CH10 bank

Magno Cereal Corporation uses a standard cost system for its "crunchy pickle" cereal. The materials standard for each batch of cereal produced is 1.4 pounds of pickles at a standard cost of$3.00 per pound. During the month of August, Magno purchased 78,000 pounds of pickles at a total cost of $253,500. Magno used all of these pickles to produce 60,000 batches of cereal. What is Magno's materials quantity variance for August?

Explanation: Materials quantity variance = (AQ-SQ) × SP = 78,000 pounds- (60,000 batches × 1.4 pounds per batch)] × $3.00 per pound $18,000 F

An unfavorable materials' quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period.

FALSE

The production department should generally be responsible for materials price variances that resulted from:

rush orders arising from poor scheduling

If variable manufacturing overhead is applied on the basis of direct labor-hours and overhead rate variance is favorable, then

the standard variable overhead rate exceeded the actual rate

The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the variable part of the predetermined overhead rate

TRUE

When the materials price variance is recorded at the time of purchase, raw materials are recorded as inventory at standard cost

TRUE

If skilled workers with high hourly rates of pay are given duties that require little skill and call for lower hourly rates of pay, this will result in a favorable labor rate variance

FALSE

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will be:

Favorable

Poorly trained workers could have an unfavorable effect on which of the following variances?

Labor Rate Variance: NO Materials Quantity Variance: YES

Zanny Electronics Corporation uses a standard cost system for the production of its water skiradios. The direct labor standard for each radio is 0.9 hours. The standard direct labor cost perhour 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?

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

The following materials standards have been established for a particular product:Standard quantity per unit of output 5.3 meters Standard price $ 17.20 per meter The following data pertain to operations concerning the product for the last month:Actual materials purchased 8,100 meters Actual cost of materials purchased $141,345 Actual materials used in production 7,600 meters Actual output 1,400 units What is the materials price variance for the month?

Materials price variance = (AQ ×AP) -(AQ × SP) = $141,345-(8,100 meters × $17.20 per meter) $2,025 U

The following labor standards have been established for a particular product:Standard labor-hours per unit of output 8.7 hours Standard labor rate $ 18.10 per hour The following data pertain to operations concerning the product for the last month:Actual hours worked 3,800 hours Actual total labor cost $ 67,640 Actual output 500 units What is the labor efficiency variance for the month?

SH = 500 units × 8.7 hours per unit = 4,350 hours Labor efficiency variance = (AH-SH) × SR = (3,800 hours - 4,350 hours) × $18.10 per hour $9,955 F

Material price variances are often isolated at the time materials are purchased, rather than when they are placed into production, to facilitate earlier recognition of variances.

TRUE

In general, the production manager is responsible for the materials price variance

FALSE

The labor rate variance measures the difference between the actual hourly rate and the standard hourly rate, multiplied by the standard hours allowed for the actual output.

FALSE

Waste on the production line will result in an unfavorable materials price variance

FALSE

Piper Corporation's standards call for 1,000 direct labor-hours to produce 250 units of product. During October the company worked 1,250 direct labor-hours and produced 300 units.The standard hours allowed for October would be

Standard hours per unit of output = 1,000 direct labor-hours ÷ 250 units = 4 direct labor-hours per unit Standard hours allowed = 300 units × 4 direct labor-hours per unit = 1,200 hours

The materials price variance is computed based on the amount of materials purchased during the period

TRUE

The following materials standards have been established for a particular product: Standard quantity per unit of output 4.6 gram 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 $ 44,020Actual materials used in production 2,400 grams Actual output 300 units What is the materials quantity variance for the month?

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 $15,351 U

The standard price per unit for direct materials should reflect the final, delivered cost of the materials

TRUE

The variable overhead efficiency variance does not actually measure how efficiently variable manufacturing overhead resources were used

TRUE