Exam 10: Standard Costs and Overhead Analysis

Dodge Company produces a single product.The company has set the following standards for materials and labour: Direct Materials Direct Labour Standard quantity or hours per unit ? kilograms 3 hours Standard price or rate ? per kilogram \1 5 per hour Standard cost per unit ? \ 45 During the past month,the company purchased 7,000 kilograms of direct materials at a cost of $26,250.All of this material was used in the production of 1,300 units of product.Direct labour cost totalled $55,125 for the month.The following variances have been computed: Materials price variance \ 1,750 favourable Total materials variance \ 250 unfavourable Labour efficiency variance \ 6,000 favourable Required: a)For direct materials,compute the standard price per kilogram,the standard quantity allowed for materials in total for the month's production,and the standard quantity per unit of product. b)For direct labour,compute the actual direct labour cost per hour for the month and the labour rate variance.

Direct labour hour is often assumed as the sole cost driver in analyzing the total variable overhead cost variance into spending and efficiency variances. Required: a)Will direct labour cost ever be a better cost driver of variable overhead costs than direct labour hour? Explain b)How is the standard variable overhead rate different from the standard labour rate in variance analysis? Explain.

The Albright Company uses standard costing and has established the following standards $f$ its single product: Direct Materials 2 litres at \3 per litre Direct Labour 0.5 hours at \8 per hour Variable Manufacturing Overhead 0.5 hours at \2 per hour During November, the company made 4,000 units and incurred the following costs: Direct Materials Purchased 8,100 litres at \ 3.10 per litre Direct Materials Used 7,600 litres Direct Labour Used 2,200 hours at \ 8.25 per hour Actual Variable Manufacturing Overhead \ 4,175 The company applies variable manufacturing overhead to products on the basis of direct labour hours. -What was the total variable overhead variance for November?

The following materials standards have been established for a particular product: Standard quantity per unit of output 1.7 metres Standard price \ 19.80 per metre The following data pertain to operations concerning the product for the last month: Actual materials purchased 5,800 metres Actual cost of materials purchased \ 113,680 Actual materials used in production 5,100 metres Actual output 3,200 wits What was the materials quantity variance for the month?

The Clark Company makes a single product and uses standard costing. Some data concerning this product for the month of May follow: Labour rate variance \ 7,000 favourable Labour efficiency variance \ 12,000 favourable Variable overhead efficiency variance \ 4,000 favourable Number of units produced 10,000 Standard labour rate per direct labour hour \ 12 Standard variable overhead rate per direct labour hour \ 4 Actual labour hours used 14,000 Actual variable manufacturing overhead costs \ 58,290 -What was the actual direct labour rate for May in dollars per hour?

Albert Manufacturing Company manufactures a single product.The standard cost of one unit of this product is: Direct Materials: 6 metres at \ 1.50 \ 9.00 Direct Labour: 1 hour at \ 6.75 \ 6.75 Variable Overhead: 1 hour at \ 4.50 \ 4.50 Total Standard Variable Cost per Unit \ 20.25 During the month of October,6,000 units were produced.Selected cost data relating to the month's production follow: Materials Purcahsed: 60,000 metres at \ 1.43 \ 85,800 Material Used in Production: 38,000 metres Direct Labour: ? hours at \ ? per hr \ 41,925 Variable Overhead Cost Incurred \ 30,713 Variable Overhead Efficiency Variance \ 2,250 unfavourable There was no beginning inventory of raw materials.The variable overhead rate is based on direct labour-hours. Required: a)(Appendix 10B)For direct materials,compute the price and quantity variances for the month,and prepare journal entries to record activity for the month. b)(Appendix 10B)For direct labour,compute the rate and efficiency variances for the month,and prepare a journal entry to record labour activity for the month. c)For variable overhead,compute the spending variance for the month,and prove the efficiency variance given above.

Kyekyeku Company retails two models of a product: Model X and Model Y. It considers both products to be close substitutes. The following data relate to the company's operations for last year: Model X Model Y Total Sales in Units: Budget 1,000 1,000 2,000 Actual 1,008 1,092 2,100 Contribution Margins per Unit: Budget \ 30 \ 40 Actual \ 25 \ 38 Market Volume in Units: Budget 40,000 Actual 52,500 - What was the market share variance for last year?

If the denominator activity (in hours)used to compute the predetermined overhead rate is equal to the actual activity (in hours)for the period,then there is no volume variance.

Lido Company's standard and actual costs per unit for the most recent period,during which 400 units were actually produced,are given below: Standard Actual Materials: Standard: 2 metres at \ 1.50 per \ 3.00 Actual: 2.1 metres at \ 1.60 per \ 3.36 Direct labour: Standard: 1.5 hrs. at \ 6.00 per hr. 9.00 Actual: 1.4 hrs. at \ 6.50 per hr: 9.10 Variable overhead: Standard: 1.5 hrs. at \ 3.40 per hr. 5.10 Actual: 1.4 hrs. at \ 3.10 per hr. 4.34 Total unit cost \ 17.19 \ 16.80 There were no inventory of materials at the beginning or end of the period. Required: From the above information,compute the following variances.Show whether the variance is favourable (F)or unfavourable (U): a)Materials price variance b)Materials quantity variance c)Direct labour rate variance d)Direct labour efficiency variance e)Variable overhead spending variance f)Variable overhead efficiency variance

The Dexon Company makes and sells a single product, called a Mip, and employs a standard costing system. The following standards have been established for one unit of Mip: Standard Quantity or Hours Standard Cost per Mip Direct Materials 6 board metre \ 9.00 Direct Labour 0.8 hours \ 9.60 There were no inventories of any kind on August 1. During August, the following events occurred: Purchased 15,000 board metres at the total cost of $\$ 24,000$ . Used 12,000 board metres to produce 2,100 Mips. Used 1,700 hours of direct labour time at a total cost of $\$ 20,060$ . - To record the incurrence of direct labour costs and its use in production,the general ledger would include what entry to the Labour Efficiency Variance account?

