Exam 17: Additional Topics in Variance Analysis

Which of the following sales variances is further analyzed into the market size and industry volume variances?

The Becton Enterprises (BE)produces a gasoline additive,Charger Power.This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process.Careful controls are required during the production process to insure that the proper mix of input chemicals is achieved and that evaporation is controlled.Loss of output and efficiency may result if the controls are not effective.The standard cost of producing a 500-liter batch of Charger Power is $135.The standard materials mix and related standard cost of each chemical used in a 500-liter batch are: Chemical Std imput cuantly Std cost per liter Total cost Echol 200 \ 0.200 \ 40.00 Protex 100 0.425 42.50 Benz 250 0.150 37.50 CT-40 50 0.300 15.00 The quantities of chemicals purchased and used during the current production period are shown in the schedule below.A total of 140 batches of Charger Power were manufactured during the current production period.The controller of BE has determined its costs and chemical usage variations at the end of the production period. Chemical Quantity Purchased Total Cost Quantity Used Echol 25,000 \ 5,365 26,600 Protex 13,000 6,240 12,880 Benz 40,000 5,840 37,800 CT-40 2,220 85,500 84,420 If BE recognizes all variances at the earliest possible moment,what is the total material price variance?

Using the abbreviations listed below,what is the market share variance? AMS = actual market share BMS = budgeted market share BCM = budgeted contribution margin per unit ACM = actual contribution margin per unit ATM = actual total market BTM = budgeted total market

A machine distributor sells two models,basic and deluxe.The following information relates to its master budget.Actual sales were 7,000 basic models and 2,800 deluxe models.The actual sales prices were the same as the budgeted sales prices for both models. Basic Deluse Sales (units) 8,000 2,000 Sales price per unit \ 8,000 \ 12,000 Variable costs per unit \ 6,400 \ 9,000 What is the sales quantity variance for the deluxe model?

If raw materials are carried in the Direct Materials Inventory at standard cost,then it is reasonable to assume that the:

The next year's budget for Temper,Inc. ,is given below: Procuct 1 Procuct 2 Sales \ 945,000 \ 688,500 Variable costs 459,900 297,000 Fixed costs 300,000 300,000 Net income Units 126,000 54,000 At the end of the year,the total fixed costs and the variable costs per unit were exactly as budgeted,but the following units per product line were sold: Product Line Units Sales 1 126,200 \ 958,579 2 56,800 \ 721,010 Required: (Be sure to indicate whether the variance is favorable or unfavorable. ) a.Compute the sales activity variance for each product.b.Compute the sales mix variance for each product.c.Compute the sales quantity variance for each product.

Which of the following statements would be false regarding application of the variance analysis model to nonmanufacturing costs?

A manufacturer of industrial equipment has a standard costing system based on standard direct labor-hours (DLHs)as the measure of activity.Data from the company's flexible budget for manufacturing overhead are given below: Level of activity' 2,500 Overhead costs at the denominator activity lev' el: Variable overhead cost \ 8,500 Fred overhead cost \ 34,625 The following data pertain to operations for the most recent period: How much overhead was applied to products during the period to the nearest dollar?

When the actual amount of a raw material used in production is greater than the standard amount allowed for the actual output,the journal entry would include:

The following data for November have been provided by Norton Corporation,a producer of precision drills for oil exploration: Budgeted production 4,000 drills Standard machine-hours per 8.4 machine-hours drill \ 9.40 per machine- hour Standard indirect labor \ 2.90 per machine- hour Standard power 4,300 drills Actual production 36,530 machine-hours Actual machine-hours \ 362,756 Actual indirect labor \ 97,693 Required: Compute the variable overhead rate variances for indirect labor and for power for November.Indicate whether each of the variances is favorable (F)or unfavorable (U).Show your work!

A machine distributor sells two models,basic and deluxe.The following information relates to its master budget.Actual sales were 7,000 basic models and 2,800 deluxe models.The actual sales prices were the same as the budgeted sales prices for both models. Basic Deluse Sales (units) 8,000 2,000 Sales price per unit \ 8,000 \ 12,000 Variable costs per unit \ 6,400 \ 9,000 What is the sales activity variance for the deluxe model?

Resolution Company is meeting with the consultants it hired to help it with problems arising from its increasing sales and increasing production to meet them.The consultants have informed the company that they need to make price concessions in order to have their product sold over a large area.To do this,costs need to be reduced and controlled.They recommended installation of a standard costing system and a flexible budgeting system.The CEO took the recommendations back to the company management,explained to all,and a team was set up to develop the standards.The team was composed of the purchasing manager,processing manager,production engineer,and V.P.of sales.Each member of the team,rather than working to develop standards,came up with reasons why they wouldn't work.The team made its report to the CEO who told them to come up with the standards or he would have the consultants set them.Required: (1)What are the advantages and disadvantages of standard costing? (2)What has gone wrong in this situation and will having the outside consultant do the work change anything?

The industry volume variance is the portion of the sales activity variance due to a change in the company's proportion of sales in the markets in which they operate.

A credit balance in the labor yield variance implies:

Algood Incorporated is trying to decide which method of analyzing its overhead variances provides the most useful information.The following information is available from the records for April: Budgeted units of output 4,000 tor April Budgeted fixed ouerhead \ 27,000 month Budgeted variable overhead \ 6/DLH Budgeted direct labor hours 3 hoursiunit Fixed owerhead incurred \ 26,600 Direct labor hours used 12,000 Variable overhead incurred \ 71,500 Actual units produced 4,200 Required: Compute the overhead variances using the following approaches; (1)Four-way analysis (2)Three-way analysis (3)Two-way analysis

Some variances are the result of accounting errors and omissions,including timing differences.

A company makes a product using two materials,one of which is interchangeable with a third material.The standards for producing one 200-pound batch are presented below.The last 200-pound batch was produced using 140 pounds of M and 90 pounds of O.The price of M was $0.03 per pound and the actual price of O was $0.10. Material Standard Quantity (lbs) LBS Standard Costrb Total Cost 0 \ .10 \ 0 80 .08 6.40 120 .02 2.40 What is the materials mix variance?

Washington Corporation applies overhead to products based on machine-hours.The denominator level of activity is 8,600 machine-hours.The budgeted fixed manufacturing overhead costs are $286,380.In October,the actual fixed manufacturing overhead costs were $274,330 and the standard machine-hours allowed for the actual output were 8,400 machine-hours.Required: a.Compute the budget variance for October.Show your work! b.Compute the volume variance for October.Show your work!

The Fantasy Gifts Company,a maker of Holiday novelties,needs your help immediately.The company's accountant resigned without leaving adequate records or explanations for what she did.In reviewing the records,you find the following information for May: Materials Purchased 20,000 units Materials Used 15,000 units You find a copy of the budget which shows that materials were budgeted at $0.60/unit.You know that the materials price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers,which indicate the following: Materials price variance \ 200 Materials efficiency (quantity) variance \ 600 What was the total standard cost of direct materials purchased during May?

The market share variance is more controllable by the marketing department than the industry volume variance.