Exam 10: Standard Costing: a Managerial Control Tool

McDaniel Company manufactures 100-pound bags of fertilizer that have the following unit standard costs for direct materials and direct labor: The following activities were recorded for October: There were no beginning or ending work-in-process inventories. Required:

Figure 10-8. The Perfect Tool Company (South America Division) produced 80,000 saw blades during the year. It took 1.5 hours of labor per blade at a rate of $8.50 per hour. However, its standard labor rate is $8.00. Its labor efficiency variance was an unfavorable $40,000. -Refer to Figure 10-8. What is Perfect's labor rate variance?

Standard cost systems can enhance operational control through the use of

Westminster Company has the following information concerning its direct materials:

Figure 10-6. Extreme Builders constructs houses. The standard labor rate is $25 per hour and the standard number of hours is 15,000 hours per home. During the year, it constructed 12 homes using 18,000 labor hours per home and a rate of $28 per hour. -Refer to Figure 10-6. Calculate the Extreme Builders' labor rate variance.

All of the following are true regarding variance investigation except

The __________________ provides the products data needed to calculate the standard unit cost.

Pontefract Company produced 2,500 widgets during November using 4,000 units of materials at a cost of $5.00 each. It also used 5,000 direct labor hours at a rate of $7.00. Its direct materials standard is 2 units per widget. Its direct labor standard is 2.5 hours per widget. Its materials price variance was a favorable $8,000 and its labor rate variance was an unfavorable $1,000.

The sources of quantitative standards include

Which of the following is not true concerning control limits?

___________________ can provide an initial guideline for setting standards, but should be used with caution because they can perpetuate existing inefficiencies.

Leeds Company uses the following rule to determine whether labor efficiency variances should be investigated: A labor efficiency variance will be investigated when the variance is greater than either $100 or 10% of the standard labor cost. During September, the company used 500 direct labor hours at a rate of $15 per hour. Its standard rate is 475 direct labor hours at a rate of $14.50 per hour.

Figure 10-2. Highland Company's standard cost is $250,000. The allowable deviation is $\pm$ 10%. Its actual costs for six months are -Refer to Figure 10-2. The variance that is lower than the lower control limit is

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' materials usage variance?

DuRoss Company produces coats. The company uses a standard costing system and has set the following standards for materials and labor: During the year DuRoss produced 55,000 coats. Actual fabric purchased was 460,000 yards at $5.75 per yard. There were no beginning or ending inventories of fabric. Actual direct labor was 120,000 hours at $19.25 per hour.

Eastminster Company has the following information:

Acme Company's standard cost is $500,000. The allowable deviation is $\pm$ 10%. Its actual costs for three months are The upper and lower control limits are, respectively,

Which of the following is true regarding direct labor variances?

Gardener's Market manufactures hedgers. During the year, it manufactured 5,000 hedgers, using 4.2 hours of direct labor per hedger at a rate of $8. The materials and labor standards for manufacturing the hedgers are: Gardener's Market actually purchased and used 53,000 units of direct materials at a price of $2.25 per unit. Required:

Match the variance with its correct calculation. a. Actual Quantity *Actual Price b. (Actual Hours*Actual Rate) - (Standard Hours *Standard Rate) c. (Actual Quantity *Actual Price) - (Standard Quantity * Standard Price) d. (Actual Hours - Standard Hours) * Standard Rate e. (Actual Price -Standard Price) *Actual Quantity f. Standard Quantity * Standard Price g. (Actual Rate - Standard Rate) * Actual Hours h. (Actual Quantity - Standard Quantity) *Standard Price -Total Direct Labor Variance