Exam 11: Standard Costs and Variance Analysis

Eminem, Inc. manufactures music CDs. At the start of 2014, Eminem planned to produce 108,000 CDs for which the standard cost for each CD is: Plastic ( 0.25 pounds at \ 6.00 per pound) \ 1.50 Labor (0.10 hour at \ 12.00 per hour) 1.20 Overhead ( \ 0.80 fixed and \ 0.60 variable) 1.40 Total \4 .10 Overhead is allocated based on the number of units produced. Eminem isolates material purchase variances at the point of purchase. The following information summarizes Eminem's results for 2014: Actual production 110,000 CDs Actual variable overhead \ 65,000 Actual fixed overhead \ 83,000 How much is the controllable overhead variance for 2014?

Blue Box Beach Chairs has the following standards to make beach chairs: Standard Ouantity Standard Price Direct materials 2.2 pounds of polywood per chair \ 3.50 per pound Direct labor 0.65 hours per chair \ 13.00 per hour The static budget was based on the production of 6,200 beach chairs. The company used 13,000 pounds of polywood in order to make 6,000 chairs in April. The company purchased 7,000 pounds of polywood at a total cost of $24,150. It also used 3,840 labor hours at a cost of $12.70 per hour. How much is the direct labor rate variance?

All insignificant variances are closed to Cost of Goods Sold.

Lander Foods applied management by exception. Which of the following would have occurred?

Glue For All has developed the following material standard to produce one container of Glue-It: 96 ounces of Chemical A at $0.15 per ounce. Glue For All planned to produce 2,000 containers of Glue-It during July. The company purchased 1,500 gallons (192,000 ounces) of Chemical A at a cost of $0.14 per ounce in July. The company used 1,480 gallons of materials to produce 1,950 containers of Glue-It. How much is the material quantity variance?

An automobile parts company has a standard material price of $2 per pound. In October the company produced 4,500 units using 6,000 pounds of material. The company experienced a favorable materials quantity variance of $1,200. How much is the standard quantity of materials per unit?

For which of the following reasons does the volume variance arise?

Electric Zero produces relay units for generators. Each relay has a standard material cost of $67. Standards call for two relays per generator. In July, the company purchased 120 relays for $7,560. The company used 104 relays in the production of 50 generators, with 4 relays damaged in the installation process. The standard quantity of labor is 20 hours per generator, with a standard wage rate of $23. The company incurred 1,020 labor hours at a cost of $22,950. How much is the material price variance?

In which of the following situations will the overhead volume variance be favorable?

Scotch Brand Products produces packaging tape and has determined the following to be its standard cost of producing one case of budget packaging tape: Material (3.50 ounces at \ 1.30 per ounce) \ 4.55 Labor (0.30 hour at \ 12.00 per hour) 3.60 Overhead 2.20 Total \ 10.35 At the start of 2014, Scotch Brand planned to produce 80,000 cases of tape during the year. Overhead is allocated based on the number of cases of tape produced. Annual fixed overhead is budgeted at $56,000 and variable overhead costs are budgeted at $1.50 per case. The following information summarizes the results for 2014: .Actual production, 75,000 cases .Purchased 275,000 ounces of material at a total cost of $343,750 .Used 266,250 ounces of material in production .Employees worked 22,000 hours, total labor cost $275,000 .Actual overhead incurred, $175,000 How much is the material quantity variance for 2014?

Standard Gears produces lawn mower gears. It uses units as the cost driver for overhead. The following information was provided concerning its standard cost system: Actual Data Budgeted and Standard Data Produced 12,400 units Materials purchased 4,650 lbs. for a total cost of \ 32,550 Materials used 4,700 lbs. Labor worked 7,460 . costing \ 79,822 Actual overhead Fixed: \ 84,800 Variable \ 36,100 Budgeted units 12,500 units Budgeted materials 0.401@\ 7.10 per 1. Budgeted labor 36 minutes @ \ 11.00 per hour Budgeted variable overhead \ 35,625 Budgeted fixed overhead \ 85,500 What is the direct material quantity variance?

A material price variance measures whether more or less material was used in producing inventory.

Steep, Inc. budgeted 6,000 cup holders for March. Each holder is sold for $12. Actual production for March was 6,300 cup holders. Manufacturing overhead is applied based on units produced. Standards and actual costs follow for March: Standards Actual Materials 1.1 pounds @ \2 .40 a pound 6,400 pounds purchased for \ 15,040 6,450 pounds used Labor 0.10 hours @ \ 14.00 per hour 620 hours @ \ 14.30 per hour Variable overhead \ 16,800 \ 18,400 Fixed overhead \ 9,600 \ 10,300 How much is the overhead controllable variance?

Standard Tires' labor standard for the production of one bicycle tire is 4.5 hours at $8.50 per hour. During October, the company's employees produced 140,000 tires, using 610,000 hours at a total cost of $5,328,400. How much is Standard Tire's labor efficiency variance?

In what industries are standard costs used?

Mohammed Company employs a standard cost system. Mohammed has established the following standards for one unit of product: Standard Quantity Standard Price Standard Cost Direct materials 12.0 pounds \ 7.00/ pound \ 84.00 Direct labor 2.6 hours \ 22.00/ hour 57.20 During June, Mohammed planned to produce 24,000 units of product. It purchased 330,000 pounds of direct material at a total cost of $2,343,000. The total factory wages for June were $1,440,000. Mohammed manufactured 25,000 units of product during June using 302,000 pounds of direct material and 64,000 direct labor hours. How much is the labor rate variance?

Siggy Inc. budgeted 12,000 and produced 11,000 tape dispensers during June. Resin used to make the dispensers is purchased by the pound. Manufacturing overhead is applied based on units produced. Manufacturing standards and actual costs follow: Standards Actual Materials 2 pounds @ \ 5.00 a pound 20,900 pounds @\ 4.90 per pound Labor 0.25 hours @\ 15.00 per hour 2,700 hours @\ 15.30 per hour Variable overhead \ 39,000 \ 36,500 Fixed overhead \ 1.50 per dispenser \ 17,250 How much is the standard cost of a tape dispenser?

Billy Bob Subs has the following standard cost to produce a king size party sub sandwich. Direct materials = 4 pounds @ $3.00 per pound = $12.00 per sub Direct labor = 1/2 hour @ $8.00 per hour = $4.00 per sub During December, the company produced 1,000 party subs, bought 4,300 pounds and used 4,100 pounds of meat at $3.20 per pound, and used 490 hours of labor at a total cost of $4,018. How much is the direct labor efficiency variance?

Harris Manufacturing produces white sauce. It uses units as the cost driver for overhead. The following information was provided concerning its standard cost system for 2014: Budgeted and Standard Data Actual Data Material 1/41.@\ 14 per pound Labor 1.4@\ 16 per hour Total fixed overhead \ 84,000 Variable overhead \ 6.50 per unit Production 6,000 units Produced 6,200 units Materials purchased 1,600. for \ 13.70/ pound Materials used 1,520. Labor worked 8,740. at \ 15.90/ hour Total overhead \ 122,000 How much is the overhead controllable variance for 2014?

Eminem, Inc. manufactures music CDs. At the start of 2014, Eminem planned to produce 108,000 CDs for which the standard cost for each CD is: Plastic ( 0.25 pounds at \ 6.00 per pound) \ 1.50 Labor (0.10 hour at \ 12.00 per hour) 1.20 Overhead ( \ 0.80 fixed and \ 0.60 variable) 1.40 Total \4 .10 Overhead is allocated based on the number of units produced. Eminem isolates material purchase variances at the point of purchase. The following information summarizes Eminem's results for 2014: Actual production 110,000 CDs Actual variable overhead \ 65,000 Actual fixed overhead \ 83,000 How much is under or overapplied overhead for 2014?