STANDARD COSTS AND VARIANCE ANALYSIS STANDARD COSTS AND VARIANCE ANALYSIS
THEORIES: THEORIES:
Standard cost system Standard cost system
1.
1. A primary purA primary purpose of usipose of using a standard cong a standard cost systest system ism is A.
A. To make things easTo make things easier for managerier for managers in the production facs in the production facility.ility.
B.
B. To provdTo provde a dstnct meas!e a dstnct meas!re o" cost contre o" cost contro#.ro#.
C.
C. To miniTo minimize the cmize the cost per uniost per unit of product of production.tion. D.
D. b and c ab and c are core correcrrectt 2.
2. Which one of the folloWhich one of the following statwing statements is true concements is true concerning stanerning standarddard costs
costs A.
A. !tandar!tandard costs are estimd costs are estimates of costates of costs attainabs attainable only under thele only under the most ideal conditions" but rarely practicable.
most ideal conditions" but rarely practicable. #.
#. !tandar!tandard costs are difficult to use with a process$cd costs are difficult to use with a process$costinosting system.g system.
C.
C. I" proper#y !seI" proper#y !sed$ standards can %e#p motd$ standards can %e#p motvate emp#oyevate emp#oyees.es.
D.
D. %n%nfafa&o&orarablble e &a&aririananceces" s" mamateteririal al in in amamouountnt" " shshouould ld bebe in
in&e&eststigigatated" ed" but but lalargrge e fa&fa&ororabable le &a&aririanances ces neeneed d nonot t bebe in&estigated.
in&estigated. '.
'. Which of the folWhich of the followilowing is a purposng is a purpose of standard coe of standard costingsting A.
A. DetermDetermine (breaine (breake&en) pke&en) productiroduction le&elon le&el
B.
B. ConControtro# co# costssts
C.
C. *limi*liminate the need for sub+ecnate the need for sub+ecti&e decisti&e decisions by manageions by managementment D.
D. AllocAllocate cost wate cost with more acith more accuracycuracy ,.
,. WhWhen en e&e&alaluauatiting ng ththe e opopereratiating ng perperfoformrmanance ce mamanagnagemementent som
sometietimes mes useuses s the the diffdifferenerence ce betwbetween een e-pe-pecteected d and and actactualual performance. This refers to
performance. This refers to A.
A. /a/ananagegemement nt by by DeDe&i&iatatioionn C.C. /a/ananagegemement nt by by 0b0b+e+ectcti&i&ee #.
#. /an/anageagement by Cment by Controntrolol D.D. &ana'eme&ana'ement (y nt (y E)ceptonE)cepton
!tandard setting !tandard setting .
. The best basiThe best basis upon whics upon which cost standah cost standards shoulrds should be set to measured be set to measure controllable production inefficiencies is
controllable production inefficiencies is A.
A. *ngine*ngineering standering standards based on ideal perards based on ideal performancformancee #.
#. orormal mal capcapaciacityty
C.
C. En'neernEn'neern' standards (as' standards (ased on attana(#e per"ed on attana(#e per"ormanceormance
D.
D. 3ra3racticctical al capacapacitcityy 4.
4. A company empA company employing &erloying &ery tight 5high6 sty tight 5high6 standards in a staandards in a standard costndard cost system should e-pect that
system should e-pect that A.
A. o inco incenti&e benti&e bonus wonus will be ill be paid.paid.
B.
B. &ost va&ost varances rances *## (e !n*## (e !n"avora("avora(#e.#e.
C.
C. *mploy*mployees will be stroees will be strongly moti&ngly moti&ated to attain the standated to attain the standard.ard. D.
D. Costs wiCosts will be controlled better than if lower stanll be controlled better than if lower standards were used.dards were used. 7.
7. To To meameasursure e concontroltrollablable le proproductduction ineffiion inefficieciencincies" which es" which of of thethe following is the best basis for a company to use in establishing the following is the best basis for a company to use in establishing the standard hours allowed for the output of one unit of product standard hours allowed for the output of one unit of product A.
A. A&eragA&erage historice historical performaal performance for the last se&erance for the last se&eral yearsl years #.
#. *ngine*ngineering estimering estimates based on ideal perates based on ideal performancformancee
C.
C. En'neernEn'neern' estmates (ased on attan' estmates (ased on attana(#e per"orma(#e per"ormanceance
D.
D. ThThe e hohours per urs per ununit it thathat t wowould be uld be re8re8uiuired for red for ththe e prpresesentent workforce to satisfy e-pected demand o&er the long run
workforce to satisfy e-pected demand o&er the long run 9.
9. Which of the folloWhich of the following stawing statements abotements about the selectiout the selection of standardsn of standards is true
is true A.
A. :deal sta:deal standards tend to e-trandards tend to e-tract higher perforct higher performance le&elmance le&els sinces since they gi&e employees something to li&e up to.
they gi&e employees something to li&e up to. #.
#. CuCurrerrentlntly y attattaiainanablble e ststanandadards rds mamay y encencourouragage e opoperaeratitingng inefficiencies.
inefficiencies. C.
C. CurCurrenrently tly attaattainainable ble stastandarndards ds disdiscoucourage rage emplemployeoyees es fromfrom achie&ing their full performance potential.
achie&ing their full performance potential.
D.
D. Idea# standaIdea# standards demand ma)mrds demand ma)m!m e""cency *%!m e""cency *%c% mayc% may #ea
#eave ve *o*or+er+ers rs "r!"r!strstrateated$ d$ t%!t%!s s ca!ca!snsn' ' a a dedec#c#ne ne nn per"ormance.
per"ormance.
!tandard costs &s. budgeted costs !tandard costs &s. budgeted costs ;.
;. A differencA difference between stane between standard costs usedard costs used for cost control and thed for cost control and the budgeted costs represent
budgeted costs representing the ing the same manufactursame manufacturing effort ing effort cancan e-ist because
e-ist because A.
A. ststandandarard d cocoststs s mumust st be be dedetertermiminened d aftafter er ththe e bubudgdget et isis completed
completed
B.
B. stanstandard costs reprdard costs represenesent t *%a*%at t costcosts s s%os%o!#d (e !#d (e *%#*%#ee (!d'eted costs represent e)pected act!a# costs
(!d'eted costs represent e)pected act!a# costs
2<' 2<'
C.
C. budgbudgeted costs are eted costs are hishistortoricaical l coscosts ts whiwhile le stastandandard rd coscosts ts areare based on engineering studies
based on engineering studies D.
D. bubudgedgeted ted cocoststs s ininclcludude e sosome me (s(slalackck) ) or or (p(padaddidingng) ) whwhililee standard costs do not
standard costs do not 3rocess costing
3rocess costing
1<.When standard costs are used in a process$costing system" how" if 1<.When standard costs are used in a process$costing system" how" if at all" are e8ui&alent units in&ol&ed or used in the cost report at at all" are e8ui&alent units in&ol&ed or used in the cost report at standard
standard A.
A. *8ui&a*8ui&alent unlent units aits are not re not used.used. #.
#. *8ui&a*8ui&alent units are comlent units are computed using a (speputed using a (special) apprcial) approach.oach.
C.
C. T%T%e e acact!t!a# a# e,e,!!vava#e#ent nt !n!ntts s arare e m!m!#t#tpp##ed ed (y (y t%t%ee standard cost per !nt.
standard cost per !nt.
D.
D. The standarThe standard e8ui&alend e8ui&alent units are multiplt units are multiplied by the actual costied by the actual cost per unit.
per unit. ormal costing ormal costing
11.The fi-ed o&erhead application rate is a function of a predetermined 11.The fi-ed o&erhead application rate is a function of a predetermined
(norma
(normal) acti&ity le&el) acti&ity le&el. l. :f standard hours all:f standard hours allowed for good outputowed for good output e8ua
e8ual l thithis s predpredetereterminmined ed actacti&ii&ity ty le&le&el el for for a a gi&gi&en en perperiodiod" " thethe &olume &ariance will be
&olume &ariance will be
A. A. -e-eroro
#.
