Deck 10: Standard Costs and Variances

Question 1

When more hours of labor time are necessary to complete a job than the standard allows, the labor efficiency variance is unfavorable.

Answer 1

True

Question 2

The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the variable part of the predetermined overhead rate.

Answer 2

True

Question 3

A quantity standard indicates how much of an input should be used to make a unit of product or provide a unit of service.

Answer 3

True

Question 4

If variable manufacturing overhead is applied based on direct labor-hours, it is impossible to have a favorable labor rate variance and unfavorable variable overhead rate variance for the same period.

Question 5

When the materials price variance is recorded at the time of purchase, raw materials are recorded as inventory at standard cost.

Question 6

The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the fixed part of the predetermined overhead rate.

Question 7

In general, the production manager is responsible for the materials price variance.

Question 8

If skilled workers with high hourly rates of pay are given duties that require little skill and call for lower hourly rates of pay, this will result in a favorable labor rate variance.

Question 9

The labor efficiency variance is labeled favorable (F) if the actual hours used is less than the standard hours allowed for the actual output.

Question 10

The standard labor rate per hour should not include any employment taxes.

Question 11

The variable overhead efficiency variance does not actually measure how efficiently variable manufacturing overhead resources were used.

Question 12

The standard price per unit for direct materials should reflect the final, delivered cost of the materials.

Question 13

An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period.

Question 14

If demand is insufficient to keep everyone busy and workers are not laid off, an unfavorable (U) variable overhead efficiency variance often will be a result unless managers build excessive inventories.

Question 15

The materials price variance is computed based on the amount of materials purchased during the period.

Question 16

If the actual hourly rate is greater than the standard hourly rate, the labor rate variance is labeled unfavorable (U).

Question 17

The standard quantity or standard hours allowed refers to the amount of the input that should have been used to produce the actual output of the period.

Question 18

Material price variances are often isolated at the time materials are purchased, rather than when they are placed into production, to facilitate earlier recognition of variances.

Question 19

If demand is insufficient to keep everyone busy and workers are not laid off, a favorable (F) labor efficiency variance often will be a result.

Question 20

The labor rate variance measures the difference between the actual hourly rate and the standard hourly rate, multiplied by the standard hours allowed for the actual output.

Question 21

Poorly trained workers could have an unfavorable effect on which of the following variances?

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 22

In the Excel spreadsheet approach in Appendix 10B in the text, each variance has its own clearing account that appears on the right-hand side of the "=" sign. This enables us to record all favorable variances as increases to their respective clearing accounts and all unfavorable variances as decreases to their accounts.

Question 23

Magno Cereal Corporation uses a standard cost system for its "crunchy pickle" cereal. The materials standard for each batch of cereal produced is 1.4 pounds of pickles at a standard cost of $3.00 per pound. During the month of August, Magno purchased 78,000 pounds of pickles at a total cost of $253,500. Magno used all of these pickles to produce 60,000 batches of cereal. What is Magno's materials quantity variance for August?

A) $1,500 Unfavorable
B) $18,000 Favorable
C) $19,500 Unfavorable
D) $54,000 Unfavorable

Question 24

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will be:

A) favorable.
B) unfavorable.
C) zero.
D) either favorable or unfavorable.

Question 25

The following labor standards have been established for a particular product: The following data pertain to operations concerning the product for the last month:
What is the labor efficiency variance for the month?

A) $47,779 Favorable
B) $47,779 Unfavorable
C) $43,335 Favorable
D) $44,619 Favorable

Question 26

An unfavorable materials quantity variance indicates that:

A) actual usage of material exceeds the standard material allowed for output.
B) standard material allowed for output exceeds the actual usage of material.
C) actual material price exceeds standard price.
D) standard material price exceeds actual price.

Question 27

Bailey Corporation manufactures orange safety suits for road workers. The following information relates to the corporation's purchases and use of material for April: The company's materials price variance for April was $3,000 Favorable. Its materials quantity variance for April was $5,000 Favorable. What does the company use as a standard price per yard of material for its safety suits?

A) $5.75 per yard
B) $6.50 per yard
C) $6.25 per yard
D) $6.00 per yard

Question 28

Suver Corporation has a standard costing system. The following data are available for June: The actual price per pound of direct materials purchased in June was:

A) $6.10 per pound
B) $5.90 per pound
C) $6.25 per pound
D) $6.30 per pound

Question 29

The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month:
What is the materials price variance for the month?

