TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost.TaskMaster has established the following standards for the prime costs of one unit of product. \[\begin{array} { | r r | r | r | } \hline &\text { Standard } & \text { Standard } & \text { Standard } \\ &\text { Quantity } & \text { Price } & \text { Cost } \\ \hline \text { Direct Materials } & 8 \text { pounds } & \$ 1.80 \text { per pound } & \$ 14.40 \\ \hline \text { Direct Labor } & .25 \text { hour } & \$ 8.00 \text { per hour } & 2.00 \\ \hline & & &\underline{\$ 16.40} \\ \hline \end{array}\] During November,TaskMaster purchased 160,000 pounds of direct materials at a total cost of $304,000.The total factory wages for November were $42,000,90% of which were for direct labor.TaskMaster manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours.What is the direct labor efficiency variance for November?

A) $1,800. B) $1,900. C) $2,000. D) $2,090. A) $1,800. B) $1,900. C) $2,000. D) $2,090.

Easton Industries developed the following standards for one of its products: \[\begin{array} { | l | l | l l | } \hline \text { Material } & 5 \text { teet } & \$ 15 i f 00 t & \$ 75 \\ \hline \text { Labor } & 10 \text { hours } & \$ 15 \text { hour } &\underline{ 150 }\\ \hline \text { Total variable cost } & & & \$ 225 \\ \hline \end{array}\] Actual results for September were: \[\begin{array} { | l | l | } \hline \text { Units produced } & 12,000 \\ \hline \text { Material purchased } & 40,000 \text { feet for } \$ 14.25 \text { foot } \\ \hline \text { Material used } & 70,000 \text { teet } \\ \hline \text { Direct Labor } & 119,500 \text { hours at } \$ 15.10 \text { hour } \\ \hline \end{array}\] Required: (1)Calculate the following variances: (a)Material purchase price variance. (b)Material quantity variance. (c)Labor rate variance. (d)Labor efficiency variance. (2)Why would it be inappropriate to calculate the Material price variance at the time the material is used;might there be a situation when it might be all right to do so?

(1) (a)$30,000 favorable 40,000($14.25 -

The Bartok Company uses a standard cost accounting system and estimates production for the year to be 60,000 units.At this volume,the company's variable overhead costs are $0.50 per direct labor hour.The company's single product has a standard cost of $30.00 per unit.Included in the $30.00 is $13.20 for direct materials (3 yards)and $12.00 of direct labor (2 hours).Production information for the month of March follows: \[\begin{array} { | l | r | } \hline \text { Number of units produced } & 6,000 \\ \hline \text { Materials purchased (18,500 yards) } & \$ 88,800 \\ \hline \text { Materials used in production bards) } & 18,500 \\ \hline \text { Variable overhead costs incurred } & \$ 6,380 \\ \hline \text { Fixed overhead costs incurred } & \$ 20,400 \\ \hline \text { Direct labor cost incurred (\$6.50/hour) } & \$ 75,400 \\ \hline \end{array}\]Required: (Be sure to indicate whether the variances are favorable or unfavorable. ) a.Compute the predetermined overhead rate/hr used for the year.b.Compute the budgeted fixed costs for the month.c.Compute the variable overhead spending variance.d.Compute the variable overhead efficiency variance.e.Compute the fixed overhead spending (budget)variance.f.Compute the production volume variance.

a.$2.40 per DLH b.$19,000 c.$580 unfavor

What is the flexible budget contribution margin? $\begin{array}{|l|r|r|r|r|r|} \hline & \begin{array}{r} \text { Actual } \\ \text { Results } \end{array} & \begin{array}{r} \text { Flexible } \\ \text { Vudget } \end{array} & \begin{array}{r} \text { Flexible } \\ \text { Budget } \end{array} & \begin{array}{r} \text { Variance } \\ \text { Activity } \end{array} & \begin{array}{r} \text { Master } \\ \text { Budget } \end{array} \\ \hline \text { Units } & 13,000 & & ? & 2000 \mathrm{U} & ? \\ \hline \text { Sales revenue } & ? & 13,000 \mathrm{~F} & ? & ? & ? \\ \hline \begin{array}{l} \text { Less: } \end{array} & & & & \\ \hline \begin{array}{l} \text { Variable mfg. } \\ \text { Costs }> \end{array} & \$ 87,750 & & \$ 91,000 & ? & \$ 105,000 \\ \hline \begin{array}{l} \text { Variable } \\ \text { mktgiadm.costs }> \end{array} & ? & \$ 3,250 \cup & ? & \$ 4,000 \mathrm{~F} & 30,000 \\ \hline \begin{array}{l} \text { Contribution } \\ \text { margin } \end{array} & \$ 52,000 & ? & ? & \$ 6,000 \mathrm{U} & ? \\ \hline \end{array}$

A) $39,000. B) $45,000. C) $52,000. D) $58,000. A) $39,000. B) $45,000. C) $52,000. D) $58,000.