#. =a=a&o&orabrablele C.
C. %n%nfafa&o&orarableble D.
D. *it*ither fa&oraher fa&orable or ble or unfunfa&oa&orablrable" e" depedependinding ng on on the budgetethe budgetedd o&erhead.
o&erhead.
Types o" standards Types o" standards
12.The absolute minimum cost possible under the best concei&able 12.The absolute minimum cost possible under the best concei&able
operating conditions is a description of which type of standard operating conditions is a description of which type of standard A.
A. CurrenCurrently atly attainabttainable 5ele 5e-pected6-pected6 C.C. T%T%eeoorretetccaa##
#
#. . oorrmmaall DD.. 33rraaccttiiccaall
1'.!tandards" which are difficult to achie&e due to reasons beyond the 1'.!tandards" which are difficult to achie&e due to reasons beyond the indi&idual performing the task" are the result of firm using which of indi&idual performing the task" are the result of firm using which of the following methods to establish standards
the following methods to establish standards
A.
A. IdeaIdea# Stan# Standarddardss C.C. 3ra3ractictical !tancal !tandardardsds #
#.. >>aa- - !!ttaannddaarrddss DD.. **mmppllooyyeee e !!ttaannddaarrddss
1,.!tandards that represent le&els of operation that can be attained 1,.!tandards that represent le&els of operation that can be attained
with reasonable effort are called with reasonable effort are called A
A.. TThheeoorreettiiccaal l ssttaannddaarrddss CC.. ??aarriiaabblle e ssttaannddaarrddss #.
#. :de:deal al stastandandardsrds D.D. NormNorma# standaa# standardsrds Varances
Varances
@eneric &ariances @eneric &ariances 1
1.Whe.When n perfperformorming ing inpinpututoutoutput put &ari&ariancance e analanalysiysis s in in stastandandardrd costing" (standard hours allowed) is a means of measuring
costing" (standard hours allowed) is a means of measuring A.
A. !tandar!tandard outpud output at st at standard tandard hourshours CC.. AcActt!!aa# o# o!!ttpp!!t at att standard %o!rs
standard %o!rs
#.
#. !t!tanandadard rd ououtptput ut at at acactutual al hohoururss D.D. AcActutual al ououtptput ut at at acactutualal hours
hours Two way &ariances Two way &ariances
Volume variance Volume variance 14
14.A .A comcompany pany useuses s a a twotwo$wa$way y analanalysiysis s for for o&ero&erhead head &ar&arianiancesces budget 5controllable6 and &olume.
budget 5controllable6 and &olume. The &olume &ariance is The &olume &ariance is based onbased on the
the A.
A. Total Total o&erheao&erhead appld applicatioication raten rate #.
#. ?olum?olume of total e-pense of total e-penses at &arious aes at &arious acti&itcti&ity le&elsy le&els C.
C. ?aria?ariable o&erhble o&erhead appliead application rcation rateate
D.
D. )ed over)ed over%ead app#c%ead app#caton rataton ratee
17.Assuming that the standard fi-ed o&erhead rate is based on full 17.Assuming that the standard fi-ed o&erhead rate is based on full capacity" the cost of a&ailable but unused producti&e capacity is capacity" the cost of a&ailable but unused producti&e capacity is indicated by the
indicated by the
A.
A. actory ovactory over%ead coser%ead cost vo#!me varat vo#!me varancence
#.
#. DirecDirect labor cot labor cost efficist efficiency &ariency &arianceance C.
C. DirecDirect labor ct labor cost ratost rate &ariae &ariancence D.
D. =acto=actory o&erhead cost conry o&erhead cost controllatrollable &ariancble &ariancee 19
19.:n .:n analanalyziyzing ng manmanufaufacturcturing ing o&ero&erheahead d &ar&arianiancesces" " the the &ol&olumeume &ariance is the difference between the
&ariance is the difference between the A.
A. Amount shAmount shown in the fle-ibown in the fle-ible budget and the amole budget and the amount shown inunt shown in the debit side of the o&erhead control account
the debit side of the o&erhead control account #.
#. 3redete3redetermined o&errmined o&erhead applichead application rate and the fle-iblation rate and the fle-ible budgete budget 2<,
application rate times actual hours worked
C. B!d'et a##o*ance (ased on standard %o!rs a##o*ed "or act!a# prod!cton "or t%e perod and t%e amo!nt (!d'eted to (e app#ed d!rn' t%e perod
D. Actual amount spent for o&erhead items during the period and the o&erhead amount applied to production during the period 1;.The &ariance least significant for purposes of controlling costs is
the
A. /aterial usage &ariance
#. ?ariable o&erhead efficiency &ariance C. =i-ed o&erhead spending &ariance
D. )ed over%ead vo#!me varance
2<.The &ariance most useful in e&aluating plant utilization is the A. ?ariable o&erhead spending &ariance
#. =i-ed o&erhead spending &ariance. C. ?ariable o&erhead efficiency &ariance
D. )ed over%ead vo#!me varance
=our way &ariances
21.The choice of production &olume as a denominator for calculating its factory o&erhead rate
A. Bas no effect on the fi-ed factory o&erhead rate for applying costs to production
#. Bas an effect on the &ariable factory o&erhead rate for applying costs to production
C. Has no e""ect on t%e ")ed "actory over%ead (!d'et varance
D. Bas no effect on the fi-ed factory o&erhead production &olume &ariance
22.The budgeted o&erhead costs for standard hours allowed and the o&erhead costs applied to product are the same amount
A. for both &ariable and fi-ed o&erhead costs.
#. only when standard hours allowed is less than normal capacity.
C. "or vara(#e over%ead costs.
D. for fi-ed o&erhead costs.
esponsibility for &ariances
2'.Which department is customarily held responsible for an unfa&orable materials usage &ariance
A. uality control C. 3urchasing
#. *ngineering D. /rod!cton
Varance ana#yss
2,.Which of the following should be least considered when deciding whether to in&estigate a &ariance
A. 0%et%er t%e varance s "avora(#e or !n"avora(#e
#. !ignificance of the &ariance C. Cost of in&estigating the &ariance D. Trend of the &ariances o&er time Total materials &ariance
2.:f the total materials &ariance 5actual cost of materials used compared with the standard cost of the standard amount of materials re8uired6 for a gi&en operation is fa&orable" why must this &ariance be further e&aluated as to price and usage
A. There is no need to further e&aluate the total materials &ariance if it is fa&orable
#. @enerally accepted accounting principles re8uire that all &ariances be analyzed in three stages
C. All &ariances must appear in the annual report to e8uity owners for proper disclosure
D. To a##o* mana'ement to eva#!ate t%e e""cency o" t%e p!rc%asn' and prod!cton "!nctons
>abor &ariances
24.Which of the following unfa&orable cost &ariances would be directly affected by the relati&e position of a production process on a learning cur&e
A. /aterials mi- C. >abor rate #. /aterials price D. La(or e""cency
27.Which of the following is the most probable reason with a company would e-perience an unfa&orable labor rate &ariance and a 2<
fa&orable labor efficiency &ariance
A. T%e m) o" *or+ers ass'ned to t%e partc!#ar 1o( *as %eav#y *e'%ted to*ard t%e !se o" %'%er#y pad$ e)perenced ndvd!a#s.
#. The mi- of workers assigned to the particular +ob was hea&ily weighted toward the use of new" relati&ely low paid" unskilled workers.
C. #ecause of the producti&e schedule" workers from other production areas were assigned to assist in this particular process.
