Deck 15: Cost Control

Question 1

When comparing a controllable cost and a noncontrollable cost, the key difference is:

A)the significant dollar amount of the cost.
B)the recurring nature of the cost.
C)the short-term ability to influence the cost by the manager.
D)whether the cost is fixed or variable.

Answer 1

C

Question 2

A budget adjusted to reflect a budget allowance based on actual activity achieved rather than the planned level of activity in the original budget is a:

A)static budget.
B)rolling budget.
C)controllable budget.
D)flexible budget.

Answer 2

D

Question 3

Using a flexible budget is necessary to:

A)permit a more accurate determination of variances.
B)revise budget goals at the beginning of a period.
C)adjust budgeted results so they are closer to actual amounts.
D)eliminate the effect of cost behavior patterns on budgeted amounts.

Answer 3

A

Question 4

The purchasing agent of an organization acquired some raw materials at a bargain price, even though she knew that their quality was lower than that of the materials customarily used.This action resulted in a favorable raw materials purchase price variance that might very well have been more than offset by:

A)an unfavorable raw materials usage variance.
B)a favorable direct labor efficiency variance.
C)an unfavorable variable overhead spending variance.
D)an unfavorable direct labor rate variance.

Question 5

If the actual level of activity is different from the budgeted level, a ________ budget is prepared for the actual level of activity:

A)continuous
B)zero-based
C)master
D)flexible

Question 6

The principal objective of a performance report is to:

A)highlight activities that need management attention.
B)direct blame to those managers who did not meet goals.
C)provide a basis for rewarding effective managers.
D)highlight budgets that have been incorrectly established.

Question 7

The total budget variance is caused by two factors:

A)quantity and price.
B)time and materials.
C)direct and indirect relationships.
D)fixed and variable cost behavior.

Question 8

The term noncontrollable cost:

A)implies that there is really nothing the manager can do to influence the amount of cost.
B)only applies to long-term costs.
C)never applies to short-term costs.
D)is another term for discretionary cost.

Question 9

When an income statement shows data for segments of the organization, and data for each segment are added together to get totals for the whole organization:

A)all expenses should be allocated to the segments.
B)common fixed expenses should be allocated to the segments.
C)only direct revenues and direct expenses should be assigned to segments.
D)direct fixed expenses should be subtracted as one amount in the "total" column.

Question 10

If it is to be most useful for control purposes, what variance should be reported to the supervisor responsible for the number of pounds of corn syrup used in the manufacture of a candy bar?

A)Raw material price variance, expressed in cents per pound.
B)Raw material usage variance, expressed as a total cost for the month.
C)Raw material usage variance, expressed in total pounds for the month.
D)Raw material usage variance, expressed in total pounds for the week.

Question 11

An example of a cost that is noncontrollable in the short run is:

A)direct labor.
B)property taxes.
C)raw materials.
D)supervisors' salaries.

Question 12

A technique for filtering cost information within performance reports to managers in the organization at an appropriate level of detail or summarization is known as:

A)managerial reporting.
B)responsibility reporting.
C)control reporting.
D)segment reporting.

Question 13

A variance is calculated to measure the difference between actual costs and:

A)expected selling price.
B)expected costs.
C)activity-based costs.
D)capacity costs.

Question 14

When inventory valuation is based on an appropriately established and effective standard cost system:

A)cumulative variances are recognized.
B)a significant unfavorable net variance may be reported as an expense of the current period.
C)an insignificant favorable net variance may be reported as an expense of the current period.
D)the explanatory notes to the financial statements will explain the disposition of the net variance.

Question 15

A performance report for direct labor shows a variance between the budget and actual amounts.This difference is a:

A)budget variance.
B)direct labor efficiency variance.
C)direct labor spending variance.
D)direct labor rate variance.

Question 16

The difference between standard and actual cost per unit of input is measured by:

A)the raw materials price variance.
B)the direct labor rate variance.
C)the variable overhead spending variance.
D)All of the answers are correct.

