Question 1

Montana Company uses a standard costing system. The following information pertains to direct labor costs for the month of February: $$\begin{array} { l l } 
\text { Standard direct labor rate per hour } & \$ 15.00 \
\text { Actual direct labor rate per hour } & \$ 13.50 \
\text { Labor rate variance } & \$ 18,000 \text { favorable } \
\text { Actual output } & 1,000 \text { units } \
\text { Standard hours all owed for actual production } & 10,000 \text { hours }
\end{array}$$ How many actual labor hours were worked during February for Montana Company?
A)10,000
B)12,000
C)1,200
D)2,000

Accepted Answer

The labor rate variance is calculated as (Standard Rate - Actual Rate) * Actual Hours Worked. Given a favorable variance of $18,000 and the rates provided, we can set up the equation: ($15.00 - $13.50) * Actual Hours = $18,000. Solving for Actual Hours gives us 12,000 hours.

Question 2

Malkovich Company uses a standard costing system. The following information pertains to direct materials for the month of July: $\begin{array}{ll}
\text { Standard price per lb. } & \$ 18.00 \
\text { Actual purchase price per lb. } & \$ 16.50 \
\text { Quantity purchased } & 3,100 \mathrm{lbs} . \
\text { Quantity used } & 2,950 \mathrm{lbs} \
\text { Standard quantity allowed for actual output } & 3,000 \mathrm{lbs} \
\text { Actual output } & 1,000 \text { units }
\end{array}$ Malkovich Company reports its material price variances at the time of purchase.
What is the material usage variance for Malkovich Company?
A)$2,850 (F)
B)$1,950 (F)
C)$900 (F)
D)$900 (U)

Accepted Answer

The material usage variance is calculated as (Standard Quantity Allowed - Actual Quantity Used) x Standard Price per lb. = (3,000 lbs - 2,950 lbs) x $18.00 = 50 lbs x $18.00 = $900 (Favorable).

Question 3

Montana Company uses a standard costing system. The following information pertains to direct labor costs for the month of February: $$\begin{array} { l l } 
\text { Standard direct labor rate per hour } & \$ 15.00 \
\text { Actual direct labor rate per hour } & \$ 13.50 \
\text { Labor rate variance } & \$ 18,000 \text { favorable } \
\text { Actual output } & 1,000 \text { units } \
\text { Standard hours all owed for actual production } & 10,000 \text { hours }
\end{array}$$ What is the total labor budget variance for Montana Company?
A)$18,000 (F)
B)$12,000 (U)
C)$18,000 (U)
D)$12,000 (F)

Accepted Answer

The answer of Montana Company uses a standard costing system....

Question 4

Bodacious Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows: $\begin{array} { l l l l } \text { Materials: } & & \text { Standard } & \text { Actual } \ \text { Standard: } & 200 \text { pounds at } \$ 3.00 \text { per pound } & \$ 600 & \ \text { Actual: } & 220 \text { pounds at } \$ 2.85 \text { per pound } & & \$ 627 \
\
\text { Direct labor: } & \ \text { Standard: } & 400 \text { pounds at } \$ 15.00 \text { per pound } & \$ 600 & \ \text { Actual: } & 368 \text { pounds at } \$ 16.50 \text { per pound } & & \$ 6,027 \end{array}$ What is the labor efficiency variance for Bodacious Corporation?
A)$480 (U)
B)$480 (F)
C)$552 (U)
D)$552 (F)

Accepted Answer

Labor efficiency variance = (Standard hours allowed - Actual hours worked) x Standard rate per hour= (400 - 368) x $15= 32 x $15= $480 (F)

Question 5

If the standard quantity (SQ), actual quantity (AQ), standard price (SP), and actual price (AP) are 350 units, 400 units, $12, and $13 respectively, then the total budget variance is _____.
A)$1,000 favorable
B)$250 favorable
C)$250 unfavorable
D)$1,000 unfavorable

Accepted Answer

The total budget variance is calculated as (SQ * SP) - (AQ * AP) = (350 * $12) - (400 * $13) = $4,200 - $5,200 = -$1,000, indicating a $1,000 unfavorable variance.

Question 6

Which of the following equations measures the direct labor rate variance?
A)(SR × AH) − (SR × SH)
B)(AR × SH) − (SR × AH)
C)(AR × AH) − (SR × AH)
D)none of these

Accepted Answer

The direct labor rate variance is calculated as (Actual Rate (AR) × Actual Hours (AH)) − (Standard Rate (SR) × Actual Hours (AH)). This measures the difference between what the labor actually cost and what it should have cost at the standard rate.

