Author Question: The effect of revenue on the fundamental accounting equation is a(n) a. increase to liabilities. ... (Read 45 times)

nmorano1 · **on:** Jul 6, 2018

The effect of revenue on the fundamental accounting equation is a(n)
a. increase to liabilities.
b. decrease to owner's equity.
c. increase to owner's equity.
d. decrease to assets.

Question 2

Identifying favorable and unfavorable variances.

Purdue, Inc., manufactures tires for large auto companies. It uses standard costing and allocates variable and fixed manufacturing overhead based on machine-hours. For each independent scenario given, indicate whether each of the manufacturing variances will be favorable or unfavorable or, in case of insufficient information, indicate CBD (cannot be determined).

Jossy · **Reply #1 on:** Jul 6, 2018

Answer to Question 1

C

Answer to Question 2

Scenario VOH
Spending Variance VOH
Efficiency
Variance FOH
Spending Variance FOH
Production-Volume Variance
Production output is 6 less than budgeted, and actual fixed manufacturing overhead costs are 5 more than budgeted. Cannot be determined; no information on actual versus budgeted VOH rates. Cannot be determined; no information on actual versus flexible-budget machine-hours. Unfavorable:;actual fixed costs are more than budgeted fixed costs. Unfavorable; output is less than budgeted causing FOH costs to be underallocated.
Production output is 13 less than budgeted; actual machine-hours are 7 more than budgeted. Cannot be determined; no information on actual versus budgeted VOH rates. Unfavorable; actual machine-hours more than flexible-budget machine-hours. Cannot be determined; no information on actual versus budgeted FOH costs. Unfavorable; output is less than budgeted causing FOH costs to be underallocated.
Production output is 10 more than budgeted. Cannot be determined; no information on actual versus budgeted VOH rates. Cannot be determined; no information on actual machine-hours versus flexible-budget machine-hours. Cannot be determined; no information on actual versus budgeted FOH costs. Favorable; output more than budgeted will cause FOH costs to be overallocated.
Actual machine-hours are 20 less than flexible-budget machine-hours. Cannot be determined; no information on actual versus budgeted VOH rates. Favorable; less machine-hours used relative to flexible budget. Cannot be determined; no information on actual versus budgeted FOH costs. Cannot be determined; no information on flexible-budget machine-hours relative to static-budget machine-hours.
Relative to the flexible budget, actual machine-hours are 15 less, and actual variable manufacturing overhead costs are 20 greater. Unfavorable; actual VOH rate greater than budgeted VOH rate. Favorable; actual machine-hours less than flexible-budget machine-hours. Cannot be determined; no information on actual versus budgeted FOH costs. Cannot be determined; no information on actual output relative to budgeted output.