Upton Company uses a standard cost system for its single product.The following data are available: Actual experience for the current year: $\begin{array}{|l|r|} \hline \text { Purchases of raw materials }(15,000 \text { yards at } \\ \$ 13 \text { per yard) } & \$ 195,000 \\ \text { Raw materials used } & 12,000 \\ &\text { yards}\\ \hline \text { Direct labor costs }(10,200 \text { hours at } \$ 10 \text { per } \\ \text { hour) } & \$ 102,000 \\ \text { Actual variable overhead cost } & \$ 84,150 \\ \hline \text { Units produc ed } & 12,600 \\ &\text { Units}\\ \hline \end{array}$ Standards per unit of product:$\begin{array}{|l|r|} \hline \text { Raw materials } & 1.1 \text { yards at } \$ 15 \text { per yard } \\ \hline \text { Direct labor } & 0.80 \text { hours at } \$ 9.50 \text { per hour } \\ \hline \text { Variable overhead } & \$ 8 \text { per direct labor hour } \\ \hline \end{array}$Required: Compute the following variances for raw materials,direct labor,and variable overhead,assuming that the price variance for materials is recognized at point of purchase: a.Direct materials price variance.b.Direct materials quantity variance.c.Direct labor rate variance.d.Direct labor efficiency variance.e.Variable overhead rate variance.f.Variable overhead efficiency variance.

a.& b.Raw Materials: Materials price var

Which of the following direct labor variances uses the standard hours allowed for the actual number of units produced? \[\begin{array} { | l | c | c | } \hline & \text { Rate } & \text { Efficiency } \\ \hline \text { A. } & \text { Yes } & \text { Yes } \\ \hline \text { B. } & \text { No } & \text { No } \\ \hline \text { C. } & \text { Yes } & \text { No } \\ \hline \text { D. } & \text { No } & \text { Yes } \\ \hline \end{array}\]

A) Option A B) Option B C) Option C D) Option D A) Option A B) Option B C) Option C D) Option D

Based on past experience,Moss Company has developed the following budget formula for estimating its shipping expenses.The company's shipments average 12 lbs.per shipment: Shipping costs = $16,000 + ($0.50 × lbs.shipped).The planned activity and actual activity regarding orders and shipments for the current month are given in the following schedule: \[\begin{array} { | l | r | r | } \hline & \text { Plan } & \text { Actual } \\ \hline \text { Sales orders } & 800 & 780 \\ \hline \text { Shipments } & 800 & 820 \\ \hline \text { Units shipped } & 8,000 & 9,000 \\ \hline \text { Sales } & \$ 120,000 & \$ 144,000 \\ \hline \text { Total pounds shipped } & 9,600 & 12,300 \\ \hline \end{array}\]The actual shipping costs for the month amounted to $21,000.The appropriate monthly flexible budget allowance for shipping costs for the purpose of performance evaluation would be: (CMA adapted)

A) $20,680. B) $20,920. C) $20,800. D) $22,150. A) $20,680. B) $20,920. C) $20,800. D) $22,150.

What is the actual sales revenue? $\begin{array}{|l|r|r|r|r|r|} \hline & \begin{array}{r} \text { Actual } \\ \text { Results } \end{array} & \begin{array}{r} \text { Flexible } \\ \text { Vudget } \end{array} & \begin{array}{r} \text { Flexible } \\ \text { Budget } \end{array} & \begin{array}{r} \text { Variance } \\ \text { Activity } \end{array} & \begin{array}{r} \text { Master } \\ \text { Budget } \end{array} \\ \hline \text { Units } & 13,000 & & ? & 2000 \mathrm{U} & ? \\ \hline \text { Sales revenue } & ? & 13,000 \mathrm{~F} & ? & ? & ? \\ \hline \begin{array}{l} \text { Less: } \end{array} & & & & \\ \hline \begin{array}{l} \text { Variable mfg. } \\ \text { Costs }> \end{array} & \$ 87,750 & & \$ 91,000 & ? & \$ 105,000 \\ \hline \begin{array}{l} \text { Variable } \\ \text { mktgiadm.costs }> \end{array} & ? & \$ 3,250 \cup & ? & \$ 4,000 \mathrm{~F} & 30,000 \\ \hline \begin{array}{l} \text { Contribution } \\ \text { margin } \end{array} & \$ 52,000 & ? & ? & \$ 6,000 \mathrm{U} & ? \\ \hline \end{array}$

A) $156,000. B) $169,000. C) $180,000. D) $191,000. A) $156,000. B) $169,000. C) $180,000. D) $191,000.

