Exam 23: Standard Costing and Variance Analysis

The difference between actual quantity used and standard quantity multiplied by standard price is the equation for computing the

Comparing "what did happen" with "what should have happened" aids in the performance evaluation of a company.

The direct labor rate standard is either set by a labor contract or defined by the company.

Underfoot Products uses standard costing.The following information about overhead was generated during May: Standard variable overhead rate \ 2 per machine hour Standard fixed overhead rate \ 1 per machine hour Actual variable overhead costs \ 390,000 Actual fixed overhead costs \ 175,000 Budgeted fixed overhead costs \ 190,000 Standard machine hours per unit produced 10 Good units produced 18,000 Actual machine hours 200,000 Compute the fixed overhead volume variance.

The total fixed overhead variance is comprised of the

A standard costing system

Underfoot Products uses standard costing.The following information about overhead was generated during May: Standard variable overhead rate \ 2 per machine hour Standard fixed overhead rate \ 1 per machine hour Actual variable overhead costs \ 399,000 Actual fixed dverhead costs \ 175,000 Budgeted fixed overhead costs \ 190,000 Standard machine hours per unit produced 10 Good units produced 18,000 Actual machine hours 200,000 Compute the variable overhead variance.

Although expensive to install and maintain,a standard cost accounting system can save a company considerable amounts of money by reducing resource waste.

Sweet Dreams manufactures candy.Its records revealed the following data: Number of units produced 4,000 Standard direct labor hours per unit 2 Standard variable overhead rate \ 2.50 per hour Standard fixed overhead rate \ 5.00 per hour Budgeted fixed overhead costs \ 40,800 Actual variable overhead costs \ 16,800 Actual fixed overhead costs \ 40,400 Actual labor hours 8,000 direct labor hours Total actual overhead \ 57.200 The total overhead variance is

Lucas Company has set standards for the manufacturing of clay pots to be 2 pounds of direct materials,per pot,at a cost of $3 per pound.During the current period,600 pounds of direct materials were purchased for $1842.All of the direct materials were used to manufacture 295 pots.Lucas's direct materials price variance was

Using the labor time standard of 0.5 labor hour per unit and a labor cost standard of $10 per labor hour for a 10 pound bag of chocolate and the following actual cost and usage data,compute the direct labor rate variance. Direct labor hours used 4,950 hours Total cost of direct labor \ 53,460 Number of good units produced 9,000 units

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.

Standard costs are useful for all but which of the following?

The direct materials quantity variance is the difference between the actual quantity used and the standard quantity times the standard price.

Another name for a flexible budget is a variable budget.

Fantastic Lips,Inc.,specializes in manufacturing lipstick.Racy Red,one of more than 75 shades produced by the company,is made from castor oil,beeswax,aloe vera,and a base compound.For the next 12 months,the company's purchasing agent believes that the cost of ingredients will be as follows: Ingredient Standard Cost Castor oil \ 6.95 per gallon Beeswax \ 5.40 per pound Aloe vera \ 19.60 per gallon Base compound \ 25.00 per gallon The direct labor time standard is 4 hours per case at a standard direct labor rate of $11.00 per hour.The standard overhead rates are $15.00 per direct labor hour for the standard variable overhead rate and $13.00 per direct labor hour for the standard fixed overhead rate. a. Using these production standards, compute the standard unit cost of direct materials per case of Racy Red if it takes 0.2 gallon of castor oil, 0.5 pound of beeswax, 0.3 gallon of aloe vera, and 1 gallon of base compound to produce one case. b. Using the standard unit cost of direct materials per case determined in (a) and the production standards given for direct labor and overhead, compute the standard unit cost of one case of Racy Red lipstick.

A flexible budget is a summary of expected costs for a range of activity levels and is geared to changes in the level of productive output.

Harrison,Inc.,has computed direct labor standards for the manufacture of its product to be 4 hours of labor per product at a cost of $15 per hour.During March,Harrison produced 45 products in 190 hours and incurred direct labor costs of $2,720.Harrison's direct labor efficiency variance was

A variance is the difference between a standard cost and a budgeted cost.

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 volume variance.