Question 1

The following labour standards have been established for a particular product:

$\begin{array}{l}
\begin{array}{lll}
\text {Standard labour hours per unit of output }\
\text {Standard labour rate}\
\end{array}
\begin{array}{lll}
\text {2.8  hours}\
\text {\$ 11.50 per hour}\
\end{array}
\end{array}$

The following data pertain to operations concerning the product for the last month:

$\begin{array} { l r } 
\text { Actual hours worked } & 6,900 \text { hours } \
\text { Actual total labour cost } & \$ 80,385 \
\text { Actual output } & 2,300 \text { units }
\end{array}$

Required:

a) What was the labour rate variance for the month?
b) What was the labour efficiency variance for the month?

Accepted Answer

The answer of The following labour standards have been established...

Question 2

Dodge Company produces a single product.The company has set the following standards for materials and labour:

During the past month, the company purchased 7,000 kilograms of direct materials at a cost of $26,250. All of this material was used in the production of 1,300 units of product. Direct labour cost totalled $55,125 for the month. The following variances have been computed:

Required:

a) For direct materials, compute the standard price per kilogram, the standard quantity allowed for materials in total for the month's production, and the standard quantity per unit of product.
b) For direct labour, compute the actual direct labour cost per hour for the month and the labour rate variance

Accepted Answer

The answer of Dodge Company produces a single product.The company...

Question 3

The following materials standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month:

Required:

a) What was the materials price variance for the month?
b) What was the materials quantity variance for the month?

Accepted Answer

The answer of The following materials standards have been established...

Question 4

The following standards for variable manufacturing overhead have been established for a company that makes only one product:
$\begin{array}{lccc}
\text {Standard hours per unit of output} &\text { $ 6.9 $ hours}\
\text {Standard variable overhead rate} &\text { $ \$ 15.80 $ per hour}
\end{array}$
 The following data pertain to operations for the last month: $\begin{array} { l r } 
\text { Actual hours } & 6,100 \text { hours } \
\text { Actual total variable overhead cost } & \$ 97,600 \
\text { Actual output } & 800 \text { units }
\end{array}$

Required: 
a)What was the variable overhead spending variance for the month? 
b)What was the variable overhead efficiency variance for the month?

Accepted Answer

The answer of The following standards for variable manufacturing overhead...

Question 5

Because managers want stable unit cost figures,the accountant creates an artificial stability so far as fixed costs are concerned by applying fixed costs to products as if the fixed costs were really variable.

Accepted Answer

The statement accurately describes how managers may want stable unit cost figures, and how accountants may achieve this through artificially applying fixed costs to products.

Question 6

(Appendix 10A)Direct labour efficiency variance can be analyzed further into mix and yield variances if more than one class of direct labour that are good substitutes is used in operations.

Accepted Answer

Direct labour efficiency variance is the difference between the actual hours worked by the direct labour and the standard hours allowed for the actual output achieved. It can be further split into mix and yield variances if there are multiple classes of direct labour that are good substitutes in operations. The mix variance arises due to a change in the proportion of the different classes of direct labour used, while the yield variance results from a change in the efficiency of the direct labour.

Question 7

Capacity analysis is most affected by the presence of variable costs,NOT fixed costs.

Accepted Answer

Capacity analysis is primarily concerned with the maximum output a system can produce, which is more directly influenced by fixed assets and resources (fixed costs) rather than variable costs that fluctuate with production volume.

Question 8

If the denominator activity (in hours)used to compute the predetermined overhead rate is equal to the actual activity (in hours)for the period,then there is no volume variance.

Accepted Answer

The answer of If the denominator activity (in hours)used to...

Question 9

Waste or excessive usage of overhead items will show up as part of the variable overhead efficiency variance.

Accepted Answer

Variable overhead efficiency variance is concerned with the efficiency of using the variable overhead resources, not the waste or excessive usage of overhead items, which would typically affect the variable overhead spending variance.

Question 10

The following materials standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month:

Required:

a) What was the materials price variance for the month?
b) What was the materials quantity variance for the month?

Accepted Answer

The answer of The following materials standards have been established...

Question 11

The following materials standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month:

Required:

a) What is the materials price variance for the month?
b) What is the materials quantity variance for the month?

Accepted Answer

The answer of The following materials standards have been established...

Question 12

The fixed overhead budget variance is NOT controllable by managers because fixed costs are NOT controllable.

Accepted Answer

The fixed overhead budget variance can be controllable or uncontrollable. While fixed costs are generally consistent and not influenced by volume in the short term, managers can still impact these costs through efficiency improvements, negotiations, or strategic decisions, affecting the variance from the budgeted amount.

Question 13

The supervisor of the cost department has just conferred with you concerning the variance analysis of direct labour for the month just ended.As she talked,you wrote feverishly,but you weren't able to record all the information she gave you before she dashed off muttering something about "another brush fire to put out." Your efforts are shown below:
 Required: a)To redeem yourself,complete the form above,adding numbers and labels.(The usual notations,AH,SH,AR,SR,etc.,may be used where appropriate.) b)If you know that 18 minutes of labour is standard per unit of production,how many units were produced?

