Exam 16: Fundamentals of Variance Analysis

The following information relates to the month of April for The Kennedy Manufacturing Company,which uses a standard cost accounting system. Required: (Be sure to indicate whether the variances are favorable or unfavorable. ) a.What is the variable overhead efficiency variance? b.What is the fixed overhead spending variance? c.What is the fixed production volume variance?

When are the following direct materials variances ideally reported? Quantiy Price A. Purchase Date Purchase Date B. Time of Use Time of Use C. Purchase Date Time of Use D. Time of Use Purchase Date

A debit balance in the labor-efficiency variance account indicates that:

Which variance will be unfavorable due to employees working more hours than allowed for the actual number of units produced?

Fargo Company manufactures special electrical equipment and parts.Eastern employs a standard cost accounting system with separate standards established for each product.A special transformer is manufactured in the Transformer Department.Production volume is measured by direct labor hours in this department and a flexible budget system is used to plan and control department overhead.Standard costs for the special transformer are determined annually in September for the coming year.The standard cost of a transformer was computed at $67.00 as shown below. Direct materials: Iron 5 sheets @\ 2.00 \ 10.00 Copper 3 spools \ 3.00 9.00 Direct labor 4 hours \ \ 7.00 28.00 Variable overhead 4 hours @\ 3.00 12.00 Fixed overhead 4 hours @\ 2.00 Total Overhead rates were based upon normal and expected monthly capacity,both of which were 4,000 direct labor hours.Practical capacity for this department is 5,000 direct labor hours per month.Variable overhead costs are expected to vary with the number of direct labor hours actually used.During October,800 transformers were produced.This was below expectations because a work stoppage occurred at the copper supplier and shipments were delayed.The following costs were incurred in October: Direct materials: Iron: purchased 4,200 sheets, total cost \ 8,750 Used: 4,200 sheets Copper: purchased 2,600 spools, total cost \ 7,890 Used: 2,600 spools Direct labor: 3,400 hours Total payroll: \ 24,080 Required: Compute each of the following variances,showing all your work.Be sure to indicate whether the variances are favorable or unfavorable.a.Direct materials price variance for both iron and copper.b.Direct material efficiency (quantity)variance for both iron and copper.c.Direct labor rate variance.d.Direct labor efficiency variance.

The Rogers 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 (yards) 18,500 Direct labor cost incurred ( \ 6.50/ hour) \ 75,400 Required: (Be sure to indicate whether the variances are favorable or unfavorable. ) a.Compute the direct material price variance. b.Compute the direct material efficiency variance. c.Compute the direct labor price (rate)variance. d.Compute the direct labor efficiency variance.

The Fellowes Company has developed standards for labor.During June,75 units were scheduled and 100 were produced.Data related to labor are: Standard hours allowed 3 hours per unit Standard wages allowed \ 4.00 per hour Actual direct labor 310 hours (total cost \ 1,209 ) What is the labor rate variance for June?

The budget for the month of May was for 9,000 units at a direct materials cost of $15 per unit.Direct labor was budgeted at 45 minutes per unit for a total of $81,000.Actual output for the month was 8,500 units with $127,500 in direct materials and $77,775 in direct labor expense.The direct labor standard of 45 minutes was obtained throughout the month.Variance analysis of the performance for the month of May would show a(n): (CMA adapted)

The Fort Company produces and sells a single product.Standards have been established for the product as follows: Direct materials: 5 pounds @ $3.50 per pound = $17.50 Direct labor: 3 hours @ $5.50 per hour = $16.50 Actual cost and usage figures for the past month follow: Units produced 750 Direct materials used 4,000 pounds Direct materials purchased (4,500 \ 14,400 pounds) Direct labor cost (2,000 hours) \ 11,200 Required: Prepare journal entries to record: a.The purchase of raw materials.b.The usage of raw materials in production.c.The incurrence of direct labor cost.

Both the actual material used and the standard quantity allowed for material is based on the actual output attained.

Jemco Corporation makes automotive engines.For the most recent month,budgeted production was 6,000 engines.The standard power cost is $8.80 per machine-hour.The company's standards indicate that each engine requires 6.1 machine-hours.Actual production was 6,400 engines.Actual machine-hours were 38,730 machine-hours.Actual power cost totaled $350,628.Required: Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable.Show your work!

Data on Gantry Company's direct-labor costs are given below: Standard direct-tabor hours 30,000 Actual direct-labor hours 29,000 Direct-labor effic iency variance-favorable \ 4,000 Direct-labor rate variance-favorable \ 5,800 Total direct labor payroll \ 110,200 What was Gantry's actual direct-labor rate?

The materials price variance is computed by multiplying the difference between the actual price and the standard price by the actual quantity of materials used in production.

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 price (rate)variance for November?

The fixed factory overhead application rate is a function of a predetermined activity level.If standard hours allowed for good output equal this predetermined activity level for a given period,the volume variance will be: (CPA adapted)

In essence,the terms "master budget" and "operating budget" mean the same thing and can be used interchangeably.

Compound Y23Z is used by Overton Corporation to make one of its products.The standard cost of compound Y23Z is $38.70 per ounce and the standard quantity is 4.6 per unit of output.Data concerning the compound in the most recent month appear below: The raw material was purchased on account.Required: a.Record the purchase of the raw material in a journal entry.b.Record the use of the raw material in production in a journal entry.

Which of the following is the most probable reason a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance?

Miller Company planned to produce 3,000 units of its single product,Tallium,during November.The standards for one unit of Tallium specify six pounds of materials at $0.30 per pound.Actual production in November was 3,100 units of Tallium.There was a favorable materials price variance of $380 and an unfavorable materials quantity variance of $120.Based on these variances,one could conclude that: (CMA adapted)

When computing standard cost variances,the difference between actual and standard price multiplied by actual quantity yields a(n): (CMA adapted)