Deck 8: Standard Cost Accounting Materials, Labor, and Factory Overhead

Question 1

Alyssa Corporation uses a standard cost system. Direct labor information for Product CER for the month of October is as follows: What are actual hours worked?

A)1,330
B)1,400
C)1,500
D)1,300

Answer 1

C
Labor efficiency variance = (actual number of labor hours worked - standard number of labor hours allowed) x standard labor rate per hour
$ 800 U = (actual number of labor hours worked - 1,400) x $8.00
X =
$12,000
= 1,500 hours
$8

Question 2

Information relating to direct labor for the Newstead Company follow: The labor rate variance is:

A)$2,800 unfavorable
B)$2,700 unfavorable
C)$4,600 unfavorable
D)$1,800 unfavorable

Answer 2

A
Labor rate variance = (Actual labor rate per hour - standard labor rate per hour) x actual number of hours worked.
Labor rate variance = ($9.50* - $9.00) x 5,600
Labor rate variance = $2,800 U (because actual was in excess of standard)
* Actual labor rate per hour = $53,200 / 5,600 = $9.50

Question 3

Factors to be considered in setting materials standards include all of the following except:

A)Trend of prices of raw materials.
B)Historical costs.
C)Time necessary to perform tasks.
D)New production processes or market developments.

Answer 3

C
Historical costs are studied to gain familiarity with the materials standard, however, price trends, market developments and new production processes must be considered as well too. Time necessary to perform tasks would be considered in setting labor standards.

Question 4

Characteristics of ideal standards include all of the following except:

A)They generally give rise to unfavorable variances.
B)They may cause personnel to become discouraged.
C)They take into account normal waste and spoilage.
D)They provide a maximum objective for which to strive to improve efficiency.

Question 5

Factors to be considered in setting labor standards include all of the following except:

A)Impact of negotiations with labor unions.
B)The learning effect.
C)Results of engineers' time studies.
D)The purchasing manager's estimate of suppliers' prices.

Question 6

The materials quantity variance, in a standard cost system, is the:

A)Difference between the actual and standard quantities.
B)Difference between the actual and standard quantities multiplied by the actual unit price.
C)Difference between the actual quantity used and the actual quantity purchased multiplied by the standard unit price.
D)Difference between the actual and standard quantities multiplied by the standard unit price.

Question 7

What type of direct material variances for price and quantity will arise if the actual number of pounds of materials used exceeds standard pounds allowed but actual cost was less than standard cost?

Question 8

Which of the following terms best identifies the function of standard costs where any deviation from standards can be quickly detected and responsibility pinpointed so appropriate action may be taken?

A)Management by exception
B)Contribution approach
C)Marginal costing
D)Standardized accounting system

Question 9

When performing input-output variance analysis in standard costing, "standard hours allowed" is a means of measuring:

A)Standard output at standard hours.
B)Actual output at standard hours.
C)Standard output at actual hours.
D)Actual output at actual hours.

Question 10

Ben's Climbing Gear, Inc. has direct material costs as follows: What was Ben's standard quantity of material allowed?

A)$18,000
B)$24,000
C)$20,000
D)$22,000

Question 11

When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity yields:

A)Combined price--quantity variance.
B)Price variance.
C)Volume variance.
D)Mix variance.

Question 12

The actual hourly rate paid above or below the standard hourly rate, multiplied by the actual number of hours worked is the:

A)Labor rate variance.
B)Labor efficiency variance.
C)Labor usage variance.
D)Labor direct variance.

Question 13

A manufacturer generally wants to set a standard that:

A)Can be achieved only under the most efficient operating conditions.
B)Is high enough to provide motivation and promote efficiency, but is still attainable.
C)Makes no allowance for normal was or spoilage.
D)None of these is correct.

Question 14

The purpose of standard costing is to:

A)Determine optimal production level for a given period.
B)Eliminate the need for subjective decisions by management.
C)Control costs.
D)Allocate cost with more accuracy.

Question 15

Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased. Information for raw materials for Product RBI for the month of October follows: What is the materials quantity variance?

A)$175 unfavorable
B)$165 unfavorable
C)$175 favorable
D)$165 favorable

Question 16

An unfavorable labor efficiency variance is the:

A)Number of actual hours worked in excess of the standard hours allowed multiplied by the standard labor rate.
B)Number of actual hours worked in excess of the standard hours allowed multiplied by the actual labor rate.
C)The number of actual hours worked below the standard hours allowed multiplied by the standard labor rate.
D)Number of actual hours multiplied by the difference in the actual and standard labor rates.

