would be used.

If the machine is purchased, the annual rate of return expected on this machine is

a.   22.1%.

b.   44.3%.

c.   9.6%.

d.   19.3%.

Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return.

                                        Present Value of an Annuity of 1                     

Period          8%             9%           10%          11%          12%          15%

6            4.623         4.486         4.355         4.231         4.111         3.784

What is the approximate internal rate of return for this investment?

a.   9%

b.   10%

c.   11%

d.   12%

Brady Corp. is considering the purchase of a piece of equipment that costs $20,000. Projected net annual cash flows over the project's life are:

Year          Net Annual Cash Flow

           1                      $  3,000

           2                          8,000

           3                        15,000

           4                          9,000

The cash payback period is

a.   2.29 years.

b.   2.60 years.

c.   2.40 years.

d.   2.31 years.

Cash inflows from investing activities include

a.     sale of common stock.

b.     purchase of equipment.

c.     sale of land.

d.     issuance of long-term debt.

Which of the following would decrease net cash provided by operating activities?

a.     Decrease in short-term notes payable.

b.     Depreciation expense.

c.     Decrease in inventory.

d.     Loss on sale of equipment.

Noncash investing and financing activities

a.     may represent significant investing and financing activities.

b.     do not involve cash receipts or cash payments.

c.     are disclosed on a separate schedule.

d.     all of the above.