A) $3,141 Unfavorable
B) $2,025 Unfavorable
C) $8,600 Unfavorable
D) $8,725 Unfavorable

Question 30

The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month:
What is the materials quantity variance for the month?

A) $9,940 Unfavorable
B) $15,351 Unfavorable
C) $14,484 Unfavorable
D) $10,535 Unfavorable

Question 31

Suver Corporation has a standard costing system. The following data are available for June: The actual price per pound of direct materials purchased in June was:

A) $6.88 per pound
B) $7.00 per pound
C) $7.10 per pound
D) $7.12 per pound

Question 32

If variable manufacturing overhead is applied on the basis of direct labor-hours and the variable overhead rate variance is favorable, then:

A) the actual variable overhead rate exceeded the standard rate.
B) the standard variable overhead rate exceeded the actual rate.
C) the actual direct labor-hours exceeded the standard direct labor-hours allowed for the actual output.
D) the standard direct labor-hours allowed for the actual output exceeded the actual hours.

Question 33

The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month:
What is the materials price variance for the month?

A) $3,000 Unfavorable
B) $9,350 Unfavorable
C) $9,000 Unfavorable
D) $16,280 Unfavorable

Question 34

A total of 6,850 kilograms of a raw material was purchased at a total cost of $21,920. The materials price variance was $1,370 favorable. The standard price per kilogram for the raw material must be:

A) $0.20
B) $3.00
C) $3.20
D) $3.40

Question 35

When Raw Materials, Work in Process, and Finished Goods are recorded and carried at their standard cost, the fixed overhead applied to work in process is calculated by multiplying the predetermined overhead rate by the actual direct labor-hours worked.

Question 36

When Raw Materials, Work in Process, and Finished Goods are recorded and carried at their standard cost, the actual prices paid for inputs and the actual quantities of inputs that are used in production affect the costs recorded in the inventory accounts.

Question 37

A favorable labor rate variance indicates that

A) actual hours exceed standard hours.
B) standard hours exceed actual hours.
C) the actual rate exceeds the standard rate.
D) the standard rate exceeds the actual rate.

Question 38

As defined it the text, the ending balance in retained earnings equals the beginning balance in retained earnings plus net operating income minus dividends.

Question 39

The general model for calculating a quantity variance is:

A) Actual quantity of inputs used × (Actual price − Standard price).
B) Standard price × (Actual quantity of inputs used − Standard quantity allowed for output).
C) (Actual quantity of inputs used × Actual price) − (Standard quantity allowed for output × Standard price).
D) Actual price × (Actual quantity of inputs used − Standard quantity allowed for output).

Question 40

The standard cost card for one unit of a finished product shows the following: If the total standard variable cost for one unit of finished product is $78, then the standard price per foot for direct materials is:

A) $2
B) $3
C) $4
D) $5

Question 41

The following labor standards have been established for a particular product: The following data pertain to operations concerning the product for the last month:
What is the labor efficiency variance for the month?

A) $9,790 Favorable
B) $11,095 Unfavorable
C) $9,955 Favorable
D) $11,095 Favorable

Question 42

Zanny Electronics Corporation uses a standard cost system for the production of its water ski radios. The direct labor standard for each radio is 0.9 hours. The standard direct labor cost per hour is $7.20. During the month of August, Zanny's water ski radio production used 6,600 direct labor-hours at a total direct labor cost of $48,708. This resulted in production of 6,900 water ski radios for August. What is Zanny's labor rate variance for August?

A) $972 Favorable
B) $1,188 Unfavorable
C) $2,160 Favorable
D) $2,808 Unfavorable

Question 43

The following labor standards have been established for a particular product: The following data pertain to operations concerning the product for the last month:
What is the labor rate variance for the month?

A) $11,160 Favorable
B) $13,320 Unfavorable
C) $11,160 Unfavorable
D) $2,430 Favorable

Question 44

The following labor standards have been established for a particular product: The following data pertain to operations concerning the product for the last month:
What is the labor rate variance for the month?

A) $11,777 Favorable
B) $14,454 Unfavorable
C) $11,777 Unfavorable
D) $2,940 Favorable

Question 45

The following information relates to the direct labor at Padmaja Manufacturing, Incorporated for March: During March, Padmaja produced 2,100 units. What is Padmaja's labor efficiency variance for March?

A) $1,575 Favorable
B) $2,625 Unfavorable
C) $3,675 Unfavorable
D) $3,780 Unfavorable

Question 46

The direct labor standards for a particular product are 4 hours of direct labor at $12.00 per direct labor-hour = $48.00. During October, 3,350 units of this product were made, which was 150 units less than budgeted. The labor cost incurred was $159,786 and 13,450 direct labor-hours were worked. The direct labor variances for the month were:

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 47

The following standards for variable manufacturing overhead have been established for a company that makes only one product: The following data pertain to operations for the last month:
What is the variable overhead efficiency variance for the month?

A) $15,550 Unfavorable
B) $15,200 Unfavorable
C) $16,530 Unfavorable
D) $980 Favorable

Question 48

Viger Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: What was the variable overhead rate variance for the month?

A) $2,000 Favorable
B) $720 Favorable
C) $1,260 Unfavorable
D) $1,980 Favorable

Question 49

Information on Westcott Corporation's direct labor costs for a recent month follows: What were the actual hours worked during the month, rounded to the nearest hour?

A) 10,714
B) 11,120
C) 11,200
D) 11,914

Question 50

Pleiss Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's standard variable manufacturing overhead rate is $2.40 per machine-hour. The actual variable manufacturing overhead cost for the month was $5,240. The original budget for the month was based on 2,100 machine-hours. The company actually worked 2,270 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,280 machine-hours. What was the variable overhead efficiency variance for the month?

A) $24 Favorable
B) $232 Favorable
C) $208 Favorable
D) $432 Unfavorable

Question 51

Viger Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: What was the variable overhead rate variance for the month?

A) $1,434 Favorable
B) $940 Favorable
C) $1,320 Unfavorable
D) $2,260 Favorable

Question 52

The Fime Corporation uses a standard costing system. The following data have been assembled for December: The standard hours allowed for December's production is:

A) 5,900 hours
B) 6,500 hours
C) 6,200 hours
D) 6,000 hours

Question 53

Piper Corporation's standards call for 1,000 direct labor-hours to produce 250 units of product. During October the company worked 1,250 direct labor-hours and produced 300 units. The standard hours allowed for October would be:

A) 1,250 hours
B) 1,000 hours
C) 1,200 hours
D) 1,300 hours

Question 54

Elliott Corporation makes and sells a single product. Last period the company's labor rate variance was $14,400 Unfavorable. During the period, the company worked 36,000 actual direct labor-hours at an actual cost of $338,400. The standard labor rate for the product in dollars per hour is:

A) $9.40
B) $9.00
C) $8.50
D) $8.10

Question 55

The Fime Corporation uses a standard costing system. The following data have been assembled for December: The standard hours allowed for December's production is:

A) 5,100 hours
B) 5,400 hours
C) 5,700 hours
D) 6,000 hours

Question 56

Krizun Industries makes heavy construction equipment. The standard for a particular crane calls for 20 direct labor-hours at $16 per direct labor-hour. During a recent period1,300 cranes were made. The labor efficiency variance was $5,200 Unfavorable. How many actual direct labor-hours were worked?

A) 31,200 direct labor-hours
B) 26,000 direct labor-hours
C) 26,325 direct labor-hours
D) 24,700 direct labor-hours

Question 57

At Eady Corporation, maintenance is a variable overhead cost that is based on machine-hours. The performance report for July showed that actual maintenance costs totaled $9,870 and that the associated rate variance was $300 unfavorable. If 5,500 machine-hours were actually worked during July, the standard maintenance cost per machine-hour was:

A) $1.79 per machine-hour
B) $1.85 per machine-hour
C) $1.74 per machine-hour
D) $1.90 per machine-hour

Question 58

Piper Corporation's standards call for 8,000 direct labor-hours to produce2,000 units of product. During October the company worked 1,650 direct labor-hours and produced 1,650 units. The standard hours allowed for October would be:

A) 8,000 hours
B) 1,900 hours
C) 6,600 hours
D) 6,350 hours

Question 59

The following standards for variable manufacturing overhead have been established for a company that makes only one product: The following data pertain to operations for the last month:
What is the variable overhead efficiency variance for the month?

