The Bartok 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: \[\begin{array} { l r } \text { Number of units produced } & 6,000 \\ \text { Materials purchased (18,500yards) } & \$ 88,800 \\ \text { Materials used in production (yards) } & 18,500 \\ \text { Variable overhead costs incurred } & \$ 6,380 \\ \text { Fixed overhead costs incured } & \$ 20,400 \\ \text { Direct labor cost incurred (\$6.50/hour) } & \$ 75,400 \end{array}\] Required: (Be sure to indicate whether the variances are favorable or unfavorable.) a. Compute the predetermined overhead rate used for the year b. Compute the budgeted fixed costs for the month. c. Compute the variable overhead spending variance. d. Compute the variable overhead efficiency variance. e. Compute the fixed overhead spending (budget) variance. f. Compute the production volume variance.

a. $30.00 ? $13.20 ? $12.00 = $4.80/unit

Data on Gantry Company's direct labor costs are given below: $\begin{array}{lrr} \text { Standard direct-labor hours } &30,000\\ \text {Actual direct-labor hour's } &29,000\\ \text { Direct-labor efficiency variance-favorable } &\$4,000\\ \text { Direct-labor rate variance-favorable } &\$5,800\\ \text { Total direct labor payroll } &\$110,200\\ \end{array}$ - What was Gantry's standard direct labor rate?

A) $3.54 B) $3.80 C) $4.00 D) $5.80 A) $3.54 B) $3.80 C) $4.00 D) $5.80

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. $\begin{array}{lclr} &\text { Standard } & \text { Standard } & \text { Standard } \\ &\text { Quantity } & \text { Price } & \text { Cost }\\ \text { Direct Materials } & \text { 8pounds } & \$ 1.80 \text { per pound } & \$ 14.40 \\ \text { Direct Labor } & 0.25 \text { hour } & \$ 8.00 \text { per hour } & \underline{2.00}\\ &&& \underline{\$16.40} \end{array}$ 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 price variance for November?

A) $14,250 B) $14,400 C) $16,000 D) $17,100 A) $14,250 B) $14,400 C) $16,000 D) $17,100

Compound Y23Z is used by Overton Corporation to make one of its products. The standard cost of compound Y23Z is $38.70 per ounce and the standard quantity is 4.6 per unit of output. Data concerning the compound in the most recent month appear below: $\begin{array}{lrr} \text {Cost of material purchased in November, per ounce } &\$39.20\\ \text { Material purchased in November, ounces } &2,800\\ \text { Material used in production in November, ounces } &2,360\\ \text {Actual output in November, units } &500\\ \end{array}$ The raw material was purchased on account. Required: a. Record the purchase of the raw material in a journal entry. b. Record the use of the raw material in production in a journal entry.

a.Entry to record purchase of materials:

Information on Kimble Company's direct labor costs for the month of January is as follows: \[\begin{array} { l r r } \text { Actual direct labor hours } & 34,500 \\ \text { Standard direct labor hours } & 35,000 \\ \text { Total direct labor payroll } & \$ 241,500 \\ \text { Direct labor efficiency variarice-favorable } & \$ 3,200 \end{array}\] - What is Kimble's direct labor rate variance?

A) $17,250 B) $20,700 C) $18,750 D) $21,000 A) $17,250 B) $20,700 C) $18,750 D) $21,000

The Fort 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: \[\begin{array} { l c } \text { Units produced } & 750 \\ \text { Direct materials used } & 4,000 \text { pounds } \\ \text { Direct materials purchased (4,500 pounds) } & \$ 14,400 \\ \text { Direct labor cost (2,000hours) } & \$ 1,200 \end{array}\] 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. \[\begin{array} { | l | r | r | } \h

The following information is available for Baxter Manufacturing for April: $\begin{array}{lrr} \text { Actual machine hours } &840\\ \text { Standard machine hours allowed} &900\\ \text { Denominator activity (machine hours) } &1,000\\ \text {Actual fixed overhead costs } &\$3,800\\ \text { Budgeted fixed overhead costs } &\$4,000\\ \text { Predetermined overhead rate ( \( \$ 1 $ variable $ +\$ 4 $ fixed) } &\$\quad5\\ \end{array}\) - What is the fixed overhead price (spending) variance for April?

A) $200. B) $400. C) $300. D) $240. A) $200. B) $400. C) $300. D) $240.

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. $\begin{array}{lcc} &\text { Standard Cost Per }&\text {Standard Monthly }\\ &\text { Uunit}&\text { Costs}\\ \text { Materials } & \$ 4.00 & \$ 8,400 \\ \text { Direct Labor 2 hrs @ \$2.60 } & 5.20 & 10,920\\ \text { Factory Overhead: } & & \\ \text { Variable } & 1.80 & 3,780 \\ \text { Fixed } & \underline{5.00} & \underline{10,500}\\ & \underline{\$16.00}& \underline{\$33,600} \end{array}$ $\begin{array}{llrl} \text { Variances: }\\ \text { Material price } & \$ 244.75 & \text { unfavorable } \\ \text { Material quantity } & \$ 500.00 & \text { unfavorable } \\ \text { Labor rate } & \$ 520.00 & \text { favorable } \\ \text { Labor efficiency } & \$ 2,080.00 & \text { unfavorable } \end{array}$ - What were the actual direct labor hours worked during the month?