Question 17

Earl Company's direct labor costs for the month of January follow: What was Earl's standard direct labor rate?

A)$6.50
B)$6.60
C)$6.16
D)$6.40

Question 18

Woodside Company manufactures tables with vinyl tops. The standard material cost for the vinyl used per Style-R table is $7.20 based on 8 square feet of vinyl at a cost of $.90 per square foot. A production run of 1,000 tables in January resulted in usage of 8,300 square feet of vinyl at a cost of $.85 per square foot, a total cost of $7,055. The materials quantity variance resulting from the above production run was:

A)$255 favorable.
B)$255 unfavorable.
C)$270 unfavorable.
D)$270 favorable.

Question 19

Information relating to direct labor for the Newstead Company follow: The labor efficiency variance is:

A)$2,800 unfavorable
B)$1,900 unfavorable
C)$4,600 unfavorable
D)$1,800 unfavorable

Question 20

RHO Company began its operations on January 1 and produces a single product that sells for $10.25 per unit. Standard capacity is 80,000 units per year. The 80,000 units were produced and 70,000 units were sold during the year. Manufacturing costs and selling and administrative expenses follow: What is the standard cost of manufacturing a unit of product?

A)$6.00
B)$6.50
C)$5.00
D)$5.50

Question 21

Andrews Corporation purchased 3,000 gallons of raw materials for $9,200. The standard price is $3.00 per gallon. If Andrews records the price variance at the earliest possible time, the entry to record the purchase of the material is:

Question 22

In a standard cost system,when the materials price variance is recorded at the time the material is purchased, the materials purchase price variance is obtained by multiplying the:

A)Actual price by the difference between actual quantity purchased and standard quantity used.
B)Actual quantity purchased by the difference between actual price and standard price.
C)Standard price by the difference between standard quantity purchased and standard quantity used.
D)Standard quantity purchased by the difference between actual price and standard price.

Question 23

The direct labor costs for Boundary Company follow: What was Boundary's standard direct labor rate?

A)$ 11.95
B)$ 11.49
C)$ 11.60
D)$ 12.00

Question 24

If the total materials variance (actual cost of materials used compared with the standard cost of the standard amount of materials required) for a given operation is favorable, why must this variance be further evaluated as to price and usage?

A)There is no need to further evaluate the total materials variance if it is favorable.
B)Generally accepted accounting principles require that all variances be analyzed in three stages.
C)All variances must appear in the annual report to equity owners for proper disclosure.
D)It is done so that management can evaluate the efficiency of the purchasing and production functions.

Question 25

Which of the following is not likely to have caused a materials price variance?

A)The vendor from whom we always bought component XYZ closed and we found a new one.
B)One of the workers inadvertently cut several pieces of steel to the wrong length.
C)We started using a higher grade of lumber in our process.
D)Higher oil prices have increased the costs of shipping the ingredients to us.

Question 26

Taking appropriate action on variances includes all of the following except:

A)Ignoring the cause of favorable variances.
B)Revising the standard because it was set incorrectly.
C)Improving the manufacturing process.
D)Looking for new suppliers.

Question 27

Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased. Information for raw materials for Product RBI for the month of October follows: What is the entry to record the purchase of materials?

Question 28

PHI Company began its operations on January 1 and produces a single product that sells for $35.00 per unit. 5,000 units were produced and 4,000 units were sold during the year. Standard costs per unit follow: What is entry to record the finished goods?

Question 29

Earl Company's direct labor costs for the month of January follow: What was Earl's direct labor efficiency variance?

A)$6,500 favorable
B)$6,400 unfavorable
C)$1,800 favorable
D)$6,400 favorable

Question 30

What is the normal year-end treatment of immaterial variances recognized in a cost accounting system utilizing standards?

A)Reclassified to deferred charges until all related production is sold
B)Closed to cost of goods sold in the period in which they arose
C)Allocated among cost of goods manufactured and ending work in process inventory
D)Capitalized as a cost of ending finished goods inventory

Question 31

The following information pertains to Genie Company: What is the entry to record the direct labor cost and variances?

Question 32

To effectively use variances to improve operations, management should take the following steps except:

A)Taking appropriate action to follow up on variances.
B)Breaking down the total variance by usage and price.
C)Adding variances together to determine the impact on financial statements.
D)Analyzing cause and effect of both favorable and unfavorable variances.

Question 33

How should an efficiency variance that is material in amount be treated at the end of an accounting period?

