Exam 9: Standard Costing and Variances

Interpreting the variances is a key part of managerial accounting. For each scenario described below, indicate whether the result would be favorable or unfavorable. Now consider each scenario with sustainability metrics in mind. How might the answers change?

A spending variance is made up of:

Benjamin Inc. uses a standard cost system and has the following information regarding the labor and overhead used in the production of widgets. Standard labor input is 2 hours per unit. The variable overhead rate is $8 per hour; fixed overhead is budgeted to be $100,000 on budgeted production of 8,000 widgets. During August, Benjamin Inc. paid its workers $161,670 for 16,800 hours. Actual variable overhead incurred totaled $133,560, actual fixed overhead totaled $98,956. Benjamin Inc. produced 8,600 widgets during August. Calculate the: a. variable overhead rate variance. b. variable overhead efficiency variance. c. fixed overhead spending variance.

Swan Company has a direct labor standard of 15 hours per unit of output. Each employee has a standard wage rate of $14 per hour. During March, employees worked 13,100 hours. The direct labor rate variance was $9,170 favorable, the direct labor efficiency variance was $15,400 unfavorable. What was the actual payroll?

Madrid Co. has a direct labor standard of 4 hours per unit of output. Each employee has a standard wage rate of $11 per hour. During February, Madrid Co. paid $99,500 to employees for 9,150 hours worked. 2,400 units were produced during February. What is the direct labor rate variance?

Jupiter Co. applies overhead based on direct labor hours. The variable overhead standard is 4 hours at $12 per hour. During February, Jupiter Co. spent $113,400 for variable overhead. 9,150 labor hours were used to produce 2,400 units. What is the over- or underapplied variable overhead?

The formula AH × (SR - AR) is the:

After selling 4,300 units during the period, Dole Corp. prepared a flexible budget that included $22,962 for direct materials, $36,120 for direct labor, $19,350 for variable overhead, and $46,440 for fixed overhead. Dole originally planned its master budget based on sales of 4,000 units. What would total costs have been on the master budget?

An ideal standard is one that can be achieved only under perfect conditions

Ferry Chemical uses a standard cost system to account for the costs of its production of Chemical X. Standards are 1.4 gallons of materials at $105 per gallon and 10 hours of labor at a standard wage rate of $12. During September, Ferry Chemical produced 2,600 gallons of Chemical X. Ferry Chemical purchased and used totaled 3,560 gallons at a total cost of $381,180. Payroll totaled $302,730 for 25,430 hours worked. Calculate the: a. direct materials price variance. b. direct materials quantity variance. c. direct labor rate variance. d. direct labor efficiency variance.

Comparing the master budget with the flexible budget creates a:

Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's direct labor cost be if it used a flexible budget for the period based on actual sales?

Whitman has a direct labor standard of 2 hours per unit of output. Each employee has a standard wage rate of $22.50 per hour. During July, Whitman paid $94,750 to employees for 4,445 hours worked. 2,350 units were produced during July. What is the flexible budget amount for direct labor?

Wilson Manufacturing has provided you with the following variances for the month of March: Wilson Manufacturing produced 6,200 units during the month of March; 6,000 units were budgeted. Raw materials inventory did not change over the period. You have also been provided the following partial information: Calculate the: a. pounds of direct materials (purchased = used). b. actual direct labor hours. c. actual labor cost in dollars. d. actual spending for materials.

Swan Company has a direct labor standard of 15 hours per unit of output. Each employee has a standard wage rate of $14 per hour. During March, employees worked 13,100 hours. The direct labor rate variance was $9,170 favorable, the direct labor efficiency variance was $15,400 unfavorable. How many units were produced?

Beech has budgeted fixed overhead of $202,500 based on budgeted production of 13,500 units. During July, 14,100 units were produced and $214,200 was spent on fixed overhead. What is the budgeted fixed overhead rate?

Blossom, Inc. prepared the following master budget items for July: During July, Blossom actually sold 36,000 units. Prepare a flexible budget for Blossom based on actual sales.

A spending variance is calculated by comparing actual costs with the static budget

In a standard cost system, overhead is applied per unit by multiplying the ___________ overhead rate times the ____________ quantity of the cost driver.

Madrid Co. has a direct labor standard of 4 hours per unit of output. Each employee has a standard wage rate of $11 per hour. During February, Madrid Co. paid $99,500 to employees for 9,150 hours worked. 2,400 units were produced during February. What is the direct labor efficiency variance?