Exam 17: Additional Topics in Variance Analysis

One advantage of using a standard costing system is that it:

A company's direct labor standards for a given operation and the actual results for the current period are provided below: Standard rates: Level One: $20 per hour Level Two: $15 per hour Time to produce one unit: Two (2) Level One workers at 15-minutes each Three (3) Level Two workers at 10 minutes each Actual Results: Units produced: 10,000 Labor used: 4,000 hours of Level One workers at $25 per hour 6,800 hours of Level Two workers at $15 per hour Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute the labor rate variances for each worker level. b. Compute the labor efficiency variances for each worker level. c. Compute the labor mix variances for each worker level. d. Compute the labor yield variances for each worker level.

Tallon & Associates is a consulting firm specializing in business location studies. The results for last year, along with the budget, are as follows: Actual Budget Billable hours Revenue \ 2,772,000 \ 2,400,000 Professional salaries (variable) 1,310,000 1,200,000 Other variable costs 488,000 400,000 Fixed costs 492,000 450,000 Office management salaries (fixed) Operating profit Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Prepare a flexible budget using billable hours as the measure of output. b. Prepare a sales activity variance analysis. c. Compute the sales price variance.

If a company sells two products, it is possible for both products to have a favorable sales mix variance.

The Oregon Company produces and sells a single product. Standards have been established for the product as follows: Direct materials: 5 pounds @ $3.50 per pound = $17.50 Direct labor: 3 hours @ $5.50 per hour = $16.50 Actual cost and usage figures for the past month follow: Units produced 750 Direct materials used 4,000 pounds Direct materials purchased (4,500 pounds) \ 14,400 Direct labor cost (2,000hours) \ 11,200 Required: Prepare journal entries to record: a. The purchase of raw materials. b. The usage of raw materials in production. c. The incurrence of direct labor cost.

A chemical company produces a product used by manufacturers of plastics. Two basic chemicals go into this product. The standards for one-liter of this product are: Chemical 1: 800 ml. @ $50 per liter Chemical 2: 200 ml. @ $200 per liter During the last period, 5,000 liters of the solvent were produced and the company purchased the following amounts of each chemical: Chemical 1: 5,400 liters @ $59.00 per liter Chemical 2: 900 liters @ $225.00 per liter Because these chemicals are volatile, the company uses them immediately upon purchase, so there are no beginning and ending inventories. Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute the direct material price variances for the two basic chemicals. b. Compute the direct material efficiency variances for the two basic chemicals. c. Compute the direct material mix variances for the two basic chemicals. d. Compute the direct material yield variances for the two basic chemicals.

Bonner Company's direct labor cost for March was as follows: Actual direct labor hours 30,000 Standard direct labor hours 31,000 Rate variance \4 ,500 Total payroll \1 89,000 Labor mix variance \4 ,225 - Is the direct labor yield variance favorable or unfavorable?

The Fantasy Gifts Company, a maker of Holiday novelties, needs your help immediately. The company's accountant resigned without leaving adequate records or explanations for what she did. In reviewing the records, you find the following information for May: Materials Purchased 20,000 units Materials Used 15,000 units You find a copy of the budget which shows that materials were budgeted at $0.60/unit. You know that the material price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers, which indicate the following: Material price variance \ 200 F Material efficiency variance \ 600 F - What was the total standard cost of direct materials purchased during May?

Which of the following income statement items is analyzed using the sales mix and the sales quantity variances?

A credit balance in the labor yield variance implies:

The direct labor yield variance is unfavorable when the total hours worked during a period are less than the total standard hours allowed for the actual number of units produced.

Using the abbreviations listed below, what is the market share variance? AMS = actual market share BMS = budgeted market share BCM = budgeted contribution margin per unit ACM = actual contribution margin per unit ATM = actual total market BTM = budgeted total market

A machine distributor sells two models, basic and deluxe. The following information relates to its master budget. Basic Deluxe Sales (units) 8,000 2,000 Sales price per unit \ 8,000 \ 12,000 Variable costs per unit \ 6,400 \ 9,000 Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models. - Is the sales mix variance for the basic model favorable or unfavorable?

In a standard costing system, overhead is applied to production on a basis of:

If raw materials are carried in the Materials Inventory at standard cost, then it is reasonable to assume that the:

The basic variance analysis framework used for manufacturing companies can also be used in service organizations.

The Shum Company makes a product, Z, from two materials: X and Y. The standard prices and quantities are as follows: X Y Price per pound \6 \9 Pounds per unit of product Z 10 5 In May, 21,000 units of Z were produced by Shum Company, with the following actual prices and quantities of materials used: X Y Price per pound \5 .70 \8 .40 Pounds used 216,000 114,000 - Is the total direct material yield variance favorable or unfavorable?

A machine distributor sells two models, basic and deluxe. The following information relates to its master budget. Basic Deluxe Sales (units) 8,000 2,000 Sales price per unit \ 8,000 \ 12,000 Variable costs per unit \ 6,400 \ 9,000 Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models. - What is the sales mix variance for the basic model?

Next year's budget for Canfield, Inc., a multi-product company, is given below: Product A Product B Sales \1 ,890,000 \1 ,377,000 Variable costs 919,800 594,000 Fixed costs Net income Units 252,000 108,000 At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Canfield analyzes the effects its sales variances have on the profitability of the company. Product Line Units Sales A 252,230 \ 1,848,579 B 113,770 \ 1,479,010 Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute the sales activity variance for each product. b. Compute the sales mix variance for each product. c. Compute the sales quantity variance for each product.

Ingredient A12H is a material used to make Calvin Corporation's major product. The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output. Data concerning the compound for October appear below: Cost of material purchased in October \2 3.10per ounce Material purchased in October 2,300 ounces Material used in production in October 2,120 ounces Actual output in October 600 units The material was purchased on account and Calvin Corporation uses a standard costing system. - The Material Efficiency Variance for October would be recorded as a: