Question 1

If a company recognizes variances at the earliest point possible, raw materials inventory will be debited for the Actual Quantity (AQ)of raw materials purchased and costed at the Actual Price (AP)paid per unit.

Accepted Answer

When a company recognizes variances at the earliest point possible, the raw materials inventory is debited for the Actual Quantity (AQ) of raw materials purchased but at the Standard Price (SP) per unit, not the Actual Price (AP) paid. Variances are recorded separately.

Question 2

When a company uses direct materials, the amount of the debit to Work in Process Inventory is based on the standard quantity of the materials that should have been used times the Standard price (SP)per unit of the materials.

Accepted Answer

This is correct. The debit to Work in Process Inventory for direct materials is calculated using the standard quantity and standard price per unit of materials.

Question 3

Just as in job costing, the manufacturing costs flow through the inventory accounts in the following order: raw materials → work in process → cost of goods sold → finished goods.

Accepted Answer

The correct order is raw materials → work in process → finished goods → cost of goods sold.

Question 4

A standard cost income statement shows cost of goods sold at standard and then actual cost.

Accepted Answer

A standard cost income statement shows cost of goods sold at a predetermined standard cost and then compares it to the actual cost incurred, allowing for variance analysis.

Question 5

Litchfield Industries gathered the following information for the month ended June 30: The static budget volume is 3000 units:
Overhead flexible budget:
 Actual production was 6500 units. Actual overhead costs were $22,000 for variable costs and $39,000 for fixed costs. Actual machine hours worked were 16,000 hours.
What is the fixed overhead volume variance? (Assume the allocation base for fixed overhead costs is machine hours.)
A)$53,900 unfavorable
B)$53,900 favorable
C)$18,200 unfavorable
D)$18,200 favorable

Accepted Answer

The answer of Litchfield Industries gathered the following information for...

Question 6

A debit balance means that a variance is unfavorable since it decreases income (just like an expense).

Accepted Answer

A debit balance means that a company has spent more than it has earned, which is unfavorable because it decreases income just like an expense.

Question 7

The standard variable overhead cost rate for Harris Manufacturing is $25.00 per unit. Budgeted fixed overhead cost is $48,100. Harris Manufacturing budgeted 3700 units for the current period and actually produced 3900 finished units. What is the fixed overhead volume variance? Assume the allocation base for fixed overhead costs is the number of units expected to be produced.
A)$5000 favorable
B)$2600 favorable
C)$5000 unfavorable
D)$2600 unfavorable

Accepted Answer

The answer of The standard variable overhead cost rate for...

Question 8

Closing the variances to Cost of Goods Sold corrects the account balance.

Accepted Answer

Closing the variances to Cost of Goods Sold means adjusting the account balance to reflect the true cost of the goods sold, therefore correcting the account balance.

Question 9

A credit balance means that a variance is unfavorable since it decreases income (just like a revenue).

Accepted Answer

A credit balance indicates that there is more money in the account than what is owed, which is a positive result. This would increase income rather than decrease it. Therefore, a credit balance is favorable.

Question 10

The Berwin Company established a master budget volume of 35,000 units for April. Actual overhead costs incurred amounted to $98,500. Actual production for the month was 34,000 units. The standard variable overhead rate was $1.75 per direct labor hour. The standard fixed overhead rate was $1.50 per direct labor hour. One direct labor hour is the standard quantity per finished unit. Assume the allocation base for fixed overhead costs is the number of direct labor hours.
A. Compute the total manufacturing overhead cost variance.
B. Compute the overhead flexible budget variance.
C. Compute the production volume variance.

Accepted Answer

The answer of The Berwin Company established a master budget...

Question 11

LampLight Industries gathered the following information for the month of July:
Overhead flexible budget:
  LampLight actually produced 14,000 units in 17,500 machine hours. Total actual overhead cost of $85,500 consisted of $35,000 variable costs and $50,500 fixed costs. The standard variable and fixed overhead rates are based on a master (static)budget of 15,000 units. Assume the allocation base for fixed overhead costs is the number of units.
A. Compute the total manufacturing overhead cost variance.
B. Compute the overhead flexible budget variance.
C. Compute the production volume variance.

Accepted Answer

The answer of LampLight Industries gathered the following information for...

Question 12

A debit balance in the direct materials price variance indicates the standard cost of materials was less than the actual cost of materials.

Accepted Answer

A debit balance in the direct materials price variance means that the actual cost of materials exceeded the standard cost of materials, indicating a favorable variance.

