Exam 11: Standard Costs and Variances

Speaker City designs and manufactures high-end home theater speakers. Speaker City uses a standard overhead rate of 2.0 hours per unit at a cost of $8.00 per hour. Data for the month of June shows that Speaker City produced 400 units and recorded actual overhead costs of $24,500. What is the total variable overhead variance for the month of June?

A debit balance in the direct materials price variance indicates the standard cost of materials was less than the actual cost of materials.

The following direct materials variance computations are incomplete. Fill in the missing values, and identify the direct materials flexible budget variance as favorable or unfavorable. Direct materials price variance = ($? - $12.50)× 7,000 pounds = $3,500 U Direct materials quantity variance = (? - 6,700 pounds)× $12.50 = ? U Direct materials flexible budget variance = $?

The cause of a fixed overhead variance, such as an unanticipated increase or decrease in property taxes at the factory, is always under the control of management.

The managerial accountant at Red Ribbon Distribution Company prepared a report in the previous quarter and reported 4,200 actual machine hours were used. The actual rate per machine hour was $32.75 while the standard rate was $28.50. The standard hours allowed was calculated at 4,000. Compute the variable manufacturing overhead (MOH)rate variance to determine the accuracy of the forecasted MOH and, the variable MOH efficiency variance, to determine whether the volume of output was consistent with the number of machine hours used.

An unfavorable direct labor rate variance indicates which of the following?

Closing the variances to Cost of Goods Sold corrects the account balance.

A debit balance means that a variance is unfavorable since it decreases income (just like an expense).

All variances discovered by management must be investigated.

What may cause a sales volume variance for fixed expenses?

The variable overhead efficiency variance is also called the variable overhead spending variance.

Variances are never calculated for fixed overhead because fixed overhead never changes even between budgeted numbers and actual.

The total direct labor variance is the sum of the direct labor rate variance and the direct labor efficiency variance.

The ________ variance "measures whether the quantity of direct labor used to make the actual number of outputs is within the standard allowed for that number of outputs."

A company's purchasing department negotiates all of the purchasing contracts for raw materials. Which variance is most useful in assessing the performance of the purchasing department?

Management should investigate all variances whether large or small.

The standard variable overhead cost rate for the Gordon Company is $13.25 per unit. Budgeted fixed overhead cost is $80,000. The company budgeted 8000 units for the current period and actually produced 4100 finished units. What is the fixed overhead volume variance? Assume the allocation base for fixed overhead costs is the number of units expected to be produced.

Which of the following is an advantages of using standard costs and variances?

The fixed overhead budget variance is also known as the fixed overhead spending variance.

Keegan Inc. budgeted 10,500 pounds of direct materials costing $18.00 per pound to make 4900 units of product. The company actually purchased 10,600 pounds of direct materials costing $27.50 per pound to make the 4900 units. What is the direct materials price variance?