Cost Accounting Chapter 10

The following labor standards have been established for a particular product: Standard labor-hours per unit of output = 10.2 hours Standard labor rate = $14.00 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked = 8,000 hours Actual total labor cost = $108,800 Actual output = 900units What is the labor efficiency variance for the month? A. $16,520 F B. $16,048 F C. $19,720 F D. $19,720 U

A. $16,520 F (SH = 900 units × 10.2 hours per unit = 9,180 hours Labor efficiency variance = (AH − SH) × SR = (8,000 hours − 9,180 hours) × $14.00 per hour = (−1,180 hours) × $14.00 per hour = $16,520 F)

Gipple Corporation makes a product that uses a material with the quantity standard of 7.3 grams per unit of output and the price standard of $6.00 per gram. In January the company produced 3,400 units using 24,870 grams of the direct material. During the month the company purchased 27,400 grams of the direct material at $6.10 per gram. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for January is: A. $300 U B. $305 F C. $305 U D. $300 F

A. $300 U (SQ = 3,400 units × 7.3 grams per unit = 24,820 grams Materials quantity variance = (AQ − SQ) × SP = (24,870 grams − 24,820 grams) × $6.00 per gram = (50 grams) × $6.00 per gram = $300 U)

Most companies compute the materials price variance when raw materials are _______. A. received from suppliers and transported to raw materials inventory. B. withdrawn from raw materials inventory and used in production. C. ordered from suppliers. D. moved from work in process inventory to finished goods inventory.

A. received from suppliers and transported to raw materials inventory. (Most companies compute the materials price variance when purchased materials are received from suppliers and transported to raw materials inventory, rather than waiting to compute the price variance when the materials are withdrawn from raw materials inventory and used in production. This is because delaying the computation of variances until the materials are used results in delayed variance reports. Also, computing the price variance when the materials are purchased allows materials to be carried in the inventory accounts at their standard cost.)

Zanny Electronics Corporation uses a standard cost system for the production of its water ski radios. The direct labor standard for each radio is 0.9 hours. The standard direct labor cost per hour is $7.20. During the month of August, Zanny's water ski radio production used 6,600 direct labor-hours at a total direct labor cost of $48,708. This resulted in production of 6,900 water ski radios for August. What is Zanny's labor rate variance for August? A. $2,808 Unfavorable B. $1,188 Unfavorable C. $972 Favorable D. $2,160 Favorable

B. $1,188 Unfavorable (Labor rate variance = (AH × AR) − (AH × SR) = $48,708 − (6,600 direct labor-hours × $7.20 per direct labor-hour) = $48,708 − ($47,520) = $1,188 U)

The following materials standards have been established for a particular product: Standard quantity per unit of output = 4.3 meters Standard price = $18.60 per meter The following data pertain to operations concerning the product for the last month: Actual materials purchased = 7,100 meters Actual cost of materials purchased = $138,805 Actual materials used in production = 6,600 meters Actual output = 1,500units What is the materials price variance for the month? A. $2,933 U B. $6,745 U C. $12,345 U D. $7,600 U

B. $6,745 U (Materials price variance = (AQ× AP) − (AQ × SP) = $138,805 − (7,100 meters × $18.60 per meter) = $138,805 − $132,060 = $6,745 U)

The standard hours allowed is ________. A. the direct labor-hours that should have been used to complete the planned output for the period. B. the direct labor-hours that should have been used to complete the actual output for the period. C. computed by multiplying the standard labor-hours allowed per unit by the planned output for the period. D. computed by multiplying the actual labor-hours per unit by the planned output for the period.

B. the direct labor-hours that should have been used to complete the actual output for the period. (The standard hours allowed is the time that should have been taken to complete the period's actual output. It is calculated as the standard hours allowed per unit times the actual output for the period.)

When computing variable manufacturing overhead variances, the standard rate represents the ________. A. predetermined overhead rate. B. variable portion of the predetermined overhead rate. C. standard hourly pay rate for direct laborers. D. the amount of hours allowed for the actual output.

B. variable portion of the predetermined overhead rate. (The price and quantity standards for variable manufacturing overhead are usually expressed in terms of a standard rate and standard hours. The standard rate represents the variable portion of the predetermined overhead rate. The standard hours represent the amount of hours allowed for the actual output.)

Assume that direct labor-hours are used as the overhead allocation base. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance ________. A. will be favorable. B. will be unfavorable. C. cannot be determined without additional information. D. will be equal to zero.

B. will be unfavorable. (When direct labor-hours are used as the overhead allocation base, a favorable direct labor efficiency variance will also cause the variable overhead efficiency variance to be favorable. And whenever the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be unfavorable.)

