Exam 10: How Do Managers Evaluate Performance Using Cost Variance Analysis

Exhibit 10-5 Catalina Company uses activity-based costing to allocate variable manufacturing overhead costs to products.The company produced 1,800 units of product last month,and identified three activities with the following information for last month. -Refer to Exhibit 10-5.What is the variable overhead spending variance for the indirect labor activity?

Unfavorable variances are recorded with a debit to the appropriate variance account.

Exhibit 10-2 Benny's Bakery produces bagels for resale at local grocery stores.The master budget indicates that the company expects to use 2.5 pounds of direct materials for each unit produced at a cost of $10.00 per pound (one unit = one batch of bagels).Each unit produced will require 0.30 direct labor hours at a cost of $24.00 per hour.Variable manufacturing overhead is applied based on direct labor hours at a rate of $4.80 per hour.Last year's sales were expected to total 40,000 units.Benny just received last year's actual results showing sales of 35,000 units. -Refer to Exhibit 10-2.What is the standard cost per unit for direct labor?

All of the following are possible causes of a favorable labor rate variance except:

Jake's Cheese Company produces gourmet cheese for resale at local grocery stores.Jake's expected to use 0.50 direct labor hours to produce one unit (batch)of product at a cost of $10 per hour.Actual results are in for last year,which indicates 45,000 batches of cheese were sold.The company's direct labor workforce worked 27,500 hours at $9 per hour. (1)Calculate the labor rate variance. (2)Calculate the labor efficiency variance. (3)Suggest several possible reasons for the labor rate and efficiency variances.

Exhibit 10-2 Benny's Bakery produces bagels for resale at local grocery stores.The master budget indicates that the company expects to use 2.5 pounds of direct materials for each unit produced at a cost of $10.00 per pound (one unit = one batch of bagels).Each unit produced will require 0.30 direct labor hours at a cost of $24.00 per hour.Variable manufacturing overhead is applied based on direct labor hours at a rate of $4.80 per hour.Last year's sales were expected to total 40,000 units.Benny just received last year's actual results showing sales of 35,000 units. -Refer to Exhibit 10-2.What amount would the flexible budget show for direct materials?

Exhibit 10-1 Flatland Company applies fixed manufacturing overhead costs to products based on direct labor hours.Information for the month of April appears below.Flatland expects to produce and sell 18,000 units for the month. Below is budget information for Flatland Company. -Refer to Exhibit 10-1.Based on this information,what is the standard cost per direct labor hour (rounded to the nearest cent)?

Which of the following is true about managers who adhere to the concept of "management by exception"?

A production manager is evaluated based on the quantity of direct materials used in production.If the production line actually uses materials to produce 50,000 units when the master budget shows materials needed for 44,000 units,the manager's evaluation should be based on a flexible budget.

Exhibit 10-2 Benny's Bakery produces bagels for resale at local grocery stores.The master budget indicates that the company expects to use 2.5 pounds of direct materials for each unit produced at a cost of $10.00 per pound (one unit = one batch of bagels).Each unit produced will require 0.30 direct labor hours at a cost of $24.00 per hour.Variable manufacturing overhead is applied based on direct labor hours at a rate of $4.80 per hour.Last year's sales were expected to total 40,000 units.Benny just received last year's actual results showing sales of 35,000 units. -Refer to Exhibit 10-2.What is the standard cost per unit for direct materials?

Which of the following could be indicated by the fixed overhead production volume variance?

Exhibit 10-5 Catalina Company uses activity-based costing to allocate variable manufacturing overhead costs to products.The company produced 1,800 units of product last month,and identified three activities with the following information for last month. -Refer to Exhibit 10-5.What is the variable overhead efficiency variance for the indirect labor activity?

Favorable variances are recorded with a credit to the appropriate variance account.

The materials quantity variance is defined as the difference between the actual quantity of materials purchased at the actual price and the actual quantity of materials purchased at the standard price.

Jake's cheese Company produces gourmet cheese for resale at local grocery stores.Jake's expected to use 0.50 direct labor hours to produce one unit (batch)of product,and the variable overhead rate is $5.00 per hour.Actual results are in for last year,which indicates 45,000 batches of cheese were produced and sold.The company's direct labor workforce worked 27,500 hours,and variable overhead costs totaled $144,000. (1)Calculate the variable overhead spending variance. (2)Calculate the variable overhead efficiency variance. (3)Suggest several possible reasons for the variable overhead spending and efficiency variances.

Exhibit 10-5 Catalina Company uses activity-based costing to allocate variable manufacturing overhead costs to products.The company produced 1,800 units of product last month,and identified three activities with the following information for last month. -Refer to Exhibit 10-5.What is the variable overhead spending variance for the purchase order activity?

Baxter Company incurred labor costs of $10,800 in June (payable in July)for work requiring 1,100 standard hours at a standard rate of $10 per hour;1,200 actual direct labor hours were worked.Based on this information,what was the labor efficiency variance?

If an analysis shows an unfavorable materials price variance of $22,000,the journal entry to record the purchase of direct materials and the related price variance would include:

The cause of one variance might influence another variance.

Which one of the following is most likely to be the responsibility of the purchasing manager?