ACG2071 - Chapter 9: Flexible Budgets, Standard Costs and Variances
AH(AR - SR) is the formula for the variable overhead ______ variance. (Enter only one word per blank.)
rate
Comparing actual costs to what the costs should have been for the actual level of activity is done on a(n) _______ budget. (Enter only one word per blank.)
flexible or flex
What costs and revenues should have been for the actual level of activity is shown on a(n) _______ budget. (Enter only one word per blank.)
flexible or flex
An unchanged planning budget is known as a(n) ______ planning budget. (Enter only one word per blank.)
static
When the costing system assumes fixed costs behave as if they are variable, a(n) _____ variance occurs. (Enter only one word per blank.)
volume
In a standard costing system, variable and fixed overhead are applied to production using the ______ hours allowed for the ______ production. A. standard, standard B. actual, standard C. standard, actual D. actual, actual
C. standard, actual
Actual hours used 5,500; Standard hours allowed 5,800; Actual labor rate $14.75 per hour; and Standard labor rate $14.00 per hour. The labor rate variance is ______. A. $4,350 U B. $4,125 U C. $4,200 F
B. $4,125 U Reason: The labor rate variance is: AH(AR-SR): 5,500 × ($14.75 - $14.00) = $4,125 U C is the labor efficiency variance.
True or false: A static budget is being compared to actual activity. The variance is F for net income but U for most expenses. This suggests that actual activity was lower than budgeted.
False Reason: The opposite is true. This suggests that actual activity was higher than expected which resulted in higher net income and expenses.
True or False: In an standard cost system overhead is applied using the standard hours allowed for the actual production.
True Reason: In a standard cost system, actual hours are not used to apply overhead.
The material quantity variance measures the difference between the ______ quantity of materials used in production and the ______ quantity of materials allowed for the actual output, multiplied by the standard price per unit of materials. (Enter only one word per blank.)
actual; standard
The variable overhead efficiency variance compares the _____ hours times the standard rate with the standard hours allowed for the actual output times the _____ rate. (Enter only one word per blank.)
actual; standard
The difference between the actual fixed overhead and the planned fixed overhead is called the ______ variance. (Enter only one word per blank.)
budget
When the actual quantity of materials used is less than the standard quantity allowed, the material quantity variance is labeled as ______. (Enter only one word per blank.)
favorable
When the actual hourly rate is lower than the standard hourly rate, the labor rate variance is _____. (Enter only one word per blank.)
favorable, favourable , or F
When actual fixed overhead cost is less than budgeted fixed overhead cost, the budget variance is labeled _______. (Enter either favorable or unfavorable.)
favorable, favourable, or F
When budgeted fixed overhead cost is less than fixed overhead applied to work in process, the volume variance is labeled ______. (Enter either favorable or unfavorable.)
favorable, favourable, or F
Dividing the estimated total manufacturing overhead cost by the estimated total amount of the allocation base is the calculation of the _____ _____ rate. (Enter only one word per blank.)
predetermined overhead
The difference between the actual price paid for the material and what should have been paid according to the standard is reflected in the direct materials ______ variance. (Enter only one word per blank.)
price
SP(AQ-SQ) is the formula for the materials ______ variance. (Enter only one word per blank.)
quantity
The difference between the actual materials used in production and the standard amount allowed for the actual output is reflected in the materials _______ variance. (Enter only one word per blank.)
quantity
The difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period is called a(n) _____ variance. (Enter only one word per blank.)
revenue or sales
The difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period is called a(n) ______ variance. (Enter only one word per blank.)
revenue or sales
The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n) ______ variance. (Enter only one word per blank.)
spending
A benchmark used in measuring performance is called a(n) _______. (Enter only one word per blank.)
standard
When actual fixed overhead cost exceeds budgeted fixed overhead cost, the budget variance is labeled ______. (Enter either favorable or unfavorable.)
unfavorable
When the standard purchase price is less than the actual price paid for materials, the material price variance is _____. (Enter only one word per blank.)
unfavorable, unfavourable , or U
When budgeted fixed overhead cost exceeds fixed overhead applied to work in process, the volume variance is labeled ______. (Enter either favorable or unfavorable.)
unfavorable, unfavourable, or U
When using a standard cost system, the over or under applied overhead equals the sum of the overhead _____ for the period. (Enter only one word per blank.)
variances
Budgeted fixed overhead - Fixed overhead applied to work in process is the calculation of the _____ variance. (Enter only one word per blank.)
volume
The fixed component of the predetermined overhead rate x (Denominator hours - the standard hours allowed for the actual output) equals the _____ variance. (Enter only one word per blank.)
volume
The standard price of materials is $3.50 per pound and the standard quantity allowed for actual output is 7,000 pounds. If the actual quantity purchased and used was 6,700 pounds, and the actual price per pound was $3.40, the materials quantity variance is $_______ _______. (Enter the variance as a whole number and specify if it is F or U.)
