Briefly explain why a favorable variable overhead spending

Briefly explain why a favorable variable overhead spending

Subject: Business    / Finance   
Question
1) Briefly explain why a favorable variable overhead spending variance may not always be desirable.
2)Kory's Auto produces and sells an auto part for $60.00 per unit. In 2011, 100,000 parts were produced and 75,000 units were sold. Other information for the year includes:

Direct materials $24.00 per unit
Direct manufacturing labor $ 4.50 per unit
Variable manufacturing costs $ 1.50 per unit
Sales commissions $ 6.00 per part
Fixed manufacturing costs $750,000 per year
Administrative expenses, all fixed $270,000 per year

1) What is the inventoriable cost per unit using variable costing?
A) $28.50
B) $30.00
C) $36.00
D) $43.50
2) What is the inventoriable cost per unit using absorption costing?
A) $30.00
B) $36.00
C) $37.50
D) $43.50

3)10) Maintence costs at O’Brien Brewery are listed below:

Management believes that maintenance cost is a mixed cost that depends on machine-hours. Use the high-low method to estimate the variable and fixed components of this cost. (worth 6 points)

4)Parker and Spitzer Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The following per unit data apply for sales to regular customers:

Direct materials $66
Direct labor 30
Variable manufacturing support 48
Fixed manufacturing support 104
Total manufacturing costs 248
Markup (50%) 124
Targeted selling price $372
Parker and Spitzer Manufacturing has excess capacity.

Required: (each worth 2 points)
a.    What is the full cost of the product per unit?

 

b.    What is the contribution margin per unit?

 

c.    Which costs are relevant for making the decision regarding this one-time-only special order? Why?

 

d.    For Parker and Spitzer Manufacturing, what is the minimum acceptable price of this one-time-only special order?

 

e.    For this one-time-only special order, should Parker and Spitzer Manufacturing consider a price of $200 per unit? Why or why not?

5)A restaurant is deciding whether it wants to update its image or not. It currently has a cozy appeal with an outdated decor that is still in good condition, menus and carpet that need to be replaced anyway, and loyal customers.

Identify for the restaurant management (each worth 2 points)
a.    those costs that are relevant to this decision,
b.    those costs that are not differential,
c.    and qualitative considerations.