Exam 23: Standard Costing and Variance Analysis

Standard costing is typically a sophisticated and inexpensive component to add to a company's existing cost accounting system.

Discuss standard costing.As part of your discussion,define a standard cost.In addition,compare and contrast standard costs and predetermined overhead costs.Include in your discussion at least three reasons why standard costs are introduced into a standard cost accounting system.How is a standard cost accounting system useful to management?

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?

A standard cost accounting system can be used for

Prepare a flexible budget for 8,000,9,000,and 10,000 units of output,given the following data: Variable costs: Budgeted fixed overhead \ 90,000 Direct materials \ 5 Direct labor 4 Overhead 8

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?

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.

Standard costs for company products are typically used for all except which of the following?

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: Variable \ 5.00 per direct labor hour Fixed \ 5.50 per direct labor hour Compute the standard unit cost for a nylon shorts set.

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 quantity variance. Direct labor hours used 4,950 hours Total cost of direct labor \ 53,460 Number of good units produced 9,000 units

Once standard costs for direct materials,direct labor,and variable and fixed overhead have been developed,a total standard unit cost can be determined at any time.

The primary difference between a fixed (static)budget and a flexible budget is that a fixed budget

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 efficiency variance. 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 importance of direct labor standards and variances has been reduced.

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 total standard unit cost is

The use of realistic predetermined unit costs to facilitate product costing,cost control,cost flow,and inventory valuation is a description of the

The "flex" in the flexible budget formula occurs in the variable cost segment.

One drawback of using standard costing is that it is

If actual capacity used exceeds expected capacity,the fixed overhead volume variance is favorable.

In standard costing,