Exam 10: Standard Costing and Analysis of Direct Costs

Standard costs:

Howard Company has established the following standards: Direct materials: 2.0 pounds at $4.10 Direct labor: 1.5 hours at $7 per hour Additional information was extracted from the accounting records: Actual production: 32,000 completed units Direct materials purchased: 70,000 pounds at $3.82, or $267,400 Direct materials consumed: 65,000 pounds Actual labor incurred: 51,000 hours at $6.30, or $321,300 Direct-labor rate variance: $35,700 favorable Direct-labor efficiency variance: $21,000 unfavorable Assume that the company computes variances at the earliest point in time. Required: A. What is the amount of Direct Material Purchase Price Variance? B. Prepare the journal entry to record the usage of direct materials. C. Prepare the journal entry to record the incurrence of direct labor costs.

Use the following information to answer the following Questions Thomas Enterprises purchased 56,000 pounds (cost = $420,000) of direct material to be used in the manufacture of the company's sole product. According the production specifications, each completed unit requires five pounds of direct material at a standard cost of $7.80 per pound. Direct materials consumed by the end of the period totaled 53,500 pounds in the manufacture of 10,900 finished units. An examination of Thomas’ payroll records revealed that the company worked 22,000 labor hours (cost = $319,000) during the period, and specifications called for each completed unit requiring two hours of labor at a standard cost of $14.80 per hour. Assume that the company computes variances at the earliest point in time. -Thomas' direct-material price variance was:

Alberto Gonzalez operates a commercial painting business in Tampa, which has a very tight labor market. Much of his work focuses on newly constructed apartments and townhouses. The following data relate to crew no. 5 for a recently concluded period when 85 apartment units were painted: · Three new employees were assigned to crew no. 5. Wages averaged $18.80 per hour for each employee; the crew took 2,550 hours to complete the work. · Based on his knowledge of the operation, articles in trade journals, and conversations with other painters, Gonzalez established the following standards: Typical hourly wage rate of crew personnel: $15 Anticipated crew time for each unit: 34 hours · The paint quantity variance was $6,070F. · The operation did not go as smoothly as planned, with customer complaints and problems being much higher than expected. Required: A. Compute Gonzalez's direct-labor variances. B. Is the direct-labor rate variance consistent with what you might expect in a tight labor market? Explain. C. Analyze the information given and that you calculated, and determine what likely happened that would give rise to customer complaints.

An unfavorable labor rate variance is created when:

Which of the following would not be considered if a company desires to establish a series of practical manufacturing standards?

If a company has an unfavorable direct-material quantity variance, then:

Listed below are five variances (and possible causes) that are under review by management of Knight Company. Which of the following is least likely to cause the variance indicated?

One of the most important conditions for the successful use of standard costing is a stable production process.

Consider the following statements about variance investigation: I. Variance investigation involves a look at only unfavorable variances. II. Variance investigation is typically based on a cost-benefit analysis. III. Variance investigation is often performed by establishing guidelines similar to the following: Investigate variances that are greater than $X or greater than Y% of standard cost. Which of the above statements is (are) true?

Rickett Corporation had a favorable direct-labor efficiency variance of $6,000 for the period just ended. The actual wage rate was $0.50 more than the standard rate of $12.00. If the company's standard hours allowed for actual production totaled 9,500, how many hours did the firm actually work?

Use the following information to answer the following Questions -The direct-labor efficiency variance is:

Use the following data that relate to product no. 89 of Mansion Corporation to answer the following Questions Direct material standard: 3 square feet at $2.50 per square foot Direct material purchased: 30,000 square feet at $2.60 per square foot Direct material consumed: 29,200 square feet Manufacturing activity: 9,600 units completed Assume that the company computes variances at the earliest point in time. -The direct-material price variance is:

Consider the following information: The direct-labor rate variance is:

Which of the following combinations of direct-material variances might prompt management to undertake a detailed variance investigation?

Which of the following individuals is least likely to become involved in the setting of either direct material standards or direct labor standards?

Consider the following information: Direct material purchased and used, 80,000 gallons Standard quantity of direct material allowed for May production, 76,000 gallons Actual cost of direct materials purchased and used, $176,000 Unfavorable direct-material quantity variance, $9,400 The direct-material price variance is:

Joiner Corporation recently purchased 25,000 gallons of direct material at $5.60 per gallon. Usage by the end of the period amounted to 23,000 gallons. If the standard cost is $6.00 per gallon and the company believes in computing variances at the earliest point possible, the direct-material price variance would be calculated as:

Davner Enterprises recently used 14,000 labor hours to produce 7,500 completed units. According to manufacturing specifications, each unit is anticipated to take two hours to complete. The company's actual payroll cost amounted to $158,200. If the standard labor cost per hour is $11, Davner's labor efficiency variance is:

Use the following information to answer the following Questions Airon Company recently completed 10,600 units of its single product, consuming 32,000 labor hours that cost the firm $480,000. According to manufacturing specifications, each unit should have required 3 hours of labor time at $15.40 per hour. -On the basis of this information, determine Airon's labor rate variance and labor efficiency variance.