Exam 6: Performance Evaluation: Variance Analysis

The sales volume variance does not help managers understand

The direct labor efficiency variance is that part of the direct labor flexible budget variance that is caused by using more or less direct labor than the standard allows.

If the direct materials purchased is $200 per per unit while the standard price for direct materials is $180, and the total direct material used is 1,000 units while the standard direct materials allowed for actual production is 980 units,

A variance is the difference between actual results and budgeted,or expected results.

The direct labor flexible budget variance is due to

When a variable overhead spending variance is identified,managers will want to talk with the purchase manager about the purchase and/or use of variable overhead items.

Because fixed overhead does not vary with changes in the level of activity,some managers do not see a need to investigate variances relating to fixed costs.However,that is not the case. a.How is the fixed overhead spending variance calculated? b.Discuss items that generally do not affect the fixed overhead variance and those that might affect the fixed overhead variances.

Melrose Manufacturing produces gourmet blackberry preserves.Melrose based its current year budget on a production level of 540,000 jars of preserves using ½ hour direct labor time for each jar which includes hand-sorting and trimming the berries.Total budgeted variable overhead for the year was $1,242,000.During the year,Melrose used 280,000 direct labor hours to produce 550,000 jars of blackberry preserves.Actual variable overhead for the year was $1,246,000.What is Melrose's flexible budget variable overhead variance?

Assembly line workers at Thompson Manufacturing worked a total of 12,000 direct labor hours to produce 36,000 units. The standard for producing one unit is 15 minutes at a wage rate of $10. If the actual wage rate was $10.50 per direct labor hour, Thompson’s direct labor rate variance is

Variable overhead cost consists of indirect production costs that are expected to vary with production activity.How is the variable overhead spending variance calculated and list potential causes of the variance?

Why do variances have little meaning until their causes are identified?

The variable overhead spending variance has to do with the efficient use of

In June,Indigo Manufacturing purchased 6,000 gallons of blue dye used to produce stone-washed denim clothing.The price per gallon was $1.24 and the company used 5,400 gallons of the dye during the month to produce 42,660 yards of denim fabric.The standard allows for 8 yards of fabric per gallon of dye.The standard price for the dye is $1.26.What is the materials quantity variance for Indigo for June?

Adler Industries uses a standard cost system. Adler has established the following standards for one unit of product: standard labor of .25 hour and standard wage rate of $8 per hour. During January, Adler used 5,000 hours of direct labor and paid $37,800 in wages in producing 18,700 units. Required: Calculate the direct labor rate variance and indicate whether the variance is favorable or unfavorable.

Johnston Manufacturing Company purchased 14,000 switches to make 6,000 units. The standard allows for 2 switches per unit. The company actually used 12,500 to produce the 6,000 units. Johnson budgeted $0.75 per switch, but because they received a discount for purchasing more than 10,000 switches, they received a discount of $0.05 per switch and paid $0.70 each. What is Johnston’s direct materials quantity variance for the period?

The direct labor rate variance arises when

In June,Indigo Manufacturing purchased 6,000 gallons of blue dye used to produce stone-washed denim clothing.The price per gallon was $1.24 and the company used 5,400 gallons of the dye during the month.The standard price for the dye is $1.26.What is the materials price variance for Indigo for June?

Variances have very important meanings,even before their causes are identified.

The flexible budget variance is influenced most heavily by forces external to the operating process.

Melrose Manufacturing produces gourmet blackberry preserves.Melrose based its current year budget on a production level of 540,000 jars of preserves using ½ hour direct labor time for each jar which includes hand-sorting and trimming the berries.Total budgeted variable overhead for the year was $1,242,000.During the year,Melrose used 280,000 direct labor hours to produce 550,000 jars of blackberry preserves.Actual variable overhead for the year was $1,246,000.What is Melrose's variable overhead efficiency variance?