Exam 11: Standard Costs and Variance Analysis

Reference: 11-01 Bryan Company employs a standard cost system in which direct materials inventory is carried at standard cost. Bryan has established the following standards for the prime costs of one unit of product: Standard Quantity Standard Price Standard Cost Direct materials 6.0 grams \ 3.50/ gram \ 21.00 Direct labour 1.3 hours \ 11.00/ hour 14.30 \ 35.30 During March, Bryan purchased 165,000 grams of direct material at a total cost of $585,750. The total factory wages for March were $400,000, 90 percent of which were for direct labour. Bryan manufactured 25,000 units of product during March using 151,000 grams of direct material and 32,000 direct labour hours. -Borden Enterprises uses standard costing. For the month of April, the company reported the following data: Standard direct labour rate: $10 per hour Standard hours allowed for actual production: 8,000 Actual direct labour rate: $9.50 per hour Labour efficiency variance: $4,800 F The labour rate variance for April is:

Reference: 11-05 The Dexon Company makes and sells a single product called a Mip and employs a standard costing system. The following standards have been established for one unit of Mip: Standard Quantity of Hours Standard Cost per Mip Direct materials 6 board metres \ 9.00 Direct labour 0.8 hours \ 9.60 There were no inventories of any kind on August 1. During August, the following events occurred: Purchased 15,000 board metres at the total cost of $24,000. Used 12,000 board feet to produce 2,100 Mips. Used 1,700 hours of direct labour time at a total cost of $20,060. -To record the incurrence of direct labour cost and its use in production, the general ledger would include what entry to the labour rate variance account?

Reference: 11-13 The Upton Company employs a standard costing system in which variable overhead is assigned to production on the basis of direct labour hours. Data for the month of February include the following: Variable manufacturing overhead cost incurred: $48,700 Total variable overhead variance: $300 F Standard hours allowed for actual production: 7,000 Actual direct labour hours worked: 6,840 -The variable overhead spending variance is?

Reference: 11-02 The Litton Company has established standards as follows: Direct material 3 kg @ $4/kg = $12 per unit Direct labour 2 hrs. @ $8/hr. = $16 per unit Variable manuf. overhead 2 hrs. @ $5/hr. = $10 per unit Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased. Units produced 600 Direct material used 2,000 Direct material purchased (3,000) \ 11,400 Direct labour cost (1,100 hrs. ) \ 9,240 Variable manuf. overhead cost incurred \ 5,720 The company applies variable manufacturing overhead to products on the basis of direct labour hours. -A favourable material price variance coupled with an unfavourable material usage variance would most likely result from:

Reference: 11-09 The following materials standards have been established for a particular product: Standard quantity per unit of output 6.8 metres Standard price \ 17.10 per metre The following data pertain to operations concerning the product for the last month: Actual materials purchased 9,000 metres Actual cost of materials purchased \ 156,600 Actual materials used in production 8,500 metres Actual output 1,200 units -A labour efficiency variance resulting from the use of poor quality materials should be charged to:

Reference: 11-04 Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows: Standard Quantity Standard Cost per Bag Direct material 20 grams \ 8.00 Direct labour 0.1 hours \ 1.10 Variable manuf. overhead 0.1 hours \ 0.40 The company had no beginning inventories of any kind on Jan. 1. Variable manufacturing overhead is applied to production on the basis of direct labour hours. During January, the following activity was recorded by the company: Production of Fastgro: 4,000 bags Direct materials purchased: 85,000 grams at a cost of $32,300 Direct labour worked: 390 hours at a cost of $4,875 Variable manufacturing overhead incurred: $1,475 Inventory of direct materials on Jan. 31: 3,000 grams -The terms "standard quantity allowed" or "standard hours allowed" mean:

Reference: 11-04 Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows: Standard Quantity Standard Cost per Bag Direct material 20 grams \ 8.00 Direct labour 0.1 hours \ 1.10 Variable manuf. overhead 0.1 hours \ 0.40 The company had no beginning inventories of any kind on Jan. 1. Variable manufacturing overhead is applied to production on the basis of direct labour hours. During January, the following activity was recorded by the company: Production of Fastgro: 4,000 bags Direct materials purchased: 85,000 grams at a cost of $32,300 Direct labour worked: 390 hours at a cost of $4,875 Variable manufacturing overhead incurred: $1,475 Inventory of direct materials on Jan. 31: 3,000 grams -The labour efficiency variance for January is?