Question 17

Violet's travel budget for November was $1,350, based on her plan to drive 2,500 miles at a cost of $0.54 per mile.During November, she actually drove 2,250 miles at a total cost of $1,250.A flexed budget performance report would show a variance of:

A)$35 F.
B)$35 U.
C)$100 U.
D)$100 F.

Question 18

The total variance for any particular cost component is referred to as the:

A)price variance.
B)efficiency variance.
C)budget variance.
D)cost correction.

Question 19

Which of the following product cost components will not need "flexing" when analyzing end of period production cost variances?

A)Direct material.
B)Direct labor.
C)Variable manufacturing overhead.
D)Fixed manufacturing overhead.

Question 20

For performance reports to be most effective for management by exception, they should:

A)be issued at the same time for all responsibility centers.
B)be held until the financial statements for the month have been issued.
C)be issued as soon as possible after the activity or period covered.
D)show all of the costs associated with the responsibility center being reported about.

Question 21

Which of the following is a true statement pertaining to segment income statements?

A)Present the individual segments' net income.
B)Variable costs should be reported by segment.
C)Do not present a segment margin.
D)Do not include arbitrarily allocated common fixed expenses when calculating segment margin.

Question 22

April Corporation developed the following per-unit standards for its product: 2 pounds of direct materials at $3.75 per pound.Last month, 2,000 pounds of direct materials were purchased for $7,600.The direct materials price variance for last month was:

A)$3,800 favorable.
B)$200 favorable.
C)$100 unfavorable.
D)$200 unfavorable.

Question 23

The preferred format for a segmented income statement emphasizes:

A)direct and common fixed costs.
B)variable and fixed costs.
C)operating expenses and fixed costs.
D)variable costs and operating expenses.

Question 24

When evaluating the performance of a cost center, the appropriate measurement technique would be:

A)actual costs incurred compared to budgeted costs.
B)actual segment margin compared to budgeted segment margin.
C)comparison of actual and budgeted return on investment (ROI)based on segment margin and assets controlled by the segment.
D)None of the answers are correct.

Question 25

If they are to be useful to managers, variances should be reported:

A)simultaneously to all managers within a week after the end of the month.
B)in dollar amounts as soon as all costs are known.
C)in physical terms or dollar amounts as promptly as feasible.
D)in physical terms and dollar amounts if the variance exceeds 10% of the budget.

Question 26

An unfavorable materials usage variance would occur if:

A)less material is purchased than is used.
B)actual pounds of materials used were less than the standard pounds allowed.
C)actual labor hours used was greater than the standard labor hours allowed.
D)actual pounds of materials used was greater than the standard pounds allowed.

Question 27

The portion of the budget variance for variable overhead due to the difference between actual hours required and standard hours allowed for the work done is called the:

A)variable overhead spending variance.
B)variable overhead price variance.
C)variable overhead efficiency variance.
D)variable overhead volume variance.

Question 28

Which of the following variances is not determined during an overhead variance analysis?

A)Volume variance.
B)Budget variance.
C)Spending variance.
D)Price variance.

Question 29

If the net variance of a business using standard costing is significant relevant to total production cost, the net variance should be:

A)assigned to cost of goods sold.
B)allocated between WIP and FG inventories and cost of goods sold.
C)carried forward to the next accounting period.
D)None of the answers are correct.

Question 30

ROI used to evaluate the performance of an investment center manager can sometimes lead to suboptimization.A performance measure designed to avoid the risk of suboptimization is:

A)operating income.
B)residual income.
C)segment income.
D)the DuPont model.

Question 31

A set of integrated financial and operating performance measures that communicate an organization's priorities associated with achieving strategic goals is known as a:

A)balanced scorecard.
B)segment report.
C)responsibility report.
D)master budget.

Question 32

The fixed manufacturing overhead variance caused by actual activity being different from the estimated activity used in calculating the predetermined overhead application rate is called the:

A)spending variance.
B)budget variance.
C)efficiency variance.
D)volume variance.

