Exam 16: Fundamentals of Variance Analysis

When computing standard cost variances, the difference between actual and standard prices multiplied by actual quantity yields a(n): (CMA adapted)

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 quantity of materials used during the month?

James Manufacturing has the following information available for July: - What was James's activity variance for variable manufacturing costs?

The production volume variance is the difference between fixed costs on the flexible budget and the fixed costs on the master budget.

The production volume variance must be computed when a company uses:

Angler Corporation has provided the following data concerning its direct labor costs for November: Standard wage rate \ 14.70 per DLH Standard hours 2.4 DLHs per urit Actual wage rate \ 14.860 per DLH Actual hours 5,990 DLHs Actual output 2,600 units Required: Prepare the journal entry to record the incurrence of direct labor costs.

The standards for product A22G specify 8.2 direct labor-hours per unit at $11.90 per direct labor-hour. Last month 200 units of product A22G were produced using 1,700 direct labor-hours at a total direct labor wage cost of $20,060. Required: a. What was the labor rate variance for the month? b. What was the labor efficiency variance for the month? c. Prepare a journal entry to record direct labor costs during the month, including the direct labor variances.

Which of the following direct labor variances uses the standard hours allowed for the actual number of units produced? Price Efficiency A. Yes Yes B. No No C. Yes No D. No Yes

The condensed flexible budget of the Texas Company for the year is given as $160,000 + $1.25/direct labor hour. The company produces a single product that requires 2.5 direct labor-hours to complete. Assume that the company chooses 100,000 direct labor-hours as the denominator level of activity, but actually worked 96,000 hours during the year producing 37,000 units. Actual overhead costs for the year are: Variable costs \1 24,800 Fixed costs Total overhead costs Required: (Be sure to indicate whether the variances are favorable or unfavorable.) a. Compute the variable overhead price variance and the variable overhead efficiency variance. b. Compute the fixed overhead spending (budget) variance and the production volume variance.

The budget for the month of May was for 9,000 units at a direct materials cost of $15 per unit. Direct labor was budgeted at 45 minutes per unit for a total of $81,000. Actual output for the month was 8,500 units with $127,500 in direct materials and $77,775 in direct labor expense. The direct labor standard of 45 minutes was obtained throughout the month. Variance analysis of the performance for the month of May would show a(n): (CMA adapted)

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product. Standard Standard Standard Quantity Price Cost Direct Materials 8pounds \ 1.80 per pound \ 14.40 Direct Labor 0.25 hour \ 8.00 per hour During November, TaskMaster purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for November were $42,000, 90% of which were for direct labor. TaskMaster manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours. - Is the direct materials efficiency variance favorable or unfavorable?

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product. Standard Standard Standard Quantity Price Cost Direct Materials 8pounds \ 1.80 per pound \ 14.40 Direct Labor 0.25 hour \ 8.00 per hour During November, TaskMaster purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for November were $42,000, 90% of which were for direct labor. TaskMaster manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours. - Is the direct labor rate variance favorable or unfavorable?

The difference between operating profits in the master budget and operating profits in the flexible budget is called the:

The following standards have been established for a raw material used to make product JN36: Standard quantity of material per unit of output 6.3pounds Standard price of the material \1 5.50 per pound The following data pertain to a recent month's operations: Actual material purchased 6,700 pounds Actual cost of material purchased \ 100,500 Actual material used in production 6,400 pounds Actual output 920 mits of product JN36 Required: a. What is the materials price variance for the month? b. What is the materials quantity variance for the month?

In analyzing company operations, the controller of the Carson Corporation found a $250,000 favorable flexible budget revenue variance. The variance was calculated by comparing the actual results with the flexible budget. This variance can be wholly explained by: (CMA adapted)

It is possible to have a favorable direct material price variance and an unfavorable direct material efficiency variance.

Jackson Company uses a standard cost system. The following information pertains to direct labor for product B for the month of October: Standard hours allowed for actual production 2,000 Actual rate paid per hour \ 8.40 Standard rate per hour \ 8.00 Labor efficiency variance \ 1,600 What were the actual hours worked for the month of October?

Shum Company manufactures special electrical equipment and parts. Shum employs a standard cost accounting system with separate standards established for each product. A special transformer is manufactured in the Transformer Department. Production volume is measured by direct labor hours in this department and a flexible budget system is used to plan and control department overhead. Standard costs for the special transformer are determined annually in September for the coming year. The standard cost of a transformer was computed at $67.00 as shown below. Direct materials: Iron 5 sheets @ \ 2.00 \ 10.00 Copper 3 spools @ \ 3.00 9.00 Direct labor 4 hours @ \ 7.00 28.00 Variable overhead 4 hours @ \ 3.00 12.00 Fixed overhead 4 hours @ \ 2.00 Total Overhead rates were based upon normal and expected monthly capacity, both of which were 4,000 direct labor hours. Practical capacity for this department is 5,000 direct labor hours per month. Variable overhead costs are expected to vary with the number of direct labor hours actually used. During October, 800 transformers were produced. This was below expectations because a work stoppage occurred at the copper supplier and shipments were delayed. The following data pertain to October's operations: Direct materials: Iron: Copper: Direct labor: purchased 5,000 sheets@ \2 .00/sheet Used: 3,900 sheets purchased2,200spools@ \3 .10 Used: 2,600 spools 3,400 hours Total payroll: \ 24,080 Overhead: Variable \1 0,000 Fixed \8 ,800 Required: Compute each of the following variances, showing all your work. Be sure to indicate whether the variances are favorable or unfavorable. a. Variable overhead spending variance. b. Variable overhead efficiency variance. c. Fixed overhead spending (budget) variance. d. Production volume variance.

The Fox 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 Variable overhead costs incurred \ 6,380 Fixed overhead costs incured \ 20,400 Direct labor cost incurred ( \6 .50/hour) \ 75,400 Required: Prepare the journal entries to record the following: a. Incurring actual overhead. b. Application of overhead to production. c. Closing of overhead accounts and recognizing variances. d. Transferring production to finished goods.

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product. Standard Standard Standard Quantity Price Cost Direct Materials 8pounds \ 1.80 per pound \ 14.40 Direct Labor 0.25 hour \ 8.00 per hour During November, TaskMaster purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for November were $42,000, 90% of which were for direct labor. TaskMaster manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours. - What is the direct materials efficiency variance for November?