Exam 10: Standard Costing: a Managerial Control Tool

Hair of the K9 manufactures dog food.During the month,it manufactured 3,000 bags of kibble,using 0.25 hours of direct labour per bag at a rate of $9.00 per hour.The materials and labour standards for manufacturing the bags of kibble are as follows: The company actually used 3,300 kg of beef at a price of $1.10 per kilogram.It also purchased 3,000 bags at a price of $0.15 per bag. Direct materials ( 1 kg of beef @\ 1.00 per kilogram) \ 1.00 Direct materials (1 bag @\ 0.25 per bag) 0.25 Direct labour (0.30 hour @\ 9.00 per hour ) 2.70 A. Determine the total materials price variance and whether it is favourable or unfavourable. B. Determine the materials usage variance for beef 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.

Allan Company manufactures overalls. During the year, it manufactured 125,000 overalls, using 2.9 hours of direct labour at a rate of $6.25 per hour. The materials and labour standards for manufacturing the overalls are as follows: Allan required 600,000 m at $1.95 per metre to make the 125,000 overalls. \begin{array}{lll}\text {Direct materials ( 5 \mathrm{~m} of denim \( (012 \) per metre) }&\$10\\\text { Direct labour (3 hours \( @ \$ 6 \) per hour)}&18\\\end{array} -Refer to the Figure.What is the entry to record the purchase of materials?

Match the variance with its correct calculation. -Labour rate variance

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

Match each item with the correct statement below. -These reflect the amount of input that should be used per unit of output.

Royal Company uses a standard costing system.The following information pertains to direct materials for the month of September: Royal Company reports its material price variances at the time of purchase.What is the material usage variance for Royal Company? Standard price per kilogram \ 17.00 Actual purchase price per kilogram \ 16.50 Quantity purchased 3,100 Quantity used 3,950 Standard quantity allowed for actual output 4,000 Actual output 1,000 units

Which of the following does NOT describe kaizen costing?

Managers develop price standards when they determine what amount should be paid for the quantity of input to be used.

The actual quantity of input at the actual price less the actual quantity of input at the standard price is the price variance.

Match the variance with its correct calculation. -Budgeted costs

Kaizen means continuous improvement.

What is the material price variance?

Aqua Company produces aquariums. During the year, 150,000 aquariums were produced. Materials and labour standards for producing the aquariums are as follows: Aqua 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. Direct materials ( 2 sheets of glass @ \ 2 per sheet) \ 4 Direct labour (3 hours @\ 8 per hour) 24 -Refer to the Figure.What is the materials usage variance?

Allan Company manufactures overalls. During the year, it manufactured 125,000 overalls, using 2.9 hours of direct labour at a rate of $6.25 per hour. The materials and labour standards for manufacturing the overalls are as follows: Allan required 600,000 m at $1.95 per metre to make the 125,000 overalls. \begin{array}{lll}\text {Direct materials ( 5 \mathrm{~m} of denim \( (012 \) per metre) }&\$10\\\text { Direct labour (3 hours \( @ \$ 6 \) per hour)}&18\\\end{array} -Refer to the Figure.What is Allan's labour rate variance?

The unit standard quantity of inputs is vital to the computation of total amount of inputs allowed for the actual output and efficiency variances.

Sterling Manufacturing has developed the following standards for one of its products. The company records materials price variances at the time of purchase. The following activity occurred during the month of December: Materials: 5\times\ 6 per metre \ 30 Direct labour: 2 hours \times\ 8 per hour 16 Required: Materials purchased: 5,200 costing \ 29,900 Materials used: 4,750 Units produced: 1,000 units Direct labour: 2,100 hours costing \ 17,850 A. Calculate the direct materials price variance. B. Calculate the direct materials usage variance. C. Calculate the direct labour rate variance. D. Calculate the direct labour efficiency variance.

Operating personnel can easily achieve standards set by engineering studies.

Why should historical experience be used with caution in a standard setting?

Which of the following is NOT characteristic of normal costing systems?

Rayvo Company has the following information: 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. E. Provide the journal entries to record the purchase of materials, the issuance and usage of materials, and direct labour variances. F. Provide the closing entries for the immaterial variances.