D. Defecti&e materials caused more labor to be used in order to produce a standard unit.
Two$way o&erhead &ariance
29.The budget for a gi&en cost during a gi&en period was 31"4<<"<<<. The actual cost for the period was 31",,<"<<<. Considering these facts" it can be said that the plant manager has done a better than e-pected +ob in controlling the cost if
A. The cost is &ariable and actual production was ;<E of budgeted production
B. T%e cost s vara(#e and act!a# prod!cton e,!a#ed (!d'eted prod!cton
C. The cost is &ariable and actual production was 9<E of budgeted production
D. The cost is discretionary fi-ed cost and actual production e8ualed budgeted production
Budget variance
2;.The budget &ariance for fi-ed factory o&erhead for the normal$ &olume" practical$capacity" and e-pected$acti&ity le&els would be the
A. !ame e-cept for normal &olume C. !ame e-cept for e-pected acti&ity
#. !ame e-cept for practical capacity D. Same "or a## t%ree actvty #eve#s
Volume variance
'<.Fou ha&e leased a "<<<$gallon storage tank for 3"<<< per month.
Fou stored ,"<<< gallons of li8uid in the tank during the month. The cost of storage was 31.2 per gallon" rather than 31.<< per gallon based on "<<< gallon capacity. Therefore" the cost of storing ,"<<< gallons was 31"<<< more 53.2 - ,"<<<6 in total than if you had stored "<<< gallons of li8uid in the tank. Which &ariance is being described
A. ?ariable$o&erhead efficiency &ariance #. =i-ed$o&erhead spending &ariance C. ?ariable$o&erhead spending &ariance
D. )ed2over%ead vo#!me varance
'1.=a&orable fi-ed o&erhead &olume &ariance occurs if A. There is a fa&orable labor efficiency &ariance #. There is a fa&orable labor rate &ariance C. 3roduction is less than planned
D. /rod!cton s 'reater t%an p#anned
'2.The unfa&orable &olume &ariance may be due to all but which of the following factors
A. =ailure to maintain an e&en flow of work #. /achine breakdowns
C. 3ne)pected ncreases n t%e cost o" !t#tes
D. =ailure to obtain enough sales orders
''.Bow will a fa&orable &olume &ariance affect net income under each of the following methods
Absorpt ion ?ariabl e A. Decrea se o eff ect #. Decrea se :ncrea se C. Increa se No e"" ect D. :ncreas e Decre ase 2<4
',.=a&orable &olume &ariances may be harmful when A. /achine repairs cause work stoppages
B. S!pervsors "a# to mantan an even "#o* o" *or+
C. 3roduction in e-cess of normal capacity cannot be sold
D. There are insufficient sales orders to keep the factory operating at normal capacity
Three$way 0&erhead &ariance
'.During 2<<4" a departmentGs three$&ariance o&erhead standard costing system reported unfa&orable spending and &olume &ariances. The acti&ity le&el selected for allocating o&erhead to the product was based on 9<E of practical capacity. :t 1<<E of practical capacity had been selected instead" how would the reported unfa&orable spending and &olume &ariances be affected
!pending ?ariance ?olume ?ariance A. :ncreased %nchanged #. :ncreased :ncreased C. 3nc%an'ed Increased D. %nchanged %nchanged /ROBLE&S: Standard settn' aw /aterials
i. !hampoo Company is a chemical manufacturer that supplies industrial users. The company plans to introduce a new chemical solution and needs to de&elop a standard product cost for this new solution.
The new chemical solution is made by combining a chemical compound 5yclyn6 and a solution 5!ale-6" boiling the mi-tureH adding a second compound 53rotet6" and bottling the resulting solution in 2<$liter containers. The initial mi-" which is 2< liters in &olume" consists of 2, kilograms of yclyn and 1;.2 liters of !ale-. A 2<E reduction in &olume occurs during the boiling process. The solution is then cooled slightly before 1< kilograms of 3rotet are
addedH the addition of 3rotet does not affect the total li8uid &olume. The purchase prices of t he r aw materials used in t he manufacture
of this new chemical solution are as follows
yclyn 31.<< per kilogram
!ale- 321.<<perliter
3rotet 329.<< per kilogram
The total standard materials cost of 2< liters of the product is A. 31"<,'.2< C. 3 9',.4
#. 31"'<,.<< D. /4$567.88
ii. *l Andre Co. uses a standard costing system in connection with the manufacture of a line of T$shirts. *ach unit of finished product contains 2.2 yards of direct material. Bowe&er" a 2 percent direct material spoilage calculated on input 8uantities occurs during the manufacturing process. The cost of the direct materials is 31< per yard. The standard direct material cost per unit of finished product is
A. 3 2' C. / 798
#. 3 ,22 D. 3 ,<
iii. *ach finished unit of 3roduct */ contains 4< pounds of raw material. The manufacturing process must pro&ide for a 2<E waste allowance. The raw material can be purchased for 32.< a pound under terms of 21<" n'<. The company takes all cash discounts. The standard direct material cost for each unit of */ is
A. 319<.<< C. 3197.<
B. /46.;9 D. 3174.,<
i&. The ?andana Company has a signature scarf for ladies that is &ery popular. Certain production and marketing data are indicated below
Cost per yard of cloth 3,<.<< Allowance for re+ected scarf E of production Fards of cloth needed per scarf <.,7 yard Airfreight from supplier 31.<<yard /otor freight to customers 3<.;< scarf 3urchase discounts from supplier 'E 2<7
!ales discount to customers 2E The allowance for re+ected scarf is not part of the <.,7 yard of
cloth per scarf. e+ects ha&e no market &alue. /aterials are used at the start of production.
Calculate the standard cost of cloth per scarf that ?andana Company should use in its cost sheets.
A. 31;.9 C. 31;.,<
#. 32<.<< D. /4<.<8
Direct labor
&. Double / company is a chemical manufacturer that supplies &arious products to industrial users. The company plans to introduce a new chemical solution called #ysap" for which it needs to de&elop a standard product cost. The following labor information is a&ailable on the production of #ysap.
• The product" which is bottled in 1<$liter containers" is
primarily a mi-ture of #yclyn" !ale-" and 3rotet.
• The finished product is highly unstable" and one 1<$liter
batch out of si- is re+ected at final inspection. e+ected batches ha&e no commercial &alue and are thrown out.
• :t takes a worker ' minutes to process one 1<$liter batch of
#ysap. *mployees work on eight$hour a day" including one hour per day for rest breaks and cleanup.
What is the standard labor time to produce one 1<$liter batch of #ysap
A. ' minutes C. 7 mn!tes
#. ,< minutes D. , minutes
&i. The following direct labor information pertains to the manufacture of 3art I'
umber of hours re8uired to make a part 2. D>B
umber of Direct workers 7
umber of total producti&e hours per week '<<< Weekly wages per worker 31"<<< >aborersG fringe benefits treated as direct labor costs 2E of wages
What is the standard direct labor cost per unit of 3art I'
A. 342.<< C. 3,1.47<
B. /;.459 D. 39,.12
/aterials J >abor
uestions os. 7 and 9 are based on the following
!upercold Company is a small producer of fruit$fla&ored frozen desserts. =or many years" !upercoldGs products ha&e had strong regional sales on the basis of brand recognition. Bowe&er" other companies ha&e begun marketing similar products in the area" and price competition has become increasingly important. Baydee /e+ia" the companyGs controller" is planning to implement a standard costing system for !upercold and has gathered considerable information on production and material re8uirements for !upercoldGs products. Baydee belie&es that the use of standard costing will allow !upercold to impro&e cost control and make better pricing decisions.
!upercoldGs most popular products is strawberry sherbet. The sherbet is produced in 1<$gallon batches" and each batch re8uires si- 8uarts of good strawberries. The fresh strawberries are sorted by hand before entering the production process. #ecause of imperfections in the strawberries and normal spoilage" one 8uart of berries is discarded for e&ery four 8uarts of acceptable berries. Three minutes is the standard direct labor time for sorting that is re8uired to obtain one 8uart of acceptable berries. The acceptable berries are then blended with the other ingredientsH blending re8uires 12 minutes of direct labor time per batch. After blending" the sherbet is package in 8uart containers. Baydee has gathered the following information from izza Alano" !upercoldGs cost accountant.