King Company estimated that it would operate its manufacturing facilities at 800,000 direct labour hours for the year, which served as the denominator activity in the predetermined overhead rate. The total budgeted manufacturing overhead for the year was $2,000,000, of which $1,600,000 was variable and $400,000 was fixed. The standard variable overhead rate was $2 per direct labour hour. The standard direct labour time was 3 direct labour hours per unit. The actual results for the year are presented below: Actual Finished Units 250,000 Actual Direct Labour Hours 764,000 Actual Variable Overhead \ 1,610,000 Actual Fixed Overhead \ 392,000 -What was the variable overhead efficiency variance for the year?

The following materials standards have been established for a particular product: Standard quantity per unit of output 3.6 metre Standard price \ 10.20 per metre The following data pertain to operations concerning the product for the last month: Actual materials purchased 7,100 metres Actual cost of materials purchased \ 68,515 Actual materials used in production 6,600 metres Actual output 1,780 units Required: a)What was the materials price variance for the month? b)What was the materials quantity variance for the month?

Kyekyeku Company retails two models of a product: Model X and Model Y. It considers both products to be close substitutes. The following data relate to the company's operations for last year: Model X Model Y Total Sales in Units: Budget 1,000 1,000 2,000 Actual 1,008 1,092 2,100 Contribution Margins per Unit: Budget \ 30 \ 40 Actual \ 25 \ 38 Market Volume in Units: Budget 40,000 Actual 52,500 - What was the market volume variance for last year?

Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows: Standard Quantity Standard Cost per Bag Direct Materials 20 kilograms \ 8.00 Direct Labour 0.1 hours 1.10 Variable Manufacturing Overhead 0.1 hours .40 The company had no beginning inventories of any kind on January 1. Variable manufacturing overhead is applied to production on the basis of direct labour hours. The results of the company's operations during January are as follows: Production of Fastgro: 4,000 bags Direct Materials Purchased 85,000 kilograms at a cost of \ 32,300 Direct Labour Used 390 hours at a cost of \ 4,875 Variable Manufacturing Overhead Incurred \ 1,475 Inventory of Direct Materials on January 31 3,000 kilograms -What was the labour efficiency variance for January? Do not round intermediate calculations.

Cox Company's direct material costs for the month of January were as follows; Actual quantity purchased \ 18,000 kilograms Actual unit purchase price \ 3.60 per kilogram Materials price variance- Unfavourable (based on purchases) \ 3,600 Standard quantity allowed For actual production 16,000 kilograms Actual quantity used 15,000 kilograms What was the favourable direct materials quantity variance for January?

The Murray Company makes and sells a single product. The company recorded the following activity and cost data for May: Number of Units Completed 45,000 units Standard Direct Labour Hours Allowed per Unit of Product 1.5 DLHS Budgeted Direct Labour Hours (denominator activity) 72,000 DLHS Actual Fixed Overhead Costs Incurred \ 66,000 Volume Variance \ 4,4275 unfavourable The fixed portion of the predetermined overhead rate is \ 0.95 per direct labour hour. -What was the amount of fixed overhead contained in the company's overhead flexible budget for May?

The Ferris Company applies manufacturing overhead costs to products on the basis of direct labour hours. The standard cost card shows that 3 direct labour hours are required per unit of product. For August, the company budgeted to work 90,000 direct labour hours and to incur the following total manufacturing overhead costs: Total Variable Overhead Costs \ 99,000 Total Fixed Overhead Costs \ 118,000 During August, the company completed 28,000 units of product, worked 86,000 direct labour hours, and incurred the following total manufacturing overhead costs: Total Variable Overhead Costs \ 98,900 Total Fixed Overhead Costs \ 115,300 The denominator activity used for the predetermined overhead rate was 90,000 direct labour hours. -For August,what was the variable overhead efficiency variance?

If the actual labour hours worked exceed the standard labour hours allowed,what type of variance will occur?

$\text { The Litton Company has established standards as follows: }$ Direct Material 3@@4/.=\ 12 per unit Direct Labour 2@\ 8/.=\ 16 per unit Variable Manufacturing Overhead 2 hrs. @ \ 5/.=\ 10 per unit Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased. Units Produced 600 Direct Material Used 2,000. Direct Material Purcahsed (3,000 kgs.) \ 11,400 Direct Labour Cost (1,100 hrs. ) \ 9,240 Variable Manufacturing Overhead Cost Incurred \ 5,720 The company applies variable manufacturing overhead to products on the basis of direct labour hours. -What was the variable overhead efficiency variance?

A favourable sales volume variance for a substitute product in a multiple-product firm does NOT necessarily imply a favourable sales mix variance for that substitute product.