Exam 16: Fundamentals of Variance Analysis

The following information is available for Baxter Manufacturing for April: Actual machine hours 840 Standard machine hours allowed 900 Denominator activity (machine hours) 1,000 Actual fixed overhead costs \3 ,800 Budgeted fixed overhead costs \4 ,000 Predetermined overhead rate ( \ 1 variable +\ 4 fixed) quad5 - Is the fixed overhead price (spending) variance for April favorable or unfavorable?

The Norris Company uses a standard cost accounting system and estimates production for the year to be 60,000 units. At this volume, the company's variable overhead costs are $0.50 per direct labor hour. The company's single product has a standard cost of $30.00 per unit. Included in the $30.00 is $13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information for the month of March follows: Nurnber of units produced 6,000 Materials purchased (18,500yards) \ 88,800 Materials used in production (yards) 18,500 Direct labor cost incured ( \6 .50/hour) \ 75,400 Required: Prepare the journal entries to record the following: a. Purchase and use of direct materials (Assume materials are used as purchased and no inventory is maintained). b. Recognition of direct labor.

The sales price variance is the difference between the actual sales revenues and the:

The standard unit cost is used in the calculation of which of the following variances? (CPA adapted) Materials Price Variance Materials Usage Variance A ) No No B) No Yes C) Yes No D) Yes Yes

Angie Manufacturing uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. At standard, each unit of product requires one machine-hour to complete. The standard variable overhead is $1.75 per machine-hour and Budgeted Fixed Manufacturing Costs are $300,000 per year. The denominator level of activity is 150,000 machine-hours, or 150,000 units. Actual data for the year were as follows: Actual variable overhead cost \ 211,680 Actual fixed marufacturing overhead cost \ 315,000 Actual machine-hours 126,000 Units produced 120,000 Required: a. What are the predetermined variable and fixed manufacturing overhead rates for the year? b. Compute the variable overhead rate and efficiency variances for the year. c. Compute the fixed manufacturing overhead budget and volume variances for the year.

James Manufacturing has the following information available for July: - What was James's actual sales revenue for July?

Which of the following statements is not true regarding the fixed production cost variance?

Variable manufacturing overhead is applied to products on the basis of standard direct labor hours. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be: (CMA adapted)

Shawn Incorporated planned to produce 3,000 units of its single product, Megatron, during November. The standard specifications for one unit of Megatron include six pounds of material at $0.30 per pound. Actual production in November was 3,100 units of Megatron. The accountant computed a favorable materials price variance of $380 and an unfavorable materials quantity variance of $120. Based on these variances, one could conclude that: (CMA adapted)

The following information is available for the Danske Company: Denominator hours for May 15,000 Actual hours worked during May 14,000 Standard hours allowed for May 12,000 Flexible budget fixed overhead cost \4 5,000 Actual fixed overhead costs for May \4 8,000 Danske Company had total underapplied overhead of $15,000. Additional information is as follows: Variable Overhead: Applied based on standard direct labor hours allowed Budgeted based on standard direct labor hours Fixed Overhead: Applied based on standard direct labor hours allowed Budgeted based on standard direct labor hours \4 2,000 38,000 \3 0,000 27,000 - What is the actual total overhead for the period?

Which of the following statements is(are) true? (A) A favorable variance is not necessarily good, and an unfavorable variance is not necessarily bad. (B) The master budget includes operating budgets (e.g., production budget) and financial budgets (e.g., cash budget).

The data below relate to a product of Bellingham Company. Standard costs: Materials, 2 pounds at \ 6 per pound \ 12 per unit Labor, 3 hours at \ 15 per hour \ 45 per unit Actual results were: Production 3,600 unit Material purchased \& used, 7,300 pounds \ 42,340 Labor, 10,360 hours \ 160,580 Required: (Be sure to indicate whether the variances are favorable or unfavorable and show your work.) a. Compute the direct material price variance. b. Compute the direct material usage variance. c. Compute the direct labor rate variance. d. Compute the direct labor efficiency variance.