Angie Manufacturing uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours.At standard,each unit of product requires one machine-hour to complete.The standard variable overhead is $1.75 per machine-hour and Budgeted Fixed Manufacturing Costs are $300,000 per year.The denominator level of activity is 150,000 machine-hours,or 150,000 units.Actual data for the year were as follows:\[\begin{array} { | l | r | } \hline \text { Actual variable overhead cost } & \$ 211,680 \\ \hline \text { Actual fixed manufacturing overhead cost } & \$ 315,000 \\ \hline \text { Actual machinehours } & 126,000 \\ \hline \text { Units produced } & 120,000 \\ \hline \end{array}\] Required: a.What are the predetermined variable and fixed manufacturing overhead rates for the year? b.Compute the variable overhead rate and efficiency variances for the year. c.Compute the fixed manufacturing overhead budget and volume variances for the year.

a.Predetermined variable overhead rate

Exam 16: Fundamentals of Variance Analysis

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost.TaskMaster has established the following standards for the prime costs of one unit of product. Standard Standard Standard Quantity Price Cost Direct Materials 8 pounds \ 1.80 per pound \ 14.40 Direct Labor .25 hour \ 8.00 per hour 2.00 During November,TaskMaster purchased 160,000 pounds of direct materials at a total cost of $304,000.The total factory wages for November were $42,000,90% of which were for direct labor.TaskMaster manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours.What is the direct labor efficiency variance for November?

(Multiple Choice)

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Question 21

Easton Industries developed the following standards for one of its products: Material 5 teet \ 15if00t \ 75 Labor 10 hours \ 15 hour Total variable cost \ 225 Actual results for September were: Units produced 12,000 Material purchased 40,000 feet for \ 14.25 foot Material used 70,000 teet Direct Labor 119,500 hours at \ 15.10 hour Required: (1)Calculate the following variances: (a)Material purchase price variance. (b)Material quantity variance. (c)Labor rate variance. (d)Labor efficiency variance. (2)Why would it be inappropriate to calculate the Material price variance at the time the material is used;might there be a situation when it might be all right to do so?

(Essay)

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Question 22

The Bartok Company uses a standard cost accounting system and estimates production for the year to be 60,000 units.At this volume,the company's variable overhead costs are $0.50 per direct labor hour.The company's single product has a standard cost of $30.00 per unit.Included in the $30.00 is $13.20 for direct materials (3 yards)and $12.00 of direct labor (2 hours).Production information for the month of March follows: Number of units produced 6,000 Materials purchased (18,500 yards) \ 88,800 Materials used in production bards) 18,500 Variable overhead costs incurred \ 6,380 Fixed overhead costs incurred \ 20,400 Direct labor cost incurred ( \6 .50/hour) \ 75,400 Required: (Be sure to indicate whether the variances are favorable or unfavorable. ) a.Compute the predetermined overhead rate/hr used for the year.b.Compute the budgeted fixed costs for the month.c.Compute the variable overhead spending variance.d.Compute the variable overhead efficiency variance.e.Compute the fixed overhead spending (budget)variance.f.Compute the production volume variance.

(Essay)

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Question 23

Production cost variances are input variances,while sales activity variances are output variances.

(True/False)

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Question 24

The standards for product J42 call for 3.6 feet of a raw material that costs $14.00 per feet.Last month,5,500 feet of the raw material were purchased for $76,175.The actual output of the month was 1,260 units of product J42.A total of 4,800 feet of the raw material were used to produce this output.Required: a.What is the materials price variance for the month? b.What is the materials quantity variance for the month? c.Prepare journal entries to record the purchase and use of the raw material during the month.(All raw materials are purchased on account. )

(Essay)

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Question 25

Which of the following organizational policies is most likely to result in undesirable managerial behavior? (CMA adapted)

(Multiple Choice)

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Question 26

What is the flexible budget contribution margin? Actual Results Flexible Vudget Flexible Budget Variance Activity Master Budget Units 13,000 ? 2000 ? Sales revenue ? 13,000 ? ? ? Less: Variable mfg. Costs > \ 87,750 \ 91,000 ? \ 105,000 Variable mktgiadm.costs > ? \ 3,250\cup ? \ 4,000 30,000 Contribution margin \ 52,000 ? ? \ 6,000 ?

(Multiple Choice)

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Question 27

In general,the direct labor efficiency variance is the responsibility of the:

(Multiple Choice)

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Question 28

The production volume variance is the difference between fixed costs on the flexible budget and the fixed costs on the master budget.

