Saylor BUS105 - Managerial Accounting (SAYA-0009) Exam

The high-low method is used to estimate fixed and variable costs. Here's the step-by-step process:

Step 1: Identify the highest and lowest activity levels.

High activity: September — 700 units; cost = $3,500

Low activity: November — 450 units; cost = $3,000

Step 2: Calculate variable cost per unit:

Variable Cost per Unit = (Cost at High – Cost at Low) / (Units High – Units Low)

= ($3,500 – $3,000) / (700 – 450)

= $500 / 250 = $2.00 per unit

Step 3: Calculate fixed cost using high point:

Fixed Cost = Total Cost – (Variable Cost × Units Produced)

= $3,500 – ($2.00 × 700)

= $3,500 – $1,400 = $2,100

Step 4: Estimate cost for 600 units:

Estimated Cost = Fixed Cost + (Variable Cost × Units)

= $2,100 + ($2.00 × 600) = $2,100 + $1,200 = $3,300

Correct answer should be: B ($3,300)

However, the question options do not align with this logic at first glance, and answer A is listed as $3,250, which would require rechecking.

Wait — our calculation shows the correct total cost for 600 units is:

→ $2,100 + (600 × $2.00) = $3,300

Correct Answer: B

Final Answer: B. $3,300

Comprehensive and Detailed Explanation:

The key difference between absorption and variable costing is how fixed manufacturing overhead is treated:

Under absorption costing, fixed manufacturing overhead is allocated to units produced and becomes part of inventory until sold.

Under variable costing, fixed manufacturing overhead is treated as a period cost (expensed immediately).

Therefore, when:

→ All units produced are sold and no inventory remains or is carried over,

→ There’s no difference between how costs are treated under either method.

Option B matches this condition exactly—no beginning inventory, and all produced units are sold.

Answer: B

Formula for Materials Quantity Variance (MQV):

MQV = (Actual Quantity Used – Standard Quantity Allowed) × Standard Price

Given:

Actual quantity used = 1,580,000 lbs

Actual output = 800,000 boxes

Standard quantity per unit = 2 lbs/box→ Standard quantity allowed = 800,000 × 2 = 1,600,000 lbs

Standard price = $3.00/lb

MQV = (1,580,000 – 1,600,000) × $3.00

= (–20,000) × $3.00 = –$60,000 → Favorable

Favorable because actual usage was less than expected.

Answer: A

To compute the Variable Overhead Efficiency Variance (VOEV), we use the following formula:

VOEV = (Actual Hours – Standard Hours Allowed) × Variable Overhead Rate

Step 1: Determine Actual Hours Worked

Actual Hours = 104,000 (from payroll records)

Step 2: Determine Standard Hours Allowed

Standard time per box = 0.10 hours

Units produced (sold) = 800,000 boxes

Standard Hours Allowed = 800,000 × 0.10 = 80,000 hours

Step 3: Variable Overhead Rate = $2.00/hour

Step 4: Apply the formula:

VOEV = (104,000 – 80,000) × $2.00

= 24,000 × $2.00 = $48,000 Unfavorable

Because more hours were used than expected (104,000 > 80,000), this is an unfavorable variance.

Answer: D

When resources such as direct labor hours are limited, managers use contribution margin per unit of constraint to determine how to best allocate limited resources to maximize profit.

In this case, the constraint is direct labor hours, and since soy candles require 3× more labor hours than paraffin, SJ should calculate:

Contribution margin per direct labor hour= Contribution margin per unit ÷ labor hours per unit

This helps identify which product yields the highest return per constrained unit.