!upercold purchases strawberries at a cost of 39.<< per 8uart. All other ingredients cost a total of 3,.< per gallon.
Direct labor is paid at the rate of 3< per hour.
The total cost of material and labor re8uired to package the sherbet is 3'.9< per 8uart.
izza Alano has a friend who owns a berry farm that has been losing money in recent years. #ecause of good crops" there has been an o&ersupply of strawberries" and prices ha&e dropped to 3.<< per 2<9
8uart. izza has arranged for !upercold to purchase strawberries form her friend and hopes that 39.<< per 8uart will help her friendGs farm become profitable again.
&ii. The standard materials cost per 1<$gallon batch of strawberry sherbet is
A. 3 9.<< C. 31<1.<< #. 3 4<.<< D. /489.88
&iii. The standard direct labor cost per 1<$gallon batch of sherbet is A. 3<.<< C. /59.88
#. 329.7 D. 31.<<
&atera#s varance
i-. %nder a standard cost system" the materials 8uantity &ariance was recorded at 31";7< unfa&orable" the materials price &ariance was recorded at 3'"7,< fa&orable" and the @oods in 3rocess was debited for 31"4;<. inety$si- thousand units were completed. What was the per unit price of the actual materials used
A. /8.95 eac% C. 3<., eac #. 3<.' each D. 3<.1 each
-. #lake Company has a standard price of 3.< per pound for materials. IulyGs results showed an unfa&orable material price &ariance of 3,, and a fa&orable 8uantity &ariance of 32<;. :f 1"<44 pounds were used in production" what was the standard 8uantity allowed for materials
A. 4$487 C. 1 "< 44 #. 1"<7, D. 1"1<<
-i. *lite Company uses a standard costing system in the manufacture of its single product. The '"<<< units of raw material in in&entory were purchased for 31<"<<<" and two units of raw material are re8uired to produce one unit of final product. :n o&ember" the company produced 12"<<< units of product. The standard allowed for material was 34<"<<<" and there was an unfa&orable 8uantity &ariance of 32"<<. The materials price &ariance for the units used in o&ember was
A. 3 2"<< % C. /45$988 3
#. 311"<<< % D. 3 '"<< =
). !heridan Company has a standard of 1 parts of component ## costing 31.< each. !heridan purchased 1,";1< units of component ## for 322"1,. !heridan generated a 322< fa&orable price &ariance and a 3'"7' fa&orable 8uantity &ariance. :f there were no changes in the component in&entory" how many units of finished product were produced
A. ;;, units. C. 1"<<< units #. 1"<;< units. D. 4$4=8 !nts
-iii. The standard usage for raw materials is pounds at 3,<.<< per pound. Ca&e Company spent 31'1"2<< in purchasing '"2<< pounds. Ca&e used '"1< pounds to produce 4<< units of finished product. The material 8uantity &ariance is
A. /=$888 !n"avora(#e C. 3'"2<< unfa&orable #. 3"2<< unfa&orable D. 32"<<< unfa&orable
-i&. The #ohol Company uses standard costing. The following data are a&ailable for 0ctober
Actual 8uantity of direct materials used 2'"<< pounds !tandard price of direct materials 32 per pound /aterial 8uantity &ariance 31"<<< % The standard 8uantity of materials allowed f or 0ctober production
is
A. 56$888 #(s C. 2,"<<< lbs #. 2,"<< lbs D. 2"<<< lbs
-&. :nformation on DulceGs direct material costs for /ay is as follows Actual 8uantity of direct materials purchased and used'<"<<< lbs.
Actual cost of direct materials 39,"<<< % nf a& or ab le d ir ec t m at er ia ls u sa ge & ar ia nc e 3 ' "<<< !tandard 8uantity of direct materials allowed for /ay production
2;"<<< lbs =or the month of /ay" DulceGs direct materials price &ariance was A. 32"9<< fa&orable C. 32"9<< unfa&orable
#. 34"<<< unfa&orable D. /=$888 "avora(#e
-&i. :nformation on Katrina CompanyGs direct material costs is as follows
!tandard unit price 3 '.4<
Actual 8uantity purchased 1"4<< !tandard 8uantity allowed for actual production 1",< /at erials pu rch ase price &ariance L fa&or able 3 2,< What was the actual purchase price per unit" rounded to the
nearest centa&os
A. 3'.<4 C. 3'.11
B. /6.79 D. 3'.7
-&ii. 3almas Company" which has a standard cost system" had << units of raw material M in its in&entory at Iune 1" purchased in /ay for 31.2< per unit and carried at a standard cost of 31.<<. The following information pertains to raw material M for the month of Iune
Actual number of units purchased 1",<< Actual number of units used 1"<< !tandard number of units allowed for actual production 1"'<< !tandard cost per unit 31.<<
Actual cost per unit 31.1<
The unfa&orable materials purchase price &ariance for raw material M for Iune was
A. 3 < C. /478
# . 31 '< D. 3 1 <
-&iii. During /arch" >umban CompanyGs direct material costs for the manufacture of product T were as follows
Actual unit purchase price 34.< ! ta nd ar d 8u an ti ty a ll owe d fo r a ct ua l pr od uc ti on 2" 1< < uantity purchased and used for actual production 2"'<<
!tandard unit price 34.2
>umbanGs material usage &ariance for /arch was
A. /4$598 !n"avora(#e C. 31"2< fa&orable #. 31"'<< unfa&orable D. 31"'<< fa&orable
-i-. azonable Company installs shingle roofs on houses. The standard
material cost for a Type house is 31"2<" based on 1"<<< units at a cost of 31.2 each. During April" azonable installed roofs on 2< Type houses" using 22"<<< units of material cost of 324",<<.
azonableGs material price &ariance for April is
A. 31"<<< fa&orable C. /4$488 "avora(#e
#. 31",<< unfa&orable D. 32"<< unfa&orable
--. !amson Candle Co. manufactures candles in &arious shapes" sizes" colors" and scents. Depending on the orders recei&ed" not all candles re8uire the same amount of color" dye" or scent materials. Fields also &ary" depending upon the usage of beeswa- or synthetic
wa-. !tandard ingredients for 1"<<< pounds of candles are :nput !tandard /i- !tandard Cost per
3ound #eeswa- 2<< lbs. 1.<< !ynthetic wa- 9,< lbs. <.2< Colors 7 lbs. 2.<< !cents ' lbs. 4.<< Totals 1"<< lbs. ;.2< !tandard output 1"<<< lbs.
3rice &ariances are charged off at the time of purchase. During Ianuary" the company was busy manufacturing red candles for
?alentineGs Day. Actual production then was
Inp!t: :n 3ounds #eeswa- ,"1<< !yntheticwa- 1'"9<< Colors 2"2<< !cents 4< Total 2<"14< Actualoutput 19"<<
The material yield &ariance is
A. / 58 !n"avora(#e C. 3 29< fa&orable #. 3'";9; unfa&orable D. 3'";9; fa&orable
La(or varance
--i. The fle-ible budget for the month of /ay 2<<7 was for ;"<<< units with direct material at 31 per unit. Direct labor was budgeted at 21<
, minutes per unit for a total of 391"<<<. Actual output for the month was 9"<< units with 3127"<< in direct material and 377"77 in direct labor e-pense. Direct labor hours of 4"'7 were actually worked during the month. ?ariance analysis of the performance for the month of /ay would show a5n6
A. =a&orable material 8uantity &ariance of 37"<<. #. %nfa&orable direct labor efficiency &ariance of 31"27. C. %nfa&orable material 8uantity &ariance of 37"<<.
D. 3n"avora(#e drect #a(or rate varance o" /4$5;9.
--ii. The standard hourly rate was 3,.1<. !tandard hours for the le&el of production are ,"<<<. The actual rate was 3,.27. The labor rate &ariance was 34,.<" unfa&orable. What were the actual labor hours
A . '" 7<< C. 6$98
#. ,"1< D. ,"<<<
--iii. Clean Barry Corp. uses two different types of labor to manufacture its product. The types of labor" /i-ing and =inishing" ha&e the following standards
>abor Type !tandard /i- !td Bourly ate !tandard Cost /i-ing << hours 31< 3"<<< =inishing 2< hours 3 31"2< Field ,"<<< units
During Ianuary" the following actual production information was pro&ided
>aborType Actual
/i-/i-ing ,"<<hours
=inishing '"<<<hours
Field '4"<<< units
What is the labor mi- &ariance
A. /5$988 C. 32"<< % #. 3"<<< = D. 3"<<< = --i&.Bow much labor yield &ariances should be reported
A. /=$598 3 C. 3"2< =
#. 34"2< = D. 3"2< %
--&. Bingis had a 37< unfa&orable direct labor rate &ariance and an 39<< fa&orable efficiency &ariance. Bingis paid 37"1< for 9<< hours of labor. What was the standard direct labor wage rate
A . 39. ;, C. /.88
#. 37.;, D. 37.9<
--&i.3owerless CompanyGs operations for April disclosed the following data relating to direct labor
Actualcost 31<"<<< ate &ariance 1"<<< fa&orable *fficiency &ariance 1"<< unfa&orable !tandard cost 3 ;"<<
Actual direct labor hours for April amounted to 2"<<<. 3owerlessG standard direct labor rate per hour in April was
A. /9.98 C. 3 . <<
#. 3,.7 D. 3,.<
--&ii. >ion CompanyGs direct labor costs for the month of Ianuary were as follows
Actual direct labor hours 2<"<<< !tandard direct labor hours 21"<<< Direct labor rate &ariance L %nfa&. 3 '"<<<
Total payroll 3124"<<<
What was >ionGs direct labor efficiency &ariance A. 34"<<< fa&orable C. /=$498 "avora(#e
#. 34"'<< fa&orable D. 34",< fa&orable
--&iii. %sing the information gi&en below" determine the labor efficiency &ariance
>abor price per hour 3 2< !tandard labor price per gallon of output at 2< gal.hr 3 1 !tandard labor cost of 9",,< gallons of actual output 39",,< Actual total inputs5,1< hours at 321hr6 39"41< A. 3 ,1< unfa&orable C. / 578 "avora(#e
#. 3 17< unfa&orable D. 3 ,1< fa&orable
--i-.!imbad CompanyGs operations for the month +ust ended originally set up a 4<"<<< direct labor hour le&el" with budgeted direct labor of 3;4<"<<< and budgeted &ariable o&erhead of 32,<"<<<. The actual results re&ealed that direct labor incurred amounted to 31"1,9"<<< and that the unfa&orable &ariable o&erhead &ariance was 3,<"<<<. >abor trouble caused an unfa&orable labor efficiency &ariance of 312<"<<<" and new employees hired at higher rates resulted in an actual a&erage wage rate of 314.,< per hour. The total number of standard direct labor hours allowed for the actual units produced is
A. 32"<< C. /=5$988
#. 377"<< D. 37<"<<<
>!estons 68 and 64 are (ased on t%e "o##o*n' n"ormaton.
:nformation on @oode&e CompanyGs direct labor costs are presented below
!tandard direct labor hours '<"<<< Actual direct labor hours 2;"<<< Direct labor efficiency &ariance =a&orable 3 ,"<<< Direct labor rate &ariance =a&orable 3 "9<<
Total payroll 311<"2<<
---. What was @oode&eGs standard direct labor rate
A. 3'., C. 3'.9<
B. /7.88 D. 3.9<
---i.What was @oode&eGs actual direct labor rate
A . 3' .4 < C. /6.8
#. 3,.<< D. 3.9<
---ii. The :slander Corporation makes a &ariety of leather goods. :t uses standards costs and a fle-ible budget to aid planning and control. #udgeted &ariable o&erhead at a ,"<<<$direct labor hour le&el is 327"<<<.
During April material purchases were 32,1";<<. Actual direct$labor costs incurred were 31,<"7<<. The direct$labor usage &ariance was
3"1<< unfa&orable. The actual a&erage wage rate was 3<.2< lower than the a&erage standard wage rate.
The company uses a &ariable o&erhead rate of 2<E of standard direct$labor cost for fle-ible budgeting purposes. Actual &ariable o&erhead for the month was 3'<"7<.
What were the standard hours allowed during the month of April A. <"2< C. 9"42
B. 7$998 D. '7"2<
---iii. :nformation on #arber CompanyGs direct labor costs for the month of Ianuary is as follows
Actual direct labor hours ',"<< !tandard direct labor hours '"<<< Total direct labor payroll 32,1"<< Direct labor efficiency &ariance L fa&orable 3 '"2<< What is #arberGs direct labor rate &ariance
A. 317"2< % C. 321"<<< %
B. /58$;88 3 D. 321"<<< =
---i&. !TA Company uses a standard cost system. The following information pertains to direct labor costs for the month of Iune
!tandard direct labor rate per hour 3 1<.<< Actual direct labor rate per hour 3 ;.<< >abor rate &ariance 5fa&orable6 312"<<< Actual output 5units6 2"<<< !tandard hours allowed for actual production 1<"<<< hours Bow many actual labor hours were worked during /arch for !TA Company
A. 1<"<<< C. 9"<<<
B. 45$888 D. 1<"<<
---&. :nformation of BanesG direct labor costs for the month of /ay is as follows
Actual direct labor rate 37.< !tandard direct labor hours allowed 11"<<< Actual direct labor hours 1<"<<< Direct labor rate &ariance L fa&orable 3"<< What was the standard direct labor rate in effect for the month of 212
/ay
A. 34.; C. 39.<<
# . 37 .< < D. /.89 T*o2*ay over%ead varance
---&i. The o&erhead &ariances for #ig Company were
?ariable o&erhead spending &ariance 3'4<< fa&orable. ?ariable o&erhead efficiency &ariance 34"<<< unfa&orable. =i-ed o&erhead spending &ariance 31<"<<< fa&orable. =i-ed o&erhead &olume &ariance 32,"<<< fa&orable. What was the o&erhead controllable &ariance
A. 3'1"4<< fa&orable C. 32,"<<< fa&orable #. 31'"4<< fa&orable D. / ;$=88 "avora(#e
---&ii. Kent Company sets the following standards for 2<<7
Direct labor cost 52 D>B N 3,.<6 3 ;.<< /anufacturing o&erhead 52 D>B N 37.<6 1.<< Kent Company plans to produce its only product e8ually each month. The annual budget for o&erhead costs are
=i-ed o&erhead 31<"<<< ?ariable o&erhead '<<"<<< ormal acti&ity in direct labor hours 4<"<<< :n /arch" Kent Company produced 2",< units with actual direct labor hours used of "<<. Actual o&erhead costs for the month amounted to 3'7"2, 5=i-ed o&erhead is as budgeted.6
The amount of o&erhead &olume &ariance for Kent Company is
A. /598 !n"avora(#e C. 3<< unfa&orable #. 37< %nfa&orable D. 3'7 %nfa&orable
---&iii. Calma Company uses a standard cost system. The following budget" at normal capacity" and the actual results are summarized for the month of December
Direct labor hours 2,"<<< ?ariable factory 0B 3 ,9"<<< =i-ed factory 0B 31<9"<<< Total factory 0B per D>B 3 4.< Actual data for December were as follows
Direct labor hours worked 22"<<<
Total factory 0B 31,7"<<< !tand ard D>Bs allowe d for cap acity attaine d 21"<<< %sing the two$way analysis of o&erhead &ariance" what is the controllable &ariance for December
A. / 6$888 avora(#e C. 3 "<<< =a&orable #. 3 ;"<<< =a&orable D. 31<"<< %nfa&orable
---i-. Beart Company uses a fle-ible budget system and prepared the following information for the year
3ercent of Capacity 9< 3ercent
;< 3ercent Direct labor hours 2,"<<< 27"<<< ?ariable factory o&erhead 3 ,"<<< 3 4<"7< =i-ed factory o&erhead 3 91"<<< 3 91"<<< Total factory o&erhead rate
