Ralston Corporation makes a product with the following standard costs: \[\begin{array} { | l | c | c | c | } \hline \text { Imputs } & \begin{array} { c } \text { Standard } \\ \text { Quantity } \\ \text { or Hours } \end{array} & \begin{array} { c } \text { Standard } \\ \text { Price } \\ \text { or Rate } \end{array} & \begin{array} { c } \text { Standard } \\ \text { Cost } \\ \text { Per Unit } \end{array} \\ \hline \begin{array} { l } \text { Direct } \\ \text { materials } \end{array} & 6.9 \text { liters } & \begin{array} { c } \$ 5.00 \text { per } \\ \text { liter } \end{array} & \$ 34.50 \\ \hline \text { Direct labor } & 0.3 \text { hours } & \begin{array} { c } \$ 17.00 \text { per } \\ \text { hour } \end{array} & \$ 5.10 \\ \hline \begin{array} { l } \text { Variable } \\ \text { overhead } \end{array} & 0.3 \text { hours } & \begin{array} { c } \$ 6.00 \text { per } \\ \text { hour } \end{array} & \$ 1.80 \\ \hline \end{array}\] The company reported the following results concerning this product in August.$\begin{array}{|lr|} \hline \text { Originally budgeted output } & 8,600 \text { units } \\ \hline \text { Actual output } & 8,400 \text { units } \\ \hline \text { Raw materials used in production } & 58,330 \text { liters } \\ \hline \text { Actual direct labor-hours } & 2,310 \text { hours } \\ \hline \text { Purchases of raw materials } & 62,500 \text { liters } \\ \hline \text { Actual price of raw materials } & \$ 4.90 \text { per liter } \\ \hline \text { Actual direct labor rate } & \$ 17.10 \text { per hour } \\ \hline \text { Actual variable overhead rate } & \$ 5.50 \text { per hour } \\ \hline \end{array}$ The materials price variance is recognized when materials are purchased.Variable overhead is applied on the basis of direct labor-hours.Required: a.Compute the materials quantity variance. b.Compute the materials price variance. c.Compute the labor efficiency variance. d.Compute the direct labor rate variance.e.Compute the variable overhead efficiency variance.f.Compute the variable overhead rate variance.

a.Materials quantity variance = SP(AQ -

When a manager is concerned with monitoring total cost,total revenue,and net profit conditioned upon the level of productivity,an accountant should normally recommend: (CPA adapted) \[\begin{array} { | l | c | c | } \hline & \text { Flexble Buogeting } & \text { Standard Costing } \\ \hline \text { A. } & \text { Yes } & \text { Yes } \\ \hline \text { B. } & \text { Yes } & \text { No } \\ \hline \text { C. } & \text { No } & \text { Yes } \\ \hline \text { D. } & \text { No } & \text { No } \\ \hline \end{array}\]

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

Given the following information in standard costing: \[\begin{array} { | l | l | } \hline \text { Standard } & 16,000 \text { hours at } \$ 4.00 \\ \hline \text { Actual } & 15,800 \text { hours at } \$ 4.20 \\ \hline \end{array}\]What is the labor rate variance?

A) $3,160 favorable. B) $3,160 unfavorable. C) $2,360 favorable. D) $2,360 unfavorable. A) $3,160 favorable. B) $3,160 unfavorable. C) $2,360 favorable. D) $2,360 unfavorable.

Jackson Company uses a standard cost system.The following information pertains to direct labor for product B for the month of October: \[\begin{array} { | l | c | c | } \hline \text { Standard hours allowed for actual production } & 2,000 & \\ \hline \text { Actual rate paid per hour } & \$ 8.40 & \\ \hline \text { Standard rate per hour } & \$ 8.00 & \\ \hline \text { Labor efficiency variance } & \$ 1,600 & \cup \\ \hline \end{array}\]What were the actual hours worked for the month of October?

A) 1,800. B) 1,810. C) 2,190. D) 2,200. A) 1,800. B) 1,810. C) 2,190. D) 2,200.