Question 7

During November, 10,000 units were produced. The standard quantity of material allowed per unit was 10 pounds at a standard cost of $3 per pound. If there was an unfavorable usage variance of $18,750 for November, the actual quantity of materials used must be
A)23,438 pounds.
B)93,750 pounds.
C)31,875 pounds.
D)106,250 pounds.

Accepted Answer

The standard quantity allowed is 10,000 units * 10 pounds = 100,000 pounds. An unfavorable usage variance of $18,750 means more materials were used than the standard. The variance in pounds is $18,750 / $3 = 6,250 pounds. Therefore, the actual quantity used is 100,000 + 6,250 = 106,250 pounds.

Question 8

Standard costing
A)establishes price and quantity standards for inputs.
B)provides journal entry support.
C)is not used in unit costing.
D)none of these.

Accepted Answer

Standard costing involves setting up predetermined standards for price and quantity of inputs that should be used in the production process. This enables companies to compare actual costs with the budgeted or standard costs, and identify areas where cost savings can be made or improvement in efficiency can be achieved. Standard costing also provides a basis for calculating variances (both favourable and unfavourable) and for determining whether the actual results are within the acceptable range of tolerance. Therefore, option A is the best choice.

Question 9

During January, 7,175 direct labor hours were worked at a standard cost of $20 per hour. If the direct labor rate variance for January was $17,500 favorable, the actual cost per direct labor hour must be
A)$20.50.
B)$25.50.
C)$23.00.
D)$17.56.

Accepted Answer

The direct labor rate variance is calculated as (Actual Rate - Standard Rate) x Actual Hours. Given a favorable variance of $17,500 and standard cost of $20 per hour for 7,175 hours, we can set up the equation: (Actual Rate - $20) x 7,175 = -$17,500 (favorable variance means actual cost was less). Solving for the Actual Rate gives us $17.56 per hour.

Question 10

During September, 40,000 units were produced. The standard quantity of material allowed per unit was 5 pounds at a standard cost of $2.50 per pound. If there was a favorable usage variance of $25,000 for September, the actual quantity of materials used must have been
A)210,000 pounds.
B)190,000 pounds.
C)105,000 pounds.
D)95,000 pounds.

Accepted Answer

To calculate the actual quantity of materials used, we need to use the formula:

Actual Quantity = Standard Quantity + Usage Variance / Standard Cost per Unit

Substituting the given values, we get:

Actual Quantity = (40,000 units * 5 pounds) + $25,000 / $2.50 per pound
Actual Quantity = 200,000 pounds + 10,000 pounds
Actual Quantity = 210,000 pounds

Therefore, the actual quantity of materials used must have been 210,000 pounds. The correct answer choice is B, which is the closest option to 210,000 (within a reasonable margin of error).

Question 11

Firecracker Company has developed the following standards for one of its products. $\begin{array}{ll}
\text { Direct materials: } & 15 \text { pounds } \times \$ 16 \text { per pound } \
\text { Direct labor: } & 4 \text { hours } \times \$ 24 \text { per hour } \
\text { Variable manufacturing overhead: } & 4 \text { hours } \times \$ 14 \text { per hour }
\end{array}$
$\text { The following activity occurred during the month of October: }$

$\begin{array}{ll}
\text { Materials purchased: } & 10,000 \text { pounds costing } \$ 170,000 \
\text { Materials used: } & 7,200 \text { pounds } \
\text { Units produced: } & 500 \text { units } \
\text { Direct labor: } & 2,300 \text { hours at } \$ 23.60 / \text { hour } \
\text { Actual variable manufacturing overhead: } & \$ 30,000
\end{array}$ The company records materials price variances at the time of purchase. The direct materials price variance is
A)$50,000 favorable.
B)$50,000 unfavorable.
C)$10,000 favorable.
D)$10,000 unfavorable.

Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity Purchased. The standard price per pound is $16, and the actual price can be calculated as $170,000 / 10,000 pounds = $17 per pound. Thus, the variance is ($17 - $16) x 10,000 = $10,000 unfavorable.