1050 or 1,050; F, Favorable, or Favourable
Given on the following information, calculate the variable overhead rate variance. Actual variable overhead cost $15,500; Actual hours used 4,200; Standard hours allowed 4,000; and Standard variable overhead rate $3.75 per hour. A. $250 U B. $250 F C. $500 U D. $500 Favorable
B. $250 F Reason: Applied variable overhead cost is based on the actual hours so, applied overhead of $15,750 (4,200 actual hours × $3.75) - $15,500 of actual overhead = $250 overapplied. When the actual cost is less than the applied cost, the variance is favorable.
At the beginning of last year, Tarind Corporation budgeted $600,000 of fixed manufacturing overhead and chose a denominator level of activity of 500,000 machine-hours. At the end of the year, Tari's fixed manufacturing overhead budget variance was $10,500 favorable. Its fixed manufacturing overhead volume variance was $16,800 favorable. Actual direct labor-hours for the year were 525,000. What was Tari's total standard machine-hours allowed for last year's output? A. 630,000 B. 514,000 C. 616,800 D. 646,800
B. 514,000
When the standard hours allowed are lower than the actual hours used, the labor efficiency variance is ______. A. favorable B. unfavorable
B. unfavorable
When the standard price is higher than the actual price, the materials price variance is ______. A. favorable B. unfavorable
A. favorable Reason: The variance is unfavorable when the actual price is higher than standard.
The over or under applied overhead equals the sum of the overhead variances when using a(n) _____ cost system. (Enter only one word per blank.)
standard
When calculating the labor rate variance, multiply the actual hours worked with the ______ labor rate and subtract this figure from the product of the actual hours worked and the ______ labor rate. (Enter only one word per blank.)
standard; actual
The standard price of materials is $3.50 per pound and the standard quantity allowed for actual output is 7,000 pounds. If the actual quantity purchased and used was 6,700 pounds, and the actual price per pound was $3.40, the direct materials price variance is $ _____ ______. (Enter the variance as a whole number and specify if it is F or U.)
670; F, Favorable, or Favourable
Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: Total budgeted fixed overhead cost for the year$ 501,600Actual fixed overhead cost for the year$ 495,000Budgeted direct labor-hours (denominator level of activity)66,000Actual direct labor-hours67,000Standard direct labor-hours allowed for the actual output64,000 Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.) 2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)
1. $7.60/DLH 2. $6,600 F 3. $15,200 U
Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company's products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 3,000 helmets, using 2,250 kilograms of plastic. The plastic cost the company $14,850. According to the standard cost card, each helmet should require 0.69 kilograms of plastic, at a cost of $7.00 per kilogram. Required: 1. What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 3,000 helmets? 2. What is the standard materials cost allowed (SQ × SP) to make 3,000 helmets? 3. What is the materials spending variance? 4. What is the materials price variance and the materials quantity variance? (For requirements 3 and 4, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)
1. 2,070 2. $14,490 3. $360 U 4a. $900 F 4b. $1,260 U
Standards are ______. A. set for each major production input or task B. rarely used outside of management accounting C. benchmarks for measuring performance D. compared to the actual quantities and costs of inputs
A. set for each major production input or task C. benchmarks for measuring performance D. compared to the actual quantities and costs of inputs Reason: Standards are found in most situations both inside and outside of accounting.
Planning budgets are sometimes called ______ budgets. A. static B. flexible
A. static Reason: A planning budget is prepared using a static level of activity. A flexible budget takes into account what costs should have been at the actual level of activity.
