Answered: Smokey & the Bandit Corporation has…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Smokey & the Bandit Corporation has three production departments Alpha, Beta, and Gamma. Smokey & the Bandit also has two service departments, Human Resources and Technology. Technology costs are allocated based on value of assets employed, and Human Resources costs are allocated based on number of employees. Assume that Technology provides more service to the other departments than does the Human Resources Department.

Dept.	Direct Costs	Employees	Asset Value
Technology	$900,000	25
Human Resources	350,000		$600,000
Alph	700,000	15	300,000
Beta	200,000	5	150,000
Gamma	250,000	10	800,000

Using the direct method, what amount of Human Resources costs is allocated to Alpha (round to the nearest dollar)?

Group of answer choices

$95.455

$350,000

$175,000

$450,000

The Frugal Bandit uses a standard cost system and applied overhead based on direct labor hours. In March, the company produced 4,500 units of its product Smokey 678.

Standard:
DLH per unit	2.50
Variable overhead per DLH	$1.75
Fixed overhead per DLH	$3.10
Budgeted variable overhead	$21,875
Budgeted fixed overhead	$38,750

Actual:
Direct labor hours	10,000
Variable overhead	$26,250
Fixed overhead	$38,000

Using the four-variance approach, what is the fixed overhead spending variance?

Group of answer choices

$7,000.00 U

$3,125.00 F

$ 750.00 U

$ 750.00 F

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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