Exam 23: Standard Costing and Variance Analysis

Direct labor time standards express the hourly labor cost per function or job classification that exists during the current accounting period.

One drawback of using standard costing is that it is

Fredman Company has a standard costing system and keeps all its costs up to date.The company's main product is copper wind chimes,which are made in a single department.The standard variable costs for one wind chime (unit)are as follows: Direct materials ( 3 yards at \ 12.50 per yard) \ 37.50 Direct labor ( 2 hours at \ 9.00 per hour) 18.00 Variable overhead ( 2 hours @\ 5.00 per direct labor hour) 10.00 Standard variable cost per unit \ 65.50 The company's normal capacity is 10,000 direct labor hours.Its budgeted fixed overhead costs for the year were $44,000.During the year,it produced and sold 4,900 wind chimes and it purchased 15,000 yards of direct materials; the purchase cost was $12.40 per yard.The average labor rate was $9.10 per hour,and 10,050 direct labor hours were worked.The company's actual variable overhead costs for the year were $48,900,and its fixed costs were $45,000. Using the data given,compute the following using formulas or diagram form: 1.Direct materials cost variances: a.Direct materials price variance b.Direct materials quantity variance c.Total direct materials cost variance 2.Direct labor cost variances: a.Direct labor rate variance b.Direct labor efficiency variance c.Total direct labor cost variance 3.Variable overhead variances: a.Variable overhead spending variance b.Variable overhead efficiency variance c.Total variable overhead variance 4.Fixed overhead variances: a.Fixed overhead budget variance b.Fixed overhead volume variance c.Total fixed overhead variance

If a company's flexible budget formula is $9.50 per unit plus $69,800,what would be the total budget for evaluating operating performance if 23,850 units were sold and 28,460 units were produced?

Under which of the following circumstances would the base used to calculate the variable overhead rate be the same as that used for the fixed overhead rate?

Multiplying the standard price of direct materials by the standard quantity for direct materials yields

It is not necessary to provide an area on the performance report for a manager's reasons for variances.

The variable overhead efficiency variance is the difference between actual total overhead costs incurred and the total overhead costs applied using the standard overhead rates.

The C.M.Landscaping Co.uses chicken manure to fortify the soil around trees bearing rare fruit.The price standard used is $3.50 per 10 pound sack of chicken manure.During the current year,the actual purchase price averaged $3.65 per sack,according to the company's purchasing agent.The company purchased and used 1,560 sacks of chicken manure during the year.Compute the direct materials price variance.Be sure to indicate whether it is favorable or unfavorable.

Point Company uses the standard costing method.The company's main product is a fine-quality audio speaker that normally takes 0.25 hour to produce.Normal annual capacity is 3,000 direct labor hours,and budgeted fixed overhead costs for the year were $6,750.During the year,the company produced and sold 8,000 units.Actual fixed overhead costs were $4,800.Compute the fixed overhead variance.

The purchasing agent is responsible for developing the direct materials quantity standard.

Sport Runner,Inc.,produces a complete line of men's running apparel.The nylon short set is a very popular item in the southern states.During June,the company's records revealed the following information about the production of the nylon shorts set: Standards: Direct materials 4 yards@ \2 .50 per yard Direct labor 1.5 hour @9 per hour Overhead: varable \5 .00 per direct labor hour Fixed \5 .50 per direct labor hour Compute the standard unit cost for a nylon shorts set.

Ewing Corporation's controller has developed the cost and usage data listed below in preparation of standard unit cost information for the coming year. Direct materials quantity standard 3 pounds per product Direct labor time standard 5 hours per product Direct materials price standard \ 10 per pound Direct labor rate standard \ 9 per hour Standard variable overhead rate \ 5 per labor hour Standard fixed overhead rate \ 10 per labor hour The standard unit cost for direct labor is

During April 20xx,production is expected to be 30,000 units with the following costs: direct materials,$195,000; direct labor,$300,000; variable overhead,$120,000; and fixed overhead,$150,000.Prepare a flexible budget for 25,000 and 35,000 units.

Earth,Inc.,is developing flexible budgets for each department as part of its plan to use standard costs.Normal monthly volume in the Sifting Department is 50,000 direct labor hours.At normal volume,department fixed costs include $70,000 for power and $40,000 for maintenance,and salaries of $70,000 per month.Indirect variable labor is $120,000,which involves 15,000 hours of indirect labor at $8 per hour.Other variable costs in the Sifting Department are as follows: Tools and supplies \ 3.00 per machine hour Maintenance 2.50 per machine hour Power 3.50 per machine hour Depreciation 4.50 per machine hour Normal volume is 40,000 machine hours per month.The company uses a service (or usage)hours method to depreciate its fixed assets. a. Prepare a departmental flexible overhead budget for 30,000 machine hours and for 40,000 machine hours. b. Did you treat depreciation expense as a variable or a fixed cost? Defend your approach.

Using the standard costs of $5 per pound for a 10 pound bag of chocolate and the following actual cost and usage data,compute the direct materials price variance. Direct materials purchased and used 99,000 pounds Price paid far direct materials \ 4.00 per pound Number of good urits produced 9,000 urits

Which of the following provides an explanation of why the variable overhead rate is separated from the fixed overhead rate in standard costing?

Point Company uses the standard costing method.The company's main product is a fine-quality audio speaker that normally takes 0.25 hour to produce.Normal annual capacity is 3,000 direct labor hours,and budgeted fixed overhead costs for the year were $6,750.During the year,the company produced and sold 8,000 units.Actual fixed overhead costs were $4,800.Compute the fixed overhead budget variance.

The effective evaluation of managers' performance depends on both human factors and company policies.Using variances from standard costs in a manager's performance report adds accuracy to the evaluation process.To ensure effectiveness and fairness when setting up a performance evaluation process,what actions should be taken?

A purpose of standard costing is to