Deck 9: Standard Costing and Flexible Budgeting

Question 1

Which of the following would not be considered if a company desires to establish a series of practical manufacturing standards?

A)Production time lost during unusual machinery breakdowns.
B)Normal worker fatigue.
C)Freight charges on incoming raw materials.
D)Production time lost during setup procedures for new manufacturing runs.
E)The historical 2% defect rate associated with raw material inputs.

Answer 1

A

Question 2

The following data relate to Logan Corporation's only product: Direct material standard: 4 square feet at $1.50 per square foot
Direct material purchased: 20,000 square feet at $1.60 per square foot
Direct material consumed: 19,200 square feet
Manufacturing activity: 4,600 units completed
The direct-material quantity variance is:

A)$1,200F.
B)$1,200U.
C)$640F.
D)$2,000F.
E)$2,000U.

Answer 2

B

Question 3

Which of the following choices correctly notes the use of the standard price per unit of direct material when calculating the direct-material price variance and the direct-material quantity variance? $\begin{array} { | l | c | l | } \hline & \text { Price Variance } & \text { Quantity Variance } \\\hline 1 & \text { Used } & \text { Always used } \\\hline 2 & \text { Used } & \text { Occasionally used } \\\hline 3 & \text { Used } & \text { Not used } \\\hline 4 & \text { Not used } & \text { Always used } \\\hline 5 & \text { Not used } & \text { Not used } \\\hline\end{array}$

A)1
B)2
C)3
D)4
E)5

Answer 3

1

Question 4

Most companies base the calculation of the direct-material price variance on the:

A)number of units purchased.
B)number of units spoiled.
C)number of units that should have been used.
D)number of units actually used.
E)number of units to be purchased during the next accounting period.

Question 5

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

A)Standard labour rate and actual hours worked.
B)Actual hours worked and actual units produced.
C)Standard labour rate, actual labour rate, and actual units produced.
D)Actual labour rate and actual hours worked.
E)Actual labour rate, standard labour rate, and actual hours worked.

Question 6

Moose Company recently produced 60,000 units of a product that was expected to consume 3 litres of direct material per finished unit. The standard price of the direct material was $8.00 per litre. If the firm purchased and consumed 186,000 litres in manufacturing (cost = $1,534,500), the direct-material quantity variance would be:

A)$6,000U.
B)$46,500F.
C)$46,500U.
D)$48,000F.
E)$48,000U.

Question 7

A perfection standard:

A)tends to motivate employees over a long period of time.
B)is attainable in an ideal operating environment.
C)would make allowances for normal amounts of scrap and waste.
D)is generally preferred by behavioural scientists.
E)will result in a number of favourable variances on a performance report.

Question 8

Which of the following variances are most similar with respect to the manner in which they are calculated?

A)Direct-labour rate variance and direct-labour efficiency variance.
B)Direct-material price variance and direct-material quantity variance.
C)Direct-material price variance, direct-material quantity variance, and total direct-material variance.
D)Direct-material price variance and direct-labour efficiency variance.
E)Direct-material quantity variance and direct-labour efficiency variance.

Question 9

Jameison Incorporated purchased and consumed 50,000 litres of direct material that was used in the production of 11,000 finished units of product. According to engineering specifications, each finished unit had a manufacturing standard of five litres. If a review of Jameison's accounting records at the end of the period disclosed a material price variance of $5,000U and a material quantity variance of $3,000F, determine the actual price paid for a litre of direct material.

A)$0.50.
B)$0.60.
C)$0.70.
D)$1.60.
E)$5.00.

Question 10

A favourable direct-labour efficiency variance is created when:

A)actual labour hours worked exceed standard hours allowed.
B)actual hours worked are less than standard hours allowed.
C)actual wages paid are less than amounts that should have been paid.
D)actual units produced exceed budgeted production levels.
E)actual units produced exceed standard hours allowed.

Question 11

Which of the following are methods for setting standards?

A)Analysis of the perfect outcome.
B)Analysis of a competitor's financial statements.
C)Task analysis and the analysis of historical data.
D)Matrix application forms.
E)Goal congruence.

Question 12

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
Unfavourable direct-material quantity variance: $9,400
The direct-material price variance is:

A)$9,400U.
B)$11,400F.
C)$11,400U.
D)$12,000F.
E)$12,000U.

