Exam 17: Additional Topics in Variance Analysis

Olsen Company uses a standard cost system for its only product. The bickering between purchasing and production that occurs every month after the material variances are developed has the production vice president, Mr. Becker, at his wits end. He has checked the job descriptions of the individuals involved and notes that the purchasing department is responsible for the price at which materials and supplies are purchased and the manufacturing department is responsible for the quantity of material used. This seems very clear cut to him so he has gone to the cost accountant for some additional help. Required: As the cost accountant, explain to Mr. Becker why, or why not, this division of duties solves the conflict between price and quantity variances.

If the number of units produced exceeds the number of units sold, the full-absorption operating profit will be lower than variable costing operating profit.

The next year's budget for Trend, Inc., a multi-product company, is given below: Product A Product B Sales \ 1,890,000 \ 1,377,000 Variable costs 926,100 596,700 Fixed costs 500,000 500,000 Net income 463,900 280,300 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. Trend, Inc. analyzes the effects its sales variances have on the profitability of the company. Product Lines Units Sales A 253,230 \ 1,848,579 B 113,770 \ 1,479,010 - What is the total sales price variance?

The data below relate to a product of Omaha Company. Standard costs Materials, 3 pounds at \ 7 per pound \2 1 per unit Labor, 4 hours at \ 18 per hour \7 2per unit Budgeted production for the year 2,000units Actual results were: Production 1,800 units Material purchases, 6,000 pounds \4 8,230 Labor, 7,420 hours \1 40,170 Material used in production 5,750 pounds Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute the direct material price variance. b. Compute the direct material efficiency variance. c. Compute the direct labor rate variance. d. Compute the direct labor efficiency variance.

What is the correct journal entry to record a favorable materials mix variance assuming all material variances are recognized when the direct materials are issued to production?

Which of the following statements is (are) true? (A)The market share variance is more controllable by the marketing department than the industry volume variance. (B)The industry volume variance is the portion of the sales activity variance due to a change in the company's proportion of sales in the markets in which they operate.

Prince Inc. has the following information: Total payroll Standard direct lab or hours Labor rate variance Labor mix variance Labor yield variance \ 165,300 45,000 \ 8,700F \ 4,000F \ 2,000F - What was Prince's actual direct labor rate?

The labor mix variance is actual total hours at:

The computation of the material yield variance does not require the:

The sales activity variance is equal to the sum of the market share variance and the:

Which of the following statements would be false regarding application of the variance analysis model to nonmanufacturing costs?

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 quantity variance for the deluxe model?

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 quantity variance for the basic model?

Next year's budget for Howard, 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 500,000 500,000 Net income 470,200 283,000 Units 252,00 108,000 Market share 12.5\% 20.0\% 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. Howard analyzes the effects its sales variances have on the profitability of the company. Product Line Units Sales Mkt share A 252,230 \ 1,848,579 15.0\% B 113,770 \ 1,479,010 17.0\% Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute the sales activity variance for each product. b. Compute the market share variance for each product. c. Compute the industry volume variance for each product.

Danner Fashions sells a line of women's dresses. Danner's performance report for November is shown below: (CMA adapted) The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income. Actual Budget Dresses sold Sales \ 235,000 \ 300,00 Variable costs Contribution margin \9 0,000 120,000 Fixed Costs Operating income \& \& - The effect of the sales activity variance on the contribution margin for November is:

The following standards have been established for a raw material used to make product P62: Standard quantity of the material per unit of output 6.3pounds Standard price of the material \ 15.50 per pound The following data pertain to a recent month's operations: Actual material purchased 6,700 ounds Actual cost of material purchased \ 100,500 Actual material used in production 6,400 pounds Actual output 920 mits of product P62 Required: a. What is the material price variance for the month? b. What is the material efficiency variance for the month?

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?

Some variances are the result of standards that are inaccurate or do not reflect the current production process.

The next year's budget for Trend, Inc., a multi-product company, is given below: Product A Product B Sales \ 1,890,000 \ 1,377,000 Variable costs 926,100 596,700 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. Trend, Inc. analyzes the effects its sales variances have on the profitability of the company. Product Lines Units Sales A 253,230 \ 1,848,579 B 113,770 \ 1,479,010 - Is the total sales quantity variance favorable or unfavorable?

There are several reasons why actual results differ from standards. Which of the following does not represent a reason why a variance might occur?