A) 5,000 B) 4,800 C) 4,200 D) 4,000 A) 5,000 B) 4,800 C) 4,200 D) 4,000

When are the following direct materials variances ideally reported? $\begin{array} { l l l } && { \text { Quantity } } &&& { \text { Price } } \\\end{array}$ A.$\begin{array} { l l l } & \text { Purchase Date } & \text { Purchase Date } \\\end{array}$ B.$\begin{array} { l l l } & \text { Time of Use } && \text { Time of Use } \\\end{array}$ C.$\begin{array} { l l l } & \text { Purchase Date } & \text { Time of Use } \\\end{array}$ D.$\begin{array} { l l l } & \text { Time of Use } && \text { Purchase Date } \\ \end{array}$

A) Option A B) Option B C) Option C D) Option D A) Option A B) Option B C) Option C D) Option D

Exam 16: Fundamentals of Variance Analysis

The Bartok 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: Number 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: (Be sure to indicate whether the variances are favorable or unfavorable.) a. Compute the predetermined overhead rate used for the year b. Compute the budgeted fixed costs for the month. c. Compute the variable overhead spending variance. d. Compute the variable overhead efficiency variance. e. Compute the fixed overhead spending (budget) variance. f. Compute the production volume variance.

(Essay)

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Question 121

When using standard costing, costs are transferred through the production process at their standard costs.

(True/False)

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Question 122

Data on Gantry Company's direct labor costs are given below: Standard direct-labor hours 30,000 Actual direct-labor hour's 29,000 Direct-labor efficiency variance-favorable \4 ,000 Direct-labor rate variance-favorable \5 ,800 Total direct labor payroll \1 10,200 - What was Gantry's standard direct labor rate?

(Multiple Choice)

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Question 123

The slope of the flexible budget line is the:

(Multiple Choice)

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Question 124

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 price variance for November?

(Multiple Choice)

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Question 125

A debit balance in the direct labor efficiency variance account indicates that

(Multiple Choice)

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Question 126

Compound Y23Z is used by Overton Corporation to make one of its products. The standard cost of compound Y23Z is $38.70 per ounce and the standard quantity is 4.6 per unit of output. Data concerning the compound in the most recent month appear below: Cost of material purchased in November, per ounce \3 9.20 Material purchased in November, ounces 2,800 Material used in production in November, ounces 2,360 Actual output in November, units 500 The raw material was purchased on account. Required: a. Record the purchase of the raw material in a journal entry. b. Record the use of the raw material in production in a journal entry.

(Essay)

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Question 127

Information on Kimble Company's direct labor costs for the month of January is as follows: Actual direct labor hours 34,500 Standard direct labor hours 35,000 Total direct labor payroll \ 241,500 Direct labor efficiency variarice-favorable \ 3,200 - What is Kimble's direct labor rate variance?

(Multiple Choice)

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Question 128

When using a flexible budget, what will happen to variable costs on a per-unit basis as production increases within the relevant range?

(Multiple Choice)

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Question 129

Excess direct labor wages resulting from overtime premium will be disclosed in which type of variance? (CPA adapted)

(Multiple Choice)

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Question 130

The Fort 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) \ 1,200 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.

(Essay)

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Question 131

The condensed flexible budget of the Evergreen Company for the year is given below: Direct labor-hours Direct labor-hours Overhead costs: 30,000 40,000 50,000 Variable costs \ 75,000 ? ? Fixed costs ? ? \ 320,000 The company produces a single product that requires 2.5 direct labor-hours to complete. The direct labor wage rate is $7.50 per hour. Three yards of raw material are required for each unit of product, at a cost of $5 per yard. Assume that the company chooses 50,000 direct labor-hours as the denominator level of activity, but actually worked 48,000 hours during the year, producing 18,500 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.

(Essay)

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Question 132

Variance analysis for fixed production costs is virtually the same as for variable production costs.

(True/False)

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Question 133

Megham Company manufactures a single product. The following standards have been developed for it: Direct Material 6 pounds \ 4/pound Direct Labor 2hours \ 15/ hour During May, the following actual activities occurred: Material purchased, 12,000 pounds for $45,600; material used in the production of 2,000 units of product, 13,000 pounds; direct labor, 3,500 hours costing $56,000. Required: (1) Compute the following variances: (a) material quantity variance. (b) labor rate variance. (c) labor efficiency variance. (2) Give one possible explanation for each of the 3 variances computed.

(Essay)

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Question 134

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 - What is the fixed overhead price (spending) variance for April?

(Multiple Choice)

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Question 135

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 were the actual direct labor hours worked during the month?

(Multiple Choice)

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Question 136

Variances are the difference between actual results and budgeted results.

(True/False)

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Question 137

The production volume variance is computed by calculating the difference between the:

(Multiple Choice)

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Question 138

When are the following direct materials variances ideally reported? Quantity Price A. Purchase Date Purchase Date B. Time of Use Time of Use C. Purchase Date Time of Use D. Time of Use Purchase Date

(Multiple Choice)

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Question 139

The simplest measure of performance is the variance that compares:

(Multiple Choice)

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Question 140

When using standard costing, costs are transferred through the production process at their standard costs.

The slope of the flexible budget line is the:

A debit balance in the direct labor efficiency variance account indicates that

Information on Kimble Company's direct labor costs for the month of January is as follows: Actual direct labor hours 34,500 Standard direct labor hours 35,000 Total direct labor payroll \ 241,500 Direct labor efficiency variarice-favorable \ 3,200 - What is Kimble's direct labor rate variance?

When using a flexible budget, what will happen to variable costs on a per-unit basis as production increases within the relevant range?

Excess direct labor wages resulting from overtime premium will be disclosed in which type of variance? (CPA adapted)

Variance analysis for fixed production costs is virtually the same as for variable production costs.

Variances are the difference between actual results and budgeted results.

The production volume variance is computed by calculating the difference between the:

When are the following direct materials variances ideally reported? Quantity Price A. Purchase Date Purchase Date B. Time of Use Time of Use C. Purchase Date Time of Use D. Time of Use Purchase Date

The simplest measure of performance is the variance that compares:

Cost Accounting: Information for Decision Making

Cost Concepts and Behavior

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

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