(True/False)

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Question 29

The production volume variance is computed by the difference between the:

(Multiple Choice)

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Question 30

Upton Company uses a standard cost system for its single product.The following data are available: Actual experience for the current year: Purchases of raw materials (15,000 yards at \ 13 per yard) \ 195,000 Raw materials used 12,000 yards Direct labor costs (10,200 hours at \ 10 per hour) \ 102,000 Actual variable overhead cost \ 84,150 Units produc ed 12,600 Units Standards per unit of product: Raw materials 1.1 yards at \ 15 per yard Direct labor 0.80 hours at \ 9.50 per hour Variable overhead \ 8 per direct labor hour Required: Compute the following variances for raw materials,direct labor,and variable overhead,assuming that the price variance for materials is recognized at point of purchase: a.Direct materials price variance.b.Direct materials quantity variance.c.Direct labor rate variance.d.Direct labor efficiency variance.e.Variable overhead rate variance.f.Variable overhead efficiency variance.

(Essay)

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Question 31

Which of the following direct labor variances uses the standard hours allowed for the actual number of units produced? Rate Efficiency A. Yes Yes B. No No C. Yes No D. No Yes

(Multiple Choice)

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Question 32

Shawn Inc.planned to produce 3,000 units of its single product,Megatron,during November.The standard specifications for one unit of Megatron include six pounds of material at $0.30 per pound.Actual production in November was 3,100 units of Megatron.The accountant computed a favorable materials purchase price variance of $380 and an unfavorable materials quantity variance of $120.Based on these variances,one could conclude that: (CMA adapted)

(Multiple Choice)

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Question 33

In the new cost management scheme of things,what are some of the disadvantages of the traditional standard cost system (list at least four)?

(Essay)

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Question 34

Based on past experience,Moss Company has developed the following budget formula for estimating its shipping expenses.The company's shipments average 12 lbs.per shipment: Shipping costs = $16,000 + ($0.50 × lbs.shipped).The planned activity and actual activity regarding orders and shipments for the current month are given in the following schedule: Plan Actual Sales orders 800 780 Shipments 800 820 Units shipped 8,000 9,000 Sales \ 120,000 \ 144,000 Total pounds shipped 9,600 12,300 The actual shipping costs for the month amounted to $21,000.The appropriate monthly flexible budget allowance for shipping costs for the purpose of performance evaluation would be: (CMA adapted)

(Multiple Choice)

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Question 35

What is the actual sales revenue? Actual Results Flexible Vudget Flexible Budget Variance Activity Master Budget Units 13,000 ? 2000 ? Sales revenue ? 13,000 ? ? ? Less: Variable mfg. Costs > \ 87,750 \ 91,000 ? \ 105,000 Variable mktgiadm.costs > ? \ 3,250\cup ? \ 4,000 30,000 Contribution margin \ 52,000 ? ? \ 6,000 ?

(Multiple Choice)

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Question 36

The sales activity variance is the result of a difference between budgeted units sold and actual units sold.

(True/False)

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Question 37

Which one of the following variances is of least significance from a behavioral control perspective? (CMA adapted)

(Multiple Choice)

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Question 38

Angie Manufacturing uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours.At standard,each unit of product requires one machine-hour to complete.The standard variable overhead is $1.75 per machine-hour and Budgeted Fixed Manufacturing Costs are $300,000 per year.The denominator level of activity is 150,000 machine-hours,or 150,000 units.Actual data for the year were as follows: Actual variable overhead cost \ 211,680 Actual fixed manufacturing overhead cost \ 315,000 Actual machinehours 126,000 Units produced 120,000 Required: a.What are the predetermined variable and fixed manufacturing overhead rates for the year? b.Compute the variable overhead rate and efficiency variances for the year. c.Compute the fixed manufacturing overhead budget and volume variances for the year.

(Essay)

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Question 39

A variance can best be described as:

(Multiple Choice)

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Question 40

Production cost variances are input variances,while sales activity variances are output variances.

Which of the following organizational policies is most likely to result in undesirable managerial behavior? (CMA adapted)

In general,the direct labor efficiency variance is the responsibility of the:

The production volume variance is the difference between fixed costs on the flexible budget and the fixed costs on the master budget.

The production volume variance is computed by the difference between the:

Which of the following direct labor variances uses the standard hours allowed for the actual number of units produced? Rate Efficiency A. Yes Yes B. No No C. Yes No D. No Yes

In the new cost management scheme of things,what are some of the disadvantages of the traditional standard cost system (list at least four)?

The sales activity variance is the result of a difference between budgeted units sold and actual units sold.

Which one of the following variances is of least significance from a behavioral control perspective? (CMA adapted)

A variance can best be described as:

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

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