Question 1

White Company budgeted for $200,000 of fixed overhead cost and volume of 40,000 units. During the year, the company produced and sold 39,000 units and spent $210,000 on fixed overhead.The fixed overhead cost volume variance is:
A)$10,000 favorable.
B)$10,000 unfavorable.
C)$5,000 favorable.
D)$5,000 unfavorable.

Accepted Answer

The answer of White Company budgeted for $200,000 of fixed...

Question 2

Which range of difficulty should normally be used to develop standards?
A)Practical standards
B)Lax standards
C)Ideal standards
D)Inflated standards

Accepted Answer

Practical standards should be used to ensure that standards are achievable and realistic. Setting lax standards would result in poor performance, while setting ideal or inflated standards may be too difficult to achieve and demotivating for employees. Therefore, practical standards are the most appropriate range of difficulty to develop standards.

Question 3

The Russell Company provides the following standard cost data per unit of product: During the period, the company produced and sold 22,000 units incurring the following costs:
The direct labor price variance was:
$\begin{array} {| l|l|  }
\hline\text { Direct material ( } 3 \text { gallons }(a) \$ 6 \text { per gallon) }&\$18.00\
\hline\text { Direct labor ( } 2 \text { hours (a) } \$ 10 \text { per hour) }&\$20.00\\hline
\end{array}$
 $\begin{array} {| l|l|  }
\hline \text { Direct material}&68,000 \text { gallons } @ \$ 5.90 \text { per gallon }\
\hline\text { Direct labor }&45,500 \text { hours } a \$ 9.75 \text { per hour }\\hline
\end{array}$

A)$11,000 unfavorable.
B)$11,000 favorable.
C)$11,375 unfavorable.
D)$11,375 favorable.

Accepted Answer

The direct labor price variance is calculated as: (Actual Rate - Standard Rate) x Actual Hours = ($9.75 - $10.00) x 45,500 = -$0.25 x 45,500 = $11,375 favorable.

Question 4

Which of the following factors should be considered in establishing standards for use with a standard costing system?
A)Historical data
B)Current and planned technology, plant layout, and operating procedures
C)Behavioral implications
D)All of these answers are correct.

Accepted Answer

All of these factors should be considered when establishing standards for use with a standard costing system. Historical data is important in determining the average cost of production, while current and planned technology, plant layout, and operating procedures can affect efficiency and productivity. Behavioral implications, such as employee motivation and morale, must also be taken into account to ensure the standards are realistic and achievable.

Question 5

All of the following factors should influence the decision to investigate a variance except:
A)Frequency of occurrence.
B)Materiality of the variance amount.
C)The direction of the variance (favorable or unfavorable).
D)Capacity for management to control.

Accepted Answer

The direction of the variance (favorable or unfavorable) should not influence the decision to investigate a variance. Both types of variances could potentially be indicators of underlying issues that require attention. The frequency of occurrence, materiality of the variance amount, and capacity for management to control are all relevant factors to consider when deciding whether to investigate a variance.

Question 6

The resources used in the manufacturing process are frequently called:
A)Variances.
B)Standards.
C)Inputs.
D)Outputs.

Accepted Answer

Inputs refer to the resources used in the manufacturing process, such as raw materials, labor, machinery, and energy. Variances are deviations from expected performance or costs, while standards are the expected levels of performance or costs. Outputs are the finished products or services that result from the manufacturing process.

Question 7

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units and average selling price was $6.12.The sales revenue flexible budget variance was:
A)$6,120 favorable.
B)$6,000 unfavorable.
C)$17,880 favorable.
D)$17,880 unfavorable.

Accepted Answer

The flexible budget for sales revenue is calculated based on actual units sold at the budgeted selling price. Therefore, the flexible budget for sales revenue is 149,000 units * $6.00 = $894,000. The actual sales revenue is 149,000 units * $6.12 = $911,880. The variance is $911,880 - $894,000 = $17,880, which is favorable because the actual revenue is higher than the budgeted revenue.

Question 8

Global Company makes a product that is expected to use 2.2 pounds of material per unit of product. The material has a standard cost of $2 per pound. Global actually used 2.3 pounds of material per unit of product made in January. The actual cost of material was $1.95 per pound. Based on this information alone, the materials variances for the January production would be:
A)Favorable for price and unfavorable for usage.
B)Unfavorable for price and favorable for usage.
C)Unfavorable for price and unfavorable for usage.
D)Favorable for price and favorable for usage.

Accepted Answer

The material price variance is favorable because the actual cost per pound ($1.95) is less than the standard cost per pound ($2). The material usage variance is unfavorable because more material was used per unit (2.3 pounds) than the standard (2.2 pounds).

Question 9

Kokko Company makes a product that is expected to require 2 hours of labor per unit of product. The standard cost of labor is $6.00. Kokko actually used 2.1 hours of labor per unit of product. The actual cost of labor was $6.25 per hour. Kokko made 1,100 units of product during the period. Based on this information alone, the labor usage variance is:
A)$190 favorable.
B)$660 unfavorable.
C)$600 favorable.
D)$660 favorable.

