Exam 26: Standard Costing and Variance Analysis

During the current month, Ringo Company started 50,000 units of product and transferred 40,000 fully completed units to finished goods. The final work in process inventory was 40 percent complete as to labor operations. There was no initial work in process, and actual labor hours were 180,000 for the period. Each unit should have required 4 direct labor hours to be produced at standard. The total standard hours allowed for the period are

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 formula used to compute budgeted total cost at any level of activity is presented in the

The fixed overhead volume variance measures the use of existing facilities and capacity.

Service organizations use direct materials, direct labor, and overhead standard costs.

Another name for a flexible budget is a variable budget.

A production manager usually is responsible for direct materials used and direct labor hours used.

The total fixed overhead variance is comprised of the

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.

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

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 \ 381,000 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 variable overhead spending variance.

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

Golf Pro, Inc., makes wood drivers for the professional golfer. Because of the clientele of users, only the finest materials can be used, and the quality of craftsmanship must be high. The following cost, quantity, and time standards have been set for 20xx: Direct materials: 2 board-feet of wood @ $20 per board-foot and 2 feet of leather strip @ $5 per foot Direct labor: Cutting Department, 0.6 hour per driver at $10 per hour; Shaping/Finishing Department, 1.4 hours per driver at $15 per hour Overhead: variable, $5 per direct labor hour; fixed, $8 per direct labor hour The wood is added at the beginning of the cutting process and the leather strip at the beginning of the shaping/finishing process. Compute the standard cost per driver.

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

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 cost accounting system. How is a standard cost accounting system useful to management?

The final step in variance analysis is determining the cause of the variance.

Discuss the keys to preparing a performance report based on standard costs and related variances.

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

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: 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 direct labor rate variance would occur in which of the following situations?