Question 33

The decision rule to determine what budget variances to investigate should be to:

A)investigate unfavorable variances only.
B)investigate favorable variances only.
C)investigate if the variance is significant.
D)perform a random investigation of 10% of all variances.

Question 34

When the net amount of all product cost variances is not material during the period relative to the total production costs incurred, the net variance is:

A)treated as an adjustment to cost of goods sold.
B)treated as an adjustment to cost of goods manufactured.
C)treated as an adjustment to work in process, finished goods, and cost of goods sold.
D)treated as an adjustment to manufacturing overhead.

Question 35

The term transfer price refers to:

A)the price at which a product or service is sold to a government entity.
B)the price at which a product or service is sold by one segment to another related segment.
C)the price at which a product or service is sold by a segment to an outside party.
D)None of the answers are correct.

Question 36

A performance measurement technique that allows managers to focus their attention on maximizing an amount of earnings above a minimum required ROI is known as:

A)optimization.
B)the DuPont model.
C)residual income.
D)transfer pricing.

Question 37

How is performance evaluated for an investment center?

A)Actual costs incurred compared to budgeted costs.
B)Actual segment margin compared to budgeted segment margin.
C)Comparison of actual and budgeted return on investment (ROI)based on segment margin and assets controlled by the segment.
D)None of the answers are correct.

Question 38

The part of the variable overhead budget variance due to the difference between actual variable overhead cost and the standard cost allowed for the actual inputs used is called the:

A)variable overhead spending variance.
B)variable overhead budget variance.
C)variable overhead efficiency variance.
D)variable overhead volume variance.

Question 39

Which of the following costs would be controllable in the short run?

A)Property taxes.
B)Production equipment depreciation.
C)Plant supervisor's salary.
D)Building lease.

Question 40

How is performance evaluated for a profit center?

A)Actual costs incurred compared to budgeted costs.
B)Actual segment margin compared to budgeted segment margin.
C)Comparison of actual and budgeted return on investment (ROI)based on segment margin and assets controlled by the segment.
D)None of the answers are correct.

Question 41

April Corporation developed the following per-unit standards for its product: 2 pounds of direct materials at $3.75 per pound.Last month, 2,000 pounds of direct materials were used to produce 900 units of product.The direct materials usage variance for last month was:

A)$1,800 favorable.
B)$200 favorable.
C)$200 unfavorable.
D)$750 unfavorable.

Question 42

Marine Products Inc.'s, budget for the current year include budgeted fixed overhead of $200,000; budgeted direct labor hours of 100,000; budgeted units produced of 50,000.Unit standards allow 2 direct labor hours for each unit produced, therefore, fixed overhead is applied at the rate of $4 per unit.Marine Product's actual fixed overhead for the current year amounted to $204,000 and the company produced 48,000 units. Marine Products Inc.'s, fixed overhead budget variance for the year is:

A)$2,000 F.
B)$2,000 U.
C)$4,000 F.
D)$4,000 U.

Question 43

Measuring and reporting organizational performance using a high-level integrated approach is accomplished with:

A)a DuPont performance analysis.
B)a balanced scorecard.
C)a segment income statement.
D)a residual income analysis.

Question 44

U.S.Products operates two divisions with the following sales and expense information for the month of May: North Division: Sales $240,000; Operating income $72,000, Operating assets $600,000.
South Division: Sales $160,000; Operating income $80,000, Operating assets $800,000.
U.S.Products expects a minimum return of 10% should be earned from all investments.
North Division's return on investment for May is:

A)10%.
B)12%.
C)20%.
D)30%.

Question 45

How are unfavorable standard cost variances reported in an organization's annual report?

A)As an expense in the income statement.
B)As a reduction in the work in process inventory in the balance sheet.
C)As an explanatory note to accompany the financial statements.
D)None of the answers are correct.

Question 46

ABC Company's standard direct labor cost per unit includes 3 hours @ $15 per hour.During May ABC Company produced 380 units and incurred total labor cost of $16,200 for 1,200 actual direct labor hours worked.ABC's labor rate variance for May is:

A)$1,200 U.
B)$1,200 F.
C)$1,800 U.
D)$1,800 F.

Question 47

U.S.Products operates two divisions with the following sales and expense information for the month of July: East Division: Sales $240,000; Contribution margin ratio 35%, Direct fixed expenses $48,000.
West Division: Sales $160,000; Contribution margin ratio 50%, Direct fixed expenses $32,000.
U.S.Products' total fixed expenses during July was $200,000.
U.S.Products' common fixed expenses for July are:

A)$80,000.
B)$84,000.
C)$120,000.
D)$200,000.

Question 48

AAA Export Company's actual production for March is 1,000 units.The standard cost for raw material #123 is $72 per unit consisting of 6 pounds per unit at $12 per pound.The actual cost for raw material #123 in March amounted to $71.50 per unit consisting of 6.5 pounds per unit at $11 per pound.The resulting budget variance for raw material #123 in March was therefore $500 F (1,000 units × ($72.00 − $71.50). What amount of AAA Exports' $500 F budget variance in March is attributable to the cost per pound of raw material #123?

A)$6,000 F.
B)$6,000 U.
C)$6,500 F.
D)$6,500 U.

Question 49

A balanced scorecard framework is integrated through four key perspectives.The presentation of these key perspectives on a balanced scorecard from the lowest level perspective to the highest level perspectives is:

A)customer, financial, internal business process, learning and growth.
B)financial, customer, learning and growth, internal business process.
C)learning and growth, internal business process, customer, financial.
D)internal business process, learning and growth, customer financial.

Question 50

Riverside Company's standard direct labor cost per unit includes 2 hours @ $20 per hour.During June Riverside Company produced 580 units and incurred total labor cost of $22,800 for 1,200 actual direct labor hours worked.Riverside's labor efficiency variance for June is:

A)$0.
B)$800 U.
C)$800 F.
D)$900 U.

Question 51

Which of the following organizational perspectives is not reported on a balanced scorecard?

A)Environmental.
B)Customer.
C)Financial.
D)Internal Business Process.

Question 52

U.S.Products operates two divisions with the following sales and expense information for the month of May: North Division: Sales $240,000; Operating income $72,000, Operating assets $600,000.
South Division: Sales $160,000; Operating income $80,000, Operating assets $800,000.
U.S.Products expects a minimum return of 10% should be earned from all investments.
South Division's residual income for May is:

A)$(8,000).
B)$0.
C)$8,000.
D)$12,000.

Question 53

NuArt Company's budgeted production for November is 5,500 units.Budgeted component unit costs include: direct materials, $24; direct labor, $30; variable overhead, $18.Budgeted fixed overhead is $100,000.NuArt's actual production for November was 6,000 units.Actual component unit costs include: direct materials, $24.50; direct labor, $29; variable overhead, $18.40.Actual fixed overhead was $94,000. NuArt's budget variance amount for direct materials in November would be:

A)$3,000 F.
B)$3,000 U.
C)$15,000 F.
D)$15,000 U.

Question 54

AAA Export Company's actual production for March is 1,000 units.The standard cost for raw material #123 is $72 per unit consisting of 6 pounds per unit at $12 per pound.The actual cost for raw material #123 in March amounted to $71.50 per unit consisting of 6.5 pounds per unit at $11 per pound.The resulting budget variance for raw material #123 in March was therefore $500 F (1,000 units × ($72.00 − $71.50). What amount of AAA Export's $500 F budget variance in March is attributable to the quantity of raw material #123 used?

A)$6,000 F.
B)$6,000 U.
C)$6,500 F.
D)$6,500 U.

Question 55

Which of the following is true about an unfavorable variance appearing in a performance report?

A)Actual revenue exceeded budgeted revenue.
B)Budgeted expense exceeded actual expense.
C)Budgeted variable costs exceeded actual variable costs.
D)Budgeted revenue exceeded actual revenue.

