Question 1

Compare and contrast mix and yield variances.

Accepted Answer

Substituting direct materials or direct labour produces mix and yield variances.A mix variance is created whenever the actual mix of inputs differs from the standard mix.A yield variance occurs whenever the actual yield or output differs from the standard yield.For direct materials,the sum of the mix and yield variances equals the direct materials usage variance; for direct labour,the sum is the direct labour efficiency variance.The mix variance is the difference in the standard cost of the actual mix of inputs used and the standard cost of the mix of inputs that should have been used.Using a formula,the standard mix quantity can be described as SM = Standard mix proportion * Total actual input quantity.Then,the mix variance will be computed as (AQ - SM) * SP for each component of direct materials.The yield variance is calculated by (standard yield - actual yield) * SP.Standard yield equals the yield ratio multiplied by total actual inputs.The direct labour mix and yield variances are computed in the same manner as the direct materials mix and yield variances.

Question 2

What will the result be if variable manufacturing overhead is applied based on direct labour hours and there is an unfavourable direct labour efficiency variance?

Accepted Answer

A) The direct materials usage variance will be unfavourable. 
B) The direct labour rate variance will be favourable. 
C) The variable manufacturing overhead efficiency variance will be unfavourable. 
D) The variable manufacturing overhead spending variance will be unfavourable. 
A) The direct materials usage variance will be unfavourable. 
B) The direct labour rate variance will be favourable. 
C) The variable manufacturing overhead efficiency variance will be unfavourable. 
D) The variable manufacturing overhead spending variance will be unfavourable. C

Question 3

Hansenko Company manufactures 100-kilogram bags of fertilizer that have the following unit standard costs for direct materials and direct labour: 
 $\begin{array}{lr}
\text { Direct materials }(100 \mathrm{~kg} @ \$ 1.00 \text { per kg) } & \$ 100.00 \
\text { Direct labour }(0.5 \text { hours at } \$ 24 \text { per hour) } & \underline{12.00} \
\text { Total standard direct cost per } 100 \mathrm{~kg} \text { bag } & \underline{\$ 112.00}
\end{array}$
 The following activities were recorded for October:
 - 1,000 bags were manufactured.
- $ 95,000 \mathrm{~kg} $ of materials costing $ \$ 76,000 $ were purchased
- $ 102,500 \mathrm{~kg} $ of materials were used.
- $ \$ 12,000 $ was paid for 475 hours of direct labour. There were no beginning or ending work-in-process inventories. 
a.Compute the direct materials variances.
b.Compute the direct labour variances.
c.Give possible reasons for the occurrence of each of the preceding variances.

Accepted Answer

a.Material price variance: 
[$76,000 - (95,000 * $1.00)] = $19,000 F 
Material usage variance 
[102,500 - 1,000(100)] * $1.00 = $2,500 U 
b.Labour rate variance 
[$12,000 - (475 hrs.* $24)] = $600 
U Labour efficiency variance 
[(0.5 * 1,000)- 475 hrs.]$24 = 600 F 
c.All of the material price variances could be caused by out-of-date or inappropriate standards.Other potential reasons could be that the firm could be purchasing in larger quantities (larger quantity discounts),the firm could be purchasing lower-grade materials,or the supplier could be forced to offer a lower price due to the economics of the product.
Material usage variance:
Low-quality materials; lower-skilled workers; less-efficient machines; low employee morale.
Labour rate variance: 
Higher-skilled workers; longer-tenured workers with higher wages.
Labour efficiency variance: 
The firm could be using a more experienced workforce than desired.

Question 4

Mills Company uses standard costing for direct materials and direct labour.Management would like to use standard costing for variable and fixed overhead.
The following monthly cost functions were developed for manufacturing overhead items:
 $$\begin{array} { l c } 
\underline{\text { Overhead Item }} &\underline{\text { Cost Functian }} \
 \text { Indirect materials } & \$ 1.00 \text { per DLH } \
\text { Indirect labour } & \$ 1.25 \text { per DLH } \
\text { Utilities } & \$ 0.50 \text { per DLH } \
\text { Insurance } & \$ 10,000 \
\text { Depreciation } & \$ 40,00
\end{array}$$ The cost functions are considered reliable within a relevant range of 20,000 to 40,000 direct labour hours.The company expects to operate at 25,000 direct labour hours per month.
Information for the month of June is as follows:
 $\begin{array}{lr}
\text { Actual overhead costs incurred: }\
\text { Indirect materials } & \$ 20,000 \
\text { Indirect labour } & 30,000 \
\text { Utilities } & 12,000 \
\text { Insurance } & 11,000 \
\text { Depreciation } & 40,000 \
\quad \text { Total } & \$ 113,000 \
\
\text { Actual direct labour hours worked:}&24,000\
\text { Standard direct labour hours allowed for production achieved:}&27,000
\end{array}$ 
a.Calculate the following standard manufacturing overhead rates based upon expected capacity:
i.Variable manufacturing overhead
ii.Fixed manufacturing overhead rate
iii.Total manufacturing overhead rate
b.Calculate the following variances:
i.Variable overhead spending variance
ii.Variable overhead efficiency variance
iii.Fixed overhead spending variance
iv.Fixed overhead volume variance
c.Prepare the journal entries to record and apply overhead costs.Solution includes the record of overhead costs as well as the entries necessary to close variance accounts.