Danske Company had total underapplied overhead of $15,000.Additional information is as follows: \[\begin{array} { | l | r | } \hline \text { Denominator hours for May } & 15,000 \\ \hline \text { Actual hours worked during May } & 14,000 \\ \hline \text { Standard hours allowed for May } & 12,000 \\ \hline \text { Flexible budget fixed overhead cost } & \$ 45,000 \\ \hline \text { Actual fixed overhead costs for May } & \$ 48,000 \\ \hline \end{array}\] $\begin{array}{|l|l|} \hline \text { Variable Overheact } & \\ \hline \begin{array}{l} \text { Applied based on standard direct labor hours } \\ \text { allowed } \end{array} & \$ 42,000 \\ \hline \begin{array}{l} \text { Budgeted based on standard direct labor hours } \end{array} & 38,000 \\ \hline \text { Fixed Overhead: } & \\ \hline \begin{array}{l} \text { Applied based on standard direct labor hours } \\ \text { allowed } \end{array} & \$ 30,000 \\ \hline \begin{array}{l} \text { Budgeted based on standard direct labor hours } \end{array} & 27,000 \\ \hline \end{array}$ What is the fixed overhead spending (budget)variance for May?

A) $1,000 unfavorable. B) $3,000 unfavorable. C) $2,000 unfavorable. D) $2,000 favorable. A) $1,000 unfavorable. B) $3,000 unfavorable. C) $2,000 unfavorable. D) $2,000 favorable.

What is the master 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) $52,000. B) $47,500. C) $45,000. D) $39,000. A) $52,000. B) $47,500. C) $45,000. D) $39,000.

Photo Corporation makes a product with the following standard costs: \[\begin{array} { | l | c | c | } \hline \text { Imputs } & \begin{array} { c } \text { Stancard Quantity } \\ \text { or Hours } \end{array} & \begin{array} { c } \text { Standard Price } \\ \text { or Rate } \end{array} \\ \hline \text { Direct materials } & 7.8 \text { kilos } & \$ 1.00 \text { per kilo } \\ \hline \text { Direct labor } & 0.4 \text { hours } & \$ 18.00 \text { per hour } \\ \hline \text { Variable overhead } & 0.4 \text { hours } & \$ 3.00 \text { per hour } \\ \hline \end{array}\] The company reported the following results concerning this product in August. $\begin{array}{|l|r|} \hline \text { Actual output } & 8,500 \text { units } \\ \hline \text { Raw materials used in production } & 65,560 \text { kilos } \\ \hline \text { Purchases of raw materials } & 69,000 \text { kilos } \\ \hline \text { Actual direct labor-hours } & 3,410 \text { hours } \\ \hline \text { Actual cost of raw materials purchases } & \$ 75,900 \\ \hline \text { Actual direct labor cost } & \$ 66,495 \\ \hline \text { Actual variable overhead cost } & \$ 9,889 \\ \hline \end{array}$ The company applies variable overhead on the basis of direct labor-hours.The direct materials purchases variance is computed when the materials are purchased.Required: a.Compute the materials quantity variance.b.Compute the materials price variance.c.Compute the labor efficiency variance.d.Compute the direct labor rate variance.e.Compute the variable overhead efficiency variance.f.Compute the variable overhead rate variance.

a.Materials quantity variance = SP(AQ -

What is the production volume variance? \[\begin{array} { l | r | } \hline \text { Actual machine hours } & 840 \\ \hline \text { Standard machine hours allowed } & 900 \\ \hline \text { Denominator activity (machine hours) } & 1,000 \\ \hline \text { Actual fixed overhead costs } & \$ 3,800 \\ \hline \text { Budgeted fixed overhead costs } & \$ 4,000 \\ \hline \text { Predetermined overhead rate ( } \$ 1 \text { variable } + \$ 4 & \$ 5 \\ \text { fixed) } & \\ \hline \end{array}\]

A) $200. B) $400. C) $300. D) $240. A) $200. B) $400. C) $300. D) $240.