A company's fixed component of the predetermined overhead rate was $4.50 per machine hour based 40,000 denominator hours. A total of 38,000 actual hours were used and 43,000 standard hours were allowed for the actual output. The volume variance is $ ______. A. $22,500 U B. $13,500 F C. $13,500 U D. $9,000 F E. $22,500 F F. $9,000 U
B. $13,500 F Reason: $4.50 × (40,000 - 43,000) = $13,500 F. The variance is favorable because standard hours exceed denominator hours. Standard not actual hours are used in the calculation.
Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours. In the most recent month, 165,000 items were shipped to customers using 6,800 direct labor-hours. The company incurred a total of $22,100 in variable overhead costs. According to the company's standards, 0.04 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.30 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 165,000 items to customers? 2. What is the standard variable overhead cost allowed (SH × SR) to ship 165,000 items to customers? 3. What is the variable overhead spending variance? 4. What is the variable overhead rate variance and the variable overhead efficiency variance? (For requirements 3 and 4, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)
1. 6,600 2. $21,780 3. $320 U 4a. $340 F 4b. $660 U
SkyChefs, Incorporated, prepares in-flight meals for a number of major airlines. One of the company's products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 4,800 of these meals using 882 direct labor-hours. The company paid its direct labor workers a total of $10,143 for this work, or $11.50 per hour. According to the standard cost card for this meal, it should require 0.20 direct labor-hours at a cost of $10.50 per hour. Required: 1. What is the standard labor-hours allowed (SH) to prepare 4,800 meals? 2. What is the standard labor cost allowed (SH × SR) to prepare 4,800 meals? 3. What is the labor spending variance? 4. What is the labor rate variance and the labor efficiency variance? (For requirements 3 and 4, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)
1. 960 2. $10,080 3. $63 U 4a. $882 U 4b. $819 F
Forsyth Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. During the year, the company produced and sold 10,000 units at a price of $152 per unit. Its standard cost per unit produced is $122 and its selling and administrative expenses totaled $243,500. Forsyth does not have any variable manufacturing overhead costs and it recorded the following variances during the year: Materials price variance$ 8,200FMaterials quantity variance$ 11,900ULabor rate variance$ 5,200ULabor efficiency variance$ 6,100FFixed overhead budget variance$ 4,200FFixed overhead volume variance$ 13,700F Required: 1. When Forsyth closes its standard cost variances, the cost of goods sold will increase (decrease) by how much? 2. Prepare an income statement for the year.
1. The cost of goods sold will decrease by $15,100. Explanation: Materials price variance: $ (8,200) Materials quantity variance: 11,900 Labor rate variance: 5,200 Labor efficiency variance: (6,100) Fixed overhead budget variance: (4,200) Fixed overhead volume variance: (13,700) Decrease in cost of goods sold: $ (15,100) 2. Sales; Cost of goods sold at standard; Cost of goods sold; Gross margin; Selling and administrative expenses; Net operating income; 1,220,000; 15,100; 1,520,000; 1,204,900; 315,100; 243,500 Explanation: Sales: 10,000 units × $152 = $1,520,000 Cost of goods sold at standard: 10,000 units × $122 = $1,220,000
Based on the following information, the amount of overhead applied when using a standard cost system equals $______. (Enter your answer as a whole number.) Budgeted variable overhead: $100,000 Budgeted fixed overhead: $50,000 Estimated total machine-hours: 20,000 Standard machine-hours for actual production: 18,000 Actual machine-hours used: 17,500
135,000
Assume that a company's planning budget is based on 2,000 units and it actually produced and sold 2,500 units. Its planning budget is based on the assumption that 60% of its administrative expenses are fixed and the remainder is variable. If the planning budget includes $12,000 of fixed administrative expenses and the company's actual total administrative expense for the period is $19,000, then what is the amount of the administrative expense spending variance? A. $3,000 favorable B. $5,000 favorable C. $2,000 unfavorable D. $5,000 unfavorable
A. $3,000 favorable
Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price or RateStandard Cost Per UnitDirect materials6.9ounces$ 2.00per ounce$ 13.80Direct labor0.8hours$ 13.00per hour$ 10.40Variable overhead0.8hours$ 8.00per hour$ 6.40 The company reported the following results concerning this product in June. Originally budgeted output2,300unitsActual output2,800unitsRaw materials used in production17,500ouncesPurchases of raw materials23,000ouncesActual direct labor-hours4,800hoursActual cost of raw materials purchases$ 42,000 Actual direct labor cost$ 12,300 Actual variable overhead cost$ 3,150 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for June is: A. $4,000 F B. $4,000 U C. $2,070 F D. $2,070 U
A. $4,000 F
Calculate the predetermined overhead rate using machine-hours as the allocation base. Budgeted overhead: $350,000 Budgeted production: 28,000 units Total budgeted machine-hours: 70,000 hours Actual production: 20,000 units Standard machine-hours allowed for actual production: 50,000 hours Actual machine-hours used for production: 52,000 hours A. $5.00 per machine-hour B. $7.00 per machine-hour C. $6.73 per machine-hour
A. $5.00 per machine-hour Reason: The predetermined overhead rate is total estimated overhead cost ($350,000) divided by the estimated total of the allocation base (70,000 hours).