Question 13

The managerial accountant at Sailboat World compiles a monthly overhead variance report. The company produced 30,584 sailboats in the past month at 0.28 machine hours per unit. The budgeted fixed overhead cost was $95,000 whereas actual fixed overhead cost was $96,400. Calculate the standard fixed overhead cost allocated to production at $11 per machine-hour. Compute the fixed overhead volume variance and the fixed overhead budget variance.

Accepted Answer

The answer of The managerial accountant at Sailboat World compiles...

Question 14

A credit balance means that a variance is favorable since it increases income (just like a revenue).

Accepted Answer

A credit balance in accounting typically means that there is more money coming in than going out, which is often considered favorable since it can increase income.

Question 15

The standard variable overhead cost rate for the Gordon Company is $13.25 per unit. Budgeted fixed overhead cost is $80,000. The company budgeted 8000 units for the current period and actually produced 4100 finished units. What is the fixed overhead volume variance? Assume the allocation base for fixed overhead costs is the number of units expected to be produced.
A)$39,000 favorable
B)$25,675 unfavorable
C)$25,675 favorable
D)$39,000 unfavorable

Accepted Answer

Fixed overhead volume variance = (Budgeted units - Actual units) x Budgeted fixed overhead rate
= (8000 - 4100) x (Budgeted fixed overhead cost / Budgeted units)
= 3900 x (80000 / 8000)
= 3900 x 10
= $39,000 unfavorable

Question 16

Work in process inventory is debited for which of the following when recording the use of direct materials in the production process?
A)Standard quantity of Direct Materials Used (AQU)for actual production output times actual cost per pound
B)Standard quantity of Direct Materials Used (AQU)for actual production output times standard cost per pound
C)Actual quantity (AQ)of Direct Materials Used (AQU)times standard cost per pound
D)Actual quantity (AQ)of Direct Materials Used (AQU)times actual cost per pound

Accepted Answer

When recording the use of direct materials in the production process, work in process inventory is debited for the standard quantity of direct materials used (AQU) for actual production output times standard cost per pound. This is because work in process inventory is valued based on the standard cost of materials used in production, not the actual cost.

Question 17

The Dogwood Technology Company managerial accountant computes the May total variance report. The budgeted fixed overhead was $46,140 and the standard fixed overhead cost allocated to production was $45,910. The actual fixed overhead totaled $45,490. Compute the fixed overhead budget variance and the fixed overhead volume variance.
A)$880 U; $420 F
B)$650 F; $230 U
C)$420 U; $880 F
D)$230 F; $650 U

Accepted Answer

Fixed overhead budget variance = Actual fixed overhead - Budgeted fixed overhead = $45,490 - $46,140 = -$650 (Favorable, since actual costs are less than budgeted costs). Fixed overhead volume variance = Standard fixed overhead cost allocated to production - Budgeted fixed overhead = $45,910 - $46,140 = -$230 (Unfavorable, since the standard cost allocated is less than the budgeted cost).

Question 18

A debit balance means that a variance is favorable since it decreases income (just like a expense).

Accepted Answer

A debit balance means that there has been an increase in expenses and a decrease in assets or revenue. This would result in an unfavorable variance, as it would decrease the overall income. Therefore, a favorable variance would result in a credit balance.

Question 19

The entry to allocate manufacturing overhead costs to production involves which of the following?
A)Debit to work in process inventory for the actual cost of overhead
B)Credit to work in process inventory for the standard rate of overhead times the standard quantity of the allocation base allowed for actual output
C)Credit to work in process inventory for the actual cost of overhead
D)Debit to work in process inventory for the standard rate of overhead times the standard quantity of the allocation base allowed for actual output

Accepted Answer

The entry to allocate manufacturing overhead costs to production involves debiting the work in process inventory account for the standard rate of overhead times the standard quantity of the allocation base allowed for actual output. This method ensures that overhead costs are allocated evenly across all products produced, and that each product is charged a fair share of manufacturing overhead based on the resources it consumed during production. Therefore, option D is the best choice.

Question 20

The managerial accountant at Matheson Tool Company is compiling a fixed overhead volume variance report. According to the data, 4,200 standard hours were tallied at $8 per machine hour, the fixed overhead volume variance was calculated at $2,860 U. Compute the budgeted fixed overhead cost at $2,860U and compare the budgeted fixed overhead cost if the fixed overhead volume variance was $2,860F.

Accepted Answer

The answer of The managerial accountant at Matheson Tool Company...

Quiz 11: Standard Costs and Variances