per D>B
3.42 3.2
Beart operated at 9< percent of capacity during the year" but applied factory o&erhead based on the ;< percent capacity le&el. Assuming that actual factory o&erhead was e8ual to the budgeted amount of o&erhead" how much was the o&erhead &olume &ariance for the year
A. / <$888 !n"avora(#e C. 3 ;"<<< fa&orable #. 31"7< unfa&orable D. 31"7< fa&orable
-l. The =ire Company has a standard absorption and fle-ible budgeting system and uses a two$way analysis of o&erhead &ariances. !elected data for the Iune production acti&ity are
#udgeted fi-ed factory o&erhead costs 3 4,"<<< Actual factory o&erhead 2'<"<<< ?ariable factory o&erhead rater per D>B 3
!tandardD>B '2"<<<
Actual D>B '2"<<<
The budget 5controllable6 &ariance for Iune is
A. 31"<<< fa&orable C. 31"<<< unfa&orable #. 34"<<< fa&orable D. /=$888 !n"avora(#e
-li. !orsogon Company had actual o&erhead of 31,"<<< for the year. The company applied o&erhead of 31'",<<. :f the o&erhead 21'
budgeted for the standard hours allowed is 31"4<<" the o&erhead controllable &ariance is
A. 3 4<< =a&orable C. /4$=88 avora(#e
#. 32"2<< %nfa&orable D. 31"4<< %nfa&orable
-lii. Compo Co. uses a predetermined factory 0B application rate based on direct labor cost. =or the year ended December '1" CompoGs budgeted factory 0B was 34<<"<<<" based on a budgeted &olume of <"<<< direct labor hours" at a standard direct labor rate of 34 per hour. Actual factory 0B amounted to 342<"<<<" with actual direct labor cost of 3'2"<<<. =or the year" o&er$applied factory 0B was
A. 32<"<<< C. /68$888
#. 32"<<< D. 3<"<<<
-liii. The Terrain Company has a standard absorption and fle-ible budgeting system and uses a two$way analysis of o&erhead &ariances. !elected data for the Iune production acti&ity are
#udgeted fi-ed factory o&erhead costs 3 4 ,"<<< Actual factory o&erhead 2'<"<<< ?ariable factory o&erhead rater per D>B 3
!tandardD>B '2"<<<
ActualD>B '2"<<<
The budget 5controllable6 &ariance for the month of Iune is A. 31"<<< fa&orable C. 31"<<< unfa&orable #. 34"<<< fa&orable D. /=$888 !n"avora(#e
-li&. The standard factory o&erhead rate is 31< per direct labor hour 539 for &ariable factory o&erhead and 32 for fi-ed factory o&erhead6 based on 1<<E capacity of '<"<<< direct labor hours. The standard cost and the actual cost of factory o&erhead for the production of "<<< units during /ay were as follows
!tandard2"<<< hours at 31< 32<"<<< Actual ?ariable factory o&erhead 2<2"<< =i-ed factory o&erhead 4<"<<< What is the amount of the factory o&erhead &olume &ariance A. 12"<< fa&orable C. 12"<< unfa&orable
B. 48$888 !n"avora(#e D. 1<"<<< fa&orable
T%ree2*ay over%ead varance
-l&. The following data are the actual results for Wow Company for the month of /ay
Actual output ,"<< units Actual &ariable o&erhead 3'4<"<<< Actual fi-ed o&erhead 31<9"<<< Actual machine time 1,"<<< /B !tandard cost and budget information for Wow Company follows !tandard &ariable o&erhead rate 34.<< per /B !tand ard 8uan tity of machine hou rs ' hou rs pe r un it #udgeted fi-ed o&erhead 3777"4<< per year #udgeted output ,"9<< units per month The o&erhead efficiency &ariance is
A. 3'"<<< =a&orable C. /6$888 3n"avora(#e
#. 3",<< =a&orable D. 3",<< %nfa&orable
-l&i. The >ibiran Company produces its only product" /enthol Chewing @um. The standard o&erhead cost for one pack of the product follows
=i-ed o&erhead 51.< hours at 319.<<6 327.<< ?ariable o&erhead 51.< hours at 31<.<<6 1.<<
Total application rate 3,2.<<
>ibiran uses e-pected &olume of 2<"<<< units. During the year" >ibiran used '1"<< direct labor hours for the production of 2<"<<< units. Actual o&erhead costs were 3,"<<< fi-ed and 3'<9"7<< &ariable.
The o&erhead efficiency &ariance is
A. 322"<< =a&orable C. 31"<<< =a&orable #. 322"<< %nfa&orable D. /49$888 3n"avora(#e
-l&ii.Abbey Company produces a single product. Abbey employs a standard cost system and uses a fle-ible budget to predict o&erhead costs at &arious le&els of acti&ity. =or the most recent year" Abbey used a standard o&erhead rate e8ual to 39.< per direct labor hour. The rate was computed using normal acti&ity. #udgeted o&erhead costs are 31<<"<<< for 1<"<<< direct labor hours and 314<"<<< for 2<"<<< direct labor hours. During the past 21,
year" Abbey generate the following data Actual production 1",<< units
=i-ed o&erhead &olume &ariance 3"<<< % ?ariable o&erhead efficiency &ariance 3'"<<< = Actual fi-ed o&erhead costs 3,2"47<
Actual &ariable o&erhead costs 392"<<<
The number of direct labor hours used as normal acti&ity are
A. 4=$888 C. 1,"<<< #. 1"<<< D. 1'"<<
-l&iii. %sing the information presented below" calculate the total o&erhead spending &ariance.
#udgeted fi-ed o&erhead 31<"<<< !tandard &ariable o&erhead 52 D>B at 32 per D>B63, per unit Actual fi-ed o&erhead 31<"'<< Actual &ariable o&erhead 31;"<< #udgeted &olume 5"<<< units - 2 D>B6 1<"<<< D>B Actual direct labor hours 5D>B6 ;"<<
%nitsproduced ,"<<
A. 3 << % C. 31"<<< %
B. / 88 3 D. 31"'<< %
-li-. The following data are the actual results for #ustos Company for the month of /ay
Actual output ,"<< units Actual &ariable o&erhead 3'4<"<<< Actual fi-ed o&erhead 31<9"<<< Actual machine time 1,"<<< /B !tandard cost and budget information for #ustos Company follows
!tandard &ariable o&erhead rate 34.<< per /B !tan dard 8u antity of machine hours ' hou rs pe r un it #udgeted fi-ed o&erhead 3777"4<< per year #udgeted output ,"9<< unit per month The o&erhead efficiency &ariance is
A. 3'"<<< =a&orable C. /6$888 3n"avora(#e
#. 3",<< =a&orable D. 3",<< %nfa&orable l. The following information is a&ailable from the Tyro Company
Actual factory o&erhead 31"<<< =i-ed o&erhead e-penses" actual 3 7"2<< =i-ed o&erhead e-penses" budgeted 3 7"<<<
Actualhours '"<<
!tandardhours '"9<<
?ariable o&erhead rate per D>B 3 2.< Assuming that Tyro uses a three$way analysis of o&erhead &ariances" what is the spending &ariance
A. / ;98 C. 3 ; < = #. 3 7< % D. 31"<< %
li. The !acto Co.Gs standard fi-ed o&erhead cost is 3' per direct labor hour based on budgeted fi-ed costs of 3'<<"<<<. The standard allows 2 direct labor hours per unit. During 2<<4" !acto produced "<<< units of product" incurred 3'1"<<< of fi-ed o&erhead costs" and recorded 31<4"<<< actual hours of direct labor. What are the fi-ed o&erhead &ariances
!pen ding & ariance ?olu me &ariance
A. /49$888 3 /68$888
#. 3''"<<< % 3'<"<<< = C. 31"<<< % 319"<<< = D. 3''"<<< % 319"<<< =
lii. %sing the information in the preceding number" the amounts of controllable &ariances for &ariable o&erhead are
!pending *fficiency
A. /58$888 av /58$888 3n"
#. 32<"<<< %nf 32<"<<< =a& C. 3 "<<< %nf 32<"<<< %nf D. 32<"<<< =a& 3 "<<< %nf
o!r2*ay over%ead varance
liii. !afin CorporationGs master budget calls for the production of "<<< units of product monthly. The annual master budget includes indirect labor of 31,,"<<< annually. !afin considers indirect labor to be a &ariable cost. During the month of April" ,"<< units of product were produced" and indirect labor costs of 31<"1<< were incurred. A performance report utilizing fle-ible budgeting would 21
