ACCT 281 - Week 8

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit, then the materials quantity variance is:

$1,575 Unfavorable. Explanation: (95,000 × $0.15) - (84,500 × $0.15) = $1,575, Unfavorable

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit, then the materials price variance is:

$2,850 Favorable. Explanation: (95,000 × $0.12) - (95,000 × $0.15) = $2,850, Favorable

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit, then the journal entry to record the cost of materials used includes:

A debit to Work in Process Inventory of $12,675. Explanation: 84,500 × $0.15 = $12,675

If actual direct labor cost was $7,560 and standard labor cost was $7,000, the journal entry to record this would include:

A debit to the labor rate variance account of $560 and a credit to Direct Labor of $7,560.

If the actual amount of direct materials used in production was less than the standard amount allowed for units produced, there was:

A favorable materials quantity variance.

The calculation of the labor rate variance is:

Actual Hours × (Standard Rate − Actual Rate).

There is an unfavorable labor efficiency variance when:

Actual hours are greater than standard hours.

The total overhead variance is the difference between:

Actual overhead and applied overhead.

Using more direct labor hours for units produced than the amount allowed by the standard results in:

An unfavorable labor efficiency variance, regardless of the wage rate paid to employees.

Excessive overtime hours worked by direct labor workers often results in:

An unfavorable labor rate variance.

If the hourly wage rate actually paid during January is higher than the standard rate, the result is:

An unfavorable labor rate variance.

Standard costs:

Are the costs that should be incurred to produce a product under normal conditions.

Unfavorable standard cost variances are normally closed at the end of the period by:

Crediting the variance account and debiting Cost of Goods Sold.

Favorable standard cost variances are normally closed at the end of the period by:

Debiting the variance account and crediting Cost of Goods Sold.

An unfavorable labor efficiency variance is most likely to occur if:

Employees are inefficient and units must be reworked.

A supervisor's salary is an example of:

Fixed manufacturing costs.

The overhead spending variance:

Is the portion of the total overhead variance that is considered "controllable" by the production manager.

The Victor Corporation has been incurring favorable overhead volume variances in each of the last several months. These persistent favorable variances indicate:

Monthly output is consistently over that budgeted.

A standard cost is the per-unit cost incurred under:

Normal, but efficient operating conditions.

An unfavorable overhead volume variance results from:

Producing at levels of output that fall short of normal output levels.

The calculation of the labor efficiency variance is:

Standard Hourly Rate × (Standard Hours − Actual Hours).

In a system designed to measure cost variances, goods transferred from the Work in Process account to the Finished Goods Inventory are valued at:

Standard cost.

In a standard cost system, finished goods are reported in:

The balance sheet at standard cost.

Controlling the materials quantity variance is usually the responsibility of:

The production supervisor.

EJB Company used a "normal" production level of 10,000 units to determine the standard per-unit cost of manufacturing overhead. Which of the following is not true?

When actual production is less than 10,000 units, use of standard costs results in an unfavorable total overhead variance.