Question 13

Which of the following choices correctly notes a characteristic associated with perfection standards and one associated with practical standards? $\begin{array} { | l | l | l | } \hline & { \text { Perfection Standards } } & { \text { Practical Standards } } \\\hline 1 & \text { Attainable in an ideal environment } & \begin{array} { l } \text { Incorporate abnormal occurrences when } \\\text { setting quantity and efficiency targets }\end{array} \\\hline 2 & \text { Result in many unfavourable variances } & \text { Are often attainable by workers } \\\hline 3 & \begin{array} { l } \text { Tend to boost worker morale over the } \\\text { long-run }\end{array} & \begin{array} { l } \text { Generally, are preferred by behavioural } \\\text { scientists }\end{array} \\\hline 4 & \begin{array} { l } \text { Generally, are easily achieved by } \\\text { workers }\end{array} & \begin{array} { l } \text { Result in both favorable and unfavourable } \\\text { variances }\end{array} \\\hline 5 & \begin{array} { l } \text { Generally, are preferred by } \\\text { behavioural scientists }\end{array} & \begin{array} { l } \text { Are casier to achieve than perfection } \\\text { standards }\end{array} \\\hline\end{array}$

A)1
B)2
C)3
D)4
E)5

Question 14

Which of the following variances cannot occur together during the same period?

A)Unfavourable direct-labour rate variance and favourable direct-labour efficiency variance.
B)Unfavourable direct-labour efficiency variance and favourable direct-material quantity variance.
C)Favourable direct-labour rate variance and unfavourable total direct-labour variance.
D)Favourable direct-labour efficiency variance and favourable material quantity variance.
E)Favourable direct-labour efficiency variance and an unfavourable fixed-overhead efficiency variance.

Question 15

A standard cost:

A)is the "true" cost of a unit of production.
B)is a budget for the production of one unit of a product or service.
C)can be useful in calculating equivalent units.
D)is normally the average cost within an industry.
E)is almost always the actual cost from previous years.

Question 16

The term "management by exception" is best defined as:

A)choosing exceptional managers.
B)controlling actions of subordinates through acceptance of management techniques.
C)investigating unfavourable variances.
D)devoting management time to investigate significant variances.
E)controlling costs so that non-zero variances are treated as "exceptional."

Question 17

The following data relate to Logan Corporation's only product: Direct material standard: 4 square feet at $1.50 per square foot
Direct material purchased: 20,000 square feet at $1.60 per square foot
Direct material consumed: 19,200 square feet
Manufacturing activity: 4,600 units completed
The direct-material price variance is:

A)$1,920F.
B)$1,920U.
C)$2,000F.
D)$2,000U.
E)$2,880U.

Question 18

Which of the following would be considered if a company desires to establish a series of practical manufacturing standards?

A)The productivity loss associated with a short-term worker slowdown.
B)Normal defect rates in an assembly process only.
C)Highly unusual spoilage rates with direct materials.
D)Quantity discounts associated with purchases of direct materials only.
E)Normal defect rates in an assembly process and quantity discounts associated with purchases of direct materials.

Question 19

Hope Corporation recently purchased 30,000 metres of direct material at $6.60 per metre. Usage by the end of the period amounted to 28,000 metres. If the standard cost is $7.00 per metre and the company believes in computing variances at the earliest point possible, the direct-material price variance would be calculated as:

A)$800F.
B)$11,200F.
C)$11,200U.
D)$12,000F.
E)$12,000U

Question 20

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

A)Product cost and period cost.
B)Actual cost and differential cost.
C)Price factors and rate factors.
D)Actual cost and standard cost.
E)Product cost and standard cost.

Question 21

Bowing International purchased 66,000 metres (cost = $514,800) of direct material to be used in the manufacture of the company's sole product. According to the production specifications, each completed unit requires five metres of direct material at a standard cost of $8.00 per metre. Direct materials consumed by the end of the period totalled 63,500 metres in the manufacture of 12,933 finished units. An examination of Bowing's payroll records revealed that the company worked 23,000 labour hours (cost = $333,500) during the period, and specifications called for each completed unit requiring two hours of labour at a standard cost of $14.60 per hour.
Bowing's direct-material price variance is:

A)$12,700F.
B)$12,700U.
C)$13,200F.
D)$13,200U.
E)$12,933F.

