Exam 16: Fundamentals of Variance Analysis

Which of these variances is least significant for cost control?

The following information summarizes the standard cost for producing one metal tennis racket frame at Spaulding Industries.In addition,the variances for one month's production are given.Assume that all inventory accounts have zero balances at the beginning of the month. Variances: Material price 244.75 unfavorable Material quantity 500.00 unfavorable Labor rate 520.00 favorable Labor efficiency 2,080.00 unfavorable What was the actual price paid for the direct material during the month,assuming all materials purchased were put into production?

The Norris 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: Prepare the journal entries to record the following: a.Purchase and use of direct materials (Assume materials are used as purchased and no inventory is maintained).b.Recognition of direct labor.

The Fox 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: Prepare the journal entries to record the following: a.Incurring actual overhead.b.Application of overhead to production.c.Closing of overhead accounts and recognizing variances.d.Transferring production to finished goods.

If the total materials variance for a given operation is favorable,why must this variance be further evaluated as to price and usage?

In the general model,an efficiency variance is calculated as:

Pure Corporation makes a product with the following standard costs: Imputs Standard Quantiy or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 4.3 pounds \ 6.00 per pound \ 25.80 Direct labor 0.7 hours \ 20.00 per hour \ 14.00 Variable overhead 0.7 hours \ 2.00 per hour \ 1.40 The company reported the following results concerning this product in September. Originally budgeted output 1,900 units Actual output 1,700 units Raw materials used in production 7,210 pounds Purchases of raw materials 7,600 pounds Actual direct labor-hours 1,260 hours Actual cost of raw materials purchases \ 43,320 Actual direct labor cost \ 25,578 Actual variable overhead cost \ 2,394 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.