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Order Up, Inc., provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Order Up, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours. In the most recent month, 140,000 items were shipped to customers using 5,800 direct labor-hours. The company incurred a total of $15,950 in variable overhead costs.

According to the company's standards, 0.04 direct labor-hours are required to fulfill an order for one item and the variable
overhead rate is $2.80 per direct labor-hour.
 
Required :
 
1 a. According to the standards, what variable overhead cost should have been incurred to fill the orders
for the 140 ,0 00 items? {Omit the"$" sign in your response.)
 
Total standard variable overhead cost:          15,680
 
1b. How much does this differ from the actual variable overhead cost?
{Input the amount as a positive value. Leave no cells blank - be certain to enter " 0" wherever required.
Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect
{i.e ., zero variance). Omit the"$" sign in your response.)
 
Spending variance: $  270             U
   
2. Break down the difference computed in (1) above into a variable overhead rate variance and a
variable overhead efficiency variance. {Do not round intermediate calculations. Input all
amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required.
Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and
"None" for no effect {i.e., zero variance). Omit the "$"sign in your response.)
 
Variable overhead rate variance: $    290              F
Variable overhead efficiency: $          560              U

AirMeals, Inc., prepares in-flight meals for a number of major airlines.
One of the company's products is stuffed cannelloni with roasted pepper sauce,
fresh baby corn, and spring salad. During the most recent week, the company prepared 6,000 of these meals
using 1,150 direct labor-hours.
The company paid these direct labor workers a total of $11 ,500 for this work, or $1 0 per hour.
According to the standard cost card for this meal, it should require 0.20 direct labor-hours at a cost of $9.50 per hour.
 
Required :
 
1a. According to the standards, what direct labor cost should have been incurred to prepare 6,000 meals?
(Omit the "$" sign in your response.)
 
Total standard direct labor cost $              11,400
 
1b. How much does this differ from the actual direct labor cost?
(Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required.
Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e.,
zero variance). Omit the"$" sign in your response.)
 
Spending variance; $       100                   U
 
2. Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance.
(Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank - be certain to enter " 0"
wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for
no effect (i.e., zero variance). Omit the"$" sign in your response.)
 
Labor rate variance $              575              U
Labor efficiency variance $     475              F
   
The Worldwide Credit Card, Inc., uses standards to control the labor time involved in opening mail from card holders and recording
the enclosed remittances. Incoming mail is gathered into batches, and a standard time is set for opening and recording each batch.
The labor standards relating to one batch are as follows:
 

 
The record showing the time spent last week in opening batches of mail has been misplaced.
However, the batch supervisor recalls that 168 batches were received and opened during the week,
and the controller recalls the following variance data relating to these batches:
 

 
1. Determine the number of actual labor-hours spent opening batches during the week.
 
Actual labor hours:      250 hours
 
2. Determine the actual hourly rate paid to employees for opening batches last week.
     (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
 
Actual hourly rate $                11.4  per hour
  "What's going on in that lab?" asked Derek Warren, chief administrator for Cottonwood Hospital, as he
studied the prior month's reports. "Every month the lab teeters between a profit and a loss. Are we going
to have to increase our lab fees again?"
 
"We can't," replied Lois Ankers, the controller. "We' re getting lots of complaints about the last increase,
particularly from the insurance companies and governmental health units. They're now paying only about 80 % of
what we bill. I'm beginning to think the problem is on the cost side."
 
To determine if lab costs are in li ne with other hospitals, Mr. Warr en has asked you to evaluate the
costs for the past month. Ms. Ankers has provided you with the fo ll ow in g information:
 
a. Two basic types of tests are performed in the lab- smears and blood tests. Dur in g the past month,
2, 700 smears and 900 blood tests were performed in the lab.
 
b. Small glass plates are used in both types of tests. During the past month, the hospital purchased
16,000 plates at a cost of $38,400. This cost is net of a 4% purchase discount. A total of 2,000 of these
plates were unused at the end of the month; no plates were on hand at the beginning of the month.
 
c. Du ring the past month, 1,800 hours of labor time were us ed in performing smears and blood tests.
The cost of this labor time was $ 18 ,450.
 
d. The lab's variable overhead cost last month totaled $11,700. Cottonwood Hospital has never used standard costs.
By searching industry literature, however, you have determined the following nationwide averages for hospital labs:
 
Plates: Three plates are required per lab test. These plates cost $2.50 each and are disposed of after the test is completed.
Labor: Each smear should require 0.3 hours to complete, and each blood test should require 0.6 hours to complete.
The average cost of this lab time is $ 12 per hour.
Overhead: Overhead cost is based on direct labor-hours. The average rate of variable overhead is $6 per hour.
 