Question 56

Marine Products Inc.'s, budget for the current year include budgeted fixed overhead of $200,000; budgeted direct labor hours of 100,000; budgeted units produced of 50,000.Unit standards allow 2 direct labor hours for each unit produced, therefore, fixed overhead is applied at the rate of $4 per unit.Marine Product's actual fixed overhead for the current year amounted to $204,000 and the company produced 48,000 units. Marine Products Inc.'s, fixed overhead volume variance for the year is:

A)$4,000 U.
B)$8,000 U.
C)$10,000 U.
D)$12,000 U.

Question 57

U.S.Products operates two divisions with the following sales and expense information for the month of July: East Division: Sales $240,000; Contribution margin ratio 35%, Direct fixed expenses $48,000.
West Division: Sales $160,000; Contribution margin ratio 50%, Direct fixed expenses $32,000.
U.S.Products' total fixed expenses during July was $200,000.
The East Division's segment margin for July is:

A)$36,000.
B)$48,000.
C)$80,000.
D)$84,000.

Question 58

Patrick Company manufactures a single product.The original budget for April was based on expected production of 12,000 units; actual production for April was 10,600 units.The original budget and actual costs for the manufacturing department are shown below:
$\begin{array}{lrr}&\text { Original } & \text { Actual } \\&\text { Budget } & \text { Costs }\\ \text { Direct Materials} &\$96,000&\$90,500\\ \text {Direct Labor } &50,400&48,400\\ \text { Variable Overhead} &42,000&38,700\\ \text { Fixed Overhead } &\underline{48,000}&\underline{82,000}\\ \text { Total } &\underline{\$272,400}&\underline{\$259,600}\\\end{array}$

Prepare an appropriate performance report for the manufacturing department.

Question 59

NuArt Company's budgeted production for November is 5,500 units.Budgeted component unit costs include: direct materials, $24; direct labor, $30; variable overhead, $18.Budgeted fixed overhead is $100,000.NuArt's actual production for November was 6,000 units.Actual component unit costs include: direct materials, $24.50; direct labor, $29; variable overhead, $18.40.Actual fixed overhead was $94,000. NuArt's flexible budget amount for direct labor in November would be:

A)$100,000.
B)$156,000.
C)$174,000.
D)$180,000.

Question 60

NuArt Company's budgeted production for November is 5,500 units.Budgeted component unit costs include: direct materials, $24; direct labor, $30; variable overhead, $18.Budgeted fixed overhead is $100,000.NuArt's actual production for November was 6,000 units.Actual component unit costs include: direct materials, $24.50; direct labor, $29; variable overhead, $18.40.Actual fixed overhead was $94,000. NuArt's production budget amount for variable overhead in November would be:

A)$99,000.
B)$100,000.
C)$108,000.
D)$110,400.

Question 61

The cost formula for the maintenance department of the Raven Co.is $13,000 per month plus $6.50 per machine hour used by the production department.
a.Calculate the maintenance cost that would be budgeted for the month of November in which 10,800 machine hours are planned to be used.
b.Prepare an appropriate performance report for the maintenance department assuming that 11,130 machine hours were actually used in the month of November, and the total maintenance cost incurred was $86,485.

Question 62

The standards for one carton of Flavor Rite are:
$$\begin{array} { | l | l | } \hline\text { Direct materials } & 3.2 \mathrm { lbs } @ \$ 6.00 / \mathrm { hb } \\\hline \text { Direct labor } & 2.4 \mathrm { hrs } @ \$ 10.00 \mathrm { hr } . \\\hline\end{array}$$

During the week ended May 17, the following activity took place:
• 4,800 lbs.of raw material were purchased for inventory at a cost of $5.60 per pound;
• 1,200 cartons of finished product were produced;
• 4,020 lbs.of raw material were used;
• 3,110 labor hours were worked at a total cost of $26,435.
Calculate each of the following variarices:
(a) Raw materials purchase price variance.
(b.) Raw materials usage variance.
(c) Direct labor rate variance.
(d.) Direct labor efficiency variance.
(e.) Explain the factors that most likely caused the variances computed above.