Question 22

BirdCo.'s master budget shows that the planned activity level for next year is expected to be 20,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected: $\begin{array}{lr}\text { Indirect labour } & \$ 45,000 \\\text { Factory supplies } & 4,000 \\\text { Indirect materials } & 21,000 \\\text { Amortization on factory building (straight line) } & \underline {15,000}\\\text { Total manufacturing overhead } &\underline { \$85,000}\end{array}$ If BirdCo. operates at 21,000 machine hours, how much is allowed on a flexible budget for manufacturing overhead costs?

A)$48,500.
B)$69,500.
C)$73,500.
D)$88,500.
E)$89,250.

Question 23

Stevenson Enterprises recently used 16,000 labour hours to produce 8,500 completed units. According to manufacturing specifications, each unit is anticipated to take two hours to complete. The company's actual payroll cost amounted to $165,300. If the standard labour cost per hour is $12, Stevenson's labour efficiency variance is:

A)$10,331F.
B)$10,331U.
C)$12,000F.
D)$12,000U.
E)26,700U.

Question 24

Which of the following is used in the computation of the variable-overhead spending variance?

A)Budgeted Variable Overhead Based on Actual Hours.
B)Standard Variable Overhead Applied.
C)Actual Variable Overhead Cost and Standard Variable Overhead Applied.
D)Actual Variable Overhead Cost and Standard Variable Overhead Based on Actual Hours.
E)Actual Variable Overhead Cost, Budgeted Variable Overhead Based on Actual Hours, and Standard Variable Overhead Applied.

Question 25

Simms Limited had a favourable direct-labour efficiency variance of $8,000 for the period just ended. The actual wage rate was $0.70 more than the standard rate of $10.00. If the company's standard hours allowed for actual production totalled 10,000, how many hours did the firm actually work?

A)800.
B)8,000.
C)9,200.
D)10,000.
E)18,000.

Question 26

Which of the following should have the strongest cause and effect relationship with overhead costs?

A)Cost followers.
B)Non-value-added costs.
C)Cost drivers.
D)Value-added costs.
E)Units of output.

Question 27

Black Dog Corporation produced 9,900 units of Product No. 5A. A total of 55,000 direct labour hours were used at a cost of $841,500. The direct labour standard to complete one unit is 5 hours at $15 per hour. The direct-labour rate variance is:

A)$16,500F.
B)$16,500U.
C)$19,800F.
D)$19,800U.
E)$639,000U.

Question 28

What is the primary difference between a static budget and a flexible budget?

A)The static budget contains only fixed costs, while the flexible budget contains only variable costs.
B)The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels.
C)The flexible budget is prepared for a single level of activity, while a static budget is adjusted for different activity levels.
D)The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management.
E)The flexible budget is constructed using input from only upper level management, while a static budget obtains input from all levels of management.

Question 29

Barber Corporation recently used 30,000 labour hours to produce 7,800 completed units. According to manufacturing specifications, each unit is anticipated to take 3.75 hours to complete. The company's actual payroll cost amounted to $565,000. If the standard labour cost per hour is $19.20, Barber's labour rate variance is:

A)$3,487F.
B)$3,487U.
C)$11,000F.
D)$11,000U.
E)$30,000U.

Question 30

Black Dog Corporation produced 9,900 units of Product No. 5A. A total of 55,000 direct labour hours were used at a cost of $841,500. The direct labour standard to complete one unit is 5 hours at $15 per hour. The direct-labour efficiency variance is:

A)$19,800F.
B)$19,800U.
C)$49,500F.
D)$82,500F.
E)$82,500U.

Question 31

Which of the following is not an overhead variance?

A)Variable-overhead spending variance.
B)Variable-overhead efficiency variance.
C)Fixed-overhead efficiency variance.
D)Fixed-overhead budget variance.
E)Fixed-overhead volume variance.

Question 32

The gears department of Cycle Company has budgeted monthly manufacturing overhead cost of $40,000 plus $5 per direct labour hour. The flexible budget report reflects $120,000 for total budgeted manufacturing cost for the month. What is the actual level of activity achieved during the month?

A)16,000 direct labour hours.
B)22,400 direct labour hours.
C)24,000 direct labour hours.
D)32,000 direct labour hours.
E)120,000 direct labour hours.

Question 33

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as:

A)actual hours x a predetermined (standard) overhead rate.
B)standard allowed hours x a predetermined (standard) overhead rate.
C)actual hours x an actual overhead rate.
D)standard allowed hours x an actual overhead rate.
E)$0 because users of standard costing do not apply overhead to work in process.

Question 34

Which of the following mathematical expressions is found in a typical flexible-budget formula for overhead?

A)Total activity units + budgeted fixed overhead cost per unit.
B)Total activity units + actual fixed overhead cost per unit.
C)Budgeted variable overhead cost per unit + budgeted fixed overhead cost.
D)(Budgeted variable overhead cost per unit x total activity units) + budgeted fixed overhead costs.
E)(Budgeted fixed overhead cost per unit x total activity units) + (budgeted variable overhead cost per unit x total activity units).

Question 35

Which of the following is not an overhead variance?

A)Variable-overhead spending variance.
B)Variable-overhead volume variance.
C)Variable-overhead efficiency variance.
D)Fixed-overhead budget variance.
E)Fixed-overhead volume variance.

Question 36

Alex Company recently completed 10,600 units of its single product, consuming 32,000 labour hours that cost the firm $480,000. According to manufacturing specifications, each unit should have required 3 hours of labour time at $15.40 per hour. On the basis of this information, determine Alex's labour rate variance and labour efficiency variance. $\begin{array}{|l|c|l|}\hline & \text { Rate } & {\text { Efficiency }} \\\hline 1 & \$ 12,720 \mathrm{~F} & \$ 3,000 \mathrm{~F} \\\hline 2 & \$ 12.720 \mathrm{~F} & \$ 3,000 \mathrm{U} \\\hline 3 & \$ 12,800 \mathrm{~F} & \$ 3,080 \mathrm{~F} \\\hline 4 & \$ 12,800 \mathrm{~F} & \$ 3,080 \mathrm{U} \\\hline 5 & \$ 12.800 \mathrm{U} & \$ 3,080 \mathrm{U} \\\hline\end{array}$

A)1
B)2
C)3
D)4
E)5

Question 37

Consider the following information: $\begin{array}{lr}\text { Actual direct labour hours } & \$ 44,500 \\\text { Standard direct labour hours } & 45,000 \\\text { Total actual direct labour cost } & 315,950 \\\text { Direct labour efficiency variance } & 3,400\end{array}$ The direct-labour rate variance is:

A)$3,400U.
B)$13,350F.
C)$13,350U.
D)$9,000F.
E)$9,400U.

Question 38

The activity measure selected for use in a variable overhead flexible budget and a fixed overhead flexible budget:

A)should be stated in sales dollars.
B)should be approved by the company's president.
C)should be one that varies in a similar behaviour pattern to the way that variable overhead varies.
D)should remain fixed.
E)should produce the most attractive results for the individual who will use the budget in managerial applications.

Question 39

A flexible budget for 20,000 hours revealed variable manufacturing overhead of $120,000 and fixed manufacturing overhead of $140,000. The budget for 35,000 hours would reveal total overhead costs of:

A)$140,000.
B)$260,000.
C)$270,000.
D)$350,000.
E)$365,000.

Question 40

Assume that machine hours is the cost driver for overhead. The difference between the actual variable overhead incurred and the applied variable overhead is the:

A)volume variance.
B)production variance.
C)efficiency variance.
D)sum of the spending and efficiency variances.
E)spending variance.

Question 41

Bargain Boys Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 14,800
Actual fixed overhead incurred: $791,000
Standard fixed overhead rate: $13 per hour
Budgeted fixed overhead: $780,000
Planned level of machine-hour activity: 60,000
If Bargain Boys estimates four hours to manufacture a completed unit, the fixed-overhead volume variance would be:

A)$10,400 favourable.
B)$10,400 unfavourable.
C)$11,000 favourable.
D)$11,000 unfavourable.
E)$66,600 favourable.

Question 42

Which variance is commonly associated with measuring the cost of under- or over-utilization of plant capacity?

A)The variable-overhead spending variance.
B)The variable-overhead efficiency variance.
C)The fixed-overhead budget variance.
D)The fixed-overhead volume variance.
E)The total fixed-overhead variance.

Question 43

Hawkins Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 9,000
Actual variable overhead incurred: $54,400
Actual machine hours worked: 16,000
Standard variable overhead cost per machine hour: $3.50
If Hawkins estimates two hours to manufacture a completed unit, the company's variable-overhead efficiency variance is:

A)$1,600 favourable.
B)$1,600 unfavourable.
C)$1,800 favourable.
D)$7,000 favourable.
E)$7,000 unfavourable.

Question 44

The difference between the total actual factory overhead and the total factory overhead applied to production is the:

A)sum of the spending, efficiency, budget, and volume variances.
B)controllable variance.
C)efficiency variance.
D)spending variance.
E)volume variance.

Question 45

What will cause the variable-overhead efficiency variance?

A)Efficient or inefficient use of a specific component of variable overhead (e.g., electricity).
B)Full or partial utilization of major equipment resources.
C)Production of units in excess of the number of units sold.
D)Efficient or inefficient use of the cost driver (e.g., machine hours) for variable overhead.
E)Changes in the salary cost of manufacturing supervisors.

Question 46

Livesey Incorporated, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 12,000
Actual variable overhead incurred: $77,700
Actual machine hours worked: 18,800
Standard variable overhead cost per machine hour: $4.50
If Livesey estimates 1.5 hours to manufacture a completed unit, the company's variable-overhead spending variance is:

A)$3,300 favourable.
B)$3,600 favourable.
C)$3,600 unfavourable.
D)$6,900 favourable.
E)$6,900 unfavourable.

Question 47

Smithville uses labour hours to apply variable overhead to production. If the company's workers were very inefficient during the period, which of the following statements would be true about the variable-overhead efficiency variance?

A)The variance would be favourable.
B)The variance would be unfavourable.
C)The nature of the variance (favourable or unfavourable) would be unknown based on the facts presented.
D)The variance would be the same amount as the labour efficiency variance.
E)The variance would be the same amount as the fixed overhead volume variance.

Question 48

Dance Company has a standard variable overhead rate of $4.50 per machine hour, and each unit produced has a standard time allowed of three hours. The company's static budget was based on 46,000 units. Actual results for the year follow: Actual units produced: 42,000
Actual machine hours worked: 120,000
Actual variable overhead incurred: $520,000
Dance's variable-overhead spending variance is:

A)$9,200 favourable.
B)$20,000 favourable.
C)$20,000 unfavourable.
D)$27,000 favourable.
E)$27,000 unfavourable.

Question 49

The difference between budgeted fixed manufacturing overhead and the fixed overhead applied to production is the:

A)sum of the spending and efficiency variances.
B)controllable variance.
C)efficiency variance.
D)spending variance.
E)volume variance.

Question 50

Dance Company has a standard variable overhead rate of $4.50 per machine hour, and each unit produced has a standard time allowed of three hours. The company's static budget was based on 46,000 units. Actual results for the year follow: Actual units produced: 42,000
Actual machine hours worked: 120,000
Actual variable overhead incurred: $520,000
Dance's variable-overhead efficiency variance is:

A)$9,200 favourable.
B)$20,000 favourable.
C)$20,000 unfavourable.
D)$27,000 favourable.
E)$27,000 unfavourable.

Question 51

Skinner Incorporated, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 13,000
Actual fixed overhead incurred: $742,000
Standard fixed overhead rate: $15 per hour
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 48,000
If Skinner estimates four hours to manufacture a completed unit, the company's fixed-overhead budget variance would be:

A)$22,000 favourable.
B)$22,000 unfavourable.
C)$60,000 favourable.
D)$60,000 unfavourable.
E)$180,000 favourable.

Question 52

Which of the following variances would be useful to help control overhead spending?

A)Variable-Overhead Spending Variance, Fixed-Overhead Budget Variance, and Fixed-Overhead Volume Variance.
B)Variable-Overhead Spending Variance, and Fixed-Overhead Budget Variance.
C)Variable-Overhead Spending Variance.
D)Variable-Overhead Spending Variance, and Fixed-Overhead Volume Variance.
E)Fixed-Overhead Budget Variance.

Question 53

A fixed-overhead volume variance would normally arise when:

A)Actual hours of activity coincide with actual units of production.
B)Budgeted fixed overhead is overapplied to production.
C)There is a fixed-overhead budget variance.
D)Actual fixed overhead exceeds budgeted fixed overhead.
E)There is a variable-overhead efficiency variance.

Question 54

An activity-based flexible budget differs from a conventional flexible budget in that:

A)the flexible budget is the better basis to use for cost management purposes.
B)the activity-based costing approach is more accurate because costs that were categorized as fixed on the conventional flexible budget become variable when multiple cost drivers are used.
C)the conventional flexible budget approach is more accurate because costs are classified as variable with respect to a single, appropriately chosen cost driver.
D)the conventional budget approach provides a richer view of cost behaviour.
E)the conventional approach is the most widely used by management accountants.

Question 55

SpaSpring Corporation, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 12,000
Actual fixed overhead incurred: $730,000
Actual machine hours worked: 60,000
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 50,000
If Spring estimates four hours to manufacture a completed unit, Spring's standard fixed overhead rate per machine hour would be:

A)$12.00.
B)$14.40.
C)$14.60.
D)$15.00.
E)$20.00.

Question 56

Rowe Corporation reported the following variances for the period just ended: Variable-overhead spending variance: $50,000U
Variable-overhead efficiency variance: $28,000U
Fixed-overhead budget variance: $70,000U
Fixed-overhead volume variance: $30,000U
If Rowe desires to analyze variances that arose primarily from managers' expenditures in excess of anticipated amounts, the company should focus on variances that total:

A)$50,000U.
B)$70,000U.
C)$98,000U.
D)$120,000U.
E)$178,000U.

Question 57

An overhead cost performance report typically includes:

A)only spending variances for efficiency items.
B)only efficiency variances for variable items.
C)only spending and efficiency items for variable items.
D)only a budget variance for fixed items.
E)all variances for variable and fixed items except the volume variance.

Question 58

Smollett Manufacturing Company has a standard variable overhead rate of $5 per machine hour, with each completed unit expected to take three machine hours to produce. A review of the company's accounting records found the following: Actual production: 19,500 units
Variable-overhead efficiency variance: $9,000U
Variable-overhead spending variance: $21,000F
What was Smollett's actual variable overhead during the period?

A)$97,500.
B)$262,500.
C)$280,500.
D)$304,500.
E)$322,500.

Question 59

Silver Manufacturing Company has a standard variable overhead rate of $4 per machine hour, with each completed unit expected to take three machine hours to produce. A review of Silver's accounting records found the following: Actual variable overhead: $210,000
Variable-overhead efficiency variance: $18,000U
Variable-overhead spending variance: $30,000F
How many units did Silver actually produce during the period?

A)13,500.
B)16,500.
C)18,500.
D)21,500.
E)52,500.

Question 60

The budget variance arises from a comparison of:

A)budgeted fixed overhead expenditures with budgeted fixed overhead costs.
B)actual fixed overhead costs with budgeted fixed overhead costs.
C)actual variable overhead expenditures with budgeted variable overhead costs.
D)variable overhead costs with budgeted fixed overhead costs.
E)static-budget amounts with flexible-budget amounts.

Question 61

Which of the following journal entries definitely contains an error? $\begin{array} { | l | l | r | r | } \hline 1 & \text { Raw-Material Inventory } & 200,000 & \\\hline & \text { Direct-Material Price Variance } & 5,000 & \\\hline & \text { Accounts Pavable } & & 205.000 \\\hline 2 & \text { Raw-Material Inventory } & 38,000 & \\\hline & \text { Direct-Material Price Variance } & & 2,000 \\\hline & \text { Accounts Payable } & & 36,000 \\\hline 3 & \text { Raw-Material Inventory } & 156,000 & \\\hline & \text { Direct-Material Price Variance } & & 8.000 \\\hline & \text { Work-in-Process Inventory } & & 148,000 \\\hline 4 & \text { Work-in-Process Inventory } & 67,000 & \\\hline & \text { Direct-Material Quantity Variance } & 3,000 & \\\hline & \text { Raw-Material Inventory } & & 70,000 \\\hline 5 & \text { Work-in-Process Inventory } & 79,000 & \\\hline & \text { Direct-Material Quantity Variance } & & 4,000 \\\hline & \text { Raw-Material Inventory } & & 75,000 \\\hline\end{array}$

A)1
B)2
C)3
D)4
E)5

Question 62

When actual variable cost per unit equals standard variable cost per unit, the difference between actual and budgeted contribution margin is explained by a combination of which two variances?

A)The sales-volume variance and the fixed-overhead volume variance.
B)The sales-volume variance and the fixed-overhead budget variance.
C)The sales-price variance and the fixed-overhead volume variance.
D)The sales-price variance and sales-volume variance.
E)The sales-price variance and fixed-overhead budget variance.

Question 63

Coulter Manufacturing Company had an unfavourable labour efficiency variance and an unfavourable materials quantity variance. Which department in Coulter might be held accountable for these variances?

A)Purchasing, because bad materials can harm labour efficiency.
B)Production, because inefficient workers may use more materials than allowed.
C)Production.
D)Marketing.
E)Shipping.

Question 64

Cannington Company manufactures a product that has the following standard costs:
The following information pertains to July: Required:
Calculate the direct-material price and quantity variances, and the direct-labour rate and efficiency variances. Indicate whether each variance is favourable or unfavourable.

Question 65

Master Products has the following information for the year just ended: $\begin{array} { | l | r | r | r | } \hline & \text { Budget } && \text { Actual } \\\hline \text { Sales in units } & \underline { 15,000 } & &\underline { 14,000}\\\hline \text { Sales } & \$ 150,000 & & \$ 147,000 \\\hline \text { Less: Variable expenses } & \underline { 90,000} & & \underline { 82,600 }\\\hline \text { Contribution margin } & \mathrm { S } 60,000 & & \$ 64,400 \\\hline \text { Less: Fixed expenses } & \underline { 3 5 , 0 0 0 } & & \underline { 40,000} \\\hline \text { Operating income } & \mathrm { S }\underline { 25,000} && \underline { \$ 24,400} \\\hline\end{array}$ The company's sales-volume variance is:

A)$3,000 unfavourable.
B)$4,000 unfavourable.
C)$4,400 favourable.
D)$10,000 unfavourable.
E)$10,000 favourable.

Question 66

Justin Company recently purchased materials from a new supplier at a very attractive price. The materials were found to be of poor quality, and the company's labourers struggled significantly as they shaped the materials into finished product. In a desperation move to make up for some of the time lost, the manufacturing supervisor brought in more senior employees from another part of the plant. Which of the following variances would have a low probability of arising from this situation?

A)Material price variance, favourable.
B)Material quantity variance, unfavourable.
C)Labour rate variance, unfavourable.
D)Labour efficiency variance, unfavourable.
E)Fixed overhead volume variance.

Question 67

Master Products has the following information for the year just ended: $\begin{array} { | l | r | r | r | } \hline & \text { Budget } & \text { Actual } \\\hline \text { Sales in units } & \underline { 15,000 } & & 14,000 \\\hline \text { Sales } & \$ 150,000 & & \$ 147,000 \\\hline \text { Less: Variable expenses } & 90,000 & & 82,600 \\\hline \text { Contribution margin } & \mathrm { S } 60,000 & & \$ 64,400 \\\hline \text { Less: Fixed expenses } & \mathbf { 3 5 , 0 0 0 } & & 40,000 \\\hline \text { Operating income } & \mathrm { S } 25,000 & \$ 24,400 \\\hline\end{array}$ The company's sales-price variance is:

A)$3,000 unfavourable.
B)$7,000 unfavourable.
C)$7,000 favourable.
D)$7,500 unfavourable.
E)$7,500 favourable.

Question 68

A direct-material quantity variance can be caused by all of the following except:

A)improper employee training.
B)changes in sales volume.
C)acquisition of materials at a very attractive price.
D)adjustment problems with machines.
E)disgruntled workers.

Question 69

Chen Enterprises purchased 67,000 pounds (cost = $616,400) of direct material to be used in the manufacture of the company's sole product. According the production specifications, each completed unit requires four pounds of direct material at a standard cost of $9 per pound. Direct materials consumed by the end of the period totalled 65,500 pounds in the manufacture of 16,050 finished units.
An examination of Chen's payroll records revealed that the company worked 42,000 labour hours (cost = $621,600) during the period, and specifications called for each completed unit requiring 2.6 hours of labour at a standard cost of $15 per hour:
Required:
Calculate the direct-material price and quantity variances, and the direct-labour rate and efficiency variances. Indicate whether each variance is favourable or unfavourable.

Question 70

Venice Corporation manufactures a variety of liquid lawn fertilizers, including a very popular product called Lush 'N Green. Data about Lush 'N Green and Proctol, a major ingredient, follow.
Expected operations:
Proctol is purchased in 55-gallon drums at a cost of $65 per drum. A 2% cash discount is offered by Proctol's manufacturer for prompt payment of invoices, and Venice takes advantage of all discounts offered.
Venice normally purchases 200 drums of Proctol at a time, paying shipping fees of $2,660 per shipment.
Each gallon of Lush 'N Green requires three quarts of Proctol; however, because of evaporation and spills, Venice loses 4% of all Proctol that enters production. (Recall that there are four quarts in a gallon.)
Actual operations:
For the period just ended, Venice purchased 1,500 drums of Proctol at a total cost of $118,100, which reflects discounts and shipping. There was no beginning inventory, but an end-of-period inventory revealed that 30 drums were still on hand.
Manufacturing activity output totalled 104,000 gallons of Lush 'N Green.
Required:
A. Compute the standard purchase price for one gallon of Proctol.
B. Compute the standard quantity of Proctol to be used in producing one gallon of Lush 'N Green. Express your answer in quarts.
C. Compute the direct-material price variance for Proctol.
D. How much Proctol was used in manufacturing activity and how much should have been used? Express your answer in quarts.

Question 71

The individual generally responsible for the direct-material price variance is the:

A)sales manager.
B)production supervisor.
C)purchasing manager.
D)finance manager.
E)head of the human resources department.

Question 72

At the end of the accounting period, most companies close variance accounts to:

A)Raw-Material Inventory.
B)Work-in-Process Inventory.
C)Finished-Goods Inventory.
D)Cost of Goods Sold.
E)Income Summary.

Question 73

When considering whether to investigate a variance, managers should consider all of the following except:

A)the size of the variance.
B)the pattern of recurrence of the variance.
C)a variance's trends over time.
D)nature of the variance, namely, whether it is favourable or unfavourable.
E)controllability of the variance.

Question 74

A production supervisor generally has significant influence over the:

A)direct-material quantity variance.
B)direct-labour efficiency variance.
C)direct-material price variance.
D)number of units produced.
E)prices of direct materials.

Question 75

Which department would normally begin an investigation regarding an unfavourable materials quantity variance?

A)Quality control.
B)Purchasing.
C)Human resource.
D)Production.
E)Receiving.

Question 76

Tetra Corporation produces glass shelves that are used in furniture. Each shelf requires 4.0 pounds of raw material at a cost of $3 per pound. Unfortunately, given the nature of the manufacturing process, one out of every four shelves is chipped, scratched, or broken at the beginning of production and has to be scrapped.
On average, 25 good shelves are completed during each hour. Labourers who work on these units are paid $18 per hour.
Required:
A. Distinguish between perfection standards and practical standards.
B. Who within an organization would be in the best position to assist in setting the:
1. direct-material price standard?
2. direct-material quantity standard?
3. direct-labour efficiency standard?
4. Calculate a practical direct-material and direct-labour standard for each good shelf produced.

Question 77

The sales-volume variance equals:

A)(Actual sales volume - Budgeted sales volume) x Actual sales price.
B)(Actual sales volume - Budgeted sales volume) x Actual contribution margin.
C)(Actual sales volume - Budgeted sales volume) x Budgeted sales price.
D)(Actual sales price - Budgeted sales price) x Budgeted sales volume.
E)(Actual sales price - Budgeted sales price) x Fixed-overhead volume variance.

Question 78

Which of the following is not a criticism of standard costing, as applied to today's manufacturing environment?

A)Traditional standard costing tends to focus too much on cost minimization rather than increasing product quality or customer service.
B)Variance information is usually aggregated (i.e., combined) rather than associated with a particular batch of goods or a specific product line.
C)Traditional standard costing has a fairly narrow orientation, failing to focus on broader issues such as the overall costs of ownership.
D)Standard costing pays considerable attention to labour cost and labour efficiency, which are becoming a relatively unimportant factor of production.
E)A standard costing system is usually less expensive than an actual or product costing system.

Question 79

Townsend Incorporated has set the following standards for one unit of product:
Direct material
Quantity: 8.2 pounds per unit
Price: $12.50 per pound
Direct labour
Quantity: 8 hours per unit
Rate: $25 per hour
Actual costs incurred in the production of 3,000 units were as follows
Direct material: $246,000 ($12.00 per pound)
Direct labour: $454,500 ($22.50 per hour)
All materials purchased were consumed during the period.
Required:
Calculate the direct-material price and quantity variances, and the direct-labour rate and efficiency variances. Indicate whether each variance is favourable or unfavourable.

Question 80

A direct-labour efficiency variance cannot be caused by:

A)inexperienced employees.
B)poor quality raw materials.
C)employee inefficiency.
D)an out-of-date labour time standard.
E)producing fewer finished units than originally planned.