Given the following information, calculate the variable overhead efficiency variance. Actual hours: 1,500 Standard hours allowed: 1,350 Actual variable overhead rate: $3.00 per hour Standard variable overhead rate: $3.50 per hour A. $525 Unfavorable B. $450 Unfavorable C. $525 Favorable D. $450 Favorable
A. $525 Unfavorable Reason: The variable overhead efficiency variance uses the standard, not the actual rate. When actual hours are greater than standard hours, the variable overhead efficiency variance is unfavorable. The variable overhead efficiency variance uses the standard, not the actual rate. When actual hours are greater than standard, the variance is unfavorable. (1,350 - 1,500) × $3.50 = $525 Unfavorable.
The materials price variance is calculated using the ______. A. actual price of the input B. standard quantity allowed of the input for the actual output C. standard price of the input D. actual quantity of the input purchased
A. actual price of the input C. standard price of the input D. actual quantity of the input purchased Reason: The standard quantity of input allowed for the output is used to calculate the materials quantity variance.
When the standard hourly rate is lower than the actual rate, the labor rate variance is ______. A. unfavorable B. favorable
A. unfavorable Reason: The variance is favorable when the actual rate is lower than standard.
Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company's planning budget for May appears below: Puget Sound DiversPlanning BudgetFor the Month Ended May 31Budgeted diving-hours (q)300Revenue ($470.00q)$ 141,000Expenses: Wages and salaries ($11,100 + $120.00q)47,100Supplies ($5.00q)1,500Equipment rental ($2,200 + $24.00q)9,400Insurance ($4,200)4,200Miscellaneous ($540 + $1.46q)978Total expense63,178Net operating income$ 77,822 During May, the company's actual activity was 290 diving-hours. Required: Prepare a flexible budget for May. (Round your answers to the nearest whole dollar.)
Actual diving-hours; 290; 136,300; 45,900; 1,450; 9,160; 4,200; 963 Explanation: Revenue ($470.00 × 290) = $136,300 Wages and salaries ($11,100 + ($120.00 × 290)) = $45,900 Supplies ($5.00 × 290) = $1,450 Equipment rental ($2,200 + ($24.00 × 290)) = $9,160 Miscellaneous ($540 + ($1.46 × 290)) = $963
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 12. What amounts of advertising, sales salaries and commissions, and shipping expenses would be included in the company's flexible budget for March?
Advertising = $360,000 Sales salaries and commissions = $1,372,000 Shipping expenses = $646,000
The calculation of the budget variance uses ______. A. budgeted variable overhead B. actual fixed overhead C. budgeted fixed overhead D. actual variable overhead
B. actual fixed overhead C. budgeted fixed overhead Reason: Fixed overhead is used to calculate the budget variance.
The volume variance is the ______. A. best measure of utilization of facilities available B. error that occurs when the level of activity is estimated incorrectly C. difference between the actual fixed overhead and the budgeted fixed overhead
B. error that occurs when the level of activity is estimated incorrectly Reason: Other measures such as percentage of capacity utilized are easier to compute and understand. C is the budget variance.
SR(AH - SH) is the formula for the ______ variance. A. labor rate B. labor efficiency C. material price D. material quantity
B. labor efficiency Reason: The labor rate variance is AH(SR-AR).
Budgeted fixed overhead - Fixed overhead applied to work in process is the calculation of the ______ variance. A. budget B. volume C. fixed overhead
B. volume
A product's standard cost card specifies that a unit of the product requires 4 direct labor-hours. During September, 3,350 units were made, which was 150 units less than budgeted. The total budgeted direct labor cost for September was $117,600. The direct labor cost incurred during September was $111,850 and 13,450 direct labor-hours were worked. The labor rate variance for the month was: (Round your intermediate calculations to 2 decimal places.) A. $5,750 F B. $5,750 U C. $1,130 F D. $1,130 U
C. $1,130 F
Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price or RateStandard Cost Per UnitDirect materials7.2ounces$ 5.00per ounce$ 36.00Direct labor0.9hours$ 16.00per hour$ 14.40Variable overhead0.9hours$ 5.00per hour$ 4.50 The company reported the following results concerning this product in June. Originally budgeted output2,600unitsActual output2,200unitsRaw materials used in production18,000ouncesPurchases of raw materials22,100ouncesActual direct labor-hours5,100hoursActual cost of raw materials purchases$ 41,100 Actual direct labor cost$ 12,600 Actual variable overhead cost$ 3,300 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for June is: A. $10,800 F B. $4,017 U C. $10,800 U D. $4,017 F
C. $10,800 U
If the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 units is ______. A. $118,000 B. $120,000 C. $108,000 D. $180,000
C. $108,000 Reason: $120,000 ÷ 5,000 = $24 per unit × 4,500 = $108,000
Actual hours used 5,500; Standard hours allowed 5,800; Actual labor rate $14.75 per hour; and Standard labor rate $14.00 per hour. The labor efficiency variance is ______. A. $4,125 U B. $4,425 F C. $4,200 F
C. $4,200 F Reason: $14.00 × (5,800 - 5,500) = $4,200 F. $4,125 U is the labor rate variance. The labor efficiency variance is calculated using the standard, not the actual, labor rate.
The materials price variance is the difference between the actual price of materials ______. A. and the standard price for materials with the difference multiplied by the standard quantity of material allowed B. times the actual quantity of materials and the standard price of materials times the standard quantity allowed for production C. and the standard price for materials with the difference multiplied by the actual quantity of materials
C. and the standard price for materials with the difference multiplied by the actual quantity of materials Reason: A explains that standard quantity allowed at the standard price is a component of the materials quantity variance. B is the calculation of the spending variance.
The volume variance is the difference between ______ fixed overhead. A. actual and applied B. actual and budgeted C. budgeted and applied
C. budgeted and applied Reason: B is the budget variance.
Volume variance = ______. A. actual fixed overhead - fixed overhead applied to production B. standard fixed overhead applied to production - actual fixed overhead applied to production C. budgeted fixed overhead - fixed overhead applied to work in process D. actual fixed overhead - budgeted fixed overhead
C. budgeted fixed overhead - fixed overhead applied to work in process
A spending variance is the ______. A. difference between the budgeted cost of the item and the actual cost of the item B. actual amount spent C. difference between the actual amount of the cost and how much a cost should have been, given the actual level of activity D. projected amount to be spent
C. difference between the actual amount of the cost and how much a cost should have been, given the actual level of activity
A revenue variance is the ______. A. difference between total revenue in the planning budget and actual total revenue B. actual total revenue earned C. difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period D. difference between what a cost should have been at the actual level of activity and the actual amount of the cost
C. difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period Reason: D is the definition of a spending variance.
When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that ______. A. there are no revenue or expense variances B. net income is lower than expected but all or most expense variances are favorable C. net income is higher than expected but all or most expense variances are unfavorable
C. net income is higher than expected but all or most expense variances are unfavorable Reason: This is likely to happen when actual activity is lower than budgeted activity
Fancy Nail's monthly rent is $2,500. The company's static budget for March was based on the activity level of 2,000 manicures. Total sales was budgeted at $40,000 and nail technician wages (a variable cost based on the number of manicures) was budgeted at $20,000. Actual manicures in March totaled 2,200. Assuming no other expenses, Fancy Nails' flexible budget will show ______. A. rent expense of $2,750 B. wages of $20,000 C. sales of $44,000 D. net operating income of $19,500
C. sales of $44,000 D. net operating income of $19,500 Reason: Rent expense is a fixed costs and will remain at $2,500. Wages is a variable cost of $10 per manicure ($20,000 ÷ 2,000) and would be $22,000 at an activity level of 2,200 manicures. Sales = $20 per manicure ($40,000 ÷ 2,000) × 2,200 = $44,000. Net operating income = $44,000 - $22,000 - $2,500 = $19,500.