Required:
1. Compute the materials price variance for the plates purchased last month and compute a materials quantity
    variance for the plates used last month.
(Input all amounts as positive values. Leave no cells blank • be certain to enter "0" wherever required.  Indicate the effect of
each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).
Omit the "$" sign in your response.)
 
Materials price variance: $                 1,600           F
Materials quantity variance: $            8,000           U
 
2. For labor cost in the lab:
 
a. Compute a labor rate variance and a labor efficiency variance.
    (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required.
    Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect
    (i.e., zero variance). Omit the "$" sign in your response.)
 
Labor rate variance: $             3,150                       F
Labor efficiency variance: $    5,400                       U
 
b. In most hospitals, three-fourths of the workers in the lab are certified technicians and one-fourth
are assistants. In an effort to reduce costs, Cottonwood Hospital employs only one-half certified
technicians and one-half assistants. Would you recommend that this policy be continued?
 
Yes
 
3a. Compute the variable overhead rate and efficiency variances.
(Input all amounts as positive values. Leave no cells blank - be certain to enter " 0" wherever required.
Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).
Omit the"$" sign in your response.)
 
Variable overhead rate variance: $                900              U
Variable overhead efficiency variance: $       2,700           U
 
3b. ls there any relation between the variable overhead efficiency variance and the labor efficiency variance?
 
Yes
   
Sonne Company produces a perfume called Whim. The direct materials and direct labor standards for one bottle of Whim are given below:
 

 
During the most recent month, the following activity was recorded:
 
a. Twenty thousand ounces of material were purchased at a cost of $2.40 per ounce.
b. All of the material was used to produce 2,500 bottles of Whim.
c. Nine hundred hours of direct labor time were recorded at a total labor cost of $10,800.
 
Required:
 
1. Compute the direct materials price and quantity variances for the month.
(Input all amounts as positive values. Do not round your per unit rates. Leave no cells blank be certain to enter "0 " wherever required.
Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect
(i.e., zero variance). Omit the"$" sign in your response.)
 
Direct materials price variance: $               2,000              F
Direct materials quantity variances: $      5,000              U
 
2. Compute the direct labor rate and efficiency variances for the month. (Input all amounts as positive
values. Do not round your per unit rates. Leave no cells blank • be certain to enter " 0"
wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance). Omit the"$" sign in your response.)
 
Direct labor rate variance: $                         1,800               U
Direct labor efficiency variances: $            1,000                F
   
On June​ 30, 2024, Clooney Printers purchased a printer for $58,000. It expects the printer to last for four years and have a residual value of
$2,000. Compute the depreciation expense on the printer for the year ended December​ 31, 2024, using the straight−line method.
 
A. $7,000
B. $14,000
C. $8,167
D. $14,500
   
Which of the following is true when the estimate of an​ asset's useful life is​ changed?
 
A. The​ asset's remaining depreciable book value will be spread over the​ asset's new useful life.
B. The depreciation expense in the prior years is restated.
C. Prior​ years' financial statements must be restated.
D. The new estimate is ignored until the last year of the​ asset's life.
   
A​ company's accountant capitalized a payment that should have been recorded as a revenue expenditure.
How will this error affect the​ company's financial​ statements?
 
A. Net income will be overstated.
B. Assets will be understated.
C. Revenues will be understated.
D. Liabilities will be understated.
   
An asset was purchased for $25,000 on January​ 1, 2025. The​ asset's estimated useful life was five​ years, and its residual value was
$5,000. The straight−line method of depreciation was used. Calculate the gain or loss if the asset is sold for $18,000 on December​ 31, 2025,
the last day of the accounting period.
 
A. $3,000 gain
B. $1,500 gain
C. $3,000 loss
D. no gain or no loss
   
The type of intangible asset related to the exclusive right to reproduce
and sell a book or intellectual property is a​ ________.
 
A. Franchise
B. Patent
C. Copyright
D. Trademark
  A coal mine cost $1,002,000 and is estimated to hold 55,000 tons of coal. There is no residual value. During the first year of​ operations,
16,000 tons are extracted and sold. Calculate depletion expense for the
first year.​ (Round any intermediate calculations to the nearest​ cent.)
 
