Exam 10: Standard Costing and Analysis of Direct Costs

Which department would normally begin an investigation regarding an unfavorable materials quantity variance?

Which of the following is a predetermined estimated cost that can be used in the calculation of a variance?

Use the following information to answer the following Questions -The direct-material price variance is:

Which of the following variances are most similar with respect to the manner in which they are calculated?

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 quantity variance was:

Jared, Inc. produces glass shelves that are used in furniture. Each shelf requires 3.6 pounds of raw material at a cost of $2 per pound. Unfortunately, given the nature of the manufacturing process, one out of every five shelves is chipped, scratched, or broken at the beginning of production and has to be scrapped. On average, 20 good shelves are completed during each hour. Laborers who work on these units are paid $15 per hour. Required: A. Distinguish between perfection standards and practical standards. B. Who within an organization would be in the best position to assist in setting the: 1. direct-material price standard? 2. direct-material quantity standard? 3. direct-labor efficiency standard? C. Calculate a practical direct-material and direct-labor standard for each good shelf produced.

Which of the following correctly lists all the information needed to calculate a labor rate variance?

Most companies close their variance accounts directly into Cost of Goods Sold.

Consider the following statements: I. Behavioral scientists find that perfection standards often discourage employees and result in low worker morale. II. Practical standards are also known as attainable standards. III. Practical standards incorporate a certain amount of inefficiency such as that caused by an occasional machine breakdown. Which of the above statements is (are) true?

Vito, Inc. had an unfavorable labor efficiency variance and an unfavorable materials quantity variance. Which department might be held accountable for these variances?

Use the following data that relate to product no. 33 of Volusia Corporation to answer the following Questions Direct labor standard: 5 hours at $14 per hour Direct labor used in production: 45,000 hours at a cost of $639,000 Manufacturing activity: 8,900 units completed -The direct-labor efficiency variance is:

Use the following data that relate to product no. 33 of Volusia Corporation to answer the following Questions Direct labor standard: 5 hours at $14 per hour Direct labor used in production: 45,000 hours at a cost of $639,000 Manufacturing activity: 8,900 units completed -The direct-labor rate variance is:

Variances are computed by taking the difference between the product cost and standard cost.

A direct-material quantity variance can be caused by all of the following except:

Standard cost systems can have motivational effects; some are desirable, some are not. Consider the following situation: The materials purchasing manager is paid a salary plus a bonus based on the net favorable materials price variance. Generally, this bonus amounts to 30 - 40% of the manager's total compensation. Due to the bankruptcy of a company in a related field, there is an opportunity to buy a key raw material. The standards for this material call for grade 2A, usually purchased for $56 per ton. Because of the bankruptcy, the company can obtain a higher grade, 4A, for $62 per ton. While the quality of the final product will be the same regardless of the grade of material used, there will be substantial savings in material yield and labor productivity if 4A is used. These savings are expected to be two-to-three times the additional cost of $6 per ton. Required: A. How would an unfavorable price variance on a particular purchase affect the overall price variance for the year and the manager's bonus? B. Would the use of the materials price variance as a basis for the manager's bonus lead to a desirable or undesirable behavioral outcome? Explain being sure to note whether the manager would likely pursue acquisition of the grade 4A material.

Consider the following statements: I. The standard cost per unit of materials is used to calculate a materials price variance. II. The standard cost per unit of materials is used to calculate a materials quantity variance. III. The standard cost per unit of materials cannot be determined until the end of the period. Which of the above statements is (are) true?

Which of the following variances cannot occur together during the same accounting period?

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 quantity variance is:

For the quarter just ended, Halston, Inc. reported the following variances in one of its manufacturing departments: Material price variance, U Material quantity variance, F Labor efficiency variance, F Labor rate variance, negligible Machine hours efficiency, F The sum of the favorable variances exceeded the unfavorable materials price variance by a considerable amount. The quality of the output from the department was the same as usual. Halston operates very close to a JIT system for materials purchases, with virtually all material acquired during the quarter being used in manufacturing activities. Required: Is there any connection among these variances? If so, explain.

Enrique Industries purchased and consumed 50,000 gallons of direct material that was used in the production of 11,000 finished units of product. According to engineering specifications, each finished unit had a manufacturing standard of five gallons. If a review of Enrique's accounting records at the end of the period disclosed a material price variance of $5,000U and a material quantity variance of $3,000F, what is the actual price paid for a gallon of direct material?