An unfavorable materials quantity variance occurs when ______. A. too much material is purchased B. the actual price paid for material is greater than the standard price allowed for the material C. the actual amount of material used is greater than the standard amount of material allowed for the actual output
C. the actual amount of material used is greater than the standard amount of material allowed for the actual output Reason: The material quantity variance is based on the amount of material used, not purchased. When the actual price paid for material is greater than the standard price, this is an unfavorable material price variance.
Selected operating information on three different companies for a recent year is given below: CompanyABCFull-capacity machine-hours36,00025,00026,000Budgeted machine-hours*35,00024,10026,000Actual machine-hours35,00024,60025,000Standard machine-hours allowed for actual production35,20023,70026,000 *Denominator activity for computing the predetermined overhead rate. Required: For each company, state whether the volume variance would be favorable or unfavorable. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.))
Company A: F Company B: U Company C: None Explanation: Company A: This company has a favorable volume variance because the standard hours allowed for the actual production are greater than the denominator hours. Company B: This company has an unfavorable volume variance because the standard hours allowed for the actual production are less than the denominator hours. Company C: This company has no volume variance because the standard hours allowed for the actual production and the denominator hours are the same.
Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price or RateStandard Cost Per UnitDirect materials5.6ounces$ 3.00per ounce$ 16.80Direct labor0.3hours$ 10.00per hour$ 3.00Variable overhead0.3hours$ 7.00per hour$ 2.10 The company reported the following results concerning this product in June. Originally budgeted output4,000unitsActual output4,000unitsRaw materials used in production20,000ouncesPurchases of raw materials22,800ouncesActual direct labor-hours540hoursActual cost of raw materials purchases$ 42,700 Actual direct labor cost$ 14,000 Actual variable overhead cost$ 3,900 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for June is: A. $132 U B. $132 F C. $120 F D. $120 U
D. $120 U
Based on the following information, calculate the amount of overhead applied when using a standard costing system. Budgeted variable overhead: $200,000 Budgeted fixed overhead: $150,000 Estimated total machine-hours: 25,000 Standard machine-hours for actual production: 20,000 Actual machine-hours used: 20,500 A. $160,000 B. $287,000 C. $164,000 D. $280,000
D. $280,000 Reason: ($200,000 + $150,000) ÷ 25,000 × 20,000 standard hours allowed = $280,000 applied
Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price or RateStandard Cost Per UnitDirect materials7.3ounces$ 3.00per ounce$ 21.90Direct labor0.2hours$ 17.00per hour$ 3.40Variable overhead0.2hours$ 6.00per hour$ 1.20 The company reported the following results concerning this product in June. Originally budgeted output2,700unitsActual output2,800unitsRaw materials used in production18,500ouncesPurchases of raw materials21,600ouncesActual direct labor-hours480hoursActual cost of raw materials purchases$ 42,100 Actual direct labor cost$ 12,700 Actual variable overhead cost$ 3,350 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for June is: A. $496 F B. $480 U C. $496 U D. $480 F
D. $480 F
The standard price of materials is $4.10 per pound and the standard quantity allowed for actual output is 5,800 pounds. If the actual quantity purchased and used was 6,000 pounds, and the actual price per pound was $4.00, the direct materials price variance is ______. A. $580 F B. $600 U C. $580 U D. $600 F
D. $600 F Reason: 6,000 × ($4.00 - $4.10) = $600 F The variance is favorable because the actual price is less than the standard price.
Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price or RateStandard Cost Per UnitDirect materials6.9ounces$ 2.00per ounce$ 13.80Direct labor0.4hours$ 13.00per hour$ 5.20Variable overhead0.4hours$ 8.00per hour$ 3.20 The company reported the following results concerning this product in June. Originally budgeted output2,300unitsActual output2,800unitsRaw materials used in production20,500ouncesPurchases of raw materials21,000ouncesActual direct labor-hours540hoursActual cost of raw materials purchases$ 42,000 Actual direct labor cost$ 12,300 Actual variable overhead cost$ 3,150 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The labor efficiency variance for June is: A. $4,940 F B. $7,540 U C. $4,940 U D. $7,540 F
D. $7,540 F
Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price or RateStandard Cost Per UnitDirect materials6.0ounces$ 3.00per ounce$ 18.00Direct labor0.3hours$ 11.00per hour$ 3.30Variable overhead0.3hours$ 9.00per hour$ 2.70 The company reported the following results concerning this product in June. Originally budgeted output3,600unitsActual output3,200unitsRaw materials used in production21,000ouncesPurchases of raw materials22,100ouncesActual direct labor-hours500hoursActual cost of raw materials purchases$ 42,300 Actual direct labor cost$ 13,600 Actual variable overhead cost$ 3,800 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The labor rate variance for June is: A. $2,166 F B. $8,100 F C. $2,166 U D. $8,100 U
D. $8,100 U
A revenue variance is the ______. A. actual total revenue earned B. difference between total revenue in the planning budget and actual total revenue C. difference between what a cost should have been at the actual level of activity and the actual amount of the cost D. difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period
D. difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 6. What direct labor cost would be included in the company's flexible budget for March?
Direct labor cost = SH × SR = $1,632,000
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 7. What is the direct labor efficiency variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
Direct labor efficiency variance = $496,000 F Explanation: The direct labor cost included in the flexible budget (SH × SR = $1,632,000), the labor efficiency variance ($496,000 F) can be computed using the general model for cost variances as follows:Actual Hours of Input, at Standard Rate (AH × SR) = 71,000 hours × $16.00 per hour = $1,136,000Standard Hours Allowed for Actual Output, at Standard Rate (SH × SR) = 102,000 hours* × 16.00 per hour = $1,632,000Labor efficiency variance = $496,000 F*34,000 units × 3.0 hours per unit = 102,000 hours
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 8. What is the direct labor rate variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
Direct labor rate variance = $71,000 U Explanation: The direct labor cost included in the flexible budget (SH × SR = $1,632,000), the labor efficiency variance ($496,000 F), and the labor rate variance ($71,000 U) can be computed using the general model for cost variances as follows:Actual Hours of Input, at Actual Rate (AH × AR) = 71,000 hours × $17.00 per hour = $1,207,000Actual Hours of Input, at Standard Rate (AH × SR) = 71,000 hours × $16.00 per hour = $1,136,000Standard Hours Allowed for Actual Output, at Standard Rate (SH × SR) = 102,000 hours* × $16.00 per hour = $1,632,000Labor rate variance = $71,000 ULabor efficiency variance = $496,000 FSpending variance = $425,000 F*34,000 units × 3 hours per unit = 102,000 hours
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 3. What is the materials price variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
Materials price variance = $35,000 F Explanation: The raw materials cost included in the flexible budget (SQ × SP = $1,190,000), the materials quantity variance ($35,000 U), and the materials price variance ($35,000 F) can be computed using the general model for cost variances as follows:Actual Quantity of Input, at Actual Price (AQ × AP) = 175,000 pounds × $6.80 per pound = $1,190,000Actual Quantity of Input, at Standard Price (AQ × SP) = 175,000 pounds × $7.00 per pound = $1,225,000Standard Quantity Allowed for Actual Output, at Standard Price (SQ × SP) = 170,000 pounds* × $7.00 per pound = $1,190,000Materials price variance = $35,000 FMaterials quantity variance = $35,000 USpending variance = $0*34,000 units × 5 pounds per unit = 170,000 pounds
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 5. If Preble had purchased 186,000 pounds of materials at $6.80 per pound and used 175,000 pounds in production, what would be the materials price variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
Materials price variance = $37,200 F Explanation: The materials quantity variance ($35,000 U), and the materials price variance ($37,200 F) can be computed as follows: Actual Quantity of Input, at Actual Price (AQ × AP) = 186,000 pounds × $6.80 per pound = $1,264,800Actual Quantity of Input, at Standard Price (AQ × SP) = 186,000 pounds × $7.00 per pound = $1,302,000Standard Quantity Allowed for Actual Output, at Standard Price (SQ × SP) = 170,000 pounds* × $7.00 per pound = $1,190,000Materials price variance = $37,200 F175,000 pounds × $7.00 per pound = $1,225,000Materials quantity variance = $35,000 U*34,000 units × 5 pounds per unit = 170,000 units
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 4. If Preble had purchased 186,000 pounds of materials at $6.80 per pound and used 175,000 pounds in production, what would be the materials quantity variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
Materials quantity variance = $35,000 U Explanation: The materials quantity variance ($35,000 U) can be computed as follows:Actual Quantity of Input, at Standard Price (AQ × SP) = 175,000 pounds × $7.00 per pound = $1,225,000Standard Quantity Allowed for Actual Output, at Standard Price (SQ × SP) = 170,000 pounds* × $7.00 per pound = $1,190,000Materials quantity variance = $35,000 U*34,000 units × 5 pounds per unit = 170,000 units
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 2. What is the materials quantity variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
Materials quantity variance = $35,000 U Explanation: The raw materials cost included in the flexible budget (SQ × SP = $1,190,000), the materials quantity variance ($35,000 U) can be computed using the general model for cost variances as follows:Actual Quantity of Input, at Standard Price (AQ × SP) = 175,000 pounds × $7.00 per pound = $1,225,000Standard Quantity Allowed for Actual Output, at Standard Price (SQ × SP) = 170,000 pounds* × $7.00 per pound = $1,190,000Materials quantity variance = $35,000 U*34,000 units × 5 pounds per unit = 170,000 pounds
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 1. What raw materials cost would be included in the company's flexible budget for March?