Accepted Answer

Labor usage variance = (actual hours - standard hours) x standard rate

= (2.1 - 2) x $6

= $0.60 unfavorable per unit

Total labor usage variance = unfavorable variance per unit x actual units produced

= $0.60 x 1,100

= $660 unfavorable.

Question 10

Which of the following equations can be used to compute the total materials variance? (A = Actual; S = Standard; Q = Quantity; P = Price)
A)(AQ × AP) - (SQ × SP)
B)(SQ × SP) - (SQ × SP)
C)(AQ × AP) - (AQ × SP)
D)(AQ × SP) - (SQ × SP)

Accepted Answer

The equation for total materials variance is (AQ × AP) - (AQ × SP) - (SQ × SP) + (SQ × SP), which simplifies to (AQ × AP) - (SQ × SP). Therefore, only option A includes both AQ and SQ as well as both AP and SP, making it the correct choice.

Question 11

The Russell Company provides the following standard cost data per unit of product: During the period, the company produced and sold 22,000 units incurring the following costs:
The direct labor usage variance was:
$\begin{array} {| l|l|  }
\hline\text { Direct material ( } 3 \text { gallons }(a) \$ 6 \text { per gallon) }&\$18.00\
\hline\text { Direct labor ( } 2 \text { hours (a) } \$ 10 \text { per hour) }&\$20.00\\hline
\end{array}$
 $\begin{array} {| l|l|  }
\hline \text { Direct material}&68,000 \text { gallons } @ \$ 5.90 \text { per gallon }\
\hline\text { Direct labor }&45,500 \text { hours } a \$ 9.75 \text { per hour }\\hline
\end{array}$

A)$15,000 unfavorable.
B)$15,000 favorable.
C)$14,625 unfavorable.
D)$14,625 favorable.

Accepted Answer

The answer of The Russell Company provides the following standard...

Question 12

Abbot Company spent less than expected for materials and more than expected for labor. Select the incorrect statement from the following.
A)You can always expect unfavorable labor variances if you have favorable material variances.
B)In order to facilitate cost control, it will be necessary to analyze the price and quantity of each resource used in production.
C)It cannot be determined from the information provided whether employees were paid higher wages or if they worked more hours.
D)It cannot be determined from the information provided whether the company paid a lower purchase price for materials or if workers used less materials.

Accepted Answer

The statement "You can always expect unfavorable labor variances if you have favorable material variances" is incorrect. While there may be a correlation between the two, it is not always the case that favorable material variances will result in unfavorable labor variances. It is important to analyze each variance separately and determine the reasons behind them.

Question 13

Standard cost systems facilitate the management practice known as:
A)Management by the numbers.
B)Management development.
C)Managing by exception.
D)Just-in-time management.

Accepted Answer

Standard cost systems allow managers to compare actual costs to expected costs, and identify and investigate any significant variances (exceptions) between the two. This enables managing by exception, where managers focus their attention and resources on addressing these variances and improving performance.

Question 14

The standard amount of materials required to make one unit of Product Q is 4 pounds. Tusa's static budget showed a planned production of 3,800 units. During the period the company actually produced 4,100 units of product. The actual amount of materials used averaged 3.9 pounds per unit. The standard price of material is $1 per pound. Based on this information, the materials usage variance was:
A)$410 favorable.
B)$380 unfavorable.
C)$410 unfavorable.
D)$380 favorable.

Accepted Answer

The answer of The standard amount of materials required to...

Question 15

The Landrum Company provides the following standard cost data per unit of product: Landrum anticipated that they would produce and sell 24,000 units. During the period, the company produced and sold 25,000 units incurring $210,000 of variable overhead costs.The variable overhead flexible budget variance was:
$$\begin{array} { | l | l | } 
\hline \text { Variable overhead } & \$ 8.00\\hline
\end{array}$$
A)$8,000 unfavorable.
B)$10,000 unfavorable.
C)$8,000 favorable.
D)$10,000 favorable.

Accepted Answer

The flexible budget for variable overhead is based on actual production. The standard cost is $8.00 per unit, so for 25,000 units, the budgeted cost is $200,000. The actual cost was $210,000, resulting in a $10,000 unfavorable variance.

Question 16

Select the correct statement from the following, assuming Carmichael Company had a favorable direct materials price variance of $3,000 and an unfavorable direct materials usage variance of $2,000.
A)The total direct materials variance is $1,000 unfavorable.
B)The total direct materials variance is $5,000 favorable.
C)The total direct materials variance is $5,000 unfavorable.
D)The total direct materials variance is $1,000 favorable.

Accepted Answer

To calculate the total direct materials variance, we need to add the direct materials price variance and the direct materials usage variance. Favourable variances decrease costs, while unfavourable variances increase costs. Therefore, the total direct materials variance in this case is $3,000 - $2,000 = $1,000 favourable. Thus, the correct statement is option D.

