Accounting Exam 2
Jones Company has budgeted two hours of direct labor per chair at a standard cost of $20 per hour. During January, 150 actual hours were worked, completing 100 chairs. All were sold and Jones Company actually labor was $21 per hour. What is Jones Company direct labor efficiency variance for January?
$1,000 F First, calculate SQ by taking (2 hours per chair standard x 100 chairs completed) = 200 standard quantity. Then calculate Direct Labor Efficiency Variance. = (150 actual hours - 200 standard hours) x $20 = $1,000 F
Jones Company manufactures an executive chair. The company has budgeted variable costs of $100 for each chair and fixed costs of $7,000 per month. A static budget predicted production and sales of 200 chairs in January, but the company actually produced and sold only 180 chairs at a total cost of $26,000. Jones Company flexible budget variance for total costs is:
$1,000 U First calculate flexible budget for 180 chairs by (180 chairs produced x $100 budgeted variable cost per chair) + $7,000 budgeted fixed costs = $25,000. Last, take actual costs given of $26,000 - $25,000 = $1,000 Unfavorable sales volume variance.
Toby Company has budgeted three hours of direct labor per recliner at a standard cost of $30 per hour. During January, 650 actual hours were worked, completing 200 recliners. All were sold and Toby Company's actually labor was $31 per hour. What is Toby Company's direct labor efficiency variance for January?
$1,500 U First, calculate SQ by taking (3 hours per chair standard x 200 chairs completed) = 600 standard quantity. Then calculate Direct Labor Efficiency Variance. = (650 actual hours - 600 standard hours) x $30 = $1,500 U
Morris Company allocates manufacturing overhead based on machine hours. Each chair produced should require 4 machine hours. According to the static budget, the following is expected to incur: 2,200 machine hours per month (550 chairs x 4 hours per chair) $11,440 in variable manufacturing overhead costs $9,000 in fixed manufacturing overhead costs During January, Morris Company actually used 2,100 machine hours to make 510 chairs. The company spent $6,800 in variable manufacturing overhead costs and $9,100 in fixed manufacturing overhead costs. What is the fixed overhead cost variance?
$100 U = $9,100 - $9,000 = $100 U
Jones Company has budgeted two hour of direct labor per chair at a standard cost of $20 per hour. During January, 150 actual hours were worked, completing 100 chairs. All were sold and Jones Company actually labor $21 per hour. What is the direct labor cost variance for January?
$150 ($21 - $20) x 150 labor hours
Jones Company manufactures an executive chair. The company has budgeted variable costs of $100 for each chair and fixed costs of $7,000 per month. A static budget predicted production and sales of 200 chairs in January, but the company actually produced and sold only 180 chairs at a total cost of $26,000. Jones Company sales volume variance for total costs is:
$2,000 F First calculate flexible budget for 180 chairs by (180 chairs produced x $100 budgeted variable cost per chair) + $7,000 budgeted fixed costs = $25,000. Second, calculate static budget for 200 chairs by (200 chairs produced x $100 budgeted variable cost per chair) + $7,000 budgeted fixed costs = $27,000. Last, take $25,000 - $27,000 = $2,000 Favorable sales volume variance.
Andrews Company manufactures round end tables. The company has budgeted variable costs of $200 for each table and fixed costs of $8,000 per month. A static budget predicted production and sales of 300 tables in January, but the company actually produced and sold only 280 tables at a total cost of $66,000. Andrews Company flexible budget variance for total costs is:
$2,000 U First calculate flexible budget for 280 tables by (280 tables produced x $200 budgeted variable cost per table) + $8,000 budgeted fixed costs = $64,000. Last, take actual costs given of $66,000 - $64,000 = $2,000 Unfavorable sales volume variance.
Andrews Company manufactures round end tables. The company has budgeted variable costs of $200 for each table and fixed costs of $8,000 per month. A static budget predicted production and sales of 300 tables in January, but the company actually produced and sold only 280 tables at a total cost of $66,000. Andrews Company flexible budget variance for total costs is: What is the direct labor cost variance for January?
$2,000 U First calculate flexible budget for 280 tables by (280 tables produced x $200 budgeted variable cost per table) + $8,000 budgeted fixed costs = $64,000. Last, take actual costs given of $66,000 - $64,000 = $2,000 Unfavorable sales volume variance.
Variable overhead costs variance is $1,300 favorable. Variable overhead efficiency variance is $900 favorable. What is the total variable overhead variance?
$2,200 F
Variable overhead costs variance is $1,300 favorable. Variable overhead efficiency variance is $900 favorable. What is the total variable overhead variance?
$2,200 F Since both variances are favorable, add the two together. In this case, $1,300 + 900 = $2,200 F.
Jones Company allocates manufacturing overhead based on machine hours. Each chair produced should require 3 machine hours. Standard fixed cost per machine hour is $7.00. According to the static budget, $8,400 is expected in fixed manufacturing overhead costs. During January, Jones Company actually used 1,100 machine hours to make 410 chairs. The company spent $5,800 in variable manufacturing overhead costs and $8,100 in fixed manufacturing overhead costs. What is the fixed overhead volume variance?
$210 F First, calculate Overhead allocated to production. $7 x (3 standard hours per unit x 410 units produced) $8,610 Second, calculate Fixed Overhead Volume Variance. $8,400 - $8,610 $210 F
Jones Company manufactures an executive chair. The company has budgeted variable costs of $100 for each chair and fixed costs of $7,000 per month. A static budget predicted production and sales of 200 chairs in January, but the company actually produced and sold only 180 chairs at a total cost of $26,000. Jones Company total flexible budget cost for 180 chairs per month is:
$25,000 A flexible budget is prepared for various levels of sales volume. To calculate, take (180 chairs produced x $100 budgeted variable cost per chair) + $7,000 budgeted fixed costs = $25,000.
Andrews Company manufactures round end tables. The company has budgeted variable costs of $200 for each table and fixed costs of $8,000 per month. A static budget predicted production and sales of 300 tables in January, but the company actually produced and sold only 280 tables at a total cost of $66,000. Andrews Company sales volume variance for total costs is:
$4,000 F First calculate flexible budget for 280 tables by (280 tables produced x $200 budgeted variable cost per table) + $8,000 budgeted fixed costs = $64,000. Second, calculate static budget for 300 tables by (300 tables produced x $200 budgeted variable cost per table) + $8,000 budgeted fixed costs = $68,000. Last, take $64,000 - $68,000 = $4,000 Favorable sales volume variance.
A company has a $1,300 unfavorable materials cost variance and a $900 favorable materials efficiency variance. What is the total direct materials variance?
$400 U
1,200 machine hours per month (400 chairs x 3 hours per chair) $6,000 in variable manufacturing overhead costs $8,400 in fixed manufacturing overhead costs During January, Jones Company actually used 1,100 machine hours to make 410 chairs. The company spent $5,800 in variable manufacturing overhead costs and $8,100 in fixed manufacturing overhead costs. What is the variable manufacturing overhead allocation rate (to the nearest cent)?
$5.00 per machine hour
Jones Company has budgeted 5 yards of direct materials per chair at a standard cost of $10 per yard. During January, 2,000 actual yards were purchased and used, completing 410 chairs. All were sold and Jones Company actually paid $13 per yard. What is the direct materials efficiency variance?
$500 F
Jones Company has budgeted 5 yards of direct materials per chair at a standard cost of $10 per yard. During January, 2,000 actual yards were purchased and used, completing 410 chairs. All were sold and Jones Company actually paid $13 per yard. What is the direct materials efficiency variance?
$500 F First, calculate SQ by taking (5 yards of material per chair standard x 410 chairs completed) = 2,050 standard quantity. Then calculate Direct Materials Efficiency Variance. = (2,000 actual yards - 2,050 standard yards) x $10 = $500 F
Jones Company has budgeted 5 yards of direct materials per chair at a standard cost of $10 per yard. During January, 2,000 actual yards were purchased and used, completing 410 chairs. All were sold and Jones Company actually paid $13 per yard. What is the direct materials cost variance?
$6,000 U = ($13 - $10) x 2,000 yards = $6,000 U
Jones Company allocates manufacturing overhead based on machine hours. Each chair produced should require 3 machine hours. According to the static budget, the following is expected to incur: 1,200 machine hours per month (400 chairs x 3 hours per chair) $6,000 in variable manufacturing overhead costs $8,400 in fixed manufacturing overhead costs During January, Jones Company actually used 1,100 machine hours to make 410 chairs. The company spent $5,800 in variable manufacturing overhead costs and $8,100 in fixed manufacturing overhead costs. What is the fixed overhead cost variance?
$6,000 U = ($13 - $10) x 2,000 yards = $6,000 U
Jones Company allocates manufacturing overhead based on machine hours. Each chair produced should require 3 machine hours. Standard variable cost per machine hour is $5.00. During January, Jones Company actually used 1,100 machine hours to make 410 chairs. The company spent $5,720 in variable manufacturing overhead costs and $8,100 in fixed manufacturing overhead costs. What is the variable overhead efficiency variance?
$650 F First, get total standard quantity of machine hours for the efficiency variance based on the 410 units produced. Take 410 units produced * 3 standard machine hours per chair = 1,230 standard machine hours. Then calculate Variable Overhead Efficiency Variance. = (1,100 - 1,230) x $5 = 650 F
Jones Company allocates manufacturing overhead based on machine hours. Each chair produced should require 3 machine hours. According to the static budget, the following is expected to incur: 1,200 machine hours per month (400 chairs x 3 hours per chair) $6,000 in variable manufacturing overhead costs $8,400 in fixed manufacturing overhead costs During January, Jones Company actually used 1,100 machine hours to make 410 chairs. The company spent $5,800 in variable manufacturing overhead costs and $8,100 in fixed manufacturing overhead costs. What is the fixed manufacturing overhead allocation rate (to the nearest cent)?
$7.00 per machine hour
Jones Company allocates manufacturing overhead based on machine hours. Each chair produced should require 3 machine hours. According to the static budget, the following is expected to incur: 1,200 machine hours per month (400 chairs x 3 hours per chair) $6,000 in variable manufacturing overhead costs $8,400 in fixed manufacturing overhead costs During January, Jones Company actually used 1,100 machine hours to make 410 chairs. The company spent $5,800 in variable manufacturing overhead costs and $8,100 in fixed manufacturing overhead costs. What is the fixed manufacturing overhead allocation rate (to the nearest cent)?
$7.00 per machine hour $8,400 budgeted fixed overhead / 1,200 budgeted machine hours = $7.00 per hour.
A company has a $1,500 favorable materials cost variance and a $800 unfavorable materials efficiency variance. What is the total direct materials variance?
$700 F Since one variance is favorable and the other is unfavorable, subtract the variances to calculate the total variance
Lilly Company allocates manufacturing overhead based on machine hours. Each chair produced should require 4 machine hours. Standard fixed cost per machine hour is $8.00. According to the static budget, $16,400 is expected in fixed manufacturing overhead costs. During January, Lilly Company actually used 2,100 machine hours to make 510 chairs. The company spent $6,800 in variable manufacturing overhead costs and $16,100 in fixed manufacturing overhead costs. What is the fixed overhead volume variance?
$80 U First, calculate Overhead allocated to production. $8 x (4 standard hours per unit x 510 units produced) Second, calculate Fixed Overhead Volume Variance. = $16,400 - $16,320 = $80 U
Direct Labor Cost Variance
(AC - SC) x AQ
Direct Materials Cost Variance
= (AC - SC) x AQ
Direct Labor Efficiency Variance
= (AQ - SQ) x SC
Direct Materials Efficiency Variance
= (AQ - SQ) x SC
Variable Overhead Efficiency Variance
= (AQ - SQ) x SC
Variance
A budget prepared for only one level of sales
Static budget
A budget prepared for only one level of sales.
Flexible budget
A summarized budget for several levels of volume that separates variable costs from fixed costs.
Flexible Budget Variance
Actual Results - Flexible Budget
Standard overhead allocation rate
Budgeted FOH / Budgeted allocation base
Fixed Overhead Volume Variance
Budgeted fixed overhead - Allocated fixed overhead
When journalizing for a favorable direct materials cost variance ________.
Direct Materials Cost Variance is credited
When journalizing for an unfavorable direct materials cost variance ________.
Direct Materials Cost Variance is debited
Sales Volume Variance
Flexible Budget− Static Budget
If a Variable Overhead Cost Variance is the credit journal entry, the debit entry would be to ________.
Manufacturing Overhead
Overhead allocated to production
Standard fixed overhead allocation rate X Standard quantity of the allocation base allowed for actual output
Overhead allocated to production
Standard fixed overhead allocation rate * Standard quantity of the allocation base allowed for actual output
Flexible budget variance
The difference arising because the company actually earned more or less revenue, or incurred more or less cost, than expected for the actual level of output.
Sales volume variance
The difference arising only because the number of units actually sold differs from the static budget units.
A(n) __________ variance measures how well the business uses its materials or human resources.
efficiency
The person probably most responsible for the direct labor costs is __________.
human resources manager
