Question 1

A summary of expected costs for a range of activity levels that is geared to changes in the level of productive output is the definition of a

Accepted Answer

A flexible budget is designed to adjust for changes in the level of productive output, providing expected costs for a range of activity levels. This allows for better control and planning as actual output levels can be compared to the flexible budget to identify any variances that may require attention. Continuous budgeting involves updating the budget continuously throughout the year, while a master budget is an overall budget that includes all aspects of a company's operations. A period budget is a budget that covers a specific period of time.

Question 2

The direct materials standards for the main product of Duchess Company are 8 grams of direct materials per product at a cost of $3 per gram.During April,969 grams of direct materials were used to produce 120 products at a direct materials cost of $2,900.The direct materials quantity variance for April was

Accepted Answer

The answer of The direct materials standards for the main...

Question 3

Choco Sweet Inc.gives you the following information: The standard labor time of 0.75 labor hour is required to produce one unit.The standard labor cost for a 10 pound bag of chocolate is $8 per labor hour.The following is data relating to the actual cost and usage data.
 
-Using the above information provided for Choco Sweet,compute the direct labor rate variance for Choco Sweet Inc.

Accepted Answer

The answer of Choco Sweet Inc.gives you the following information:...

Question 4

Candy Stores Inc.gives you the following information: The standard material cost is $7 per pound for a 15 pound bag of chocolate.The following is the actual cost and usage data:
 
-Using the above information provided for Candy Stores,compute the direct materials price variance for Candy Stores.

Accepted Answer

The direct materials price variance is calculated as the difference between the actual cost of materials and the standard cost of materials for the actual quantity used. The choice $186,000 (F) indicates a favorable variance, meaning the actual cost was less than the standard cost.

Question 5

Harrison Inc.has computed direct labor standards for the manufacture of its product to be 4 hours of labor per product at a cost of $15 per hour.During March,Harrison produced 45 products in 190 hours and incurred direct labor costs of $2,720.Harrison's direct labor efficiency variance was

Accepted Answer

To find the direct labor efficiency variance, we need to first calculate the standard hours allowed for the actual production.

Standard hours allowed = Standard labor hour per unit x Actual units produced
= 4 x 45
= 180 hours

Now, we can calculate the direct labor efficiency variance as:

Direct labor efficiency variance = Standard hours allowed - Actual hours worked x Standard labor rate

= 180 - 190 x $15
= $150 (U)

Therefore, the correct choice is C.

Question 6

Choco Sweet Inc.gives you the following information: The standard labor time of 0.75 labor hour is required to produce one unit.The standard labor cost for a 10 pound bag of chocolate is $8 per labor hour.The following is data relating to the actual cost and usage data.
 
-Using the above information provided for Choco Sweet,compute the direct labor efficiency variance for Choco Sweet.

Accepted Answer

Direct labor efficiency variance measures the difference between the actual labor hours used and the standard labor hours allowed for the production of actual output.
 
Given data: 
Standard labor time= 0.75 labor hour/unit
Standard labor cost= $8 per labor hour/unit

Actual data:
Actual output= 7500 units
Actual labor hours= 5400 labor hours
Actual labor cost= $49,680 ($8 X 5400)

Calculation:
Standard labor hours allowed= 0.75 labor hour/unit x 7500 units= 5625 labor hours
Direct labor efficiency variance= Standard labor hours allowed - Actual labor hours
Direct labor efficiency variance= 5625 labor hours - 5400 labor hours= 225 labor hours

As the actual labor hours are less than the standard labor hours, the variance is unfavorable or adverse. 
Direct labor efficiency variance= 225 labor hours x $8 per labor hour= $1,800
Hence, the correct answer is C) $11,000 (F).

Question 7

The direct materials price variance is best measured and reported to appropriate management personnel at the time

Accepted Answer

The direct materials price variance is most accurately measured at the time shipments are received and recorded as purchases. This allows management to immediately see the difference between the actual cost of materials and the expected (standard) cost, facilitating timely decisions.

Question 8

The formula used to compute budgeted total cost at any level of activity is presented in the

Accepted Answer

The formula used to compute budgeted total cost at any level of activity is presented in a flexible budget, which adjusts costs based on different levels of activity, unlike a static budget that remains fixed regardless of changes in activity levels.

Question 9

A flexible budget is most useful

Accepted Answer

A flexible budget is most useful as a cost control tool to evaluate performance because it allows for adjustments in the budgeted amounts based on changes in activity levels. This is especially important when dealing with variable costs that can fluctuate based on levels of production or sales. It provides a more accurate picture of expected costs and allows for better comparison to actual results, aiding in the identification of areas where cost savings may be possible.

Question 10

Lucas Company has set standards for the manufacturing of clay pots to be 2 pounds of direct materials,per pot,at a cost of $3 per pound.During the current period,600 pounds of direct materials were purchased for $1,872.All of the direct materials were used to manufacture 295 pots.Lucas' direct materials price variance was

Accepted Answer

The answer of Lucas Company has set standards for the...

Question 11

If a company's flexible budget formula is $11.25 per unit plus $72,100,what would be the total budget for evaluating operating performance if 28,650 units were sold and 38,500 units were produced?

Accepted Answer

The total budget is calculated by multiplying the cost per unit by the number of units sold and then adding the fixed cost. So, for 28,650 units sold, the calculation is ($11.25 * 28,650) + $72,100 = $505,225.

Question 12

Candy Stores Inc.gives you the following information: The standard material cost is $7 per pound for a 15 pound bag of chocolate.The following is the actual cost and usage data:
 
-Using the above information provided for Candy Stores,compute the direct materials variance for Candy Stores.

Accepted Answer

The direct materials variance is the difference between the actual cost of direct materials used and the standard cost of direct materials that should have been used. In this case, the actual cost of direct materials used is $1,260,000, and the standard cost of direct materials that should have been used is $1,116,000. Therefore, the direct materials variance is $1,260,000 - $1,116,000 = $144,000 (F).

Question 13

Candy Stores Inc.gives you the following information: The standard material cost is $7 per pound for a 15 pound bag of chocolate.The following is the actual cost and usage data:
 
-Using the above information provided for Candy Stores,compute the direct materials quantity variance for Candy Stores.

Accepted Answer

To calculate the direct materials quantity variance, first we need to calculate the standard quantity of materials that should have been used based on the production output. In this case, the standard quantity of materials required for 1,000 bags (the actual production output) would be:

15 pounds/bag x 1,000 bags = 15,000 pounds

Next, we calculate the actual quantity of materials used:

10,500 pounds

Finally, we can calculate the direct materials quantity variance as follows:

Direct Materials Quantity Variance = (Standard Quantity - Actual Quantity) x Standard Cost

= (15,000 pounds - 10,500 pounds) x $7/pound

= $31,500 (U)

Since the variance is unfavorable, it means that the actual quantity of materials used was greater than the standard quantity. Therefore, the correct answer is B) $42,000 (U).

Question 14

Variance analysis includes all of the following except

Accepted Answer

Variance analysis includes taking corrective action, developing performance measures to track activities causing the variance, and computing variances. Investigating all significant and insignificant variances is not always necessary as it can be time-consuming and unproductive. Instead, the focus should be on identifying the root cause of significant variances and taking action to address them.

Question 15

The Lennon Company uses a standard costing system and a flexible budget.At a normal level of activity of 15,000 units and 45,000 standard direct labor hours,the standard direct labor cost would be $270,000.During June,44,950 hours were worked to produce 14,000 units at an actual direct labor cost of $352,000.The direct labor efficiency variance in June was

Accepted Answer

The direct labor efficiency variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. The standard rate is $270,000 / 45,000 hours = $6 per hour. Standard hours for 14,000 units = (14,000 / 15,000) x 45,000 = 42,000 hours. The variance is (44,950 - 42,000) x $6 = $17,700 (U).

Question 16

Which of the following measures the difference between the quantity of materials actually used to make the product and what the design standard called for?

Accepted Answer

The direct materials usage variance measures the difference between the quantity of materials actually used to make the product and what the design standard called for. This variance helps managers identify whether there were inefficiencies or waste in the materials usage during the production process. The other choices (A, B, and C) are unrelated to this concept.

Question 17

The primary difference between a fixed (static)budget and a flexible budget is that a fixed budget

Accepted Answer

A fixed (static) budget is prepared for a single level of activity or production, while a flexible budget adjusts for various levels of activity, allowing for a more accurate comparison of budgeted to actual costs across different production levels.

Question 18

If the actual amount of direct materials used equals the standard amount of direct materials that should have been used,the difference between the standard cost and actual cost of direct materials is called the

Accepted Answer

The difference between the standard cost and actual cost of direct materials, when the actual amount used equals the standard amount, is referred to as the price variance. This variance focuses on the difference in cost, not the quantity of materials used.

Question 19

Suppose the standard for a given cost during a period was $80,000.The actual cost for the period was $72,000.Under what circumstances would you consider the variance from budget to be a positive performance indication?

Accepted Answer

When the cost is variable and the standard cost is based on a production level lower than the actual production level, spending less than the standard cost while producing more indicates efficient management and positive performance.

Question 20

Choco Sweet Inc.gives you the following information: The standard labor time of 0.75 labor hour is required to produce one unit.The standard labor cost for a 10 pound bag of chocolate is $8 per labor hour.The following is data relating to the actual cost and usage data.
 
-Using the above information provided for Choco Sweet,compute the direct labor variance for Choco Sweet Inc.

Accepted Answer

Standard labor cost per unit = 0.75 labor hours per unit x $8 per labor hour = $6 per unit
Actual labor cost per unit = $9.50 per unit
Direct labor variance = (Standard labor cost per unit - Actual labor cost per unit) x Actual quantity
Direct labor variance = ($6 - $9.50) x 3200 units = $-11,200 (F)
Therefore, the correct answer is B - $8,500 (F).

Quiz 24: Standard Costing and Variance Analysis