Exam 9: Standard Costing and Variance Analysis

Raven applies overhead based on direct labor hours.The variable overhead standard is 2 hours at $11 per hour.During July,Raven spent $116,700 for variable overhead.8,890 labor hours were used to produce 4,700 units.What is the variable overhead efficiency variance?

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Question 1

Correct Answer:

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Wallace Inc.uses a standard cost system and has provided the following information: Budgeted production = 6,000 units Prepare the journal entries to record the following transactions.Assume Wallace Inc.does not maintain inventories other than direct materials (production is equal to sales). a.Purchase of direct materials on account b.Usage of direct materials c.Incurrence of direct labor d.Incurrence and application of variable overhead e.Incurrence and application of fixed overhead

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Question 2

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Direct labor rate variance: $259,500 - (11,530 × $22)= $5,840 unfavorable
Direct labor efficiency variance: (11,530 × $22)- (5,900 × 2 × $22)= $5,940 favorable
Variable OH rate variance: $186,600 - (11,530 × $16)= $2,120 unfavorable
Variable OH efficiency variance: (11,530 × $16)- (5,900 × 2 × $16)= $4,320 favorable
Fixed overhead spending variance: $181,400 - (6,000 × $30)= $1,400 unfavorable
Fixed overhead volume variance: (6,000 × $30)- (5,900 × $30)= $3,000 unfavorable
Debits to Direct Materials Inventory and Cost of Goods Sold should be based on the standard,not actual cost.Cash,payables,etc. ,should be credited for the actual cost incurred.Unfavorable variances should appear as debit entries;favorable variances should appear as credit entries.Costs can be taken directly to Cost of Goods Sold when production equals sales.

Wisteria Co.produces snowboards and uses a standard cost system.Variable overhead is applied using direct labor hours.Standards allowed for each unit are 5.2 hours of labor at a standard variable overhead rate of $6.60.During December,Wisteria Co.produced 3,100 snowboards.Materials purchases totaled 20,800 pounds at a total cost of $224,780.Materials usage totaled 20,970 pounds.Payroll totaled $183,660 for 17,140 hours worked.Variable overhead incurred totaled $109,140.Calculate the: a.variable overhead rate variance. b.variable overhead efficiency variance.

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Question 3

Correct Answer:

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a.$3,984 favorable = $109,140 - (17,140 × $6.60)= $109,140 - $113,124
b.$6,732 unfavorable = $113,124 - (3,100 × 5.2 × $6.60)= $113,124 - $106,392
VOH rate variance = AH × (SR - AR).VOH efficiency variance = SR × (SH - AH).

Patton Corp.uses a standard cost system to account for the costs of its one product.Budgeted fixed overhead is $75,000,budgeted production is 2,500 per month,and practical capacity is 3,000 units.During November,Patton produced 2,400 units.Fixed overhead incurred totaled $70,310. Assume Patton calculates its fixed overhead rate based on budgeted production. a.What is the fixed overhead rate? b.What is the fixed overhead volume variance? c.By how much was fixed overhead over- or underapplied? Now assume Patton calculates its fixed overhead rate based on practical capacity. d.What is the fixed overhead rate? e.What is the expected (planned)capacity variance? f.What is the unexpected (unplanned)capacity variance? g.By how much was fixed overhead over- or underapplied?

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Question 4

The overall difference between the actual and applied manufacturing overhead is the:

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Question 5

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 variable overhead rate variance?

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Question 6

Avon Co.has a favorable fixed overhead spending variance of $2,800.During February,Avon budgeted to produce 2,500 units,it actually produced 2,400 units,and it budgeted $75,000 for fixed overhead.How much was actually spent on fixed overhead?

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Question 7

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?