Reference: 11-11 The Clark Company makes a single product and uses standard costing. Variable overhead is assigned to production on the basis of direct labour hours. Some data concerning this product for the month of May follow: Labour rate variance: \ 7,000 Labour efficiency variance: \ 12,000 Variable overhead efficiency variance: \ 4,000 Number of units produced: 10,000 Standard labour rate per direct labour hour: \ 12 Standard variable overhead rate per direct labour hour: \ 4 Actual labour hours used: 14,000 Actual variable manufacturing overhead costs: \ 58,290 -The fixed overhead budget variance is not controllable by managers since fixed costs are not controllable.

Reference: 11-01 Bryan Company employs a standard cost system in which direct materials inventory is carried at standard cost. Bryan has established the following standards for the prime costs of one unit of product: Standard Quantity Standard Price Standard Cost Direct materials 6.0 grams \ 3.50/ gram \ 21.00 Direct labour 1.3 hours \ 11.00/ hour 14.30 \ 35.30 During March, Bryan purchased 165,000 grams of direct material at a total cost of $585,750. The total factory wages for March were $400,000, 90 percent of which were for direct labour. Bryan manufactured 25,000 units of product during March using 151,000 grams of direct material and 32,000 direct labour hours. -Which of the following statements concerning practical standards is incorrect

Reference: 11-09 The following materials standards have been established for a particular product: Standard quantity per unit of output 6.8 metres Standard price \ 17.10 per metre The following data pertain to operations concerning the product for the last month: Actual materials purchased 9,000 metres Actual cost of materials purchased \ 156,600 Actual materials used in production 8,500 metres Actual output 1,200 units -What is the materials price variance for the month?

Reference: 11-11 The Clark Company makes a single product and uses standard costing. Variable overhead is assigned to production on the basis of direct labour hours. Some data concerning this product for the month of May follow: Labour rate variance: \ 7,000 Labour efficiency variance: \ 12,000 Variable overhead efficiency variance: \ 4,000 Number of units produced: 10,000 Standard labour rate per direct labour hour: \ 12 Standard variable overhead rate per direct labour hour: \ 4 Actual labour hours used: 14,000 Actual variable manufacturing overhead costs: \ 58,290 -If the standard hours allowed for the actual output of the period is greater than the denominator level of activity (in hours), then the overhead budget variance will be unfavourable.

Reference: 11-03 The Albright Company uses standard costing and has established the following standards for its single product: Direct materials 2 litres at \ 3 per litre Direct labour 0.5 hours at \ 8 per hour Variable manuf. overhead 0.5 hours at \ 2 per hour During November, the company made 4,000 units and incurred the following costs: Direct materials purchased 8,100 litres at \ 3.10 per litre Direct materials used 7,600 litres Direct labour used 2,200 hours at \ 8.25 per hour Actual variable manuf. overhead \ 4,175 The company applies variable manufacturing overhead to products on the basis of direct labour hours. -If a company follows a practice of isolating variances at the earliest point in time, what would be the appropriate time to isolate and recognize a direct material price variance?

Reference: 11-13 The Upton Company employs a standard costing system in which variable overhead is assigned to production on the basis of direct labour hours. Data for the month of February include the following: Variable manufacturing overhead cost incurred: $48,700 Total variable overhead variance: $300 F Standard hours allowed for actual production: 7,000 Actual direct labour hours worked: 6,840 -During March, Younger Company's direct material costs for product T were as follows: Actual unit purchase price \ 6.50 per metre Standard quantity allowed for actual production 2,100 metres Quantity purchased and used for actual production 2,000 metres Standard unit price \ 6.00 per metre Younger's material quantity variance for March was?