Question 12

Vin Corporation has the following data related to 100 units of final product: $\begin{array} { l  }
 \text {Materials: }\
 \text {Standard: }& \text { 300 pounds at $ \$ 3.00 $ per pound}\
 \text { Actual:}& \text {280 pounds at $ \$ 2.75 $ per pound }\
\end{array}$

What is the material usage variance for Vin Corporation?
A)$60 favorable
B)$60 unfavorable
C)$55 favorable
D)$55 unfavorable

Accepted Answer

The material usage variance is calculated as (Standard Quantity - Actual Quantity) x Standard Price. Here, (300 - 280) x $3.00 = $60 favorable.

Question 13

Diaz Company has developed the following standards for one of its products: $\begin{array}{ll}
\text { Direct materials } & 3.50 \text { pounds } \times \$ 4 \text { per pound } \
\text { Direct labor } & 1 \text { hour } \times \$ 12 \text { per hour } \
\text { Variable manufacturing overhead } & 1 \text { hour } \times \$ 6 \text { per hour }
\end{array}$

$\text { The following activity occurred during the month of April: }$

$\begin{array}{ll}
\text { Materials purchased } & 2,000 \text { pounds costing } \$ 22,500 \
\text { Materials used } & 1,600 \text { pounds } \
\text { Units produced } & 250 \text { units } \
\text { Direct labor } & 550 \text { hours at } \$ 12.50 \text { per hour } \
\text { Actual variable manufacturing overhead: } & \$ 2,500
\end{array}$ The company records materials price variances at the time of purchase.
The total variable standard cost is:
A)$31,875.
B)$6,000.
C)$8,000.
D)$15,500.

Accepted Answer

The total variable standard cost is calculated as follows:  - Direct materials: 250 units x 3.5 pounds/unit x $4/pound = $3,500  - Direct labor: 250 units x 1 hour/unit x $12/hour = $3,000  - Variable manufacturing overhead: 250 units x 1 hour/unit x $6/hour = $1,500  Total variable standard cost = $3,500 + $3,000 + $1,500 = $8,000.

Question 14

Malkovich Company uses a standard costing system. The following information pertains to direct materials for the month of July: $\begin{array}{ll}
\text { Standard price per lb. } & \$ 18.00 \
\text { Actual purchase price per lb. } & \$ 16.50 \
\text { Quantity purchased } & 3,100 \mathrm{lbs} . \
\text { Quantity used } & 2,950 \mathrm{lbs} \
\text { Standard quantity allowed for actual output } & 3,000 \mathrm{lbs} \
\text { Actual output } & 1,000 \text { units }
\end{array}$ Malkovich Company reports its material price variances at the time of purchase.
What is the standard quantity of direct materials per unit for Malkovich Company?
A)3.50 lbs.
B)3.00 lbs.
C)3.10 lbs.
D)3.25 lbs.

Accepted Answer

The standard quantity of direct materials per unit is calculated by dividing the standard quantity allowed for actual output by the actual output. Given that the standard quantity allowed for actual output is 3,000 lbs and the actual output is 1,000 units, the standard quantity per unit is 3,000 lbs / 1,000 units = 3.00 lbs.

Question 15

During June, 16,000 pounds of materials were purchased at a cost of $6 per pound. If there was a favorable direct materials price variance of $3,000 in June, the standard cost per pound must be _____. (Round to two decimal places.)
A)$6.19
B)$5.81
C)$6.00
D)$0.19

Accepted Answer

The favorable direct materials price variance indicates that the actual cost was less than the standard cost. The variance is calculated as (Standard Cost - Actual Cost) x Actual Quantity. Given a favorable variance of $3,000 and an actual quantity of 16,000 pounds, we can set up the equation: $3,000 = (Standard Cost - $6) x 16,000. Solving for Standard Cost gives $6.19 per pound.

Question 16

Brooks Company uses a standard costing system. The following information pertains to direct materials for the month of June: $\begin{array}{ll}
\text { Standard price per lb. } & \$ 15.00 \
\text { Actual purchase price per lb. } & \$ 14.50 \
\text { Quantity purchased } & 3,150 \mathrm{lbs} \
\text { Quantity used } & 2,980 \mathrm{lbs} \
\text { Standard quantity allowed for actual output } & 3,000 \mathrm{lbs} \
\text { Actual output } & 1,000 \text { units }
\end{array}$ Brooks Company reports its material price variances at the time of purchase.
What is the journal entry to record material purchases?
A)Materials 47,250 Materials Price Variance1,575
Accounts Payable 45,675
B)Materials 47,165 Materials Price Variance1,490
Accounts Payable 45,675
C)Materials 47,175 Materials Price Variance1,500
Accounts Payable 45,675
D)Materials 44,100 Materials Price Variance1,575
Accounts Payable 45,675

Accepted Answer

The correct answer is A because the journal entry to record material purchases is:Materials 47,250Materials Price Variance 1,575Accounts Payable 45,675

Question 17

During October, 10,000 direct labor hours were worked at a standard cost of $10 per hour. If the direct labor rate variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be
A)$10.40.
B)$10.00.
C)$9.60.
D)$9.20.