report a budget &ariance for indirect labor of
A. 31";<< %nfa&orable. C. 31";<< =a&orable. #. 3 7<< %nfa&orable. D. / ;88 avora(#e.
li&. Wala Company applies o&erhead on a direct labor hour basis. *ach unit of product re8uires direct labor hours. 0&erhead is applied on a '< percent &ariable and 7< percent fi-ed basisH the o&erhead application rate is 314 per hour. !tandards are based on a normal monthly capacity of "<<< direct labor hours.
During !eptember 2<<4" Wala produced 1"<1< units of product and incurred ,";<< direct labor hours. Actual o&erhead cost for the month was 39<"<<<.
What is total annual budgeted fi-ed o&erhead cost A. 3 4"<<< C. /=;5$888
#. 3 4"4< D. 3479"72<
l&. #udgeted &ariable o&erhead for the le&el of production achie&ed is ,<"<<< machine$hours at a budgeted cost of 342"<<<. Actual &ariable o&erhead at the le&el of production achie&ed was '9"<<< hours at an actual cost of 342",<<. What is the total &ariable o&erhead &ariance
A. 3,<< fa&orable C. 3'"1<< unfa&orable
B. /788 !n"avora(#e D. 3'"1<< fa&orable
l&i. The 3inatubo Company makes and sells a single product and uses standard costing. During Ianuary" the company actually used 9"7<< direct labor$hours 5D>Bs6 and produced '"<<< units of product. The standard cost card for one unit of product includes the following ?ariable factory o&erhead '.< D>Bs N 3,.<< per D>B
=i-ed factory o&erhead '.< D>Bs N 3'.< per D>B
=or Ianuary" the company incurred 322"<<< of actual fi-ed o&erhead costs and recorded a 397 fa&orable &olume &ariance.
The budgeted fi-ed o&erhead cost for Ianuary is A. 3'1"<< C. /68$=59
#. 3'2"'7 D. 3''"2<
l&ii. The &ariable$o&erhead spending &ariance is 31"<9<" unfa&orable. ?ariable o&erhead budgeted at ,<"<<< machine hours is 3<"<<<.
Actual machine hours were '4"<<<. What was the actual &ariable$ o&erhead rate per machine hour
A. /4.5 C. 3 1. ';
#. 31.2 D. 31.2
l&iii. Cal&in Klein Company has a standard fi-ed cost of 34 per unit. At an actual production of 9"<<< units a fa&orable &olume &ariance of 312"<<< resulted. What were total budgeted fi-ed costs
A. /6=$888. C. 3,9"<<<. #. 34<"<<<. D. 37"<<<.
li-. 3uma Company had an 2"<<< unfa&orable &olume &ariance" a 319"<<< unfa&orable &ariable o&erhead spending &ariance" and 32"<<< total under applied o&erhead. The fi-ed o&erhead budget &ariance is
A. /74$888 "avora(#e C. 3,"<<< fa&orable #. 3,1"<<< %nfa&orable D. 3,"<<< %nfa&orable
l-. Arlene had an 319"<<< unfa&orable &olume &ariance" a 32"<<< unfa&orable &ariable o&erhead spending &ariance" and 32"<<< total under applied o&erhead. The fi-ed o&erhead budget &ariance is
A. /74$888 "avora(#e C. 3,"<<< fa&orable #. 3,1"<<< %nfa&orable D. 3,"<<< %nfa&orable
l-i. =i-ed manufacturing o&erhead was budgeted at 3<<"<<< and 2"<<< direct labor hours were budgeted. :f the fi-ed o&erhead &olume &ariance was 312"<<< fa&orable and the fi-ed o&erhead spending &ariance was 314"<<< unfa&orable" fi-ed manufacturing o&erhead applied must be
A. 314"<<< C. /945$888
#. 3<,"<<< D. 3,;4"<<<
l-ii. CT? Company has a standard fi-ed cost of 34 per unit. At an actual production of 9"<<< units a fa&orable &olume &ariance of 312"<<< resulted. What were total budgeted fi-ed costs
A. /6=$888 C. 3,9"<<< #. 34<"<<< D. 37"<<<
l-iii. ichard Company employs a standard absorption system for product costing. The standard cost of its product is as follows
awmaterials 31,.<
Direct labor 52 D>B - 396 14.<< /anufacturing o&erhead 52 D>B - 3116 22.<<
Total standard cost 32.<
The manufacturing o&erhead rate is based upon a normal acti&ity le&el of 4<<"<<< direct labor hours. ichard planned to produce 2"<<< units each month during the year. The budgeted annual manufacturing o&erhead is
?ariable 3 '"4<<"<<< =i-ed '"<<<"<<< 3 4"4<<"<<< During o&ember" ichard produced 24"<<< units. ichard used '"<< direct labor hours in o&ember at a cost of 3,''"'<. Actual manufacturing o&erhead for the month was 324<"<<< fi-ed and 3'1"<<< &ariable. The total manufacturing o&erhead applied during o&ember was 372"<<<.
The fi-ed manufacturing o&erhead &olume &ariance for o&ember is
A. /48$888 "avora(#e C. 31<"<<< unfa&orable #. 3'"<<< unfa&orable D. 322"<<< fa&orable
l-i&. %sing the information for ichard Company in the preceding number" the total &ariance related to efficiency of the manufacturing operation for o&ember is
A. 3 ;"<<< unfa&orable C. 312"<<< unfa&orable
B. /54$888 !n"avora(#e D. 311"<<< unfa&orable
>!eston Nos. =9 and == are (ased on t%e "o##o*n':
Tiny #ubbles Company had the following acti&ity relating to its fi-ed and &ariable o&erhead for the month of Iuly.