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Question 8

A master budget is an example of a:

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Question 9

Patrick Co.produces computer desks and uses a standard cost system.Materials standards are 6.75 pounds of material at $10.40 per pound and 5.2 hours of labor at a standard wage rate of $10.50.During December,Patrick Co.produced and sold 3,100 desks.Materials purchases totaled 20,800 pounds at a total cost of $224,780.Materials usage totaled 20,970 pounds.Payroll totaled $183,660 for 17,140 hours worked.Patrick Co.does not maintain inventories other than direct materials.Prepare journal entries to record the following transactions. a.Direct materials purchase b.Direct materials usage c.Direct labor incurred

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Question 10

Venus Company applies overhead based on direct labor hours.The variable overhead standard is 10 hours at $3.50 per hour.During October,Venus Company spent $157,600 for variable overhead.47,440 labor hours were used to produce 4,800 units.What is the variable overhead efficiency variance?

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Question 11

In a standard cost system,an unfavorable variance will appear as:

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Question 12

Venus Company applies overhead based on direct labor hours.The variable overhead standard is 10 hours at $3.50 per hour.During October,Venus Company spent $157,600 for variable overhead.47,440 labor hours were used to produce 4,800 units.What is the over- or underapplied variable overhead?

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Question 13

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the unexpected (unplanned)capacity variance?

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Question 14

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?

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Question 15

Sage Corp.uses a standard cost system to account for the costs of its one product.Standards are 3 pounds of materials at $14 per pound and 4 hours of labor at a standard wage rate of $12.During July,Sage Corp.produced 3,300 units.Materials purchased and used totaled 10,100 pounds at a total cost of $142,650.Payroll totaled $146,780 for 13,150 hours worked.Calculate the: a.direct labor rate variance. b.direct labor efficiency variance.

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Question 16

Which of the following statements is correct about the way managers set standards for employees?

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Question 17

Dill has a fixed overhead spending variance of $3,900 unfavorable.During July,Dill budgeted production of 4,500 units,it actually produced 4,700 units,and it actually spent $71,400 on fixed overhead.How much was budgeted fixed overhead?

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Question 18

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 materials cost be if it used a flexible budget for the period based on actual sales?

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Question 19

Branch Corp.uses a standard cost system to account for the costs of its one product.Variable overhead is applied using direct labor hours.Standards allowed for each unit are 3 hours of labor at a variable overhead rate of $10.During November,Branch Corp.produced 2,300 units.Payroll totaled $97,780 for 7,140 hours worked.Variable overhead incurred totaled $73,230.Calculate the: a.variable overhead rate variance. b.variable overhead efficiency variance.

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Question 20

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Raven applies overhead based on direct labor hours.The variable overhead standard is 2 hours at $11 per hour.During July,Raven spent $116,700 for variable overhead.8,890 labor hours were used to produce 4,700 units.What is the variable overhead efficiency variance?

The overall difference between the actual and applied manufacturing overhead is the:

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 variable overhead rate variance?

Avon Co.has a favorable fixed overhead spending variance of $2,800.During February,Avon budgeted to produce 2,500 units,it actually produced 2,400 units,and it budgeted $75,000 for fixed overhead.How much was actually spent on fixed overhead?

A master budget is an example of a:

Venus Company applies overhead based on direct labor hours.The variable overhead standard is 10 hours at $3.50 per hour.During October,Venus Company spent $157,600 for variable overhead.47,440 labor hours were used to produce 4,800 units.What is the variable overhead efficiency variance?

In a standard cost system,an unfavorable variance will appear as:

Venus Company applies overhead based on direct labor hours.The variable overhead standard is 10 hours at $3.50 per hour.During October,Venus Company spent $157,600 for variable overhead.47,440 labor hours were used to produce 4,800 units.What is the over- or underapplied variable overhead?

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the unexpected (unplanned)capacity variance?

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?

Which of the following statements is correct about the way managers set standards for employees?

Dill has a fixed overhead spending variance of $3,900 unfavorable.During July,Dill budgeted production of 4,500 units,it actually produced 4,700 units,and it actually spent $71,400 on fixed overhead.How much was budgeted fixed overhead?

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing and Cost Management

Cost Behavior

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgetary Planning

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Measuring and Evaluating Financial Performance

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