Reference: 11-11 The Clark Company makes a single product and uses standard costing. Variable overhead is assigned to production on the basis of direct labour hours. Some data concerning this product for the month of May follow: Labour rate variance: \ 7,000 Labour efficiency variance: \ 12,000 Variable overhead efficiency variance: \ 4,000 Number of units produced: 10,000 Standard labour rate per direct labour hour: \ 12 Standard variable overhead rate per direct labour hour: \ 4 Actual labour hours used: 14,000 Actual variable manufacturing overhead costs: \ 58,290 -Purchase of poor quality materials will generally result in a favourable materials price variance and an unfavourable labour rate variance.

Reference: 11-02 The Litton Company has established standards as follows: Direct material 3 kg @ $4/kg = $12 per unit Direct labour 2 hrs. @ $8/hr. = $16 per unit Variable manuf. overhead 2 hrs. @ $5/hr. = $10 per unit Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased. Units produced 600 Direct material used 2,000 Direct material purchased (3,000) \ 11,400 Direct labour cost (1,100 hrs.) \ 9,240 Variable manuf. overhead cost incurred \ 5,720 The company applies variable manufacturing overhead to products on the basis of direct labour hours. -Henley Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct labour-hours. For the month of January, the fixed manufacturing overhead volume variance was $2,220 favourable. The company uses a fixed manufacturing overhead rate of $1.85 per direct labour-hour. During January, the standard direct labour-hours allowed for the month's output:

Reference: 11-11 The Clark Company makes a single product and uses standard costing. Variable overhead is assigned to production on the basis of direct labour hours. Some data concerning this product for the month of May follow: Labour rate variance: \ 7,000 Labour efficiency variance: \ 12,000 Variable overhead efficiency variance: \ 4,000 Number of units produced: 10,000 Standard labour rate per direct labour hour: \ 12 Standard variable overhead rate per direct labour hour: \ 4 Actual labour hours used: 14,000 Actual variable manufacturing overhead costs: \ 58,290 -A flexible budget enables managers to compute a richer set of variances than a static budget does.

Reference: 11-08 The following materials standards have been established for a particular product: Standard quantity per unit of output 1.9 grams Standard price \ 18.00 per gram The following data pertain to operations concerning the product for the last month: Actual materials purchased 5,800 grams Actual cost of materials purchased \ 108,460 Actual materials used in production 5,200 grams Actual output 2,700 units -What is the materials quantity variance for the month?

Reference: 11-11 The Clark Company makes a single product and uses standard costing. Variable overhead is assigned to production on the basis of direct labour hours. Some data concerning this product for the month of May follow: Labour rate variance: \ 7,000 Labour efficiency variance: \ 12,000 Variable overhead efficiency variance: \ 4,000 Number of units produced: 10,000 Standard labour rate per direct labour hour: \ 12 Standard variable overhead rate per direct labour hour: \ 4 Actual labour hours used: 14,000 Actual variable manufacturing overhead costs: \ 58,290 -Analysis of all sales volume variances provides no useful information to management.

Reference: 11-04 Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows: Standard Quantity Standard Cost per Bag Direct material 20 grams \ 8.00 Direct labour 0.1 hours \ 1.10 Variable manuf. overhead 0.1 hours \ 0.40 The company had no beginning inventories of any kind on Jan. 1. Variable manufacturing overhead is applied to production on the basis of direct labour hours. During January, the following activity was recorded by the company: Production of Fastgro: 4,000 bags Direct materials purchased: 85,000 grams at a cost of $32,300 Direct labour worked: 390 hours at a cost of $4,875 Variable manufacturing overhead incurred: $1,475 Inventory of direct materials on Jan. 31: 3,000 grams -Which of the following entries would correctly record the charging of direct labour costs to work in process given an unfavourable labour efficiency variance and a favourable labour rate variance?

Reference: 11-05 The Dexon Company makes and sells a single product called a Mip and employs a standard costing system. The following standards have been established for one unit of Mip: Standard Quantity of Hours Standard Cost per Mip Direct materials 6 board metres \ 9.00 Direct labour 0.8 hours \ 9.60 There were no inventories of any kind on August 1. During August, the following events occurred: Purchased 15,000 board metres at the total cost of $24,000. Used 12,000 board feet to produce 2,100 Mips. Used 1,700 hours of direct labour time at a total cost of $20,060. -To record the use of direct materials in production, the general ledger would include what entry to the materials quantity variance account?