Question 63

The Central Division of AAA, Inc., has operating income of $64,000 on sales revenue of $640,000.Divisional operating assets are $320,000 and management of AAA has determined that a minimum return of 12% should be expected from all investments.
(a.)Using the DuPont model, calculate the Central Division's margin, turnover, and ROI.
(b.)Calculate the Central Division's residual income.

Question 64

Selected information about American Industries is presented below.American has three operating divisions and requires a 12% return on all investments:
$\begin{array}{lccc}&\text { Eastern Division }&\text { Central Division }&\text { Western Division }\\\text { Revenues } & \$ 1,000,000& ? & ? \\\text { Operating income } & \$ 120,000 & ? & \$ 100,000\\\text { Operating assets } & \$ 500,000 & \$ 300,000 &?\\\text { Margin } & ? & 12 \% & ? \\\text { Turnover } & ? & 1 \text { turn } & \text { 2turns } \\\text { ROI } & ? & ? & ? \\\text { Residual income } & ? & ? & \$ 25,000\end{array}$
Calculate the missing amounts for each division.

Question 65

The standards for one case of Peardrax are:
$$\begin{array} { | l | l | } \hline \text { Direct materials } & 8 \text { lbs. } \$ \$ 3.50 / \mathrm { Ib } . \\\hline \text { Direct labor } & 4 \text { hrs. } \$ 15.00 / \mathrm { hr } \\\hline \text { Variable overhead (based on machine hours) } & 2 \text { hrs. } \$ \$ 5.00 / \mathrm { hr } . \\\hline\end{array}$$ During the week ended June 7, the following activity took place:
• 5,740 machine hours were worked;
• 22,600 lbs.of raw material were purchased for inventory at a total cost of $83,620;
• 2,700 cases of finished product were produced;
• 21,330 lbs.of raw material were used;
• 10,650 labor hours were worked at an average rate of $15.20 per hour;
• $27,552 actual variable overhead costs were incurred.
Calculate each of the following variances:
(a.) Price variance for raw materials purchased.
(b.) Raw materials usage variance.
(c.) Direct labor rate variance.
(d.) Direct labor efficiency variance
(e.) Variable overhead spending variance.
(f) Variable overhead efficiency variance

Question 66

The Diamond Manufacturing Company uses a standard cost system for and applies overhead based on machine hours.The following information is available for June:
$\begin{array}{lrr}\text { Standard }\\ \text { Machine hours (MH) per unit} &2\\ \text { Fixed overhead rate per \( \mathrm{MH} \) } &\$5.00\\ \text { Budgeted fixed overhead } &\$25,000\\ \text { Actual:} &\\ \text { Machine hours} &4,800\\ \text {Fixed overhead } &\$26,200\\ \text { Units produced} &2,600\\\end{array}$


Calculate the fixed overhead budget variance and volume variance for the month of June.

Question 67

The standards for one case of Saycheles are:
$$\begin{array} { | l | l | } \hline\text { Direct materials } & 7 \mathrm { lbs } @ \$ 5.90 / \mathrm { b } . \\\hline \text { Direct labor } & 4.2 \mathrm { hrs } @ \$ 13.00 / \mathrm { hr } \\\hline\end{array}$$

During the week ended April 15, the following activity took place:
• 14,500 lbs.of raw material were purchased for inventory at a total cost of $81,200;
• 1,800 cases of finished product were produced;
• 13,680 lbs.of raw material were used;
• 7,380 labor hours were worked at an average rate of $13.40 per hour.
Calculate each of the following variarices:
(a) Raw materials purchase price variance.
(b.) Raw materials usage variance.
(c) Direct labor rate variance.
(d.) Direct labor efficiency variance.
(e.) Explain the factors that most likely caused the variances computed above.

