Exam 10: Standard Costing and Analysis of Direct Costs

Cohlsen Corporation has a favorable materials quantity variance. Which department would likely be asked to explain the cause of this variance?

Alexis Company recently completed 10,600 units of its single product, consuming 32,000 labor hours that cost the firm $480,000. According to manufacturing specifications, each unit should have required 3 hours of labor time at $15.40 per hour. On the basis of this information, determine Alexis's labor rate variance and labor efficiency variance.

The Purchasing Department would normally begin an investigation regarding an unfavorable materials quantity variance.

Rogillo, Inc. had an unfavorable labor efficiency variance and an unfavorable materials quantity variance. Which department might be held accountable for these variances?

Dover Enterprises recently used 14,000 labor hours to produce 7,500 completed units. According to manufacturing specifications, each unit is anticipated to take two hours to complete. The company's actual payroll cost amounted to $158,200. If the standard labor cost per hour is $11, Dover's labor rate variance is:

For the quarter just ended, Bojangles, Inc. reported the following variances in one of its manufacturing departments: Material price variance, U Material quantity variance, F Labor efficiency variance, F Labor rate variance, negligible Machine hours efficiency, F The sum of the favorable variances exceeded the unfavorable materials price variance by a considerable amount. The quality of the output from the department was the same as usual. Bojangles operates very close to a JIT system for materials purchases, with virtually all material acquired during the quarter being used in manufacturing activities. Required: Is there any connection among these variances? If so, explain.

Consider the following statements: I. Behavioral scientists find that perfection standards often discourage employees and result in low worker morale. II. Practical standards are also known as attainable standards. III. Practical standards incorporate a certain amount of inefficiency such as that caused by an occasional machine breakdown. Which of the above statements is (are) true?

Alexis Company recently completed 10,600 units of its single product, consuming 32,000 labor hours that cost the firm $480,000. According to manufacturing specifications, each unit should have required 3 hours of labor time at $15.40 per hour. On the basis of this information, determine Alexis's total labor variance.

A favorable labor efficiency variance is created when:

A favorable labor efficiency variance is created when actual labor hours worked exceed standard hours allowed.

Which of the following correctly lists all the information needed to calculate a labor rate variance?

A statistical control chart is best used for determining:

Variances are computed by taking the difference between which of the following?

Variances are computed by taking the difference between the product cost and standard cost.

Denver Enterprises recently used 14,000 labor hours to produce 7,500 completed units. According to manufacturing specifications, each unit is anticipated to take two hours to complete. The company's actual payroll cost amounted to $158,200. If the standard labor cost per hour is $11, Denver's labor efficiency variance is:

The following events occurred at Crescent Manufacturing (CM), an assembler of engine parts, during May: 1. Because of a stock shortage at its regular supplier, CM had to rely on a new vendor for two purchases of raw material parts. The vendor required CM to pay air-freight charges; however, upon arrival, the company found the goods to be above-average in quality. 2. The local municipality raised its property tax rates by 2%. 3. A flu outbreak on the assembly line forced management to use more experienced, senior personnel to complete production orders on a timely basis. These workers more than made up for lost time. 4. A shoddy maintenance program resulted in an abnormally high number of breakdowns on machine no. 76 and slowed production. 5. The implementation of a new program had positive effects for the company with respect to material usage and worker productivity. Required: Create a table with the following headings: material price variance, material quantity variance, labor rate variance, and labor efficiency variance. Determine which of these variances would be affected by the individual events and whether the variance would be favorable or unfavorable.

Standard costs are said to be useful in performance evaluation. Assume that the standard direct materials cost per unit of finished product is $6 (three pounds at $2 per pound). Required: A. Explain how such a standard can be used to evaluate performance. B. Why is the degree of controllability important when utilizing standard costs to evaluate performance?

One of the most important conditions for the successful use of standard costing is a stable production process.

Quicksilver Company has set the following standards for one unit of product: Direct material Quantity: 6.2 pounds per unit Price per pound: $11 per pound Direct labor Quantity: 6 hours per unit Rate per hour: $23 per hour Actual costs incurred in the production of 2,800 units were as follows: Direct material: $194,350 ($11.50 per pound) Direct labor: $393,750 ($22.50 per hour) All materials purchased were consumed during the period. Required: Calculate the direct-material price and quantity variances, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.

Consider the following information: Direct material purchased and used, 80,000 gallons Standard quantity of direct material allowed for May production, 76,000 gallons Actual cost of direct materials purchased and used, $176,000 Unfavorable direct-material quantity variance, $9,400 The direct-material price variance is: