Question 1

Electric Zero produces relay units for generators.Each relay has a standard material cost of $67.Standards call for two relays per generator.In July, the company purchased 120 relays for $7,560.The company used 104 relays in the production of 50 generators, with 4 relays damaged in the installation process.The standard quantity of labor is 20 hours per generator, with a standard wage rate of $23.The company incurred 1,020 labor hours at a cost of $22,950.How much is the material quantity variance?

Accepted Answer

A) $480 favorable 
B) $268 unfavorable 
C) $1,340 unfavorable 
D) $592 unfavorable

Question 2

Cuevas Company produces magic swords.It uses units as the cost driver for overhead.The following information was provided concerning its standard cost system for 2017: $\begin{array}{|l|l|}
\hline{\text { Standard/Budgeted Data }} \
\hline \text { Material } & \begin{array}{l}
1 / 2 \mathrm{~b} . @ \$ 15.00 \text { per } \
\mathrm{b} .
\end{array} \
\hline \text { Labor } & \begin{array}{l}
1.2 \mathrm{hrs} . @ \$ 12 \mathrm{per} \
\mathrm{hr} .
\end{array} \
\hline \text { Fixed overhead } & \$ 62,000 \
\hline \begin{array}{l}
\text { Variable } \
\text { overhead }
\end{array} & \$ 11 \text { per unit } \
\hline \text { Production } & 2,000 \text { units } \
\hline
\end{array}$ $\begin{array}{|l|l|}
\hline {\text { Actual Data }} \
\hline \text { Produced } & 2,100 \text { units } \
\hline \begin{array}{l}
\text { Materials } \
\text { purchased }
\end{array} & 1,050 \mathrm{lbs} \text {. for } \$ 14,700 \
\hline \text { Materials used } & 1,080 \mathrm{lbs} . \
\hline \text { Laborworked } & \begin{array}{l}
2,500 \mathrm{hrs} . \text { costing } \
\$ 29,375
\end{array} \\
\hline \text { Overhead } & \$ 82,000 \
\hline
\end{array}$ How much is the standard cost per unit?

Accepted Answer

A) $21.90 
B) $63.90 
C) $69.00 
D) $62.42

Question 3

Straton Company produces one product, the H2001.Each unit of H2001 requires 6.5 pounds of raw material with a standard cost of $12.00 per pound.During July, Straton purchased 3,500 pounds of this raw material at a price of $12.25 per pound and used 3,280 pounds to produce 500 units of the H2001.How much is the material price variance?

Accepted Answer

A) $3,000 unfavorable 
B) $360 unfavorable 
C) $875 unfavorable 
D) $820 unfavorable

Question 4

The material quantity variance compares the actual quantity of material purchased with the quantity of material used.

Accepted Answer

A) True 
 B)False

Question 5

Electric Zero produces relay units for generators.Each relay has a standard material cost of $67.Standards call for two relays per generator.In July, the company purchased 120 relays for $7,560.The company used 104 relays in the production of 50 generators, with 4 relays damaged in the installation process.The standard quantity of labor is 20 hours per generator, with a standard wage rate of $23.The company incurred 1,020 labor hours at a cost of $22,950.How much is the material price variance?

Accepted Answer

A) $480 favorable 
B) $268 unfavorable 
C) $1,340 unfavorable 
D) $592 unfavorable

Question 6

Which of the following statements is true of standard cost?

Accepted Answer

A) It is equal to the actual cost of one unit of product. 
B) It is the amount management thinks that one unit of product should cost. 
C) It allows companies to generate more favorable than unfavorable variances. 
D) It is often calculated after production for the period is complete.

Question 7

A purchasing manager might be tempted to buy inferior materials because it will create favorable material quantity variance.

Accepted Answer

A) True 
 B)False

Question 8

Electric Zero produces relay units for generators.Each relay has a standard cost of $67.Standards call for two relays per generator.In July, the company purchased 120 relays for $7,560.The company used 104 relays in the production of 50 generators, with four relays damaged in the installation process.The standard quantity of labor is 20 hours per generator, with a standard wage rate of $23.In July, the company incurred 1,020 labor hours at a cost of $22,950.How much is the labor rate variance?

Accepted Answer

A) $460 unfavorable 
B) $50 favorable 
C) $510 favorable 
D) $460 favorable

Question 9

Harris Manufacturing produces white sauce.It uses units as the cost driver for overhead.The following information was provided concerning its standard cost system for 2017: $\begin{array}{|l|l||l|l|}
\hline {\text { Budgeted and Standard Data }} & &\text { Actual Data } \
\hline \text { Material } & \begin{array}{l}
1 / 4 \mathrm{lb} . @ \$ 14 \text { per } \
\text { pound }
\end{array} & \text { Froduced } & 6,200 \text { units } \\hline \text { Labor } & \begin{array}{l}
1.4 \mathrm{hrs} \text { hour } @ \$ 16 \text { per } \
\text { hour }
\end{array} & \begin{array}{l}
\text { Materials } \
\text { purchased }
\end{array} & \begin{array}{l}
1,600 \mathrm{lbs} \text { for } \$ 13.70 / \
\text { pound }
\end{array} \\hline \text { Total fixed overhead } & \$ 84,000 & \text { Materials used } & 1,520 \mathrm{lbs} . \
\hline \text { Variable overhead } & \$ 6.50 \text { per unit } & \text { Labor worked } & 8,740 \mathrm{hrs} \text {. at } \$ 15.90 \text { /hour } \
\hline \text { Production } & 6,000 \text { units } & \text { Total overhead } & \$ 122,000 \
\hline
\end{array}$ How much is the overhead volume variance for 2017?

Accepted Answer

A) $2,300 favorable 
B) $2,800 favorable 
C) $0 
D) $5,100 favorable

Question 10

Rodchester Company uses standard costing.Overhead is applied at $12 per unit produced.Data for the month of March follows: $\begin{array}{lr}
\text { Actual overhead costs } & \$ 194,000 \
\text { Actual units produced } & 17,400 \
\text { Flexible budget overhead for units produced } & \$ 210,000
\end{array}$ How much is the overhead volume variance?

Accepted Answer

A) $16,000 favorable 
B) $17,200 favorable 
C) $1,200 unfavorable 
D) $14,800 unfavorable

Question 11

Scotch Brand Products produces packaging tape and has determined the following to be its standard cost of producing one case of budget packaging tape: $$\begin{array} { l r } 
\text { Material (3.50 ounces at } \$ 1.30 \text { per ounce) } & \$ 4.55 \
\text { Labor (0.30 hour at } \$ 12.00 \text { per hour) } & 3.60 \
\text { Overhead } & 2.20 \
\text { Total } & \$ 10.35
\end{array}$$ At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the year.Overhead is allocated based on the number of cases of tape produced.Annual fixed overhead is budgeted at $56,000 and variable overhead costs are budgeted at $1.50 per case.The following information summarizes the results for 2017:
-Actual production, 75,000 cases
-Purchased 275,000 ounces of material at a total cost of $343,750
-Used 266,250 ounces of material in production
-Employees worked 22,000 hours, total labor cost $275,000
-Actual overhead incurred, $175,000
How much is the material quantity variance for 2017?

Accepted Answer

A) $4,875 unfavorable 
B) $8,875 favorable 
C) $$14,750 favorable 
D) $13,750 favorable

Question 12

Standard Tires' labor standard for the production of one bicycle tire is 4.5 hours at $8.50 per hour.During October, the company's employees produced 140,000 tires, using 610,000 hours at a total cost of $5,328,400.How much is Standard Tire's labor efficiency variance?

Accepted Answer

A) $143,400 unfavorable 
B) $26,600 favorable 
C) $170,000 favorable 
D) $313,400 favorable

Question 13

In which of the following situations will the overhead volume variance be favorable?

Accepted Answer

A) When more units are produced than were originally planned 
B) When actual overhead costs are less than the flexible budget 
C) When the predetermined overhead rate was set too low 
D) When there are units remaining in ending inventory

Question 14

Scotch Brand Products produces packaging tape and has determined the following to be its standard cost of producing one case of budget packaging tape: $$\begin{array} { l r } 
\text { Material (3.50 ounces at } \$ 1.30 \text { per ounce) } & \$ 4.55 \
\text { Labor (0.30 hour at } \$ 12.00 \text { per hour) } & 3.60 \
\text { Overhead } & 2.20 \
\text { Total } & \$ 10.35
\end{array}$$ At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the year.Overhead is allocated based on the number of cases of tape produced.Annual fixed overhead is budgeted at $56,000 and the variable overhead costs are budgeted at $1.50 per case.The following information summarizes the results for 2017:
-Actual production, 75,000 cases
-Purchased 275,000 ounces of material at a total cost of $343,750
-Used 266,250 ounces of material in production
-Employees worked 22,000 hours, total labor cost $275,000
-Actual overhead incurred, $175,000
How much is the overhead volume variance for 2017?

Accepted Answer

A) $6,500 unfavorable 
B) $3,500 unfavorable 
C) $10,000 unfavorable 
D) $3,000 unfavorable

Question 15

Haley Fans manufactures and distributes circulators.The standard and actual costs for the manufacture of circulators follows: $\begin{array}{|l|l|}
\hline{\text { Standard Costs }} &{\text { Actual Costs }} \
\hline \text { Variable cost, } \$ 24 \text { per unit } & \text { Total variable cost, } \$ 12,300 \
\hline \text { Fixed cost, } \$ 40 \text { per unit } & \text { Total fixed cost, } \$ 19,250 \
\hline
\end{array}$ Budgeted factory overhead was $32,000.Overhead applied is based on the number of circulator units produced.The company estimated that 500 circulators would be produced, however only 480 were produced.How much is Haley's overhead volume variance for 2017?

Accepted Answer

A) $800 unfavorable 
B) $830 favorable 
C) $450 favorable 
D) $50 unfavorable

Question 16

Thomas Company produces one product, the E4501.The standards for E4501 include the use of 25 yards of raw material at a standard price of $4.42 per yard.During a recent month, the company used 65,000 yards of raw material to produce 2,580 units of E4501.Thomas purchased this material at a cost of $4.37 per yard.How much is the material quantity variance?

Accepted Answer

A) $2,185 unfavorable 
B) $2,185 favorable 
C) $2,210 unfavorable 
D) $3,225 favorable

Question 17

For which one of the following will standard costs be most useful?

Accepted Answer

A) A soft drink bottling company 
B) A caterer 
C) A cabinet manufacturer 
D) An event planner

Question 18

Which of the following may cause an unfavorable material variance?
I.More material was used than planned.
II.A company paid a higher price for materials than expected.
III.More materials were used than purchased.

Accepted Answer

A) I and II 
B) II and III 
C) I and III 
D) I, II, and III

Question 19

Which of the following is not a criterion that a company might use to determine whether or not a variance is exceptional?

Accepted Answer

A) The variance is based on a significant percentage of the standard cost. 
B) The variance is unfavorable. 
C) The variance is for a large dollar amount. 
D) The variance is for a significant percentage of the flexible budget amount.

Question 20

For which of the following reasons does the volume variance arise?

Accepted Answer

A) Overhead costs incurred were greater or less than the amount budgeted. 
B) The company operated at more or less units of production activity than expected during the period. 
C) Actual activity equaled the volume used to establish the overhead cost per unit. 
D) The company purchased more or less materials for production than the amount used.

Exam 11: Standard Costs and Variance Analysis