Exam 17: Additional Topics in Variance Analysis

For a company that produces more than one product, the sales activity variance can be divided into which two of the following additional variances? (CMA adapted)

The labor yield variance is actual total hours at:

Professional accounting firms could not compute a labor mix and labor yield variance for their auditors because labor in accounting is not substitutable.

The Becton Enterprises (BE) produces a gasoline additive, Charger Power. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process. Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. Loss of output and efficiency may result if the controls are not effective. The standard cost of producing a 500-liter batch of Charger Power is $135. The standard materials mix and related standard cost of each chemical used in a 500-liter batch are: Chemical Std input quantity Std cost per liter Total cost Echol 200 \0 .200 \ 40.00 Protex 100 0.425 42.50 Benz 250 0.150 37.50 CT -40 0.300 The quantities of chemicals purchased and used during the current production period are shown in the schedule below. A total of 140 batches of Charger Power were manufactured during the current production period. The controller of BE has determined its costs and chemical usage variations at the end of the production period. Chemical Quantity Purchased Total Cost Quantity Used Echol 25,000 \ 5,365 26,600 Protex 13,000 6,240 12,880 Benz 40,000 5,840 37,800 CT-40 7,500 2,220 7,140 85,500 84,420 - What is the total material yield variance?

High Tech builds fence panels to custom order. Materials include 15 units of lumber at $2.25 per unit. Standards call for 3 hours of labor at $25 per hour. During October, 3,121 fence panels were built. Materials purchased totaled $113,650 for 51,100 units of lumber. Actual lumber usage in production was 51,069 units. The October payroll was $248,000 for 9,500 hours. 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.

A manufacturer of industrial equipment has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Level of activity 2,500 Overhead costs at the denominator activity level: Variable overhead cost \8 ,500 Fixed overhead cost \3 4,625 The following data pertain to operations for the most recent period: Actual hours 2,600 Standard hours allowed for the actual output 2,592 Actual total variable manufacturing overhead cost \9 ,100 Actual total fixed manufacturing overhead cost \ 35,025 - How much overhead was applied to products during the period to the nearest dollar?

A company's direct labor standards for a given operation and the actual results for the current period are provided below: Standard rates: Class A: $24 per hour Class B: $12 per hour Time to produce one unit: Three (3) Class A workers at 20 minutes each Two (2) Class B workers at 15-minutes each Actual Results: Units produced: 6,000 Labor used: 5,800 hours of Class A workers; total payroll: $156,600 3,500 hours of Class B workers; total payroll: $49,000 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.

Maxine Watters, the managerial accountant, has been asked by the President of Coolare Ceiling Fan Company to prepare an analysis of the effectiveness of the new management team. The company manufactures paper fans. 2020 standards: Direct materials - 4 parts @ $2 per part Direct labor - one half hour (0.5) @ $10 per hour Estimated production - 100,000 Actual results 2020: Direct materials - 585,000 parts at a total cost of $1,462,500 were purchased and used Direct labor - 51,000 hours at a cost of $561,000 Actual production - 130,000 fans Required: Requirement: Compute the direct material and direct labor price and efficiency variances.

A company makes a product using two materials, one of which is interchangeable with a third material. The standards for producing one 200-pound batch are presented below. The last 200-pound batch was produced using 140 pounds of M and 90 pounds of O. The price of M was $0.03 per pound and the actual price of O was $0.10. Standard Quartity Standard Material () Cost/lb. Total Cost 0 \ 0.10 \ 0 80 0.08 6.40 0.02 - What is the material mix variance?

Resolution Company is meeting with the consultants it hired to help it with problems arising from its increasing sales and increasing production to meet them. The consultants have informed the company that they need to make price concessions in order to have their product sold over a large area. To do this, costs need to be reduced and controlled. They recommended installation of a standard costing system and a flexible budgeting system. The CEO took the recommendations back to the company management, explained to all, and a team was set up to develop the standards. The team was composed of the purchasing manager, processing manager, production engineer, and V.P. of sales. Each member of the team, rather than working to develop standards, came up with reasons why they wouldn't work. The team made its report to the CEO who told them to come up with the standards or he would have the consultants set them. Required: (a) What are the advantages and disadvantages of standard costing? (b) What has gone wrong in this situation and will having the outside consultant do the work change anything?

Barium Corporation has provided the following data concerning its most important raw material, Compound XYY2: Standard cost \ 23.80 per liter Stardard quartity 5.7 liters per unit of output Material used in production in August 2,350 liters Actual output in August 400 units When recording the use of materials in production under a standard costing system, Materials Inventory would be:

The Vargas Company had the following expectations for the year: Budgeted results for the year were: Total market for the product 175,000 Vargas' budgeted sales \ 1,763,125 Variable costs per unit \ 18.75 Selling price per unit \ 32.50 Actual results for the year were: Total market for the product 166,250 Vargas's actual sales 56,525 Total Variable costs \1 ,073,975 Total sales \1 ,752,275 - What is Vargas' industry volume variance?

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 rits 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 actual cost of the direct materials purchased during May?

A company makes a product using two materials, one of which is interchangeable with a third material. The standards for producing one 200-pound batch are presented below. The last 200-pound batch was produced using 140 pounds of M and 90 pounds of O. The price of M was $0.03 per pound and the actual price of O was $0.10. Standard Quartity Standard Material () Cost/lb. Total Cost 0 \ 0.10 \ 0 80 0.08 6.40 0.02 - Is the material yield variance favorable or unfavorable?

The sales quantity variance is the same as the sales activity variance on a flexible budget performance report.

The variable production cost variances are computed using the units produced instead of the units sold.

The Stangle Company had the following expectations: Total market for the product 350,006 mits Stangle's budgeted sales 108,500 Contribution margin per unit \ 12.00 Actual results for the year were: Total market for the product 332,500 units Stangle's actual sales 113,050 Required: (Be sure to indicate whether the variance is favorable or unfavorable.) a. Compute Stangle's sales activity variance. b. Compute Stangle's market share variance. c. Computer Stangle's industry volume variance.

Actual and budgeted information about the sales of a product are presented below for June: (CIA adapted) Actual Budget Units 10,000 Sales Reverue The sales price variance for June was:

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 - What is the total direct material yield variance for May?

Two important characteristics to consider when deciding how many variances to review are is the impact of the variance and the extent to which the variance can be controlled.