Level of capacity utilization that managers expect for the current budget

Level of capacity utilization that managers expect

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Level of capacity utilization that managers expect for the current budget period8.Ideal goal of capacity utilization9.Takes into account seasonal, cyclical, and trend factors10.Measures capacity levels in terms of what a plant can supplyAnswer: 1.b2.a3.c, d4.c5.a6.a, b7.d8.a9.c10.a, bDiff: 2Objective: 5AACSB: Application of knowledge
23) Soul Socket Inc. manufactures socket wrenches.For next month, the vice president of production plans on producing 4,450 wrenches per day.The company can produce as many as 5,000 wrenches per day, but is more likely to produce 4,500 per day.The demand for wrenches for the next three years is expected to average 4,250 wrenches per day.Fixed manufacturing costs per month total $374,000.The company works 22 days a month.Fixed manufacturing overhead is charged on a per-wrench basis. Required: a.What is the theoretical fixed manufacturing overhead rate per wrench for the next month?b.What is the practical fixed manufacturing overhead rate per wrench for the next month?c.What is the normal fixed manufacturing overhead rate per wrench for the next month?d.What is the master-budget fixed manufacturing overhead rate per wrench for the next month?Answer: a.Theoretical overhead rate = $374,000 / (5,000 × 22) = $3.40b.Practical overhead rate = $374,000 / (4,500 × 22) = $3.78 c.Normal overhead rate = $374,000 / (4,250 × 22) = $4.00 d.Master-budget overhead rate = $374,000 / (4,450 × 22) = $3.82Diff: 3Objective: 5AACSB: Application of knowledge9.6 Objective 9.61) Yellow Mountain Manufacturing factors practical capacity as a denominator to calculate budgeted fixed overhead. Theoretical capacity is 12,000 units per year with practical capacity of 9,000 units per year. Budgeted fixed overhead costs were $690,000 and actual overhead costs were $730,000 with actual output of 8,000 units. Which of the following statements is true?A) The budgeted cost per unit of supplying the capacity was $86.25B) The actual cost of supplying capacity was $76.67 per unitC) The budgeted cost of supplying the capacity was $76.67 per unitD) The budgeted cost of supplying the capacity was $57.50 per unit.Answer: CExplanation: $690,000 / 9,000 units = $76.67 per unitDiff: 2Objective: 6AACSB: Analytical thinking
2) The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on ________.A) real available capacityB) an unattainable and idealistic level of capacityC) normal capacity utilizationD) normal costingAnswer: BDiff: 2Objective: 6AACSB: Analytical thinking3) Hyland Resources Inc. uses practical capacity as the denominator to set the cost of supplying capacity and for the current period the budgeted cost per unit of supplying capacity was $44. Practical capacity was set at 14,000 units with theoretical capacity at 20,000 units. During the period, only 11,000 units were produced while the master budget assumed that the company would produce 13,000 units. What is value of the manufacturing resources not used during the period?

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