Unit 6 Standard Costs and Variances TEST Cost and Managerial Accounting - D101 B

The cost data for a company are as follows: Actual results Number of units produced: 500 units Total labor cost: $85,000 Number of labor hours worked: 2,300 hours The company has established the following standards: Number of labor hours to produce one unit: 4 hours Standard labor rate: $35.00 per hour What is the company's computed labor efficiency variance?

$10,500 U Explanation: The labor efficiency variance is based on the quantity of labor hours used compared to the quantity that should have been used according to the standard. The amount is computed using the standard rate. Hours that should have been used: 2,000 hours = 500 units produced × 4 standard hours/unit AH × SR = 2,300 hours × $35.00 = $80,500 SH × SR = 2,000 hours × $35.00 = $70,000 $80,500 - $70,000 = $10,500 U The variance is unfavorable because we used more hours than the standard.

The cost data for a company are as follows: Actual results Number of material pounds purchased: 13,000 lbs. Number of material pounds used in production: 10,000 lbs. Number of units produced: 300 units Total cost of purchasing material: $150,000 Alliah has established the following standards: Price per pound of materials: $11.00 per lb. Number of pounds of material to produce one unit: 30 lbs. What is this company's computed materials quantity variance?

$11,000 U Explanation: The materials quantity variance is based on the quantity of materials used compared to the quantity that should have been used according to the standard. The amount is computed using the standard price. Pounds that should have been used: 9,000 pounds = 300 units produced × 30 standard pounds/unit AQ × SP = 10,000 pounds × $11.00 = $110,000 SQ × SP = 9,000 pounds × $11.00 = $99,000 $110,000 - $99,000 = $11,000 U The variance is unfavorable because we used more than the standard.

The cost data for a company are as follows: Actual results Number of material pounds used in production: 5,000 lbs. Number of units produced: 200 units Total cost of purchasing material: $50,000 Number of material pounds purchased: 6,000 lbs. The company has established the following standards: Price per pound of materials: $8.00 per lb. Number of pounds of material to produce one unit: 20 lbs. What is this company's computed materials price variance?

$2,000 U Explanation: The materials price variance is based on the quantity of materials purchased, with the actual price paid compared to the price that should have been paid according to the standard. The amount is computed using the standard price. Actual cost of the 6,000 lbs. = $50,000 AQ × SP = 6,000 pounds × $8.00 = $48,000 $50,000 - $48,000 = $2,000 U The variance is unfavorable because we paid more than the standard.

Cost data for a marketing company are provided below: Estimated standard data as of the beginning of Year 1: Estimated total manufacturing overhead: $225,000 Estimated direct labor hours: 15,000 hours Actual data for Year 1: Actual total manufacturing overhead: $220,000 Actual direct labor hours: 13,000 hours The number of units produced during Year 1 was 1,000. The standard number of direct labor hours to be worked to produce each unit is 14. What is this marketing company's computed variable manufacturing overhead spending variance?

$25,000 U Explanation: Predetermined overhead rate: $225,000 ÷ 15,000 hours = $15.00 per hour The variable overhead spending variance is based on the total amount of variable overhead spending, with the actual spending compared to the amount that should have been spent according to the predetermined overhead rate and the actual number of direct labor hours worked (the overhead cost driver). Actual cost of the 13,000 hours = $220,000 AH × SR = 13,000 hours × $15.00 = $195,000 $220,000 - $195,000 = $25,000 U The variance is unfavorable because we spent more than the standard, given the actual number of labor hours worked.

The cost data for a company are as follows: Actual results Number of labor hours worked: 2,000 hours Total labor cost: $48,000 Number of units produced: 300 units The company has established the following standards: Standard labor rate: $30.00 per hour Number of labor hours to produce one unit: 7 hours What is the company's computed labor efficiency variance?

$3,000 F Explanation: The labor efficiency variance is based on the quantity of labor hours used compared to the quantity that should have been used according to the standard. The amount is computed using the standard rate. Hours that should have been used: 2,100 hours = 300 units produced × 7 standard hours/unit AH × SR = 2,000 hours × $30.00 = $60,000 SH × SR = 2,100 hours × $30.00 = $63,000 $63,000 - $60,000 = $3,000 F The variance is favorable because we used fewer hours than the standard.

