Exam 10: Standard Costing: a Managerial Control Tool

Figure 10-9. James Company manufactures t-shirts. During the year, it manufactured 250,000 t-shirts, using 2 hours of direct labor at a rate of $8.50 per hour. The materials and labor standards for manufacturing the t-shirts are: It took James 1,400,000 yards at $2.50 per yard to make the 250,000 t-shirts. -Refer to Figure 10-9. What is James' labor efficiency variance?

The ____________________ measures the difference between the actual costs of materials and their budgeted costs for actual level of activity.

The quantity of each input that should be used to produce one unit of output is documented on the standard cost sheet.

The labor efficiency variance is calculated by the equation

Figure 10-4. High Fliers Company produces model airplanes. During the month of November, it produced 2,000 planes. The actual labor hours were 7 hours per plane. Its standard labor hours are 10 hours per plane. The standard labor rate is $11 per hour. At the end of November, High Fliers found that it had a favorable labor rate variance of $10,500. -Refer to Figure 10-4. What was High Fliers' total labor variance?

Figure 10-1. Flying High Company manufactures model airplanes. During the month, it manufactured 10,000 airplanes. Each one used an average of 6.5 direct labor hours and an average of 1.5 sheets of aluminum. It normally manufactures 7,500 airplanes. Materials and labor standards for making the airplanes are: -Refer to Figure 10-1. Compute the standard number of sheets of aluminum allowed for a volume of 10,000 airplanes.

Figure 10-1. Flying High Company manufactures model airplanes. During the month, it manufactured 10,000 airplanes. Each one used an average of 6.5 direct labor hours and an average of 1.5 sheets of aluminum. It normally manufactures 7,500 airplanes. Materials and labor standards for making the airplanes are: -Refer to Figure 10-1. Compute the standard hours allowed for a volume of 10,000 airplanes.

The materials price variance is computed using the equation

The benefits of operational control under a standard cost system can extend to all manufacturing environments.

If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the number of hours allowed, the labor rate variance and labor efficiency variance will be Labor Rate Labor Efficiency Variance Variance

MATCHING Match each item with the correct statement below. a. Quantity Standards b. Ideal Standards c. Price Standards d. Standard Cost Sheet e. Upper Control Limit f. Currently Attainable Standards g. Kaizen Standards -A tool used to provide the production data needed to calculate the standard unit cost.

Overland Automotive Company is considering on manufacturing a new brand of car. Given the current product and process designs, the cost data are: The company expects the selling price to be $20,000 and has set a target profit of $5,000. A supplier told Overland that it could purchase a couple of similar components under a different brand name at a lower price. This would result in cost savings of $2,000 per car. Furthermore, the company found that it could redesign its manufacturing process to cut down on both inspection labor and worker labor, which would result in cost savings of $1,000 per car.

All of the following are true except

Starling Manufacturing has developed the following standards for one of its products. The company records materials price variances at the time of purchase. The following activity occurred during December: Required:

MATCHING Match each item with the correct statement below. a. Quantity Standards b. Ideal Standards c. Price Standards d. Standard Cost Sheet e. Upper Control Limit f. Currently Attainable Standards g. Kaizen Standards -These reflect the amount of input that should be used per unit of output.

An accountant would refer to a cost sheet to perform which of the following actions?

Mover Company has developed the following standards for one of its products: The following activity occurred during March: The company records materials price variances at the time of purchase. The variable standard cost per unit for materials and labor is

Explain the three potential sources of quantitative standards.

The total budget variance is the difference between the actual cost of the input and its planned cost.

The materials usage variance is calculated by the equation