A)Reported as a deferred charge or credit
B)Allocated among work in process inventory, finished goods inventory, and cost of goods sold
C)Charged or credited to cost of goods manufactured
D)Allocated among cost of goods manufactured, finished goods inventory, and cost of goods sold

Question 34

The following information pertains to Genie Company: What is the entry to record the direct materials cost and variances, assuming that the price variance is recorded when the materials are put into production?

Question 35

Bobby's Burger Place monitors its variances on an hourly basis. It is not uncommon for Bobby to send workers home early when which of the following variances indicates that he has over-scheduled the shift?

A)Unfavorable labor efficiency variance.
B)Favorable labor rate variance.
C)Unfavorable materials quantity variance.
D)Favorable labor efficiency variance.

Question 36

Information relating to direct labor for the Newstead Company follow: The entry to record the direct labor cost is:

Question 37

If a company follows a practice of isolating variances at the earliest point in time, what would be the appropriate time to isolate and recognize a direct material price variance?

A)When material is purchased
B)When material is used in production
C)When purchase order is originated
D)When material is issued

Question 38

Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased. Information for raw materials for Product RBI for the month of October follows: What is the materials purchase price variance?

A)$390 favorable
B)$390 unfavorable
C)$400 favorable
D)$400 unfavorable

Question 39

Standard costing will produce the same income before extraordinary items as actual costing when standard cost variances are assigned to:

A)Work in process and finished goods inventories.
B)An income or expense account.
C)Cost of goods sold and inventories.
D)Cost of goods sold.

Question 40

Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased. Information for raw materials for Product RBI for the month of October follows: What is the entry to record material usage?

Question 41

Information on Shonda Company's factory overhead costs follows: What is the factory overhead variance?

A)$4,500 unfavorable
B)$4,500 favorable
C)$2,500 unfavorable
D)$2,500 favorable

Question 42

The following information pertains to the Braun Company for March: Using the four-variance method of factory overhead variance analysis, what is the spending variance?

A)$1,200 unfavorable
B)$200 unfavorable
C)$1,000 favorable
D)$200 favorable

Question 43

Elgin Company's budgeted fixed factory overhead costs are $50,000 per month plus a variable factory overhead rate of $4.00 per direct labor hour. The standard direct labor hours allowed for October production were 20,000. An analysis of the factory overhead indicates that in October Elgin had an unfavorable controllable variance of $1,500 and a favorable volume variance of $500. Elgin uses a two-variance analysis of overhead variances. The actual factory overhead incurred in October is:

A)$126,500.
B)$128,000.
C)$128,500.
D)$131,500.

Question 44

In a four-variance method analyzing factory overhead, the variable factory overhead efficiency variance measures:

A)The effect of differences in the actual variable factory overhead rate and the standard variable factory overhead rate.
B)The difference in the actual hours incurred and standard hours allowed for a given level of production.
C)The difference between actual and applied variable factory overhead.
D)The difference between actual variable factory overhead and budgeted variable factory overhead.

Question 45

The data below relate to the month of April for Monroe, Inc., which uses a standard cost system and a two-variance analysis of factory overhead: What was Monroe's volume variance for April?

A)$187.50 favorable
B)$187.50 unfavorable
C)$437.50 favorable
D)$437.50 unfavorable

Question 46

In a two-variance system for analyzing factory overhead, a favorable volume variance could be caused by:

A)The top salesman leaving the company.
B)Receiving more orders than anticipated.
C)A machine breakdown.
D)A work slow-down by workers.

Question 47

The following information pertains to the Braun Company for March: Using the four-variance method of factory overhead variance analysis, what is the efficiency variance?

A)$1,200 unfavorable
B)$200 unfavorable
C)$1,000 favorable
D)$200 favorable

Question 48

A company uses a two-variance analysis for overhead variances, controllable and volume. The volume variance is the difference between the factory overhead applied at standard and:

A)Total factory overhead per the flexible budget.
B)Actual factory overhead incurred.
C)Total factory overhead per the master budget.
D)Fixed overhead incurred.

Question 49

The fixed overhead application rate is a function of a predetermined "normal" activity level. If standard hours allowed for good output equal this "normal" activity level for a given period, the volume variance will be:

A)Zero.
B)Favorable.
C)Unfavorable.
D)Either favorable or unfavorable depending on the budgeted overhead.

Question 50

Which of the following is not likely to cause a labor efficiency variance?

A)We produced more units than were budgeted.
B)There was a flu outbreak and workers had to cover unfamiliar positions.
C)We purchased materials that were poor in quality.
D)One of the supervisors discovered a way to streamline a process.