The following information summarizes the standard cost for producing one metal tennis racket frame at Spaulding Industries. In addition, the variances for one month's production are given. Assume that all inventory accounts have zero balances at the beginning of the month. Standard Cost Per Standard Monthly Uunit Costs Materials \ 4.00 \ 8,400 Direct Labor 2 hrs @ \2 .60 5.20 10,920 Factory Overhead: Variable 1.80 3,780 Fixed Variances: Material price \ 244.75 unfavorable Material quantity \ 500.00 unfavorable Labor rate \ 520.00 favorable Labor efficiency \ 2,080.00 unfavorable - What was the actual price per unit paid for the direct material during the month, assuming all materials purchased were put into production?

The Ornate Company has the following information pertaining to the month of March: Units of output, actual 21,000 Fixed costs, actual \ 497,000 Operating profit, master budget \ 220,000 Sales price variance \ 84,000 Beginning and ending inventories 0 Sales volume variance, revenue \ 300,000 Budgeted selling price per unit \ 100 Variable costs, master budget \ 1,680,000 Contribution margin, actual \ 516,000 Required: Prepare a performance report for March including columns for the (a) actual results, (b) flexible budget, (c) flexible budget variance, (d) master budget, and (e) sales activity variance.

The following information is available for the Danske Company: Denominator hours for May 15,000 Actual hours worked during May 14,000 Standard hours allowed for May 12,000 Flexible budget fixed overhead cost \4 5,000 Actual fixed overhead costs for May \4 8,000 Danske Company had total underapplied overhead of $15,000. Additional information is as follows: Variable Overhead: Applied based on standard direct labor hours allowed Budgeted based on standard direct labor hours Fixed Overhead: Applied based on standard direct labor hours allowed Budgeted based on standard direct labor hours \4 2,000 38,000 \3 0,000 27,000 - What is the production volume variance for May?

The flexible and master budget amounts are the same for fixed marketing and administrative costs.

Which of the following statements is(are) true regarding the sales activity variance? (A) The sales activity variance is the actual selling price per unit times the difference between the budgeted units and actual units. (B) If the sales activity variance for sales revenue is unfavorable, then the contribution margin sales activity variance will be unfavorable.

Meera Corporation makes a product with the following standard costs: Inputs Standard Quantity or Hours Stardard Price or Rate Direct materials 8.1 lounces \ 3.00 per hour Direct labor 0.5 hours \ 18.00 per hour Variable overhead 0.5 hours \ 2.00 per hour In December the company produced 4,200 units using 34,870 ounces of the direct material and 1,900 direct labor-hours. During the month, the company purchased 39,700 ounces of the direct material at a total cost of $111,160. The actual direct labor cost for the month was $35,530 and the actual variable overhead cost was $3,990. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. Required: a. Compute the materials quantity variance. b. Compute the materials price variance. c. Compute the labor efficiency variance. d. Compute the direct labor rate variance. e. Compute the variable overhead efficiency variance. f. Compute the variable overhead rate variance.

Pure Corporation makes a product with the following standard costs: Standard Standard Quantity or Standard Price or Cost Pet Inputs Hours Rate Unit Direct materials 4.3 pounds \ 6.00 per pound \ 25.80 Direct labor 0.7 hours \ 20.00 per hour \ 14.00 Variable overhead 0.7 hours \ 2.00 per hour \ 1.40 The company reported the following results concerning this product in September. Originally budgeted output 1,900 units Actual output 1,700 units Raw materials used in production 7,210 pounds Purchases of raw materials 7,600 pounds Actual direct labor-hours 1,260 hours Actual cost of raw materials purchases \ 43,320 Actual direct labor cost \ 25,578 Actual variable overhead cost \ 2,394 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. Required: a. Compute the materials quantity variance. b. Compute the materials price variance. c. Compute the labor efficiency variance. d. Compute the direct labor rate variance. e. Compute the variable overhead efficiency variance. f. Compute the variable overhead rate variance.

In essence, the terms "master budget" and "operating budget" mean the same thing and can be used interchangeably.