Variable Manufacturing

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Grant’s Kitchens is approached by Ms. Tammy Wang, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers:

Direct materials$455
Direct labor300
Variable manufacturing support45
Fixed manufacturing support100
Total manufacturing costs900
Markup (60%)540
Targeted selling price$1440

Grant’s Kitchens has excess capacity. Ms. Wang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.

72.For Grant’s Kitchens, what is the minimum acceptable price of this one-time-only special order?

$455 + $300 + $45 + $30 = $830

73.Other than price, what other items should Grant’s Kitchens consider before accepting this one-time-only special order?
a.Reaction of shareholders
b.Reaction of existing customers to the lower price offered to Ms. Wang
c.Demand for cherry cabinets
d.Price is the only consideration.


74.If Ms. Wang wanted a long-term commitment for supplying this product, this analysis
a.would definitely be different.
b.may be different.
c.would not be different.
d.does not contain enough information to determine if there would be a difference.

75.If there was limited capacity, all of the following amounts would change EXCEPT
a.opportunity costs.
b.differential costs.
c.variable costs.
d.the minimum acceptable price.

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 48 THROUGH 51. White Corporation manufactures football jerseys and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data.

Budgeted output units20,000 units
Budgeted machine-hours30,000 hours
Budgeted variable manufacturing overhead costs for 20,000 units$360,000

Actual output units produced18,000 units
Actual machine-hours used28,000 hours
Actual variable manufacturing overhead costs$342,000

48.What is the budgeted variable overhead cost rate per output unit?

$360,000/20,000 = $18.00

49.What is the flexible-budget amount for variable manufacturing overhead?
b.$342, 000
d.none of the above

18,000 x ($360,000/20,000)] = $324,000

50.What is the flexible-budget variance for variable manufacturing overhead?
a.$18,000 favorable
b.$18,000 unfavorable
d.none of the above

$342,000 – [18,000 x ($360,000/20,000)] = $18,000 unfavorable

51.Variable-manufacturing overhead costs were __________ for actual output.
a.higher than expected
b.the same as expected
c.lower than expected
d.unable to be determined


Kellar Corporation manufactured 1,500 chairs during June. The following variable overhead data pertain to June.

Budgeted variable overhead cost per unit $ 12.00
Actual variable manufacturing overhead cost $16,800
Flexible-budget amount for variable manufacturing overhead$18,000
Variable manufacturing overhead efficiency variance$360 unfavorable

57.What is the variable overhead flexible-budget variance?
a.$1,200 favorable
b.$360 unfavorable
c.$1,560 favorable
d.$1,200 unfavorable

$16,800 - $18,000 = $1,200 (F)

58.What is the variable overhead spending variance?
a.$840 unfavorable
b.$1,200 favorable
c.$1,200 unfavorable
d.$1,560 favorable

$1200 (F) - $360 (U) = $1,560 (F)

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 39 THROUGH 42. Yakima Manufacturing purchases trees from Cascade Lumber and processes them up to the splitoff point where two products (paper and pencil casings) are obtained. The products are then sold to an independent company that...
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