Raw material cost = SQ × SP = $1,190,000
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 13. What is the spending variance related to advertising? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
Spending variance related to advertising = $10,000 U
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 14. What is the spending variance related to sales salaries and commissions? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
Spending variance related to sales salaries and commissions = $837,000 F
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 15. What is the spending variance related to shipping expenses? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
Spending variance related to shipping expense = $371,000 F
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 9. What variable manufacturing overhead cost would be included in the company's flexible budget for March?
Variable manufacturing overhead cost = SH × SR = $408,000
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 10. What is the variable overhead efficiency variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
Variable overhead efficiency variance = $124,000 F Explanation: The variable overhead cost included in the flexible budget (SH × SR = $408,000), the variable overhead efficiency variance ($124,000 F) can be computed using the general model for cost variances as follows:Actual Hours of Input, at Standard Rate (AH × SR) = 71,000 hours × $4.00 per hour = $284,000Standard Hours Allowed for Actual Output, at Standard Rate (SH × SR) = 102,000 hours* × $4.00 per hour = $408,000Variable overhead efficiency variance = $124,000 F*34,000 units × 3.0 hours per unit = 102,000 hours
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 5 pounds at $7.00 per pound$ 35.00Direct labor: 3 hours at $16 per hour48.00Variable overhead: 3 hours at $4 per hour12.00Total standard variable cost per unit$ 95.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per MonthVariable Cost per Unit SoldAdvertising$ 360,000 Sales salaries and commissions$ 420,000$ 28.00Shipping expenses $ 19.00 The planning budget for March was based on producing and selling 30,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs: Purchased 175,000 pounds of raw materials at a cost of $6.80 per pound. All of this material was used in production. Direct-laborers worked 71,000 hours at a rate of $17.00 per hour. Total variable manufacturing overhead for the month was $340,090. Total advertising, sales salaries and commissions, and shipping expenses were $370,000, $535,000, and $275,000, respectively. 11. What is the variable overhead rate variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input the amount as a positive value.)
Variable overhead rate variance = $56,090 U Explanation: The variable overhead cost included in the flexible budget (SH × SR = $408,000), the variable overhead efficiency variance ($124,000 F), and the variable overhead rate variance ($56,090 U) can be computed using the general model for cost variances as follows:Actual Hours of Input, at Actual Rate (AH × AR) = 71,000 hours × $4.79 per hour** = $340,090Actual Hours of Input, at Standard Rate (AH × SR) = 71,000 hours × $4.00 per hour = $284,000Standard Hours Allowed for Actual Output, at Standard Rate (SH × SR) = 102,000 hours* × $4.00 per hour = $408,000Variable overhead rate variance = $56,090 UVariable overhead efficiency variance = $124,000 FSpending variance = $67,910 F*34,000 units × 3.0 hours per unit = 102,000 hours** $340,090 ÷ 71,000 hours = $4.79 per hour
When fewer hours are worked than the standard hours allows, the labor efficiency variance is _____. (Enter only one word per blank.)
favorable, favourable, or F