A. $100,200
B. $150,300
C. $291,520
D. $200,400
   
Carpenters Company a manufacturing​ company, acquired equipment on January​ 1, 2023 for $590,000.
Estimated useful life of the equipment was seven years and the estimated residual value was $20,000. On
January​ 1, 2026, after using the equipment for three​ years, the total estimated useful life has been revised to nine total years.
Residual value remains unchanged. The company uses the straight−line method of depreciation. Calculate depreciation expense for 2026.​
(Round any intermediate calculations to two decimal​ places, and your final answer to the nearest​ dollar.)
 
A. $65,556
B. $54,286
C. $63,333
D. $56,190
   
Millburn Company has acquired a property that included both land and a building for $520,000.
The company hired an appraiser who has determined that the market value of the land is $360,000 and that of the building
is $400,000. At what amount should the company record the cost of​ land?
(Round any intermediate calculations to two decimal​ places, and your final answer to the nearest​ dollar.)
 
A. $353,600
B. $260,000
C. $244,400
D. $169,200
   
Businesses record goodwill​ ________.
 
A. if they acquire another company at an amount higher than the market value of its net assets
B. when they continue the business of an acquired company
C. when they enjoy an outstanding reputation and loyalty with customers
D. if their market value has increased significantly in the recent years
   
Masonry Construction Group paid $5,000 for a plant asset that had a market value of $16,500.
At which of the following amounts should the plant asset be​ recorded?
 
A. $16,500
B. $5,000
C. $2,500
D. $10,000
   
On January​ 1, 2024, Sanderson Company acquired a machine for $1,050,000. The estimated useful life of the asset is five years.
Residual value at the end of five years is estimated to be $116,000.
What is the book value of the machine at the end of 2025 if the company uses the straight−line method of​ depreciation?
 
A. $676,400
B. $560,400
C. $630,000
D. $629,996
   
Which of the following is true of​ goodwill?
 
A. Goodwill is not amortized.
B. Both created and acquired goodwill must be recorded in the books.
C. Goodwill must be capitalized when acquired and amortized over seven years or less.
D. Goodwill must be expensed when acquired.
   
Which of the following is a characteristic of a plant​ asset, such as a​ building?
 
A. It will have a negligible value at the end of its useful life.
B. It is available for sale to customers in the ordinary course of business.
C. It is used in the operations of a business.
D. It has a short useful life.
   
On January​ 1, 2024, Jordan Company acquired a machine for $1,010,000.
The estimated useful life of the asset is five years. Residual value at the end of five years is estimated to be $57,000.
Calculate the depreciation expense per year using the straight−line method.
 
A. $247,600
B. $202,000
C. $190,600
D. $252,500
   
Regarding impairment of intangible​ assets, which of the following statements is​ incorrect?
 
A. Intangible assets are impaired when there has been a permanent decline in the value of the asset.
B. Impairment occurs when the fair value of an intangible asset is less than the book value.
C. Intangible assets with an indefinite life are tested for impairment annually.
D. If any impairment​ occurs, the company records a loss in the period in which the intangible asset was acquired.
   
Freeman Company owns a delivery truck. Which of the following​ costs, associated with the​ truck, will be capitalized and​ depreciated?
 
A. normal engine repair
B. replacement of tires
C. modification for new use
D. oil change and lubrication
   
Which of the following is an expense that results from the usage of a natural​ resource?
 
A. amortization
B. depreciation
C. depletion
D. obsolescence
   
A fully depreciated plant asset​ ________.
 
A. is no longer reported on the balance sheet
B. can no longer be used in the business
C. is removed from the accounting records
D. can be​ discarded, sold, or exchanged for another plant asset
   
Which of the following requires businesses to record​ depreciation?
 
A. going concern principle
B. matching principle
C. revenue recognition principle
D. cost principle
   
Danube Company purchased a used machine for $16,000. The machine required installation costs of $6,000 and insurance while in transit of
$1,300. At which of the following amounts would the machine be​ recorded?
 
A. $16,000
B. $23,300
C. $22,000
D. $17,300
   
Bachman Company plans to develop a shopping center. In the first​ quarter, the following amounts were​ incurred:
 
Acquisition of land                           $20,000
Surveys and legal fees                    800
Land clearing                                      1,100
Fencing                                                2,000
Install lighting and signage           1,660
 
What amount should be recorded as the cost of the land in the​ company's books?
 
