Exam 10: Standard Costs and Variances

Solly Corporation produces a product for national distribution. Standards for the product are:Materials: 12 ounces per unit at 60¢ per ounce.Labor: 2 hours per unit at $8 per hour.During the month of December, the company produced 1,000 units. Information for the month follows:Materials: 14,000 ounces purchased and used at a total cost of $7,700.Labor: 2,500 hours worked at a total cost of $20,625.The labor efficiency variance is:

Kita Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows: During the year, the company assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 24,820 hours at an average cost of $21.20 per hour.Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. When recording the direct labor costs, the Cash account will increase (decrease) by:

Becka Incorporated has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. The company produced 2,300 units of this product in November. Required: a. What is the total standard cost of one unit of this product? b. What was the standard grams allowed for the actual output of this product in November? c. What was the standard hours allowed for the actual output of this product in November?

When Raw Materials, Work in Process, and Finished Goods are recorded and carried at their standard cost, the fixed overhead applied to work in process is calculated by multiplying the predetermined overhead rate by the actual direct labor-hours worked.

The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the fixed part of the predetermined overhead rate.

A product's standard cost card specifies that a unit of the product requires 4 direct labor-hours. During September, 3,350 units were made, which was 150 units less than budgeted. The total budgeted direct labor cost for September was $117,600. The direct labor cost incurred during September was $111,850 and 13,450 direct labor-hours were worked.The labor efficiency variance for the month was:

Kartman Corporation makes a product with the following standard costs: In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931.The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The variable overhead efficiency variance for June is:

Buchauer Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead. The company's balance sheet at the beginning of the year was as follows: The standard cost card for the company's only product is as follows: The company calculated the following variances for the year: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $42,000 and budgeted activity of 10,500 hours. During the year, the company completed the following transactions: a. Purchased 30,100 pounds of raw material at a price of $6.90 per pound.b. Used 27,660 pounds of the raw material to produce 21,200 units of work in process.c. Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 15,240 hours at an average cost of $18.40 per hour.d. Applied fixed overhead to the 21,200 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs for the year were $54,800. Of this total, -$10,200 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $65,000 related to depreciation of manufacturing equipment.e. Transferred 21,200 units from work in process to finished goods.f. Sold for cash 22,800 units to customers at a price of $29.70 per unit.g. Completed and transferred the standard cost associated with the 22,800 units sold from finished goods to cost of goods sold.h. Paid $74,000 of selling and administrative expenses.i. Closed all standard cost variances to cost of goods sold. Required:1. Enter the beginning balances and record the above transactions in the worksheet that appears below. 2.Determine the ending balance (e.g., 12/31 balance) in each account.3. Prepare an income statement for the year.

When the materials price variance is recorded at the time of purchase, raw materials are recorded as inventory at standard cost.

The following direct labor standards have been established for product O64L: The following data pertain to last month's operations: Required:a. What was the labor rate variance for the month?b. What was the labor efficiency variance for the month?

Tharaldson Corporation makes a product with the following standard costs: The company reported the following results concerning this product in June. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The variable overhead rate variance for June is:

Trundle Corporation manufactures one product. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows: During the year, the company completed the following transactions concerning raw materials:a. Purchased 99,100 pounds of raw material at a price of $7.90 per pound.b. Used 89,020 pounds of the raw material to produce 34,200 units of work in process. Required:Record the above transactions in the worksheet that appears below. Because of the width of the worksheet, it is in two parts. In your text, these two parts would be joined side-by-side to make one very wide worksheet. The beginning balances have been provided for each of the accounts, including the Property, Plant, and Equipment (net) account which is abbreviated as PP&E (net).

Doby Corporation makes a product with the following standard costs: In July the company produced 4,800 units using 13,450 ounces of the direct material and 970 direct labor-hours. During the month the company purchased 14,600 ounces of the direct material at a price of $7.20 per ounce. The actual direct labor rate was $16.20 per hour and the actual variable overhead rate was $5.40 per hour. The materials price variance is computed when materials are purchased. Variable overhead is applied on the basis of direct labor-hours. Required: a. Compute the materials quantity variance. b. Compute the materials price variance. c. Compute the labor efficiency variance. d. Compute the labor rate variance. e. Compute the variable overhead efficiency variance. f. Compute the variable overhead rate variance.

Bohon Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product contains the following information concerning direct materials: During the year, the company completed the following transactions concerning direct materials:a. Purchased 19,700 pounds of raw material at a price of $4.70 per pound.b. Used 18,500 pounds of the raw material to produce 18,400 units of work in process.The company calculated the following direct materials variances for the year: Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. When recording the raw materials used in production in transaction (b) above, the Work in Process inventory account will increase (decrease) by:

The following data have been provided by Furr Corporation: Indirect labor and power are both elements of variable manufacturing overhead.The variable overhead rate variance for power is closest to:

Jakeman Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead.The standard cost card for the company's only product is as follows: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $351,000 and budgeted activity of 27,000 hours.During the year, the company completed the following transactions:Purchased 76,600 gallons of raw material at a price of $7.90 per gallon.Used 70,960 gallons of the raw material to produce 20,900 units of work in process.Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 18,710 hours at an average cost of $19.40 per hour.Applied fixed overhead to the 20,900 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs for the year were $334,600. Of this total, $252,600 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $82,000 related to depreciation of manufacturing equipment.Completed and transferred 20,900 units from work in process to finished goods.Sold (for cash) 17,700 units to customers at a price of $74.30 per unit.Transferred the standard cost associated with the 17,700 units sold from finished goods to cost of goods sold.Paid $93,000 of selling and administrative expenses.Closed all standard cost variances to cost of goods sold.The company calculated the following variances for the year: To answer the following questions, it would be advisable to record transactions a through i in the worksheet below. This worksheet is similar to the worksheets in your text except that it has been split into two parts to fit on the page. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. The adjusted Cost of Goods Sold after closing all of the variances to Cost of Goods Sold will be closest to:

Mangrum Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. Information concerning the direct labor standards for the company's only product is as follows: During the year, the company assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 12,790 hours at an average cost of $19.50 per hour. The company calculated the following direct labor variances for the year: Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. When the direct labor cost is recorded, which of the following entries will be made?

Puvo, Incorporated, manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product: During March, the following activity was recorded by the company:The company produced 2,400 units during the month.A total of 19,400 pounds of material were purchased at a cost of $13,580.There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,620 pounds of material remained in the warehouse.During March, 1,090 direct labor-hours were worked at a rate of $30.50 per hour.Variable manufacturing overhead costs during March totaled $14,061.The direct materials purchases variance is computed when the materials are purchased.The variable overhead efficiency variance for March is:

Grub Chemical Corporation has developed cost standards for the production of its new chocolate, ChocO. The variable cost standards below relate to each 10 gallon batch of ChocO: Variable manufacturing overhead at Grub is applied based on direct labor-hours. The actual results for last month were as follows: What is ChocO's materials (milk chocolate) price variance?

Emanuele Incorporated makes a single product--a critical part used in commercial airline seats. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below: Required: a. Compute the variable component of the company's predetermined overhead rate. b. Compute the fixed component of the company's predetermined overhead rate. c. Compute the company's predetermined overhead rate. d. Determine the variable overhead rate variance for the year. e. Determine the variable overhead efficiency variance for the year. f. Determine the fixed overhead budget variance for the year. g. Determine the fixed overhead volume variance for the year. h. Determine whether overhead was underapplied or overapplied for the year and by how much.