Accepted Answer

a.i. SVOR: @#LAT-DLM&
ii. SFOR: @#LAT-DLM&
iii. Total @#LAT-DLM&. oh.

Question 5

Which of the following factors would cause a labour quantity variance?

Accepted Answer

A) ordering the wrong quality of materials 
B) ordering from the wrong supplier 
C) not taking a quantity discount 
D) requiring labourers to work overtime 
A) ordering the wrong quality of materials 
B) ordering from the wrong supplier 
C) not taking a quantity discount 
D) requiring labourers to work overtime

Question 6

How are standards developed? What is the difference between ideal and currently attainable standards?

Accepted Answer

Historical experience,engineering studie

Question 7

Bender Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labour for the 100 units of Product AA are as follows:
$\begin{array}{lll}
\text { Materials: }&&\text {Standard}&\text { Actual}\
\text { Standard: } & 200 \text { kilograms at } \$ 3.00 \text { per kilogram } & \$ 600 \
\text { Actual: } & 220 \text { kilograms at } \$ 2.85 \text { per kilogram }&&\$627\
\
\text { Direct labour: }\
\text {Standard:}&\text { 400 hours at }\$ 15.00  \text {per hour}& 6,000\
\text { Actual:}&\text { 368 hours at }\$ 16.50 \text { per hour}&&6,072 
\end{array}$
-Refer to the figure.What is the material usage variance for Bender Corporation?

Accepted Answer

A) $33 (F) 
B) $33 (U) 
C) $60 (F) 
D) $60 (U) 
A) $33 (F) 
B) $33 (U) 
C) $60 (F) 
D) $60 (U)

Question 8

Regis Corporation uses two materials in the production of its product. The materials, $ \mathrm{X} $ and $ \mathrm{Y} $, have the following standards:

$\begin{array}{llll}
\text { Material }& \text { Standard Mix } &\text { Standard Unit Price } & \text { Standard Cost }\
\mathrm{X} & 3,500 \text { units } & \$ 1.00 \text { per unit } & \$ 3,500 \
\mathrm{Y} & 1.500 \text { units } & 3.00 \text { per unit } & \$ 4.500\
\
\text { Yield }& 4,000 \text { units }
\end{array}$

$\text { During April, the following actual production information was provided: }$
$\begin{array}{cl}
\text { Material } & \text { Actual Mix } \
 \mathrm{X} & 30,000 \text { units } \
\mathrm{Y} & 20,000 \text { units } \\
\text { Yield } & 36,000 \text { units }
\end{array}$
-Refer to the figure.What is the labour mix variance?

Accepted Answer

A) $2,500 (F) 
B) $2,500 (U) 
C) $5,000 (F) 
D) $5,000 (U) 
A) $2,500 (F) 
B) $2,500 (U) 
C) $5,000 (F) 
D) $5,000 (U)

Question 9

Which of the following factors would cause an unfavourable material quantity variance?

Accepted Answer

A) using poorly maintained machinery 
B) using higher quality materials 
C) using more highly skilled workers 
D) receiving discounts for purchasing larger than normal quantities 
A) using poorly maintained machinery 
B) using higher quality materials 
C) using more highly skilled workers 
D) receiving discounts for purchasing larger than normal quantities

Question 10

What is the unit standard cost?

Accepted Answer

A) the product of the standard price times the standard quantity for each unit 
B) the price standard for each unit 
C) the actual cost for a standard product 
D) the amount of actual cost to produce a unit in a standardized process 
A) the product of the standard price times the standard quantity for each unit 
B) the price standard for each unit 
C) the actual cost for a standard product 
D) the amount of actual cost to produce a unit in a standardized process

Question 11

Frekko Company collected the following information:
$\begin{array}{lr}
\text { Standard costs per unit: }\
\text { Variable overhead } & 4 \text { machine hours @\$6 per machine hour } \
\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }
\end{array}$

$\begin{array}{l}
\text { Actual output }&20,000 \text { units } \
\text { Denominator (normal capacity) output } & 21,000 \text { units } \
\text { Actual machine hours } & 79,000 \text { machine hours } \
\text { Actual variable overhead cost } & \$ 540,000 \
\text { Actual fixed overhead cost } & \$ 810,000
\end{array}$
-Refer to the figure.Using the two variance method,what is the budget variance?

