Question 1

List the direct labor variances and briefly describe each.

Accepted Answer

The answer of List the direct labor variances and briefly...

Question 2

Cavalaris Products uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Cavalaris had an unfavorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?
A)The actual number of direct labor hours was lower than the budgeted hours.
B)The actual variable overhead costs were higher than the budgeted costs.
C)The actual variable overhead costs were lower than the budgeted costs.
D)The actual number of direct labor hours was higher than the budgeted hours.

Accepted Answer

If the actual variable overhead costs were higher than the budgeted costs, it would result in an unfavorable cost variance for variable overhead costs. A and D would result in a favorable cost variance, while C would result in no variance.

Question 3

A new factory manager was hired for a company that was experiencing slow production rates and lower production volumes than demanded by management.Upon investigation,the manager found that the workers were poorly motivated and not closely supervised.Midway through the quarter,an incentive program was initiated,and cash bonuses were given when workers hit their production targets.Within a short time,production output increased,but the bonuses had to be charged to the direct labor budget.This could produce an ________.
A)unfavorable direct materials cost variance
B)unfavorable direct materials efficiency variance
C)unfavorable direct labor efficiency variance
D)unfavorable direct labor cost variance

Accepted Answer

The cash bonuses given to workers for hitting their production targets would increase the direct labor cost incurred by the company. Since the budget for direct labor is fixed at its normal level, any increase in direct labor cost would result in an unfavorable variance. Thus, an unfavorable direct labor cost variance would be produced.

Question 4

Stafford Company uses standard costs for its manufacturing division.Standards specify 0.2 direct labor hours per unit of product.The allocation base for variable overhead costs is direct labor hours.At the beginning of the year,the static budget for variable overhead costs included the following data: $$\begin{array} { | l | l | } 
\hline \text { Production volume } & 5000 \text { units } \
\hline \text { Budgeted variable overhead costs } & \$ 13,500 \
\hline \text { Budgeted direct labor hours } & 620 \text { hours } \
\hline
\end{array}$$ At the end of the year,actual data were as follows:
$$\begin{array} { | l | l | } 
\hline \text { Production volume } & 4100 \text { units } \
\hline \text { Actual variable overhead costs } & \$ 15,100 \
\hline \text { Actual direct labor hours } & 505 \text { hours } \
\hline
\end{array}$$ How much is the standard cost per direct labor hour for variable overhead? (Round your answer to the nearest cent.)
A)$21.77 per direct labor hour
B)$16.46 per direct labor hour
C)$26.73 per direct labor hour
D)$24.35 per direct labor hour

Accepted Answer

The standard cost per direct labor hour for variable overhead is $21.77. This is calculated by dividing the budgeted variable overhead costs by the budgeted direct labor hours: $13,500 / 620 hours = $21.77 per direct labor hour.

Question 5

Golden Glow Company manufactures candles.The standard direct materials quantity required to produce one large candle is 1 pound at a cost of $5 per pound.Every candle requires 2 direct labor hours at a standard cost of $3 per direct labor hour.During November,7,200 large candles were produced using 7,500 pounds costing $45,000.At the end of November,an examination of the labor cost records showed that the company used 15,000 direct labor hours (DLHr)at a cost of $4 per hour.
Using the format below,prepare an analysis of the direct labor cost variances.

Accepted Answer

The answer of Golden Glow Company manufactures candles.The standard direct...

Question 6

Judd Company uses standard costs for its manufacturing division.Standards specify 0.2 direct labor hours per unit of product.The allocation base for variable overhead costs is direct labor hours.At the beginning of the year,the static budget for variable overhead costs included the following data: $$\begin{array} { | l | l | } 
\hline \text { Production volume } & 6100 \text { units } \
\hline \text { Budgeted variable overhead costs } & \$ 14,000 \
\hline \text { Budgeted direct labor hours } & 600 \text { hours } \
\hline
\end{array}$$ At the end of the year,actual data were as follows:
$$\begin{array} { | l | l | } 
\hline \text { Production volume } & 4200 \text { units } \
\hline \text { Actual variable overhead costs } & \$ 15,100 \
\hline \text { Actual direct labor hours } & 480 \text { hours } \
\hline
\end{array}$$ What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)
A)$14,000 U
B)$15,100 F
C)$3902 U
D)$4878 F

Accepted Answer

The variable overhead cost variance is calculated as the difference between the actual variable overhead costs and the flexible budget for variable overhead costs based on actual production. The flexible budget for 4200 units is (4200 units * 0.2 hours/unit * $14,000/600 hours) = $9,798. The variance is $15,100 (actual) - $9,798 (flexible budget) = $5,302 U (unfavorable). However, the closest option is $3,902 U, indicating a possible error in the options provided.

Question 7

Marshall Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Marshall had a favorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?
A)The actual number of direct labor hours was lower than the budgeted hours.
B)The actual variable overhead costs were higher than the budgeted costs.
C)The actual variable overhead costs were lower than the budgeted costs.
D)The actual number of direct labor hours was higher than the budgeted hours.

Accepted Answer

A favorable efficiency variance means that the actual direct labor hours used were less than the budgeted hours. This would result in a lower allocation of variable overhead costs, leading to a favorable variance.

Question 8

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing a higher waste of valuable direct materials.The production manager decided to recruit some highly skilled production workers from another company to bring down the defect rate.This would produce a(n)________.
A)unfavorable direct materials cost variance
B)favorable direct labor cost variance
C)favorable direct labor efficiency variance
D)unfavorable direct materials efficiency variance

Accepted Answer

By recruiting highly skilled workers, the production department hopes to decrease the defect rate on the assembly line, which should increase efficiency in terms of direct labor. Therefore, a favorable direct labor efficiency variance is expected. The other choices are not relevant to this scenario.

Question 9

The production manager of a company,in an effort to gain a promotion,negotiated a new labor contract with the factory employees that required them to bear a greater percentage of benefit costs than before,thus bringing down the cost of direct labor to the company.Shortly afterward,several experienced and highly skilled workers resigned and were replaced by new employees whose work was very slow during their training period.At the end of the quarter,the company's profits fell 10%.This would produce a(n)________.
A)favorable direct materials cost variance
B)unfavorable direct labor cost variance
C)unfavorable direct labor efficiency variance
D)favorable direct materials efficiency variance

Accepted Answer

The negotiated labor contract led to a reduction in direct labor cost, but the resignation of experienced and skilled workers and their replacement with inexperienced employees resulted in slower work during the training period. This indicates a decrease in labor efficiency, leading to an unfavorable direct labor efficiency variance.

Question 10

Porter Company uses standard costs for its manufacturing division.Standards specify 0.1 direct labor hours per unit of product.The allocation base for variable overhead costs is direct labor hours.At the beginning of the year,the static budget for variable overhead costs included the following data: $$\begin{array} { | l | l | } 
\hline \text { Production volume } & 5000 \text { units } \
\hline \text { Budgeted variable overhead costs } & \$ 16,000 \
\hline \text { Budgeted direct labor hours (DLHr) } & 500 \text { hours } \
\hline
\end{array}$$ At the end of the year,actual data were as follows:
$$\begin{array} { | l | l | } 
\hline \text { Production volume } & 4100 \text { units } \
\hline \text { Actual variable overhead costs } & \$ 15,200 \
\hline \text { Actual direct labor hours (DLHr) } & 500 \text { hours } \
\hline
\end{array}$$ What is the variable overhead efficiency variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)
A)$2400 F
B)$2400 U
C)$2736 F
D)$2736 U

Accepted Answer

The variable overhead efficiency variance is calculated as follows:Variable overhead efficiency variance = (Standard direct labor hours - Actual direct labor hours) x Standard variable overhead rate= (500 hours - 500 hours) x $32 per hour= $0Therefore, the variable overhead efficiency variance is $0 F.

Question 11

In a standard cost system,the standard overhead allocation rate replaces the predetermined
overhead allocation rate but the concept is the same.

Accepted Answer

The statement is correct. In a standard cost system, the standard overhead allocation rate is used instead of the predetermined overhead allocation rate, but both concepts refer to allocating overhead costs based on predetermined rates or standards.

Question 12

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing a higher waste of valuable direct materials.The production manager decided to recruit some highly skilled production workers from another company to bring down the defect rate.This would produce a(n)________.
A)unfavorable direct materials cost variance
B)unfavorable direct labor cost variance
C)unfavorable direct labor efficiency variance
D)unfavorable direct materials efficiency variance

Accepted Answer

Hiring highly skilled production workers from another company is likely to increase the wages paid, leading to an unfavorable direct labor cost variance because the actual labor costs would be higher than the standard or expected labor costs.

Question 13

In a standard cost system,the manufacturing overhead allocated to production equals the standard overhead allocation rate multiplied by the standard quantity of the allocation base allowed for expected output.

Accepted Answer

In a standard cost system, the manufacturing overhead allocated to production equals standard overhead allocation rate × standard quantity of the allocation base allowed for actual output.

Question 14

Trull Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Trull had a favorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?
A)The actual number of direct labor hours was lower than the budgeted hours.
B)The actual variable overhead costs were higher than the budgeted costs.
C)The actual variable overhead costs were lower than the budgeted costs.
D)The actual number of direct labor hours was higher than the budgeted hours.

Accepted Answer

The answer of Trull Company uses a standard cost system.Variable...