The cost data for a company are as follows: Actual results Number of units produced: 200 units Number of material pounds used in production: 5,000 lbs. Total cost of purchasing material: $60,000 Number of material pounds purchased: 7,000 lbs. Merrilton has established the following standards: Number of pounds of material to produce one unit: 30 lbs. Price per pound of materials: $8.00 per lb. What is the company's computed materials price variance?

$4,000 U Explanation: The materials price variance is based on the quantity of materials purchased, with the actual price paid compared to the price that should have been paid according to the standard. The amount is computed using the standard price. Actual cost of the 7,000 lbs. = $60,000 AQ × SP = 7,000 pounds × $8.00 = $56,000 $60,000 - $56,000 = $4,000 U The variance is unfavorable because we paid more than the standard.

Recently, the materials acquired by the purchasing department at a company have been of poor quality. The production supervisor suspects that the purchasing department has been buying cheap, substandard materials in order to boost the materials price variance. As a result, the production supervisor has been forced to throw away a lot of bad materials. This is being blamed on the production supervisor and the supervisor's workers. In preparation for a regular meeting with the plant manager, the production supervisor is assembling materials variance data to back up the suspicions with numbers. The following cost data are for this company: Actual results Number of material pounds used in production: 4,500 lbs. Number of units produced: 200 units Total cost of purchasing material: $30,000 Number of material pounds purchased: 4,000 lbs. Golden Maple has established the following standards: Price per pound of materials: $8.00 per pound Number of pounds of material to produce one unit: 20 lbs. What is this company's computed materials quantity variance?

$4,000 U Explanation: The materials quantity variance is based on the quantity of materials used compared to the quantity that should have been used according to the standard. The amount is computed using the standard price. Pounds that should have been used: 4,000 pounds = 200 units produced × 20 standard pounds/unit AQ × SP = 4,500 pounds × $8.00 = $36,000 SQ × SP = 4,000 pounds × $8.00 = $32,000 $36,000 - $32,000 = $4,000 U The variance is unfavorable because we used more than the standard.

The cost data for a company are provided below: Estimated data as of the beginning of Year 1: Estimated total manufacturing overhead: $450,000 Estimated direct labor hours: 30,000 hours Actual data for Year 1: Actual total manufacturing overhead: $550,000 Actual direct labor hours: 34,000 hours The number of units produced during Year 1 was 1,000. The standard number of direct labor hours to be worked to produce each unit is 30. What is this company's computed variable manufacturing overhead efficiency variance?

$60,000 U Explanation: Predetermined overhead rate: $450,000 ÷ 30,000 hours = $15.00 per hour. The variable overhead efficiency variance is based on the quantity of labor hours used compared to the quantity that should have been used according to the standard. The amount is computed using the standard predetermined overhead rate. This overhead efficiency variance really reflects the difference in variable overhead cost caused by working a different number of labor hours (the overhead cost driver) from the standard. Hours that should have been used: 30,000 hours = 1,000 units produced × 30 standard hours/unit AH × SR = 34,000 hours × $15 = $510,000 SH × SR = 30,000 hours × $15 = 450,000 510,000 - 450,000 = $60,000 U The variance is unfavorable because we used more hours than the standard.

The cost data for a company are as follows: Actual results Total labor cost: $101,000 Number of units produced: 500 units Number of labor hours worked: 2,300 hours The company has established the following standards: Number of labor hours to produce one unit: 5 hours Standard labor rate: $40.00 per hour What is the company's computed labor rate variance?

$9,000 U Explanation: The labor rate variance is based on the quantity of labor hours paid for, with the actual wage rate paid compared to the rate that should have been paid according to the standard. The amount is computed using the actual labor hours. Actual cost of the 23,000 hours = $101,000 AH × SR = 2,300 hours × $40.00 = $92,000 $101,000 - $92,000 = $9,000 U The variance is unfavorable because we paid more than the standard.

What is a common cause for a labor rate variance?

Overtime wages Explanation: Labor rate variances are likely to be due to (1) certain tasks being performed by workers with different pay rates or (2) working overtime at rates higher than the normal wage rate.