A. $23,560
B. $23,100
C. $23,900
D. $21,900
   
In​ 2024, a company purchased a small business for​ $250,000. The market value of the small​ business's assets was​ $400,000, and the market
value of the liabilities was​ $200,000. The company recorded goodwill of​ $50,000 at the time of acquisition. At the end of​ 2025, it measured
goodwill and found it had a remaining fair value of only​ $20,000. At year−end ​2025, the company will​ ________.
 
A. record an impairment loss
B. record a gain in goodwill
C. record accumulated depletion
D. record a loss on sale of assets
   
On January​ 1, 2024, Tyson Manufacturing Company purchased a machine for $41,200,000.
​Tyson's management expects to use the machine for 28,000 hours over the next six years. The estimated residual value of the
machine at the end of the sixth year is $47,000. The machine was used for 4,600 hours in 2024 and 5,800 hours in 2025.
What is the depreciation expense for 2024 if the company uses the units−of−production method of​ depreciation?
(Round any intermediate calculations to two decimal​ places, and your final answer to the nearest​ dollar.)
 
A. $8,524,550
B. $6,760,850
C. $13,733,333
D. $6,768,578
   
Which of the following should be included in the cost of​ land?
 
A. cost of installing signage
B. cost of installing fences
C. cost to clear the land of old buildings
D. cost to build sidewalks on the land
   
Which of the following items should be​ amortized?
 
A. natural resources
B. tangible​ property, plant, and​ equipment, other than land
C. goodwill
D. patents, copyrights, trademarks
   
Which of the following depreciation methods allocates a varying amount of depreciation to expense each year based on an​ asset's usage?
 
A. the annuity method
B. the straight−line method
C. the units−of−production method
D. the double−declining−balance method
   
The expected value of an asset at the end of its useful life is known as​ ________.
 
A. residual value
B. market value
C. book value
D. carrying value
   
Equipment was originally acquired for $208,000 and has accumulated depreciation of $90,000.
The business exchanges this equipment for new equipment. The new equipment has a market value of $303,000 and the business pays $51,000 cash.
Assume the exchange has commercial substance. The exchange results in a​ ________.
 
A. gain of $134,000
B. loss of $185,000
C. gain of $185,000
D. loss of $134,000
   
Which of the following depreciation methods always allocates a higher amount of depreciation in earlier years than in later​ years?
 
A. the double−declining−balance method
B. the straight−line method
C. the units−of−production method
D. the first−​in, first−out method
   
The cost of an asset is $1,020,000​, and its residual value is $140,000. Estimated useful life of the asset is five years.
Calculate depreciation for the second year using the double−declining−balance method of depreciation.
 
A. $176,000
B. $204,000
C. $244,800
D. $352,000
   
A photocopier has an original cost of $100,000 and accumulated depreciation of $92,000.
If the business discards this plant​ asset, the result is​ ________.
 
A. a loss of $8,000
B. a gain of $8,000
C. a loss of $92,000
D. no gain or no loss
   
Westin Delivery Service owns a delivery truck.
Which of the following​ costs, associated with the​ truck, will be treated as a revenue​ expenditure?
 
A. oil change and lubrication
B. modification for new use
C. addition to storage capacity
D. major engine overhaul
   
Which of the following is the correct accounting treatment for a​ patent?
 
A. A patent must be capitalized and amortized over 20 years or less.
B. A patent must be depreciated or​ impaired, but not amortized.
C. A patent must be shown as a current asset on the balance sheet.
D. A patent must be​ expensed, not​ capitalized, in the period in which it is purchased.
   
The cost of an asset is $1,150,000​, and its residual value is $160,000.
Estimated useful life of the asset is four years. Calculate depreciation for the first year using the double−declining−balance method of depreciation.
 
A. $287,500
B. $575,000
C. $247,500
D. $495,000
   
Motor Sales sold its old office furniture for $5,000. The original cost was $15,000​, and at the time of​ sale, accumulated depreciation was $14,000.
What is the effect of this​ transaction?
 
A. gain of $5,000
B. loss of $4,000
C. loss of $5,000
D. gain of $4,000

Homework  1.1 1.2  2.1 2.2  3.1 3.2  4.1 4.2 5.1 5.2  6.1 6.2  7.1  7.2  8.1  8.2  9.1   9.2  10.1  10.2  11.1  11.2  12.1 12.2  13.1  13.2  14.1  14.2  15.1   15.2
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