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

Summerlin Law Offices applies overhead to clients based on direct labor hours. The office manager determined that overhead will be applied at a rate of $25 per direct labor hour. The static budget for the month of November showed an estimated 2,500 direct labor hours would be incurred. During November, 2,800 direct labor hours were actually incurred and actual overhead costs were $58,800. What should be the total overhead cost according to the firm's flexible budget for November?

The flexible budget variance:

Moreland Manufacturing Inc. Moreland Manufacturing Inc. produces and sells stainless steel faucets. In the current year, the company had budgeted for the production and sale of 6,000 faucets but, due to unexpected demand, 7,000 faucets were actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40 per ounce and 15 minutes of assembly time at a cost of $.20 per minute. Actual costs for the production of 7,000 faucets were $41,359.50 for materials (106,050 ounces purchased and used @ $.39 per ounce) and $21,560 for labor (98,000 minutes @ $.22 per minute). Refer to the Moreland Manufacturing Inc. information above. Moreland's direct materials price variance is:

Mystic Falls Inc. Mystic Falls Inc. bottles and sells a popular soft drink. In 2011, the company had expected to sell 1,000,000 bottles but actually bottled and sold 900,000 bottles. The standard direct materials cost for each bottle is $.40 comprised of 10 ounces at a cost of $.04 per ounce. During 2011, 10,000,000 ounces of material were purchased out of which 9,200,000 ounces were used at a cost of $.05 per ounce. Refer to the Mystic Falls Inc. information above. The direct materials price variance for 2011 was:

Mystic Falls Inc. Mystic Falls Inc. bottles and sells a popular soft drink. In 2011, the company had expected to sell 1,000,000 bottles but actually bottled and sold 900,000 bottles. The standard direct materials cost for each bottle is $.40 comprised of 10 ounces at a cost of $.04 per ounce. During 2011, 10,000,000 ounces of material were purchased out of which 9,200,000 ounces were used at a cost of $.05 per ounce. Refer to the Mystic Falls Inc. information above. The direct materials usage variance for 2011 was:

Carlton Corporation Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for the production and sale of 1,000 handbags; however, 900 handbags were actually produced and sold. Each bag has a standard requiring two yards of material at a cost of $4.00 per yard and 1 hour of assembly time at a cost of $9.50 per hour. Actual costs for the production of 900 bags were $7,215 for materials (1,850 yards purchased and used @ $3.90 per yard) and $10,125 for labor (1,125 hours @ $9.00 per hour). Refer to the Carlton Corporation information above. Carlton's direct labor rate variance is:

Carolina Tile Company manufactures and installs industrial tile flooring. In the current year, the company had anticipated producing and installing 50,000 tiles but actually produced installed 65,000 tiles. The standard direct materials cost for each square foot of tile is $5.60 comprised of 2.80 pounds of material at a cost of $2 per pound. During the year, 200,000 pounds of material were purchased out of which 190,000 pounds were used at a cost of $1.85 per pound. Required: Compute each of the following variances. Indicate whether the variance is favorable (F) or unfavorable (U).

Indicate whether each of the following statements is true (T) or false (F).

Paw-Paw Products Paw-Paw Products produces and sells flannel covered dogbeds. In the current year, Paw-Paw had expected to sell 8,000 beds but actually produced and sold 8,500 beds. The following information is available regarding the standard cost to produce a single dogbed: In the current year, 44,000 yards of material were purchased and used at a cost of $1.60 per yard and 365,500 direct labor minutes were incurred at a cost of $.23 per minute. Refer to the Paw-Paw Products information above. The company's direct labor rate variance for the current year is:

Kincaid Ltd. produces and sells leather wallets. In the current year, the company budgeted for the production and sale of 18,000 wallets; however, 21,000 wallets were actually produced and sold. Each wallet has a standard requiring eight square inches of material at a cost of .20 per inch and ten minutes of assembly time at a cost of $.15 per minute. Actual costs for the production of 21,000 wallets were $36,080 for materials (164,000 inches purchased and used @ $.22 per inch) and $36,000 for labor (225,000 minutes @ $.16 per minute). Required: Compute each of the following variances. Indicate whether the variance is favorable (F) or unfavorable (U).

JAX Inc. In early 2012, JAX Inc. had budgeted for the production and sales of 5,000 units at a sales price of $15 per unit. The following information is available regarding the standard cost for each unit: Actual results for 2012 were determined to be as follows: Refer to the JAX Inc. information above. What was JAX Inc.'s direct materials price variance for 2012?

Smith Corporation has a $6,000 favorable flexible budget variance for January. Which of the following statements is true, if January's flexible budget net operating income was $100,000?

Carlton Corporation Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for the production and sale of 1,000 handbags; however, 900 handbags were actually produced and sold. Each bag has a standard requiring two yards of material at a cost of $4.00 per yard and 1 hour of assembly time at a cost of $9.50 per hour. Actual costs for the production of 900 bags were $7,215 for materials (1,850 yards purchased and used @ $3.90 per yard) and $10,125 for labor (1,125 hours @ $9.00 per hour). Refer to the Carlton Corporation information above. Carlton's direct materials price variance is:

JAX Inc. In early 2012, JAX Inc. had budgeted for the production and sales of 5,000 units at a sales price of $15 per unit. The following information is available regarding the standard cost for each unit: Actual results for 2012 were determined to be as follows: Refer to the JAX Inc. information above. What was JAX Inc.'s direct labor rate variance for 2012?

JAX Inc. In early 2012, JAX Inc. had budgeted for the production and sales of 5,000 units at a sales price of $15 per unit. The following information is available regarding the standard cost for each unit: Actual results for 2012 were determined to be as follows: Refer to the JAX Inc. information above. What was JAX Inc.'s direct labor efficiency variance for 2012?

Tulley Manufacturing has an unfavorable direct labor rate variance. Which of the following would be the most likely reason for this variance?

Peterson Inc. uses direct labor hours as the cost driver for variable overhead. Which of the following items does not need to be known, in order to calculate the variable overhead spending variance?

Hayward Inc. Hayward Inc. produces a unique item. Hayward'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: Refer to the Hayward Inc. information above. Hayward's fixed overhead spending variance is:

Bayou Barbecue Inc. bottles and sells barbecue sauce. In the current year, the company had expected to sell 500,000 bottles but actually bottled and sold 600,000 bottles. The standard direct materials cost for each bottle is $.36 comprised of 12 ounces of material at a cost of $.03 per ounce. During the year, 7,800,000 ounces of material was purchased out of which 7,350,000 ounces were used at a cost of $.035 per ounce. Required: Compute each of the following variances. Indicate whether the variance is favorable (F) or unfavorable (U).

Which of the following statements is false regarding task analysis?