Accepted Answer

A) $30,000 (F) 
B) $30,000 (U) 
C) $70,000 (F) 
D) $70,000 (U) 
A) $30,000 (F) 
B) $30,000 (U) 
C) $70,000 (F) 
D) $70,000 (U)

Question 12

The following standard costs were developed for one of the John Miller Company's products:
STANDARD COST CARD PER UNIT 
 $\begin{array}{lr}
\text { Materials: } 10 \text { kilograms } \times \$ 8 \text { per kilogram } & \$ 80.00 \
\text { Direct labour: } 3 \text { hours } \times \$ 32 \text { per hour } & 96.00 \
\text { Variable manufacturing overhead: } \$ 20 \text { per hour } & ?  \
\text { Fixed manufacturing overhead } & ?  \
\text { Total standard cost per unit } &?
\end{array}$ The following information is available regarding the company's operations for the period:
 $\begin{array}{ll}
\text { Units produced: } & 15,000 \
\text { Materials purchased: } & 180,000 \text { kilograms } @ \$ 7.20 \text { per } \
& \text { kilogram } \
\text { Materials used: } & 160,000 \text { kilograms } \
\text { Direct labour: } & 18,000 \text { hours } @, \$ 37.00 \text { per hour }
\end{array}$

$\begin{array}{ll}
\text { Manufacturing overhead incurred: }\
\text { Variable } & \$ 880,000 \
\text { Fixed } & \$ 2.560 .000
\end{array}$ Budgeted fixed manufacturing overhead for the period is $2,400,000,and expected capacity for the period is 40,000 direct labour hours. 
a.Calculate the standard fixed manufacturing overhead rate.
b.Complete the standard cost card for the product.

Accepted Answer

None

Question 13

Reynolds Manufacturing Company has the following information pertaining to a normal monthly 10,000 units.  Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.
Standard factory overhead rates per direct labour hour are:
$\begin{array}{ll}
\text { Fixed } & \$ 6.00 \
\text { Variable } & 10.00&\$16.00 \\
\text {Units actually produced in current month}&&\text {9,000 units}\\
\text {Actual factory overhead costs incurred}\
\text {(includes $ \$ 70,000 $ fixed)}&& \$ 156,000 \\
\text {Actual direct labour hours}&&\text {9000 hours}
\end{array}$
-Refer to the figure.What is the variable overhead spending variance for Reynolds?

Accepted Answer

A) $0 
B) $4,000 (F) 
C) $10,000 (F) 
D) $86,000 (U) 
A) $0 
B) $4,000 (F) 
C) $10,000 (F) 
D) $86,000 (U)

Question 14

Frekko Company collected the following information:
$\begin{array}{lr}
\text { Standard costs per unit: }\
\text { Variable overhead } & 4 \text { machine hours @\$6 per machine hour } \
\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }
\end{array}$

$\begin{array}{l}
\text { Actual output }&20,000 \text { units } \
\text { Denominator (normal capacity) output } & 21,000 \text { units } \
\text { Actual machine hours } & 79,000 \text { machine hours } \
\text { Actual variable overhead cost } & \$ 540,000 \
\text { Actual fixed overhead cost } & \$ 810,000
\end{array}$
-Refer to the figure.Using the two variance method,what is the total variance?

Accepted Answer

A) $30,000 (F) 
B) $30,000 (U) 
C) $70,000 (F) 
D) $70,000 (U) 
A) $30,000 (F) 
B) $30,000 (U) 
C) $70,000 (F) 
D) $70,000 (U)

Question 15

What do variances indicate?

Accepted Answer

A) the cause of the variance 
B) who is responsible for the variance 
C) that actual performance is not going according to plan 
D) when the variance should be investigated 
A) the cause of the variance 
B) who is responsible for the variance 
C) that actual performance is not going according to plan 
D) when the variance should be investigated

Question 16

Gina Production Company uses a standard costing system.The following information pertains to the current year. $\begin{array}{llr}
  \text { Actual factory overhead costs \( (\$ 16,500 $ is fixed) } &\$10,125\
 \text { Actual direct labour costs (11,250 hours) } &\$131,625\
 \text { Standard direct labour for 5,500 units: } &\
 \text {Standard hours allowed  } &11,000 \text {hours}\
 \text { Labour rate } &\$12.00\

\end{array}\)
 The factory overhead rate is based on an activity level of 10,000 units.Standard cost data for 5,000 units is as follows:
$\begin{array}{lr}
\text { Variable factory overhead } & \$ 22,500 \
\text { Fixed factory overhead } & \underline{13,500} \
\text { Total factory overhead } &  \underline{\$ 36,000} \
\end{array}$ What is the variable overhead efficiency variance for Gina Production Company?

Accepted Answer

A) $562.50 (F) 
B) $562.50 (U) 
C) $1,687.50 (F) 
D) $3,000.00 (U) 
A) $562.50 (F) 
B) $562.50 (U) 
C) $1,687.50 (F) 
D) $3,000.00 (U)

Question 17

Harry Company's standard variable overhead rate is $6 per direct labour hour,and each unit requires 2 standard direct labour hours.During March,Harry recorded 6,000 actual direct labour hours,$37,000 actual variable overhead costs,and 2,900 units of product manufactured. 
What is the total variable overhead variance for March for Harry?

Accepted Answer

A) $600 (U) 
B) $1,000 (U) 
C) $1,200 (U) 
D) $2,200 (U) 
A) $600 (U) 
B) $1,000 (U) 
C) $1,200 (U) 
D) $2,200 (U)

Question 18

Which of the following people is most likely responsible for an unfavourable variable overhead efficiency variance?

Accepted Answer

A) production supervisor 
B) accountant 
C) personnel director 
D) supplier 
A) production supervisor 
B) accountant 
C) personnel director 
D) supplier

Question 19

Max Company has developed the following standards for one of its products. $\begin{array}{ll}
\text { Direct materials: } & 15 \text { kilograms } \times \$ 16 \text { per kilogram } \
\text { Direct labour: } & 4 \text { hours } \times \$ 24 \text { per hour } \
\text { Variable manufacturing overhead: } & 4 \text { hours } \times \$ 14 \text { per hour }
\end{array}$

$\begin{array}{ll}
\text { The following activity occurred during the month of October: }\
\text { Materials purchased: } & 10,000 \text { kilograms costing } \$ 170,000 \
\text { Materials used: } & 7,200 \text { kilograms } \
\text { Units produced: } & 500 \text { units } \
\text { Direct labour: } & 2,300 \text { hours at } \$ 23.60 / \text { hour } \
\text { Actual variable manufacturing overhead: } & \$ 30,000
\end{array}$ The company records materials price variances at the time of purchase.
What is the direct materials price variance?

Accepted Answer

A) $10,000 favourable 
B) $10,000 unfavourable 
C) $50,000 favourable 
D) $50,000 unfavourable 
A) $10,000 favourable 
B) $10,000 unfavourable 
C) $50,000 favourable 
D) $50,000 unfavourable

Question 20

What is total fixed overhead budget variance always equal to?

Accepted Answer

A) fixed overhead volume variance 
B) fixed overhead volume variance plus fixed overhead spending variance 
C) total variable overhead budget variance plus fixed overhead spending variance 
D) total variable overhead budget variance 
A) fixed overhead volume variance 
B) fixed overhead volume variance plus fixed overhead spending variance 
C) total variable overhead budget variance plus fixed overhead spending variance 
D) total variable overhead budget variance

Compare and contrast mix and yield variances.

What will the result be if variable manufacturing overhead is applied based on direct labour hours and there is an unfavourable direct labour efficiency variance?

Which of the following factors would cause a labour quantity variance?

How are standards developed? What is the difference between ideal and currently attainable standards?

Which of the following factors would cause an unfavourable material quantity variance?

What is the unit standard cost?

What do variances indicate?

Which of the following people is most likely responsible for an unfavourable variable overhead efficiency variance?

What is total fixed overhead budget variance always equal to?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost Behaviour

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints

Filters

Exam 9: Standard Costing: a Functional-Based Control Approach

Compare and contrast mix and yield variances.

What will the result be if variable manufacturing overhead is applied based on direct labour hours and there is an unfavourable direct labour efficiency variance?

Which of the following factors would cause a labour quantity variance?

How are standards developed? What is the difference between ideal and currently attainable standards?

Which of the following factors would cause an unfavourable material quantity variance?

What is the unit standard cost?

What do variances indicate?

Which of the following people is most likely responsible for an unfavourable variable overhead efficiency variance?

What is total fixed overhead budget variance always equal to?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost Behaviour

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints

Filters