Exam 11: Standard Costs and Variance Analysis

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 variable overhead efficiency variance reflects how efficiently variable overhead resources were used.

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 a company using a flexible budget has a sales revenue variance, the variance results solely from differences in budgeted versus actual selling prices.

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 standard quantity per unit of direct materials is determined by measuring the quantity of material in one completed finished unit.

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 positive revenue variance is favourable and a positive cost variance is favourable.

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 rate 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 -Which department is usually held responsible for an unfavourable materials quantity variance?

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 cost variance can be decomposed into a quantity variance and a price variance.

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 -Ideal standards, while requiring managers to work to ensure that employees accept them, can be very useful in forecasting and planning.

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. -The direct labour rate variance for March 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 -In a standard costing system, under-applied or over-applied fixed overhead is equal to the sum of the fixed overhead budget variance and the fixed overhead volume variance.

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. -The labour rate variance for November 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 -The overhead spending variance and the overhead efficiency variance are useful only if variable overhead really should be proportional to the activity measure that is being used in the flexible budget.

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 -Standard costs should generally be based on the actual costs of prior periods.

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 standard direct labour rate should not include fringe benefits.

Reference: 11-10 The following labour standards have been established for a particular product: Standard labour hours per unit of output 7.5 hours Standard labour rate \ 15.25 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 9,600 hours Actual total labour cost \ 144,480 Actual units of output 1,200 -Under a standard cost system, the material price variances are usually the responsibility of the:

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. -The materials quantity variance is?