Question 51

The data below relate to the month of April for Monroe, Inc., which uses a standard cost system and a two-variance analysis of factory overhead: What was Monroe's controllable variance for April?

A)$1,100 favorable
B)$1,100 unfavorable
C)$575 favorable
D)$575 unfavorable

Question 52

Overapplied factory overhead would result if:

A)Factory overhead costs incurred were greater than standard costs charged to production.
B)The plant was operated at less than normal capacity.
C)Factory overhead costs incurred were less than standard costs charged to production.
D)Factory overhead costs incurred were unreasonably large in relation to units produced.

Question 53

Elgin Company's budgeted fixed factory overhead costs are $50,000 per month plus a variable factory overhead rate of $4.00 per direct labor hour. The standard direct labor hours allowed for October production were 20,000. An analysis of the factory overhead indicates that in October, Elgin had an unfavorable budget (controllable) variance of $1,500 and a favorable volume variance of $500. Elgin uses a two-variance analysis of overhead variances. The applied factory overhead in October is:

A)$129,500.
B)$128,000.
C)$130,000.
D)$130,500.

Question 54

All of the following are features of a standard cost system except:

A)Standards should not be adjusted.
B)Standards provide incentives for workers to keep costs in line.
C)Comparisons between actual and standard are more effective than comparisons between actual costs of the current period and those of the prior period.
D)A standard cost system focuses management attention on materials prices and usages.

Question 55

The Johns Company budgeted factory overhead at $125,000 for the period for Department A based on a budgeted volume of 50,000 direct labor hours. At the end of the period, the factory overhead control account for Department A had a balance of $126,000. The actual (and allowed) direct labor hours were 52,000. What was the over- or underapplied factory overhead for the period?

A)$6,500 underapplied
B)$6,500 overapplied
C)$4,000 underapplied
D)$4,000 overapplied

Question 56

Donellan Company has a standard and flexible budgeting system and uses a two-variance analysis of factory overhead. Selected data for the February production activity follows: The controllable variance for February is:

A)$5,000 favorable.
B)$5,000 unfavorable.
C)$7,000 favorable.
D)$7,000 unfavorable.

Question 57

All of the following are features of a standard cost system except:

A)Standards change as conditions change.
B)Variances may be determined more often than monthly to allow for more timely action.
C)Standards are based on estimates.
D)The company determines the actual cost of manufacturing a unit.

Question 58

Under normal circumstances, a purchasing manager who buys poor quality materials because they were cheaper could potentially be responsible for causing all of the following variances except a(n):

A)Favorable purchase price variance.
B)Unfavorable materials quantity variance.
C)Unfavorable purchase price variance.
D)Unfavorable labor efficiency variance.

Question 59

One possible explanation for a company that experiences a favorable labor efficiency variance, but an unfavorable labor rate variance could be:

A)The company paid the workers overtime.
B)The company hired more experienced workers.
C)The company purchased materials that were hard to work with.
D)The workers "goofed around" and wasted time.

Question 60

If a company uses a two-variance analysis for overhead variances and uses a predetermined rate for absorbing manufacturing overhead, the volume variance is the:

A)Underapplied or overapplied variable cost element of overhead.
B)Underapplied or overapplied fixed cost element of overhead.
C)Difference in budgeted costs and actual costs of fixed overhead items.
D)Difference in budgeted costs and actual costs of variable overhead items.

Question 61

VanDerPloeg, Inc. produces farm equipment at several plants. The business is seasonal and cyclical in nature. The accountant for the Denver plant uses flexible budgeting to help the plant management control operations. Data for Denver follows:
a.Compute the fixed and variable factory overhead application rates per unit of production.
b.Assuming VanDerPloeg uses the two-variance method of analyzing factory overhead, compute the two overhead variances.
c.Prepare a flexible budget performance report for January comparing actual and budgeted costs of all cost elements for the actual activity for the month.
d.Prove the factory overhead budget variance from the above report.

Question 62

In a three-variance method of factory overhead analysis, the variance that indicates that the volume of production was more or less than budgeted is the:

A)Budget variance.
B)Capacity variance.
C)Spending variance.
D)Efficiency variance.

Question 63

The following information pertains to the Braun Company for March: Using the four-variance method of factory overhead variance analysis, what is the volume variance?

A)$1,200 favorable
B)$1,800 unfavorable
C)$3,000 favorable
D)$1,200 unfavorable

Question 64

Fill in the missing figures below:

Question 65

Which of the following correctly demonstrates the comparison of the four-variance method of factory overhead analysis to the two-variance method of factory overhead analysis?