Actual costs
=i-edo&erhead 312<"<<< ?ariable o&erhead 9<"<<< =le-ible budget
5!tandard input allowed for actual output achie&ed - the budgeted
rate6
?ariable o&erhead 3 ;<"<<< Applied
5!tandard input allowed for actual output achie&ed - the budgeted rate6
=i-edo&erhead 312"<<< ?ariable o&erh ead spen din g &ariance 1"2<< = 3roduction &olume &ariance "<<< % l-&. :f the budgeted rate for applying &ariable manufacturing o&erhead
was 32< per direct labor hour" how efficient or inefficient was Tiny #ubbles in terms of using direct labor hours as an acti&ity base A. 1<< direct labor hours inefficient C. 1<< direct labor hours
efficient
#. ,,< direct labor hours inefficient D. 778 drect #a(or %o!rs e""cent
l-&i. The fi-ed o&erhead efficiency &ariance is
A. 3 '"<<< fa&orable C. 3 '"<<< unfa&orable
#. 31<"<<< unfa&orable D. Never a meann'"!# varance
>!estons =; and = are based on a monthly normal &olume of <"<<< units 51<<"<<< direct labor hours6. aff Co.Gs standard cost system contains the following o&erhead costs
?ariable 34perunit
=i-ed 39 per unit
The following information pertains to the month of /arch
%nits actually produced '9"<<< Actual direct labor hours worked 9<"<<< Actual o&erhead incurred
?ariable 32<"<<<
=i-ed '9,"<<<
l-&ii. =or /arch" the unfa&orable &ariable o&erhead spending &ariance was
A. 34"<<< C. 312"<<<
B. /48$888 D. 322"<<<
l-&iii. =or /arch" the fi-ed o&erhead &olume &ariance was
A. /<=$8883 C. 39<"<<<% #. 3;4"<<<= D. 39<"<<<=
l-i-. *dney Company employs standard absorption system for product costing. The standard cost of its product is as follows
awmaterials 31,.<
Direct labor 52 D>B - 396 14.<< /anufacturing o&erhead 52 D>B - 3116 22.<< The manufacturing o&erhead rate is based upon a normal acti&ity
le&el of 4<<"<<< direct labor hours. *dney planned to produce 2"<<< units each month during the year. The budgeted annual manufacturing o&erhead is
?ariable 3'"4<<"<<< =i-ed '"<<<"<<< During o&ember" *dney produced 24"<<< units. *dney used '"<< direct labor hours in o&ember at a cost of 3,''"'<. Actual manufacturing o&erhead for the month was 324<"<<< fi-ed and 3'1"<<< &ariable. The total manufacturing o&erhead applied during o&ember was 372"<<<.
The &ariable manufacturing o&erhead &ariances for o&ember are
!pending *fficiency
A . 3; "< << u nf a& or ab le 3 '" <<< un fa &o ra ble
B. /=$888 "avora(#e /<$888 !n"avora(#e
C. 3,"<<< unf a&orable 31"<<< fa&orable D. 3;"<<< fa&orable 312"<<< unfa&orable
l--. The fi-ed manufacturing o&erhead &ariances for o&ember are
!pending ?olume
A. 31<"<<< fa&orable 31<"<<< fa&orable
B. /48$888 !n"avora(#e /48$888 "avora(#e
C. 3 4"<<< fa&orable 3 '"<<< unfa& orable D . 3 ," << < un fa &o ra ble 3 22" <<< fa &o ra bl e
T%e "o##o*n' n"ormaton *## (e !sed to ans*er >!eston Nos.
;4 t%ro!'% ;7:
@arch" :nc. analyzes manufacturing o&erhead in the production of its only one product" CD. The following set of information applies to the month of /ay" 2<<4
#udgeted Actual
%nits produced ,<"<<< '9"<<< ?ariable manufacturing 0B 3 ,D>B 314",<< =i-ed manufacturing o&erhead 32<D>B 399"<<< Direct labor hours 4 minunit ,"2<< hr l--i. What is the fi-ed o&erhead spending &ariance
A. 3,"<<< =a&orable C. /$888 3n"avora(#e
#. 39"<<< =a&orable D. 3,"<<< %nfa&orable l--ii. What is the &olume &ariance
A. 3,"<<< =a&orable C. 39"<<< =a&orable
B. /7$888 3n"avora(#e D. 39"<<< %nfa&orable l--iii. Bow much was the &ariable o&erhead spending &ariance
A. / 788 avora(#e C. 3,<< %nfa&orable #. 31"2<< =a&orable. D. 31"2<< %nfa&orable
l--i&. Bow much o&erhead efficiency &ariance resulted for the month of /ay
A. 31"4<< =a&orable C. /4$=88 3n"avora(#e
#. 3 9<< =a&orable D. 39<< %nfa&orable
>!estons ;9 t%ro!'% ; are (ased on Darf Company" which applies o&erhead on the basis of direct labor hours. Two direct labor hours are re8uired for each product unit. 3lanned production for the period was set at ;"<<< units. /anufacturing o&erhead is budgeted at 31'"<<< for the period" of which 2<E of this cost is fi-ed. The 17"2<< hours worked during the period resulted in production of 9"<< units. ?ariable manufacturing o&erhead cost incurred was 31<9"<< and fi-ed manufacturing o&erhead cost was 329"<<<. Darf Company uses a four &ariance method for analyzing manufacturing o&erhead.
l--&.The &ariable o&erhead spending &ariance for the period is
A. /9$688 !n"avora(#e C. 34"'<< unfa&orable 219
#. 31"2<< unfa&orable D. 34"<< unfa&orable
l--&i. The &ariable o&erhead efficiency &ariance 58uantity6 &ariance for the period is
A. 3"'<< unfa&orable C. /4$588 !n"avora(#e
#. 31"<< unfa&orable D. 34"<< unfa&orable
l--&ii. The fi-ed o&erhead budget 5spending6 &ariance for the period is A. 34"'<< unfa&orable C. 32"<< unfa&orable
#. 31"<< unfa&orable D. /4$888 !n"avora(#e
l--&iii. The fi-ed o&erhead &olume 5denominator6 &ariance for the period is
A. 3 7< unfa&orable C. 32"<< unfa&orable
B. /4$988 !n"avora(#e D. 31"<<< unfa&orable
Compre%ensve
l--i-. #ig /arat" :nc. began operations on Ianuary '. !tandard costs were established in early Ianuary assuming a normal production &olume of 14<"<<< units. Bowe&er" #ig /arat produced only 1,<"<<< units of product and sold 1<<"<<< units at a selling price of 319< per unit during the year. ?ariable costs totaled 37"<<<"<<<" of which 4<E were manufacturing and ,<E were selling. =i-ed costs totaled 311"2<<"<<<" of which <E were manufacturing and <E were selling. #ig /arat had no raw materials or work$in$process in&entories at December '1. Actual input prices and 8uantities per unit of product were e8ual to standard.
%sing absorption costing" #ig /aratGs income statement would show
A. #. C. D.
Cost of @oods !old at !tandard Cost 39"2<<"< << 37"2<<"< << /=$988$ 888 37"<<<"<< < 0&erhead ?olume ?ariance 39<<"<<<
% 39<<"<<< = /;88$88 8 3 37<<"<<< =
>!estons No. 8 t%ro!'% 9 are (ased on t%e "o##o*n' n"ormaton:
Fou ha&e recently graduated from a uni&ersity and ha&e accepted a
position with ?illar Company" the manufacturer of a popular consumer product. During your first week on the +ob" the &ice president has been fa&orably impressed with your work. !he has been so impressed" in fact" that yesterday she called you into her office and asked you to attend the e-ecuti&e committee meeting this morning for the purpose of leading a discussion on the &ariances reported for last period. An-ious to fa&orably impress the e-ecuti&e committee" you took the &ariances and supporting data home last night to study.
0n your way to work this morning" the papers were laying on the seat of your new" red con&ertible. As you were crossing a bridge on the highway" a sudden gust of wind caught the papers and blew them o&er the edge of the bridge and into the stream below. Fou managed to retrie&e only one page" which contains the following information
!tandard Cost !ummary
Direct materials" 4 pounds at 3' 319.< < Direct labor" <.9 hours at 3 ,.<< ?ariable o&erhead" <.9 hours at 3' 2.,< =i-ed o&erhead" <.9 hours at 37 .4< 3'<.< < Total !tandard Cost ? A : A C * ! * 3 0 T * D 3rice or ate !pendin g or #udget uantit y or *fficienc y ?olume Direct materials 3,<"<<< 34";< < = 3;"<<< % Direct labor ;<"<<< ,"9< % 7"<<< % ?ariable o&erhead ,"<<< 31"'<< = N =i-ed o&erhead 124"<<< << = 31,"<<<% Applied to Work in process during the period