The standard unit cost is used in the calculation of which of the following variances? (CPA adapted) $\begin{array}{|c|cc|} \hline & \begin{array}{c} \text { Materials Price } \\ \text { Variance } \end{array} & \begin{array}{c} \text { Materials Usage } \\ \text { Variance } \end{array} \\ \text { A. } & \text { No } & \text { No } \\ \hline \text { B. } & \text { No } & \text { Yes } \\ \hline \text { C. } & \text { Yes } & \text { No } \\ \hline \text { D. } & \text { Yes } & \text { Yes } \\ \hline \end{array}$

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

Exam 16: Fundamentals of Variance Analysis

Ralston Corporation makes a product with the following standard costs: Imputs Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 6.9 liters \ 5.00 per liter \ 34.50 Direct labor 0.3 hours \ 17.00 per hour \ 5.10 Variable overhead 0.3 hours \ 6.00 per hour \ 1.80 The company reported the following results concerning this product in August. Originally budgeted output 8,600 units Actual output 8,400 units Raw materials used in production 58,330 liters Actual direct labor-hours 2,310 hours Purchases of raw materials 62,500 liters Actual price of raw materials \ 4.90 per liter Actual direct labor rate \ 17.10 per hour Actual variable overhead rate \ 5.50 per hour The materials price variance is recognized when materials are purchased.Variable overhead is applied on the basis of direct labor-hours.Required: a.Compute the materials quantity variance. b.Compute the materials price variance. c.Compute the labor efficiency variance. d.Compute the direct labor rate variance.e.Compute the variable overhead efficiency variance.f.Compute the variable overhead rate variance.

(Essay)

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Question 81

Which department is customarily held responsible for an unfavorable materials quantity variance?

(Multiple Choice)

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Question 82

Explain two reasons for preparing a variance analysis.

(Essay)

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Question 83

The following data for November have been provided by Mazzio Corporation,a producer of precision drills for oil exploration: 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!

(Essay)

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Question 84

When a manager is concerned with monitoring total cost,total revenue,and net profit conditioned upon the level of productivity,an accountant should normally recommend: (CPA adapted) Flexble Buogeting Standard Costing A. Yes Yes B. Yes No C. No Yes D. No No

(Multiple Choice)

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Question 85

The standards for product A22G specify 8.2 direct labor-hours per unit at $11.90 per direct labor-hour.Last month 200 units of product A22G were produced using 1,700 direct labor-hours at a total direct labor wage cost of $20,060.Required: a.What was the labor rate variance for the month? b.What was the labor efficiency variance for the month? c.Prepare a journal entry to record direct labor costs during the month,including the direct labor variances.

(Essay)

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Question 86

Explain the difference between operating budgets,financial budgets,and flexible budgets.

(Essay)

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Question 87

A flexible budget adjusts the static budget to reflect the actual activity level achieved during the period.

(True/False)

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Question 88

Given the following information in standard costing: Standard 16,000 hours at \ 4.00 Actual 15,800 hours at \ 4.20 What is the labor rate variance?

(Multiple Choice)

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Question 89

Which of the following statements regarding variances is(are)false? (A)In general and holding all other things constant,an unfavorable variance decreases operating profits. (B)A favorable variance is not always good,and an unfavorable variance is not always bad.

(Multiple Choice)

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Question 90

The data below relate to a product of Bellingham Company.Required: (Be sure to indicate whether the variances are favorable or unfavorable. ) a.Compute the direct material price variance. b.Compute the direct material usage variance. c.Compute the direct labor rate variance. d.Compute the direct labor efficiency variance.

(Essay)

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Question 91

Jackson Company uses a standard cost system.The following information pertains to direct labor for product B for the month of October: Standard hours allowed for actual production 2,000 Actual rate paid per hour \ 8.40 Standard rate per hour \ 8.00 Labor efficiency variance \ 1,600 \cup What were the actual hours worked for the month of October?

