Chapter 24

The overhead spending variance:

Is the portion of the total overhead variance that is considered "controllable" by the production manager.

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit, then the total materials variance is:

$1,275 favorable Total materials variance = Standard cost - Actual cost = Standard Price × Standard Quantity - Actual Price × Actual Quantity = $0.15 × 84,500 - $0.12 × 95,000 = $1,275 favorable

If the standard quantity of materials is 83,800 units at $0.14 per unit and the actual quantity is 94,300 units at $0.11 per unit, then the materials quantity variance is:

$1,470 Unfavorable materials quantity variance = standard price * (standard quantity - actual quantity) $.14 * (83,800 - 94,300) = -$1,470

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit, then the materials price variance is:

$2,850 Favorable Materials price variance = Actual quantity used * (Standard price - Actual price) = 95,000 × ($0.15 − $0.12) = $2,850 Favorable

If the standard quantity of materials is 84,500 units at $0.16 per unit and the actual quantity is 95,100 units at $0.13 per unit, then the materials price variance is:

$2,853 Favorable materials price variance = actual quantity used * (standard price - actual price) $95,100 * ($.16 - $.13) = $2,853

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit, then the materials quantity variance is:

($1,575) Unfavorable Materials Quantity Variance = Standard Price × (Standard Quantity − Actual Quantity) = $0.15 × (84,500 - 95,000) = ($1,575)

The overhead spending variance: A. Is the portion of the total overhead variance that is considered "controllable" by the productions manager B. Is computed as the difference between variable overhead per the flexible budget and actual variable overhead costs incurred. C. Is the difference between amounts spent for actual manufacturing overhead costs and the amount applied to production. D. Occurs automatically whenever actual production levels differ from the "normal" production level used to compute the standard overhead cost per unit.

A. Is the portion of the total overhead variance that is considered "controllable" by the productions manager

The total overhead variance is the difference between:

Actual overhead and applied overhead.

A large favorable variance from standard costs at the end of the year should be:

Allocated between ending inventories and cost of goods sold.

The use of inexpensive, low quality, materials often results in:

An unfavorable materials quantity variance.

Eagle Company uses a standard cost system that has provided the following data: Units of output manufactured. 80 Direct labor Standard hours allowed (SH). 2 hours per unit of product Standard wage rate (SR). $16 per hour Actual direct labor (AH; AR). 180 hours, total cost of $3,240 The direct labor efficiency variance for the period was:

Answer: ($320) Unfavorable Explanation: (Total standard hours allowed = 2 hours * 80 units of product = 160 hours) (Actual rate: $3,240/180 hours = $18 per unit) Standard hours allowed for producing 80 units (actual level of production units) = 2 hours per unit of product * 80 units = 160 hours Direct labor efficiency variance = Standard rate × (Standard hours − Actual hours) = $16 × (160 − 180) = ($320) (that is, $320 Unfavorable)

Eagle Company uses a standard cost system that has provided the following data: Units of output manufactured. 80 Direct labor Standard hours allowed (SH). 2 hours per unit of product Standard wage rate (SR). $16 per hour Actual direct labor (AH; AR). 180 hours, total cost of $3,240 The direct labor rate variance for the period was:

Answer: ($360) Unfavorable Explanation: Actual Rate: Actual Labor Cost $3,240/ Actual Labor Hours 180 hours = $18 per unit Direct labor rate variance = Actual Hours Used × (Standard Rate - Actual Rate) = 180 hours × ($16 - $18) = ($360) Unfavorable

Standard costs:

Are the costs that should be incurred to produce a product under normal conditions.

Controlling the materials price variance is usually the responsibility of: A. The production supervisor B. The purchasing agent C. The marketing director D. The cost accountant

B. The purchasing agent.

Which statement is true regarding a standard cost system?

Both actual and standard costs are used.

When standard costs are used in a cost accounting system:

Costs charged to the Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold accounts are at standard costs.

Unfavorable standard cost variances are normally closed at the end of the period by:

Crediting the variance account and debiting Cost of Goods Sold.

An unfavorable labor efficiency variance is most likely to occur if:

Employees are inefficient and units must be reworked.

A standard cost is the per-unit cost incurred under:

Normal, but efficient operating conditions.

An unfavorable labor rate variance could most likely result from all of the following except:

Producing at levels of output that exceed normal output levels.

An unfavorable overhead volume variance results from:

Producing at levels of output that fall short of normal output levels.

In a system designed to measure cost variances, goods transferred from the Work in Process account to the Finished Goods Inventory are valued at:

Standard cost.

In a standard cost system, finished goods are reported in:

The balance sheet at standard cost.

In establishing standard costs for labor, management must look at all of the following except:

The quantity of materials for each product.

There will be a favorable materials price variance if:

The standard price per unit is greater than the actual price per unit.

What is the formula to find the standard quantity?

standard quantity per unit * actual units of production