Accepted Answer

The answer of The supervisor of the cost department has...

Question 14

One cause of an unfavourable overhead volume variance would be increases in cost for fixed overhead items.

Accepted Answer

An unfavorable overhead volume variance is caused by producing fewer units than expected, not by changes in fixed overhead costs.

Question 15

(Appendix 10B)Vernon Mills,Inc.is a large producer of men's and women's clothing.The company uses standard costs for all of its products.The standard costs and actual costs per unit of product for a recent period are given below for one of the company's product lines:

During this period, the company produced 4,800 units of this product. A comparison of standard and actual costs for the period on a total cost basis is given below:

There was no inventory of materials on hand at the beginning of the period. During the period, 21,120 metres of materials were purchased, all of which were used in production.

Required:

a) (Appendix 10B) For direct materials, compute the price and quantity variances for the period and prepare journal entries to record all activity relating to direct materials for the period.
b) (Appendix 10B) For direct labour, compute the rate and efficiency variances and prepare a journal entry to record the incurrence of direct labour cost for the period.
c) For variable overhead, compute the spending and efficiency variances.

Accepted Answer

The answer of (Appendix 10B)Vernon Mills,Inc.is a large producer of...

Question 16

(Appendix 10B)Albert Manufacturing Company manufactures a single product.The standard cost of one unit of this product is:

During the month of October, 6,000 units were produced. Selected cost data relating to the month's production follow:

There was no beginning inventory of raw materials. The variable overhead rate is based on direct labour-hours.

Required:

a) (Appendix 10B) For direct materials, compute the price and quantity variances for the month, and prepare journal entries to record activity for the month.
b) (Appendix 10B) For direct labour, compute the rate and efficiency variances for the month, and prepare a journal entry to record labour activity for the month.
c) For variable overhead, compute the spending variance for the month, and prove the efficiency variance given above.

Accepted Answer

The answer of (Appendix 10B)Albert Manufacturing Company manufactures a single...

Question 17

Lido Company's standard and actual costs per unit for the most recent period,during which 400 units were actually produced,are given below:

There were no inventory of materials at the beginning or end of the period.

Required:

From the above information, compute the following variances. Show whether the variance is favourable (F) or unfavourable (U):

a) Materials price variance
b) Materials quantity variance
c) Direct labour rate variance
d) Direct labour efficiency variance
e) Variable overhead spending variance
f) Variable overhead efficiency variance

Accepted Answer

The answer of Lido Company's standard and actual costs per...

Question 18

(Appendix 10B)The Lahn Company produces and sells a single product.Standards have been established for the product as follows:

Actual cost and usage figures for the past month follow:

Required:

Prepare journal entries to record:

a) The purchase of raw materials.
b) The usage of raw materials in production.
c) The incurrence of direct labour cost.

Accepted Answer

The answer of (Appendix 10B)The Lahn Company produces and sells...

Question 19

If the standard hours allowed for the actual output of the period is greater than the denominator level of activity (in hours),then the overhead budget variance will be unfavourable.

Accepted Answer

If the standard hours allowed for actual output of the period is greater than the denominator level of activity, it means that the actual level of output is less than expected. In this case, the overhead budget variance will be favorable because less overhead was used than expected based on the denominator level of activity.

Question 20

In a standard costing system,under- or overapplied fixed overhead is equal to the sum of the fixed overhead budget variance and the fixed overhead volume variance.

Accepted Answer

The under- or overapplied fixed overhead is the difference between the actual fixed overhead incurred and the fixed overhead applied based on the standard fixed overhead rate per unit of activity. It can be further analyzed into two variances: the fixed overhead budget variance, which measures the difference between the actual fixed overhead incurred and the budgeted fixed overhead based on the budgeted level of activity, and the fixed overhead volume variance, which measures the difference between the budget based on the actual level of activity and the budget based on the budgeted level of activity. Therefore, under- or overapplied fixed overhead is the sum of the fixed overhead budget variance and the fixed overhead volume variance.

Quiz 10: Standard Costs and Overhead Analysis

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

Because managers want stable unit cost figures,the accountant creates an artificial stability so far as fixed costs are concerned by applying fixed costs to products as if the fixed costs were really variable.

(Appendix 10A)Direct labour efficiency variance can be analyzed further into mix and yield variances if more than one class of direct labour that are good substitutes is used in operations.

Capacity analysis is most affected by the presence of variable costs,NOT fixed costs.

If the denominator activity (in hours)used to compute the predetermined overhead rate is equal to the actual activity (in hours)for the period,then there is no volume variance.

Waste or excessive usage of overhead items will show up as part of the variable overhead efficiency variance.

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

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

The fixed overhead budget variance is NOT controllable by managers because fixed costs are NOT controllable.

One cause of an unfavourable overhead volume variance would be increases in cost for fixed overhead items.

If the standard hours allowed for the actual output of the period is greater than the denominator level of activity (in hours),then the overhead budget variance will be unfavourable.

In a standard costing system,under- or overapplied fixed overhead is equal to the sum of the fixed overhead budget variance and the fixed overhead volume variance.