Exam 8: Performance Evaluation

Kokko Company makes a product that is expected to require 2 hours of labor per unit of product.The standard cost of labor is $6.00.Kokko actually used 2.1 hours of labor per unit of product.The actual cost of labor was $6.25 per hour.Kokko made 1,100 units of product during the period.Based on this information alone,the labor usage variance is:

Hickam Company makes one product,for which it has developed the following standard for labor: each unit should require 1.50 hours at $12/hour.In April,Hickam made 10,000 units,using 1.65 hours per unit at a cost of $11.50 per hour. Required: (a)Determine the total labor variance and indicate whether it is favorable or unfavorable. (b)Determine the labor price variance and indicate whether it is favorable or unfavorable. (c)Determine the labor usage variance and indicate whether it is favorable or unfavorable.

Indicate whether each of the following statements is true or false. The labor price variance is favorable when the actual rate paid for labor is higher than the standard rate.______ The production department is generally responsible for the labor price variance.______ If the standard quantity of labor per unit of a product is 0.5 hours and the actual quantity of labor is 0.45 hours,the labor price variance is favorable.______ Labor price variances measure the productivity of the labor force.______ Machine breakdowns and inferior materials can result in an unfavorable labor usage variance.______

Select the term that best fits the definition or description; enter the number of the term in the column for Your Answer.

Flexible budget amounts for variable costs and revenues come from multiplying standard per-unit amounts by the planned volume of production.

What steps or activities are involved in developing standards for the materials that are used in making a product?

When would a variance be labeled as favorable?

Select the incorrect statement regarding flexible budgets.

The Landrum Company provides the following standard cost data per unit of product: Var'iable overhead \ 8.00 Landrum anticipated that they would produce and sell 24,000 units.During the period,the company produced and sold 25,000 units,incurring $210,000 of variable overhead costs. The variable overhead flexible budget variance was:

Newton Company's management accountant prepared the following variance report for management: Required 1)Identify which manager (if any)would likely be held responsible (at least prior to further investigation)for each of the following variances: (a)Direct material price variance (b)Direct materials usage variance (c)Direct labor price variance (d)Direct labor usage variance (e)Fixed cost spending variance (f)Fixed cost volume variance 2)Provide at least two possible explanations for each of the following variances: the direct materials price variance and the direct labor usage variance.

Shia Company makes a product that is expected to require 2 hours of labor per unit of product.The standard cost of labor is $5.20.Shia actually used 2.1 hours of labor per unit of product.The actual cost of labor was $5.30 per hour.Shia made 1,000 units of product during the period.Based on this information alone,the labor price variance is:

The Russell Company provides the following standard cost data per unit of product: Direct material (3 gallons @ \6 per gallon) \1 8.00 Direct labor (2 hours@ \1 0per hour) \2 0.00 During the period,the company produced and sold 22,000 units,incurring the following costs: Direct material 68,00 Cgallons @ \ 5.90 per gallon Direct labor 45,500 hours @ \ 9.75 per hour The direct labor price variance was:

The standard amount of materials required to make one unit of Product Q is 4 pounds.Tusa's static budget showed a planned production of 3,800 units.During the period,the company actually produced 4,100 units of product.The actual amount of materials used averaged 3.9 pounds per unit.The standard price of material is $1 per pound.Based on this information,the materials usage variance was:

Which of the following statements is true?

Jones Company developed the following static budget at the beginning of the company's accounting period: Revenue (8,000 units ) \ 16,000 Variable costs Contribution margin \ 12,000 Fixed costs Net income If actual production totals 8,200 units,the flexible budget would show total costs of:

Standards that do not allow for normal downtime,waste of materials,or machine breakdowns are known as:

Select the term that best fits the definition or description; enter the number of the term in the column for Your Answer.

Opal Manufacturing Company established the following standard price and cost information: Sales price \ 50 per unit Variable marnfacturing cost 32 per unit Fixed marufacturing cost \ 100,000 total Fixed selling and adrninistrative cost \ 40,000 total Opal expected to produce and sell 25,000 units.Actual production and sales amounted to 26,500 units. Required: (a)Determine the sales volume variances,including variances for number of units,sales revenue,variable manufacturing cost,fixed manufacturing cost,and fixed selling and administrative cost. (b)Classify the variances as favorable (F)or unfavorable (U). (c)Comment on the usefulness of the variances with respect to performance evaluation. (d)Explain why the fixed cost variances are zero.

All of the following factors should influence the decision to investigate a variance except:

Which manager is usually held responsible for materials usage variances?