Gipple Corporation makes a product that uses a material with the quantity standard of 7.9 grams per unit of output and the price standard of $6.60 per gram. In January the company produced 4,000 units using 25,470 grams of the direct material. During the month the company purchased 28,000 grams of the direct material at $6.80 per gram. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for January is: A. $5,600 F B. $6,320 F C. $5,600 U D. $6,320 U

C. $5,600 U (Materials price variance = AQ × (AQ − SP) = 28,000 grams × ($6.80 per gram − $6.60 per gram) = 28,000 grams × ($0.2 per gram) = $5,600 U)

The standard quantity per unit defines the ________. A. price that should be paid for each unit of direct materials. B. total cost of direct materials that should be used for each unit of finished product. C. amount of direct materials that should be used for each unit of finished product including an allowance for normal inefficiencies, such as scrap and spoilage. D. amount of direct labor-hours that should be used to produce one unit of finished goods.

C. amount of direct materials that should be used for each unit of finished product including an allowance for normal inefficiencies, such as scrap and spoilage.

Poorly trained workers could have an unfavorable effect on which of the following variances? Labor Rate Variance. Materials Quantity A) Yes Yes B) Yes No C) No Yes D) No No A. choice A B. choice B C. choice C D. choice D

C. choice C

The standard quantity allowed is _______. A. the amount of an input that should have been used to complete the planned output for the period. B. the actual amount of input that was used to complete the planned output for the period. C. the amount of an input that should have been used to complete the actual output for the period. D. the actual amount of input that was used to complete the actual output for the period.

C. the amount of an input that should have been used to complete the actual output for the period.

The following materials standards have been established for a particular product: Standard quantity per unit of output = 4.6 grams Standard price = $15.05 per gram The following data pertain to operations concerning the product for the last month: Actual materials purchased = 3,100 grams Actual cost of materials purchased = $44,020 Actual materials used in production = 2,400 grams Actual output = 300 units What is the materials quantity variance for the month? A. $9,940 U B. $10,535 U C. $14,484 U D. $15,351 U

D. $15,351 U (SQ = 4.6 grams per unit × 300 units = 1,380 grams Materials quantity variance = (AQ − SQ) × SP = (2,400 grams − 1,380 grams) × $15.05 per gram = (1,020 grams) × $15.05 per gram = $15,351 U)

The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output = 8.0 hours Standard variable overhead rate = $14.40 per hour The following data pertain to operations for the last month: Actual hours = 2,850 hours Actual total variable manufacturing overhead cost = $41,770 Actual output = 200 units What is the variable overhead efficiency variance for the month? A. $18,730 U B. $23,040 F C. $730 U D. $18,000 U

D. $18,000 U (SH = 200 units × 8.0 hours per unit = 1,600 hours Variable overhead efficiency variance = (AH − SH) × SR = (2,850 hours − 1,600 hours) × $14.40 per hour = (1,250 hours) × $14.40 per hour = $18,000 U)

Zeta Corporation is a manufacturer of sports caps, which require soft fabric. The standards for each cap allow 2.00 yards of soft fabric, at a cost of $2.00 per yard. During the month of January, the company purchased and used 25,000 yards of soft fabric at $2.10 per yard, to produce 12,000 caps. What is Zeta Corporation's materials price variance for the month of January? A. $2,000 F B. $2,000 U C. $2,500 F D. $2,500 U

D. $2,500 U (Materials price variance = AQ(AP − SP) = 25,000 yards ($2.10 per yard − $2.00 per yard) = $2,500 U)

Consider the following information: Standard rate per direct labor-hour = $2 Standard direct labor-hours for each unit produced = 3 Units manufactured = 1,000 Actual direct labor-hours worked during the month = 3,300 Total actual variable manufacturing overhead = $6,600 Assume that direct labor-hours is used as the overhead allocation base. What is the variable overhead efficiency variance? A. $300 F B. $300 U C. $600 F D. $600 U

D. $600 U The standard hours allowed for the actual output (SH) is the time that should have been taken to complete the period's output. SH = 1,000 units × 3 direct labor-hours per unit = 3,000 hours Variable overhead efficiency variance = SR × (AH − SH) = $2.00 × (3,300 − 3,000) = $600 U

Viger Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity = 8,000MHs Actual level of activity = 8,200MHs Standard variable manufacturing overhead rate = $6.70 per MH Actual total variable manufacturing overhead = $52,650 What was the variable overhead rate variance for the month? A. $950 Favorable B. $1,432 Favorable C. $1,340 Unfavorable D. $2,290 Favorable

D. 2,290 Favorable (Variable overhead rate variance = (AH × AR) − (AH × SR) = $52,650 − (8,200 hours × $6.70 per hour) = $52,650 − $54,940 = $2,290 F)

The general model for calculating a quantity variance is: A. (Actual quantity of inputs used × Actual price) − (Standard quantity allowed for output × Standard price). B. Actual price × (Actual quantity of inputs used − Standard quantity allowed for output). C. Actual quantity of inputs used × (Actual price − Standard price). D. Standard price × (Actual quantity of inputs used − Standard quantity allowed for output).

D. Standard price × (Actual quantity of inputs used − Standard quantity allowed for output).