A) $20,542 Unfavorable
B) $19,952 Unfavorable
C) $590 Unfavorable
D) $9,048 Favorable

Question 60

Krizun Industries makes heavy construction equipment. The standard for a particular crane calls for 20 direct labor-hours at $24 per direct labor-hour. During a recent period 875 cranes were made. The labor efficiency variance was $1,200 Unfavorable. How many actual direct labor-hours were worked?

A) 17,600 direct labor-hours
B) 17,450 direct labor-hours
C) 17,500 direct labor-hours
D) 17,550 direct labor-hours

Question 61

Wadding Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 3,600 machine-hours. Budgeted and actual overhead costs for the month appear below: The company actually worked 3,900 machine-hours during the month. The standard hours allowed for the actual output were 3,890 machine-hours for the month. What was the overall variable overhead efficiency variance for the month?

A) $760 Favorable
B) $104 Unfavorable
C) $180 Favorable
D) $656 Favorable

Question 62

The Haney Corporation has a standard costing system. Variable manufacturing overhead is applied on the basis of direct labor-hours. The following data are available for January:Actual variable manufacturing overhead: $25,500Actual direct labor-hours worked: 5,800Variable overhead rate variance: $600 FavorableVariable overhead efficiency variance: $2,475 UnfavorableThe standard hours allowed for January production is:

A) 5,975 hours
B) 5,800 hours
C) 5,425 hours
D) 5,250 hours

Question 63

Gipple Corporation makes a product that uses a material with the quantity standard of 7.3 grams per unit of output and the price standard of $6.00 per gram. In January the company produced 3,400 units using 24,870 grams of the direct material. During the month the company purchased 27,400 grams of the direct material at $6.10 per gram. The direct materials purchases variance is computed when the materials are purchased.The materials price variance for January is:

A) $2,482 Favorable
B) $2,740 Unfavorable
C) $2,482 Unfavorable
D) $2,740 Favorable

Question 64

Gipple Corporation makes a product that uses a material with the quantity standard of 9.2 grams per unit of output and the price standard of $7.90 per gram. In January the company produced 5,300 units using 26,770 grams of the direct material. During the month the company purchased 29,300 grams of the direct material at $8.00 per gram. The direct materials purchases variance is computed when the materials are purchased.The materials price variance for January is:

A) $4,876 Favorable
B) $2,930 Unfavorable
C) $4,876 Unfavorable
D) $2,930 Favorable

Question 65

Mongar Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below: The original budget was based on 4,200 machine-hours. The company actually worked 4,350 machine-hours during the month and the standard hours allowed for the actual output were 4,190 machine-hours. What was the overall variable overhead efficiency variance for the month?

A) $130 Unfavorable
B) $950 Favorable
C) $1,310 Favorable
D) $1,440 Unfavorable

Question 66

Warp Manufacturing Corporation uses a standard cost system for the production of its ski lift chairs. Warp uses machine-hours as an overhead base. The variable manufacturing overhead standards for each chair are 1.2 machine-hours at a standard cost of $18 per hour. During the month of September, Warp incurred 34,000 machine-hours in the production of 32,000 ski lift chairs. The total variable manufacturing overhead cost was $649,400. What is Warp's variable overhead rate variance for September?

A) $37,400 Unfavorable
B) $41,800 Favorable
C) $79,200 Favorable
D) $84,040 Favorable

Question 67

Luma Incorporated has provided the following data concerning one of the products in its standard cost system. The company has reported the following actual results for the product for September:
The raw materials quantity variance for the month is closest to:

A) $69 Favorable
B) $78 Favorable
C) $69 Unfavorable
D) $78 Unfavorable

Question 68

Pyrdum Corporation produces metal telephone poles. In the most recent month, the company budgeted production of 3,500 poles. Actual production was 3,800 poles. According to standards, each pole requires 4.6 machine-hours. The actual machine-hours for the month were 17,800 machine-hours. The standard variable manufacturing overhead rate is $5.40 per machine-hour. The actual variable manufacturing overhead cost for the month was $96,712. The variable overhead efficiency variance is:

A) $2,320 Unfavorable
B) $1,728 Favorable
C) $2,320 Favorable
D) $1,728 Unfavorable

Question 69

Devoto Incorporated has provided the following data concerning one of the products in its standard cost system. The company has reported the following actual results for the product for June:
The raw materials price variance for the month is closest to:

A) $51,600 Unfavorable
B) $48,568 Favorable
C) $51,600 Favorable
D) $48,568 Unfavorable