Question 15

A new factory manager was hired for a company that was experiencing slow production rates and lower production volumes than demanded by management.Upon investigation,the manager found that the workers were poorly motivated and not closely supervised.Midway through the quarter,an incentive program was initiated,and cash bonuses were given when workers hit their production targets.Within a short time,production output increased,but the bonuses had to be charged to the direct labor budget.This could produce a(n)________.
A)unfavorable direct materials cost variance
B)unfavorable direct materials efficiency variance
C)favorable direct labor efficiency variance
D)favorable direct labor cost variance

Accepted Answer

The incentive program led to increased production output by motivating workers to hit their production targets, which directly relates to labor efficiency. Thus, the situation described would likely result in a favorable direct labor efficiency variance, as workers are producing more within the same or less time.

Question 16

The production manager of a company,in an effort to gain a promotion,negotiated a new labor contract with the factory employees that required them to bear a greater percentage of benefit costs than before,thus bringing down the cost of direct labor to the company.Shortly afterward,several experienced and highly skilled workers resigned,and were replaced by new employees whose work was very slow during their training period.At the end of the quarter,the company's profits fell 10%.This would produce a(n)________.
A)unfavorable direct materials cost variance
B)favorable direct labor cost variance
C)favorable direct labor efficiency variance
D)unfavorable direct materials efficiency variance

Accepted Answer

The negotiation of a new labor contract that required employees to bear a greater percentage of benefit costs would directly lead to a reduction in the cost of direct labor to the company, resulting in a favorable direct labor cost variance. This is because the company is spending less on direct labor than before, which is considered favorable from a cost perspective.

Question 17

When investigating variable overhead variances,management needs to determine whether cost increases were controllable or if the cost standard needs to be updated.

Accepted Answer

When investigating variable overhead variances, management needs to analyze if the cost increases were controllable or if the cost standard needs to be updated in the future. This will help in identifying the sources of variances and taking corrective actions accordingly.

Question 18

Sugar and Spice Foods is famous for its cupcakes.One of the main ingredients of the cupcakes is sugar,which Sugar and Spice purchases by the pound.In addition,the production requires a certain amount of direct labor.Sugar and Spice uses a standard cost system,and at the end of the first quarter,there was a favorable direct labor efficiency variance.Which of the following is a logical explanation for that variance?
A)The cost of workers' medical insurance plans jumped up dramatically during the quarter.
B)The factory lost two experienced workers at the beginning of the quarter,and their replacements wasted a large amount of direct materials during their training period.
C)The purchasing manager was able to secure a volume discount on dried fruit,purchasing the sugar for less than the amount set by standard.
D)The production staff changed the work flow process so that production required fewer direct labor hours than the standards allowed.

Accepted Answer

A favorable direct labor efficiency variance means that less direct labor was used than expected according to the standard. Option D is the only choice that provides a logical explanation for this variance, as it suggests that the production process was streamlined and required fewer direct labor hours than the standard. The other choices do not directly relate to labor efficiency variance.

Question 19

Cake Lady Bakery is famous for its pound cakes.The main ingredient of the cakes is flour,which Cake Lady purchases by the pound.In addition,the production requires a certain amount of direct labor.Cake Lady uses a standard cost system,and at the end of the first quarter,there was an unfavorable direct labor cost variance.Which of the following is a logical explanation for that variance?
A)The cost of workers' medical insurance plans jumped up dramatically during the quarter.
B)The factory lost two experienced workers at the beginning of the quarter,and their replacements wasted a large amount of direct materials during their training period.
C)The purchasing manager was able to secure a volume discount on flour,purchasing the flour for less than the amount set by standard.
D)The production staff changed the work flow process so that production required fewer direct labor hours.

Accepted Answer

The unfavorable direct labor cost variance indicates that the actual labor costs were higher than the standard or expected costs. A significant increase in the cost of workers' medical insurance plans would directly contribute to higher actual labor costs, explaining the variance.

Question 20

To compute the variable overhead cost variance,first compute the difference between actual cost and standard cost.Then,multiply this difference by standard quantity.

Accepted Answer

To compute the variable overhead cost variance, first compute the difference between actual cost and standard cost. Then, multiply this difference by actual quantity.

Quiz 23: Flexible Budgets and Standard Cost Systems

List the direct labor variances and briefly describe each.

Cavalaris Products uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Cavalaris had an unfavorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

Marshall Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Marshall had a favorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

In a standard cost system,the standard overhead allocation rate replaces the predetermined overhead allocation rate but the concept is the same.

In a standard cost system,the manufacturing overhead allocated to production equals the standard overhead allocation rate multiplied by the standard quantity of the allocation base allowed for expected output.

Trull Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Trull had a favorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

When investigating variable overhead variances,management needs to determine whether cost increases were controllable or if the cost standard needs to be updated.

To compute the variable overhead cost variance,first compute the difference between actual cost and standard cost.Then,multiply this difference by standard quantity.