Question 68

The standards for one carton of Wonder Wax are:
$$\begin{array} { | l | c | } \hline\text { Direct materials } & 4 \text { lbs. @ \$2.55 } \\\hline \text { Direct labor } & 6 \text { hrs. @ \$5.25 } \\\hline \text { Variable overhead (based on direct labor hours) } & 6 \mathrm { hrs } @ \$ 3.40 \\\hline\end{array}$$
During the week ended December 4, the following activity took place:
• 4,600 lbs.of raw material were purchased for inventory at a cost of $2.63 per pound;
• 1,050 cartons of finished product were produced;
• 4,225 lbs.of raw material were used;
• 6,140 labor hours were worked at a total cost of $33,463;
• $20,569 actual variable overhead costs were incurred.
Calculate each of the following variances:
(a) Price variance for raw materials purchased.
(b.) Raw materials usage variance.
(c) Direct labor rate variance.
(d.) Direct labor efficiency variance
(e.) Variable overhead spending variance.
(f) Variable overhead efficiency variance

Question 69

ABC, Inc., is segmented into three divisions and the company is concerned about the performance of Division Y.During your analysis of Division Y, you learn that $42,000 of the fixed expenses relate to general corporate expenses and had been allocated equally between the three divisions.
$\begin{array}{lcccc}&\text { Total Company } & \text { Division } \mathrm{X} & \text { Division } \mathrm{Y} & \text { Division } \mathrm{Z}\\ \text {Sales } &\$200,000&\$80,000&\$50,000&\$70,000\\ \text {Variable expenses } & \underline{120,000}& \underline{52,000}& \underline{30,000}& \underline{38,000}\\ \text { Contribution margin } &\$80,000&\$28,000&\$20,000&\$32,000\\ \text {Fixed expenses } & \underline{60,000}& \underline{20,000}& \underline{22,000}& \underline{18,000}\\ \text { Net income (loss) } & \underline{\$20,000}& \underline{\$8,000}& \underline{\$(2,000)}& \underline{\$14,000}\\ \text { } &\\\end{array}$
(a.)Calculate what the company's net income would be if Division Y were closed down.
(b.)Revise the income statement presented above into a more useful segmented income statement.

Question 70

Niangua Co.is divided into three segments and is interested in preparing a segmented income statement in order to better understand the operating performance of each segment.Fixed expenses in each division currently include an allocation of general corporate expenses equal to 20% of the division's sales.
$\begin{array}{lcccc}&\text { Division } 1 & \text { Division 2} & \text { Division } 3 \\\text {Sales}& \$ 320,000 & \$ 200,000 & \$ 280,000 \\ \text {Variable expenses}& \underline{208,000} & \underline{120,000}& \underline{ 152,000} \\\text {Contribution margin}& \$ 112,000 & \$ 80,000& \$ 128,000 \\\text {Fixed expenses}& \underline{ 80,000} & \underline{ 88,000 } & \underline{ 72,00 0 }\\\text {Net income (loss)}& \underline{\$ 32,000 }& \underline{\$ (8,000)} & \underline{\$56,000 }\\\end{array}$
(a.)Complete the following segmented income statement for Niangua Co.
$$\begin{array} { | l | l | l | l | l | } \hline & \text { Total Comparyy } & \text { Division 1 } & \text { Division 2 } & \text { Division 3 } \\\hline \text { Sales } & & & & \\\hline \text { Variable expenses } & & & & \\\hline \text { Contribution margin } & & & & \\\hline \text { Segment mixed expenses } & & & & \\\hline \text { Common fixed expenses } & & & & \\\hline \text { Net income (loss) } & & & & \\\hline\end{array}$$

Question 71

Innovation Inc.'s production budget for January is 35,000 units and includes the following component unit costs: direct materials, $16; direct labor, $20; variable overhead, $12.Budgeted fixed overhead is $70,000 (35,000 units × 1/2 hour × $4 unit).Actual production in January was 36,000 units.Actual unit component costs incurred during January include direct materials, $16.50; direct labor, $18.90; variable overhead, $13.64.Actual fixed overhead was $67,000.The standard fixed overhead application rate per unit consists of $4 per machine hour and each unit is allowed a standard of 1/2 hour of machine time.
Calculate the fixed overhead budget variance and the fixed overhead volume variance.