Question 17

Which of the following is not an advantage of using a standard cost system?
A)Promotes the efficient use of management talent to control costs
B)Provides immediate feedback that permits rapid response to problems
C)The easiest cost system to develop and maintain
D)Can boost morale and motivate employees

Accepted Answer

Standard cost systems require significant effort and resources to develop and maintain, including establishing standard costs, monitoring actual costs, and investigating variances. Therefore, it is not the easiest cost system to develop and maintain.

Question 18

The Russell Company provides the following standard cost data per unit of product: During the period, the company produced and sold 22,000 units incurring the following costs:
The direct material usage variance was:
$\begin{array} {| l|l|  }
\hline\text { Direct material ( } 3 \text { gallons }(a) \$ 6 \text { per gallon) }&\$18.00\
\hline\text { Direct labor ( } 2 \text { hours (a) } \$ 10 \text { per hour) }&\$20.00\\hline
\end{array}$
 $\begin{array} {| l|l|  }
\hline \text { Direct material}&68,000 \text { gallons } @ \$ 5.90 \text { per gallon }\
\hline\text { Direct labor }&45,500 \text { hours } a \$ 9.75 \text { per hour }\\hline
\end{array}$

A)$12,000 unfavorable.
B)$12,000 favorable.
C)$11,800 unfavorable.
D)$11,800 favorable.

Accepted Answer

The direct material usage variance is calculated as follows:Standard quantity of direct material per unit = 3 gallonsActual quantity of direct material used = 68,000 gallonsActual price of direct material per gallon = $5.90Standard price of direct material per gallon = $6.00Direct material usage variance = (Actual quantity of direct material used - Standard quantity of direct material per unit) x (Actual price of direct material per gallon - Standard price of direct material per gallon)= (68,000 gallons - 3 gallons x 22,000 units) x ($5.90 - $6.00)= (68,000 gallons - 66,000 gallons) x ($5.90 - $6.00)= 2,000 gallons x ($0.10)= $200 unfavorable

Question 19

Shia Company makes a product that is expected to require 2 hours of labor per unit of product. The standard cost of labor is $5.20. Shia actually used 2.1 hours of labor per unit of product. The actual cost of labor was $5.30 per hour. Shia made 1,000 units of product during the period. Based on this information alone, the labor price variance is:
A)$200 unfavorable.
B)$200 favorable.
C)$210 favorable.
D)$210 unfavorable.

Accepted Answer

First, we need to calculate the standard cost per unit of labor:
2 hours of labor per unit x $5.20 standard cost per hour = $10.40 standard cost per unit

Next, we can calculate the actual cost per unit of labor:
2.1 hours of labor per unit x $5.30 actual cost per hour = $11.13 actual cost per unit

The labor price variance is the difference between the actual cost and the standard cost:
$11.13 actual cost per unit - $10.40 standard cost per unit = $0.73 unfavorable labor price variance per unit

Finally, we can multiply the unfavorable labor price variance per unit by the number of units produced:
$0.73 unfavorable labor price variance per unit x 1,000 units produced = $730 unfavorable labor price variance for the period

Therefore, the labor price variance is $210 unfavorable.

Question 20

The Russell Company provides the following standard cost data per unit of product: During the period, the company produced and sold 22,000 units incurring the following costs:
The direct material price variance was:
$\begin{array} {| l|l|  }
\hline\text { Direct material ( } 3 \text { gallons }(a) \$ 6 \text { per gallon) }&\$18.00\
\hline\text { Direct labor ( } 2 \text { hours (a) } \$ 10 \text { per hour) }&\$20.00\\hline
\end{array}$
 $\begin{array} {| l|l|  }
\hline \text { Direct material}&68,000 \text { gallons } @ \$ 5.90 \text { per gallon }\
\hline\text { Direct labor }&45,500 \text { hours } a \$ 9.75 \text { per hour }\\hline
\end{array}$

A)$6,600 unfavorable.
B)$6,600 favorable.
C)$6,800 unfavorable.
D)$6,800 favorable.

Accepted Answer

The answer of The Russell Company provides the following standard...

Quiz 8: Performance Evaluation

White Company budgeted for $200,000 of fixed overhead cost and volume of 40,000 units. During the year, the company produced and sold 39,000 units and spent $210,000 on fixed overhead.The fixed overhead cost volume variance is:

Which range of difficulty should normally be used to develop standards?

Which of the following factors should be considered in establishing standards for use with a standard costing system?

All of the following factors should influence the decision to investigate a variance except:

The resources used in the manufacturing process are frequently called:

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units and average selling price was $6.12.The sales revenue flexible budget variance was:

Which of the following equations can be used to compute the total materials variance? (A = Actual; S = Standard; Q = Quantity; P = Price)

Abbot Company spent less than expected for materials and more than expected for labor. Select the incorrect statement from the following.

Standard cost systems facilitate the management practice known as:

Select the correct statement from the following, assuming Carmichael Company had a favorable direct materials price variance of $3,000 and an unfavorable direct materials usage variance of $2,000.

Which of the following is not an advantage of using a standard cost system?