Question 70

Luma Incorporated has provided the following data concerning one of the products in its standard cost system. The company has reported the following actual results for the product for September:
The raw materials price variance for the month is closest to:

A) $9,081 Unfavorable
B) $9,450 Favorable
C) $9,450 Unfavorable
D) $9,081 Favorable

Question 71

Gipple Corporation makes a product that uses a material with the quantity standard of 7.3 grams per unit of output and the price standard of $6.00 per gram. In January the company produced 3,400 units using 24,870 grams of the direct material. During the month the company purchased 27,400 grams of the direct material at $6.10 per gram. The direct materials purchases variance is computed when the materials are purchased.The materials quantity variance for January is:

A) $305 Unfavorable
B) $300 Unfavorable
C) $300 Favorable
D) $305 Favorable

Question 72

Devoto Incorporated has provided the following data concerning one of the products in its standard cost system. The company has reported the following actual results for the product for June:
The raw materials quantity variance for the month is closest to:

A) $77 Unfavorable
B) $85 Favorable
C) $85 Unfavorable
D) $77 Favorable

Question 73

Hermansen Corporation produces large commercial doors for warehouses and other facilities. In the most recent month, the company budgeted production of 5,100 doors. Actual production was 5,400 doors. According to standards, each door requires 3.8 machine-hours. The actual machine-hours for the month were 20,880 machine-hours. The standard supplies cost is $7.90 per machine-hour. The actual supplies cost for the month was $152,063. Supplies cost is an element of variable manufacturing overhead. The variable overhead efficiency variance for supplies cost is:

A) $10,045 Favorable
B) $10,045 Unfavorable
C) $2,844 Favorable
D) $2,844 Unfavorable

Question 74

The following standards for variable manufacturing overhead have been established for a company that makes only one product: The following data pertain to operations for the last month:
What is the variable overhead rate variance for the month?

A) $2,724 Unfavorable
B) $3,492 Unfavorable
C) $840 Favorable
D) $768 Unfavorable

Question 75

The following data have been provided by Moretta Corporation, a company that produces forklift trucks: Supplies cost is an element of variable manufacturing overhead. The variable overhead efficiency variance for supplies cost is:

A) $135 Unfavorable
B) $135 Favorable
C) $966 Unfavorable
D) $966 Favorable

Question 76

Casivant Corporation makes a product that uses a material with the following direct material standards: The company produced 7,300 units in November using 28,710 pounds of the material. During the month, the company purchased 30,800 pounds of the direct material at a total cost of $117,040. The direct materials purchases variance is computed when the materials are purchased.The materials quantity variance for November is:

A) $3,880 Favorable
B) $3,686 Unfavorable
C) $3,686 Favorable
D) $3,880 Unfavorable

Question 77

Casivant Corporation makes a product that uses a material with the following direct material standards: The company produced 7,300 units in November using 28,710 pounds of the material. During the month, the company purchased 30,800 pounds of the direct material at a total cost of $117,040. The direct materials purchases variance is computed when the materials are purchased.The materials price variance for November is:

A) $5,548 Unfavorable
B) $6,160 Unfavorable
C) $6,160 Favorable
D) $5,548 Favorable

Question 78

Wadding Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 5,100 machine-hours. Budgeted and actual overhead costs for the month appear below: The company actually worked 5,250 machine-hours during the month. The standard hours allowed for the actual output were 5,240 machine-hours for the month. What was the overall variable overhead efficiency variance for the month?

A) $480 Favorable
B) $118 Unfavorable
C) $330 Favorable
D) $686 Favorable

Question 79

At Eady Corporation, maintenance is a variable overhead cost that is based on machine-hours. The performance report for July showed that actual maintenance costs totaled $8,650 and that the associated rate variance was $250 unfavorable. If 5,000 machine-hours were actually worked during July, the standard maintenance cost per machine-hour was:

A) $1.73 per machine-hour
B) $1.78 per machine-hour
C) $1.68 per machine-hour
D) $1.83 per machine-hour

Question 80

Amirault Manufacturing Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs) at $4.00 per machine-hours. During the month, the actual total variable manufacturing overhead was $18,040 and the actual level of activity for the period was 4,100 machine-hours. What was the variable overhead rate variance for the month?

A) $410 Favorable
B) $1,640 Unfavorable
C) $1,640 Favorable
D) $410 Unfavorable