Exam 10: Standard Costing: a Managerial Control Tool

Green Lawn Corporation Green Lawn Corporation wants to produce a new lawnmower. The financial data is as follows: Target price: $\quad \$ 450$ Target profit: $\quad \$ 75$ Estimated cost given current product and process designs: $400 -Refer to Green Lawn Corporation. Assuming the company has found a design improvement that would realize cost savings of $10 per unit, and components could be purchased at a lower cost to realize cost savings of $20 per unit, what is the new expected profit?

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -A tool used to provide the production data needed to calculate the standard unit cost.

The quantity of each input that should be used to produce one unit of output is documented on the standard cost sheet.

Which of the following is NOT a characteristic of kaizen standards?

Dawson Corporation has the following information: Direct Materials: Direct Labour: Standard Quantity 2,500 Standard Hours 600 Actual Quantity 2,400 Actual Hours 625 Standard Price \ 22 Standard Rate \ 15 Actual Price \ 20 Actual Rate \ 15 Required: A. Determine the materials price variance and whether it is favourable or unfavourable. B. Determine the materials usage variance and whether it is favourable or unfavourable. C. Determine the labour rate variance and whether it is favourable or unfavourable. D. Determine the labour efficiency variance and whether it is favourable or unfavourable.

Aqua Company Aqua Company produces aquariums. During the year, 150,000 aquariums were produced. Materials and labour standards for producing the aquariums are as follows: $\begin{array}{ll}\text { Direct materials (2 sheets of glass }(\$) \$ 2 \text { per sheet) } & \$ 4 \\\text { Direct labour (3 hours }(\$ 8 \text { per hour) } & 24\end{array}$ The company purchased and used 310,000 sheets of glass at $1.50 per sheet, and its actual labour hours were 435,000 hours at a wage rate of $8.50 per hour. -Refer to Aqua Company. What is the materials price variance?

Serenity Equestrian Corporation Serenity Equestrian Corporation produces high-quality leather saddles. The company has a standard cost system and has set the following standards for materials and labour: Leather (20 strips (Q,\ 15 per strip) \ 300 Direct labour (15 hours (a)\ 15 per hour ) \ 225 Total prime cost \ 525 During the year, the company produced 150 saddles. Actual leather purchased was 3,100 strips at $12 per strip. There were no beginning or ending inventories of leather.Actual direct labour was 2,500 hours at $16 per hour. -Refer to Serenity Equestrian Corporation. What is the materials price variance?

Why are standard cost systems adopted?

Which statement best reflects the responsibility for setting price standards for materials and labour?

Currently attainable standards offer the most behavioural benefits because higher performance levels are attained through challenging, yet achievable, standards.

Who generally controls the use of labour in an organization?

The benefits of operational control may NOT extend to manufacturing environments that are emphasizing continuous improvement and just-in-time (JIT) purchasing and manufacturing.

Which standards are based on the amount of input that should be used per unit of output?

Allan Company Allan Company manufactures overalls. During the year, it manufactured 125,000 overalls, using 2.9 hours of direct labour per unit at a rate of $6.25 per hour. The materials and labour standards for manufacturing the overalls are as follows: \begin{array}{lll}\text {Direct materials ( 5 \mathrm{~m} of denim \( @ \$ 2 \) per metre) }&\$10\\\text {Direct labour (3 hours \( @ \$ 6 \) per }&18\\\end{array} The company required 600,000 m at $1.95 per metre to make the 125,000 overalls.There were no beginning or ending inventories. -Refer to Allan Company. What is the labour rate variance?

Meow Meow manufactures gourmet cat food. During the month, it manufactured 5,000 cans of tuna, using 0.10 hours of direct labour per can at a rate of $8.00 per hour. The materials and labour standards for manufacturing the cans of tuna are as follows: Direct materials (1 kg of tuna @\ 0.50 per kilogram) \ 0.50 Direct materials (1 can (@\ 0.35 per can) 0.35 Direct labour (0.20 hour @ \7 .00 per hour) 1.40 The company actually used 4,900 kg of tuna at a price of $0.65 per kg. It also purchased 5,000 cans at a price of $0.45 per can. Required: A. Determine the total materials price variance and whether it is favourable or unfavourable. B. Determine the materials usage variance for tuna and whether it is favourable or unfavourable. C. Determine the labour rate variance and whether it is favourable or unfavourable. D. Determine the labour efficiency variance and whether it is favourable or unfavourable. E. Make all necessary journal entries to record the purchase of materials, the issuance and usage of materials, and the direct labour variances. F. Provide the closing entries, assuming that all variances are immaterial.

Explain the kaizen approach to costing.

If a process-costing system uses standard costing to assign product costs, it is essential to also compute a unit cost for each equivalent unit cost category.

What is characteristic of direct materials variances?

Bear Company Bear Company uses a standard costing system. The following information pertains to direct labour costs for the month of March: Standard direct labour rate per hour \ 15.00 Actual direct labour rate per hour \ 13.50 Labour rate variance \ 18,000 fav ourable Actual output 1,000 units Standard hours allowed for actual production 10,000 hours -Refer to Bear Company. How many actual labour hours were worked during March?

Match each of the following calculations with their corresponding variance. -Budgeted (Planned) costs