Exam 7: Standard Costing and Variance Analysis

Commodore Company Commodore Company uses a standard cost system for its production process and applies overhead based on direct labor hours.The following information is available for September when Commodore produced 5,000 units:

Standard:
DLH per unit	3.00
Variable overhead per DLH	$1.80
Fixed overhead per DLH	$3.25
Budgeted variable overhead	$27,250
Budgeted fixed overhead	$49,500

Actual:
Direct labor hours	16,000
Variable overhead	$31,325
Fixed overhead	$49,750

Refer to Commodore Company.Using the three-variance approach,what is the volume variance?

Cibolo Company Cibolo Company has the following information available for March when 4,200 units were produced (round answers to the nearest dollar). Standards: 4.0 pounds Material per unit @ \ 5.25 per pound 6.0 hours Labor per unit @ \ 10.00 per hour Actual: Material purchased 17,500 pounds @ \ 5.10 Material used 16,700 pounds 25,500 direct1abor hours @ $\$9.85 \text { per hour }$ Refer to Cibolo Company.What is the material price variance (based on quantity purchased)?

The sum of the material mix and material yield variances equals

Distinguish between the four-variance,three-variance,two-variance,and one-variance approaches for computing factory overhead variances.

A firm producing one product has a budgeted overhead of $100,000,of which $20,000 is variable.The budgeted direct labor is 10,000 hours. Required: Fill in the blanks. a. $\text {\underline{ Production} }$                     $\text {\underline{ Flexible budget} }$ $120 \%$                                     ________________ $100 \%$                                         _______________ $90 \%$                                               _______________ 60\%                                              __________________

Define the following terms: standard cost system,total variance,material price variance,and labor efficiency variance.

Pearce Company Pearce Company uses a standard cost system for its production process.Pearce Company applies overhead based on direct labor hours.The following information is available for July:

Standard:
DLH per unit	2.20
Variable overhead per DLH	$2.50
Fixed overhead per DLH
Budgeted variable overhead	$3.00
(based on 11,990 DLHs)

Actual:
Units produced	4,400
Direct labor hours	8,800
Variable overhead	$29,950
Fixed overhead	$42,300

Refer to Pearce Company Using the two-variance approach,what is the noncontrollable variance?

When multiple materials are used,the effect of substituting a non-standard mix of materials during the production process is referred to as a ____________________ variance.

A favorable fixed overhead spending variance indicates that

Managers have no ability to control the budget variance.

Trump Corporation operates a factory.One of its departments has three kinds of employees on its direct labor payroll,classified as pay grades A,B,and C.The employees work in 10-person crews in the following proportions:

Pay Grade	No. of Workers in Standard Crew	Standard Hourly Wage Rate	Standard Cost per Crew Hour
A	6	$4	$24
B	3	6	18
C	1	8	8
Total	10		$50

The work crews cannot work short-handed.To keep a unit operating when one of the regular crew members is absent,the head of the department first tries to reassign one of the department's other workers from indirect labor operations. If no one in the department is able to step in,plant management will pull maintenance department workers off their regular work,if possible,and assign them temporarily to the department.These maintenance workers are all classified as Grade D employees,with a standard wage rate of $10 an hour. The following data relate to the operations of the department during the month of May: 1. Actual work time, 1,000 crew hours. 2. Actual direct labor hours: Grade A, 5,400 hours. Grade B, 3,200 hours. Grade C, 1,300 hours. Grade D, 100 hours. 3. Standard crew hours for actual output, 980. Required: Compute labor rate,mix,and yield variances.

Management would generally expect unfavorable variances if standards were based on which of the following capacity measures? $\text {\underline{ Ideal} }$            $\text {\underline{ Practical} }$             $\text {\underline{ Expected annual} }$

Standards that reflect what is expected to occur are referred to as ______________________________.

Total quality management (TQM)and just-in-time (JIT)production systems are based on the premise of ideal production standards.

Garfield Company Garfield Company applies overhead based on direct labor hours and has the following available for the current month: Standard: Direct labor hous per unit                                                  5 Variable overhead per DLH                                            $\$ 7.5$ Fixed overhead per DLH $\text { (based on 8,900 DLHs) }$                                      $\$ 1.90$ Actual: Units prochuced                                                              1,800 Direct labor hours                                                           8,900 Variable overhead                                                         $6,400 Fixed overheacl                                                            $17,500 Refer to Garfield Company.Compute all the appropriate variances using the three-variance approach.

Roberts Company Roberts Company has the following information available for the current year: Standard: Material           $4.25$ feet per unit @ $\$ 2.75$ per foot Labor                7direct labor hours@ $\$9.25$ per unit Actual: Material               128,000 feet used(130,000 feet purchased @ $\$ 2.80$ per foot Labor                    212,000 chrect labor hours incurred @ $\$ 9.30$ per hour                               30,000 units were produced. Refer to Roberts Company.Compute the labor rate and efficiency variances.

The total labor variance can be subdivided into all of the following except

The usage variance reflects the difference between the quantity of inputs used and the standard quantity allowed for the output of a period.

When multiple labor categories are used,the monetary impact of using a higher or lower number of hours than a standard allows is referred to as a labor yield variance.

Discuss why standards may need to be changed after they have been in effect for some period of time.