A)The sum of the spending, efficiency and budget variances in the four-variance method is equal to the volume variance in the two-variance method.
B)The sum of the volume and efficiency variances in the four-variance method is equal to the volume variance in the two-variance method.
C)The volume variance in the four-variance method is equal to the volume variance in the two-variance method.
D)The sum of the budget and volume variances in the four-variance method is equal to the volume variance in the two-variance method.

Question 66

The following information pertains to the Braun Company for March: Using the four-variance method of factory overhead variance analysis, what is the budget variance?

A)$1,200 favorable
B)$1,800 unfavorable
C)$3,000 favorable
D)$1,200 unfavorable

Question 67

Palek Company has adopted the following standards: Palek's January budget was based on normal volume of 40,000 standard labor hours. During January, Palek produced 7,900 units with records indicating the following data: Assuming Palek uses the four-variance method of analyzing factory overhead, compute the following variances for the month of January and indicate whether each is favorable or unfavorable:
a.Factory overhead spending variance
b.Factory overhead efficiency variance
c.Factory overhead budget variance
d.Factory overhead volume variance

Question 68

Which of the following correctly demonstrates the comparison of the four-variance method of factory overhead analysis to the two-variance method of factory overhead analysis?

A)The sum of the spending and budget variances in the four-variance method is equal to the controllable variance in the two-variance method.
B)The sum of the budget, spending and efficiency variances in the four-variance method is equal to the controllable variance in the two-variance method.
C)The sum of the spending, efficiency and volume variances in the four-variance method is equal to the controllable variance in the two-variance method.
D)The budget variance in the four-variance method is equal to the controllable variance in the two-variance method.

Question 69

In a three-variance method of factory overhead analysis, the variance that measures the difference between the factory overhead applied and the actual hours worked multiplied by the standard rate is the:

A)Budget variance.
B)Capacity variance.
C)Spending variance.
D)Efficiency variance.

Question 70

The following information is available from the Tomoto Company: Assuming that Tomoto uses a three-variance analysis of overhead variances, what is the budget (spending) variance?

A)$600 favorable
B)$600 unfavorable
C)$450 favorable
D)$450 unfavorable

Question 71

Hernandez Corporation uses a standard cost system and has established the following standards for one unit of product: During October, the company purchased 240,000 pounds of material at a total cost of $588,000. The total factory wages for October were $49,400. During October, 21,000 units of product were manufactured using 211,000 pounds of material and 5,200 direct labor hours. Material quantity and price variances are recorded when materials are used.
a.Compute the material quantity and labor efficiency variances.
b.Compute the material price and labor rate variances.Show whether each of the above variances was either favorable or unfavorable.

Question 72

Palek Company has adopted the following standards: Palek's January budget was based on normal volume of 40,000 standard labor hours. During January, Palek produced 7,900 units with records indicating the following data: Assuming Palek uses the three-variance method of analyzing factory overhead, compute the following variances for the month of January and indicate whether each is favorable or unfavorable:
a.Factory overhead budget variance
b.Factory overhead capacity variance
c.Factory overhead efficiency variance

Question 73

In the three-variance method of factory overhead analysis, what standard cost variance represents the difference between actual factory overhead incurred and budgeted factory overhead based on actual hours worked?

A)Volume variance
B)Efficiency variance
C)Budget (spending) variance
D)Quantity variance

Question 74

The normal capacity of the Malloy Company is 20,000 direct labor hours and 10,000 units per month. A finished unit requires 15 pounds of materials at an estimated cost of $1.00 per pound. The estimated cost of labor is $12.00 per hour. It is estimated that overhead for a month will be $15,000.
During the month of June, 19,000 direct labor hours were worked at an average rate of $11.50 an hour. The number of units produced was 9,000, using all 132,000 pounds of material that were purchased at a cost of $1.05 per pound.
a.Prepare a standard cost summary showing the standard unit cost.
b.Calculate the material and labor variances.
c.Prepare entries in general journal form to charge materials and labor to work in process. Indicate whether the variances are favorable or unfavorable.

Question 75

The Jurcevich Corporation manufactures and sells a single product. A standard cost system is used by the company. The standard factory overhead cost for a unit of product is as follows: The overhead cost per unit was calculated for the year based on a 60,000 unit volume as follows: The charges to the manufacturing department for April are given below for the 5,200 units produced: (a) Assuming Jurcevich uses the two-variance method of analyzing factory overhead, calculate the following variances from standard cost:
(1)
Factory overhead controllable variance
(2)
Factory overhead volume variance
(b) Prepare the journal entry to apply factory overhead to work in process and record the variances.