Exam 10: Variance Analysis A Tool for Cost Control and Performance Evaluation

Armstrong Products Armstrong Products applies fixed overhead at a rate of $3 per direct labor hour. Each unit produced is expected to take 2 direct labor hours. Armstrong expected production in the current year to be 10,000 units but 9,000 units were actually produced. Actual direct labor hours were 19,000 and actual fixed overhead costs were $62,000. Refer to the Armstrong Products information above. Armstrong's fixed overhead volume variance is:

GEO Inc. has an unfavorable direct materials price variance.

Chilé Products Ltd. Chilé Products Ltd. bottles and sells hot pepper sauce. In 2012, the company had expected to sell 65,000 bottles but actually bottled and sold 80,000 bottles. The standard direct materials cost for each bottle is $.24 comprised of .60 ounces at a cost of $.40 per ounce. During 2012, 52,000 ounces of material were purchased out of which 46,000 ounces were used at a cost of $.37 per ounce. Refer to the Chilé Products Ltd. information above. The direct materials usage variance for 2012 was:

At the end of the year, your company had the following variances: Give at least one possible cause for each of the variances and discuss the possible relationships between them.

Managers who properly apply the concept of "management by exception" will:

Latimer Textiles Inc. Latimer Textiles Inc. incurred actual variable overhead expenses of $27,000 in the current year for the production of 8,000 units. Variable overhead was applied at a rate of $1.75 per direct labor hour and 2 direct labor hours were budgeted for each unit. The company used 17,400 direct labor hours for production. Refer to the Latimer Textiles Inc. information above. What was Latimer's variable overhead efficiency variance?

Byron Products has a favorable materials price variance. Which of the following would be the least likely reason for this variance?

Trina makes handmade leis in Hawaii which she sells to local tourists. She anticipates August to be a busy month with the sale of 500 leis. She has prepared the following static budget for August: During August, Trina actually produced and sold 400 leis. What should be Trina's net operating income in August based on a flexible budget?

Lancaster Ltd. produces a unique item. Lancaster's management team wishes to perform a variance analysis on its fixed overhead. Fixed overhead is applied to units produced using direct labor hours as its cost driver. The company's managerial accountant has compiled the following information: Required:

Answer the following questions:

Martin Corporation had an unfavorable sales price variance of $4,800 for 2012. Martin had budgeted for sales of 10,000 units at a sales price of $5 each. Actual sales in 2012 totaled 12,000 units. What was the actual sales price per unit?

Atkinson Landscaping Atkinson Landscaping applies variable overhead based on direct labor hours. At the beginning of the current year, Atkinson had estimated the following: During the year, 11,000 units were produced using a total of 27,200 direct labor hours and actual overhead costs were $60,000. Refer to the Atkinson Landscaping information above. Atkinson's variable overhead efficiency variance for the year is:

Which of the following statements is true regarding the budgeted cost for direct materials?

Meow Products Ltd. Meow Products Ltd. produces and sells scratching posts for cats. In the current year, the company had expected to sell 12,000 posts but actually produced and sold 10,000 posts. The following information is available regarding the standard cost to produce a single post: In the current year, 38,000 feet of material were purchased out of which 35,000 feet were used at a cost of $1.55 per foot, and 160,000 direct labor minutes were incurred at a cost of $.32 per minute. Refer to the Meow Products Ltd. information above. The company's direct labor efficiency variance for the current year is:

In most companies, machines break down occasionally and employees are often less than perfect. Which type of standard acknowledges these characteristics when determining the standard cost of a product?

A budget for a single unit of a product or service is called as a:

Which of the following statements is true regarding variance analysis in the modern manufacturing environment?

Hoppe Inc. manufactures widgets. Management has determined that each widget has a standard materials cost of $3.50 when 2.5 ounces of raw material at a cost of $1.40 per ounce are used. The static budget for the month of December showed an estimated production of 4,000 widgets in December. During December, 4,300 widgets were actually produced. The actual cost for each widget was $3.60 when 2.25 ounces of raw material at a cost of $1.60 per ounce were purchased and used. What should be the total direct materials cost according to Hoppe's flexible budget for December?

Washington Inc. has an unfavorable fixed overhead spending variance. Which of the following would be the most likely reason for this variance?

Dabney Inc. has a favorable direct labor efficiency variance. Which of the following would be the most likely reason for this variance?