BEC #20

Yola Co. manufactures one product with a standard direct labor cost of 4 hours at $12.00 per hour. During June, 1,000 units were produced using 4,100 hours at $12.20 per hour. The unfavorable direct labor efficiency variance was

$1,200 (SQ-AQ)x SP (4000-4100)x$12 =1,200 unfavorable

During March, Comp A Department Y equivalent unit product costs, computed under weighted average method. Materials: $1 Conversion: $3 Transferred-in: $5 Materials are introduced at the end of the process in Department Y. There were 4,000 units (40% complete as to conversion costs) in WIP at March 31. The total costs assigned to the March 31 WIP inventory should be

$24,800 Transferred in (4000*5) Conversion (1600*3) Materials are added at the end of the process.

The standard direct materials cost to produce a unit of Lem is 4 meters of materials at $2.50 per meter. During May, 4,200 meters of materials costing $10,080 were purchased and used to produce 1,000 units of Lem. What was the materials price variance for May?

$420 Favorable. Materials price variance is AQ*(SP-AP) 4200*(2.50-2.40)

The following data are available for July: Budget Actual Sales 40,000 units 42,000 units Selling price $6 per unit $5.70 per unit Variable cost $3.50 per unit $3.40 per unit

(42,000-40,000)*(6-3.50)

Conversion costs are sum of direct labor and manufacturing overhead.

Beg WIP + Units started this period = Units transferred out (completed) + Ending WIP

Weighted average method: Units in beginning WIP are treated as if they had been started and completed during the current period.

Calculation of EUP under weighted average method is Total units completed+Ending WIP*% complete

What is the normal effect on the numbers of cost pools and cost assignment bases when an activity-based cost (ABC) system replaces a traditional cost system?

Cost Pools: Increase Cost assignment bases: Increase

A process costing system was used for a department that began operations in January. Approximately the same number of physical units, at the same degree of completion, were in work-in-process at the end of both January and February. Monthly conversion costs are allocated between ending work-in-process and units completed. Compared with the FIFO method, would the weighted-average method use the same or a greater number of equivalent units to calculate the monthly allocations?

Equivalent units for weight avg compared to FIFo Jan - same Feb - greater number

Quantity variances result from differences between actual resources used in production and standard amount if price is constant

If doing material price variance, do actual quantity purchased*(standard price-Actual materials price) If doing materials quantity varaince. Standard inptu-actual quantity consumed)*standard materials price

Under ABC, indirect costs are assigned to activities then rationally allocated to end products.

Inaccurate averaging or spreading of indirect costs over products or services units that use different amts of resources is called Peanut butter costing: Product cost cross subsidization. It miscosts one product and miscosts other products

Purchased direct materials are added in the second department of a three-department process. This addition does not increase the number of units produced in the second department and willl

Increase total unit cost

The difference between standard hours at standard wage rates and actual hours at standard wage rates is referred to as which of the following types of variances?

Labor usage

The standard unit cost is used in the calculation of which of the following variances?

Materials price variance: yes Materials usage variance: Yes

A favorable variance increase net income and occurs when actual costs are less than standard. Unfavorable variance decreases net income and occurs when actual costs are greater than standard.

Price rate variances: Result from difference between actual price of resources used in production and the standard price if quantity is constant

activity base systems invovle identifying organizational activies that incur overhead and assign costs of resources consumed by activites

Resource drivers: Measures the causes of resource consumed by an activity.

Sales Price Variance = Actual units sold*(actual selling price-budget'd selling price)

Sales volume variance Budget contribution margin per unit * (actual units sold - budgeted units sold)

During the month just ended, a department's fixed overhead standard costing system reported unfavorable spending and volume variances. The activity level selected for allocating overhead to the product was based on 80% of practical capacity. If 100% of practical capacity had been selected instead, how would the reported unfavorable spending and volume variances be affected?

Spending Variance: Unchanged Volume Variance: Increased

An equivalent unit of direct materials or conversion cost is equal to

The amount of direct materials or conversion cost necessary to complete one unit of production

Conversion costs are the sum of direct labor and manufacturing overhead

Transferred in costs are by definition 100% complete. EUP is equivalent units of production

Cost per EUP Weighted average cost/EUP=Beg WIP+Current Period Cost Weighted Avg EUP

Under FIFO, the EUP in beginning WIP must be excluded form the calculation.

Disadvantage of Activity based costing is the incurrence of indirect costs resulting from the rapid advance of tech

Under traditional system, accumulated in one cost pool and allocated to all end products using one allocation base

Labor efficiency variance: (Actual hours - supposed to be hours)*standard rate

When doing sales volume variance, contribution margin (Expected sales price less variable cost per unit)*(Expected volume - actual volume)

A company would most benefit from using an activity-based costing (ABC) system as opposed to a traditional costing system under which of the following conditions?

when indirect costs are a high percentage of total costs