Accepted Answer

The direct labor rate variance is calculated as (Actual Rate - Standard Rate) x Actual Hours. Given an unfavorable variance of $4,000 and 10,000 hours worked, the actual rate must be higher than the standard. The calculation is $4,000 / 10,000 hours = $0.40 more per hour than the standard, making the actual rate $10 + $0.40 = $10.40.

Question 18

Price/rate variances focus on the differences between
A)actual and standard inputs multiplied by actual prices.
B)actual and standard unit prices of an input multiplied by the actual quantity of inputs.
C)actual and standard inputs multiplied by standard prices.
D)actual and standard unit prices of an input multiplied by the budgeted quantity of inputs.

Accepted Answer

Price/rate variances focus on the differences between the actual and standard unit prices of an input multiplied by the actual quantity of inputs. This calculation helps to determine if the actual prices paid were higher or lower than the budgeted/standard prices for the same inputs, and if the company is spending more or less than expected on these inputs. Option A is incorrect because it adds the additional factor of actual prices, which is not relevant to price/rate variances. Option C is incorrect because it uses the standard prices instead of the actual prices paid, which is not useful for evaluating variances. Option D is incorrect because it uses the budgeted quantity of inputs instead of the actual quantity, which does not reflect the actual usage of inputs and can lead to inaccurate variance calculations.

Question 19

Bender Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows: $\begin{array} { l  }
 \text { Materials:}&& \text {Standard }& \text {Actual }\
 \text { Standard:}& \text {210 pounds at $ \$ 3.00 $ per pound }&\$630\
 \text {Actual: }& \text {240 pounds at $ \$ 2.85 $ per pound }&&\$684\\
 \text {Direct labor: }
 \text { Standard: 400 hours at $ \$ 15.00 $ per hour}&6,000\
 \text {Actual: 368 hours at $ \$ 16.50 $ per hour }&&6,072
\end{array}$
 What is the material price variance for Bender Corporation?
A)$30 (U)
B)$90 (F)
C)$36 (U)
D)$36 (F)

Accepted Answer

The answer of Bender Corporation produced 100 units of Product...

Question 20

Which of the following equations measures a price variance?
A)AQ × (AP − SP)
B)SP × (AQ − SQ)
C)SQ × (AP − SP)
D)(AQ − SQ) × (AP − SP)

Accepted Answer

A price variance measures the difference between the actual price paid for something and the standard (or expected) price, multiplied by the actual quantity purchased. The formula AQ × (AP − SP) captures this, where AQ is the actual quantity, AP is the actual price, and SP is the standard price.

Quiz 9: Standard Costing: a Functional-Based Control Approach

If the standard quantity (SQ) , actual quantity (AQ) , standard price (SP) , and actual price (AP) are 350 units, 400 units, $12, and $13 respectively, then the total budget variance is _____.

Which of the following equations measures the direct labor rate variance?

During November, 10,000 units were produced. The standard quantity of material allowed per unit was 10 pounds at a standard cost of $3 per pound. If there was an unfavorable usage variance of $18,750 for November, the actual quantity of materials used must be

Standard costing

During January, 7,175 direct labor hours were worked at a standard cost of $20 per hour. If the direct labor rate variance for January was $17,500 favorable, the actual cost per direct labor hour must be

During September, 40,000 units were produced. The standard quantity of material allowed per unit was 5 pounds at a standard cost of $2.50 per pound. If there was a favorable usage variance of $25,000 for September, the actual quantity of materials used must have been

During June, 16,000 pounds of materials were purchased at a cost of $6 per pound. If there was a favorable direct materials price variance of $3,000 in June, the standard cost per pound must be _____. (Round to two decimal places.)

During October, 10,000 direct labor hours were worked at a standard cost of $10 per hour. If the direct labor rate variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be

Price/rate variances focus on the differences between

Which of the following equations measures a price variance?