(Multiple Choice)

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Question 92

Danske Company had total underapplied overhead of $15,000.Additional information is as follows: Denominator hours for May 15,000 Actual hours worked during May 14,000 Standard hours allowed for May 12,000 Flexible budget fixed overhead cost \ 45,000 Actual fixed overhead costs for May \ 48,000 Variable Overheact Applied based on standard direct labor hours allowed \ 42,000 Budgeted based on standard direct labor hours 38,000 Fixed Overhead: Applied based on standard direct labor hours allowed \ 30,000 Budgeted based on standard direct labor hours 27,000 What is the fixed overhead spending (budget)variance for May?

(Multiple Choice)

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Question 93

What is the master 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 94

Photo Corporation makes a product with the following standard costs: Imputs Stancard Quantity or Hours Standard Price or Rate Direct materials 7.8 kilos \ 1.00 per kilo Direct labor 0.4 hours \ 18.00 per hour Variable overhead 0.4 hours \ 3.00 per hour The company reported the following results concerning this product in August. Actual output 8,500 units Raw materials used in production 65,560 kilos Purchases of raw materials 69,000 kilos Actual direct labor-hours 3,410 hours Actual cost of raw materials purchases \ 75,900 Actual direct labor cost \ 66,495 Actual variable overhead cost \ 9,889 The company applies variable overhead on the basis of direct labor-hours.The direct materials purchases variance is computed when the materials are purchased.Required: a.Compute the materials quantity variance.b.Compute the materials price variance.c.Compute the labor efficiency variance.d.Compute the direct labor rate variance.e.Compute the variable overhead efficiency variance.f.Compute the variable overhead rate variance.

(Essay)

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Question 95

What is the production volume variance? Actual machine hours 840 Standard machine hours allowed 900 Denominator activity (machine hours) 1,000 Actual fixed overhead costs \ 3,800 Budgeted fixed overhead costs \ 4,000 Predetermined overhead rate ( \ 1 variable +\ 4 \ 5 fixed)

(Multiple Choice)

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Question 96

The standard unit cost is used in the calculation of which of the following variances? (CPA adapted) Materials Price Variance Materials Usage Variance A. No No B. No Yes C. Yes No D. Yes Yes

(Multiple Choice)

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Question 97

The intercept of the flexible budget-line is total:

(Multiple Choice)

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Question 98

Megham Company manufactures a single product.The following standards have been developed for it: Direct Material 6 pounds \ 4 pound Direct Labor 2 hours \ 15 hour During May,the following actual activities occurred: Material purchased,12,000 pounds for $45,600;material used in the production of 2,000 units of product,13,000 pounds;direct labor,3,500 hours costing $56,000.Required: (1)Compute the following variances: (a)material quantity variance.(b)labor rate variance.(c)labor efficiency variance.(2)Give one possible explanation for each of the 3 variances computed.

(Essay)

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Question 99

The variable overhead price variance is due to:

(Multiple Choice)

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Question 100

Which department is customarily held responsible for an unfavorable materials quantity variance?

Explain two reasons for preparing a variance analysis.

When a manager is concerned with monitoring total cost,total revenue,and net profit conditioned upon the level of productivity,an accountant should normally recommend: (CPA adapted) Flexble Buogeting Standard Costing A. Yes Yes B. Yes No C. No Yes D. No No

Explain the difference between operating budgets,financial budgets,and flexible budgets.

A flexible budget adjusts the static budget to reflect the actual activity level achieved during the period.

Given the following information in standard costing: Standard 16,000 hours at \ 4.00 Actual 15,800 hours at \ 4.20 What is the labor rate variance?

Which of the following statements regarding variances is(are)false? (A)In general and holding all other things constant,an unfavorable variance decreases operating profits. (B)A favorable variance is not always good,and an unfavorable variance is not always bad.

What is the production volume variance? Actual machine hours 840 Standard machine hours allowed 900 Denominator activity (machine hours) 1,000 Actual fixed overhead costs \ 3,800 Budgeted fixed overhead costs \ 4,000 Predetermined overhead rate ( \ 1 variable +\ 4 \ 5 fixed)

The standard unit cost is used in the calculation of which of the following variances? (CPA adapted) Materials Price Variance Materials Usage Variance A. No No B. No Yes C. Yes No D. Yes Yes

The intercept of the flexible budget-line is total:

The variable overhead price variance is due to:

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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