Quiz Standard Costing 2222012 Print

LCC B
ACCTG 8 QUIZ 2/22/12

Standard Costing and Variance Analysis
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1. Specifications for materials are compiled on a bill of materials.
2. An operations flow document shows all processes necessary to manufacture one unit of a product.
3. A standard cost card is prepared before developing manufacturing standards for direct materials, direct labor, and
factory overhead.
4. The total variance can provide useful information about the source of cost differences.
. The formula for price!rate variance is "A# $ S#% & S'
(. The price variance reflects the difference between the )uantity of inputs used and the standard )uantity allowed
for the output of a period.
*. The usage variance reflects the difference between the price paid for inputs and the standard price for those
inputs.
+. The formula for usage variance is "A' $ S'% , S#
-. The point of purchase model calculates the materials price variance using the )uantity of materials purchased.
1.. The difference between the actual wages paid to employees and the standard wages for all hours wor/ed is the
labor rate variance.
11. The difference between the standard hours wor/ed for a specific level of production and the actual hours wor/ed
is the labor rate variance.
12. A fle&ible budget is an effective tool for budgeting factory overhead.
TST II( C*+,LTI*-( Co&.lete t%e state&ent /y $illing t%e /lan0
1. The difference between total actual cost incurred and total standard cost applied is referred to as
000000000000000000000000000000.
2. The difference between what was paid for inputs and what should have been paid for inputs is referred to as a
00000000000000000000000000.
3. The difference between standard )uantity allowed and )uantity used for a unit of output is /nown as an
00000000000000000000000.
4. The difference between actual variable overhead and budgeted variable overhead based upon actual hours is
referred to as the 0000000000000000000000000000000000000.
. The difference between actual and budgeted fi&ed factory overhead is referred to as a
000000000000000000000000000000000.
(. 1hen multiple materials are used, the effect of substituting a non$standard mi& of materials during the production
process is referred to as a 000000000000000000000 variance.
24+
*. 1hen multiple labor categories are used, the financial effect of using a different mi& of wor/ers in a production
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1. A primary purpose of using a standard cost system is
a. to ma/e things easier for managers in the production facility.
b. to provide a distinct measure of cost control.
c. to minimi2e the cost per unit of production.
d. b and c are correct.
2. The standard cost card contains )uantities and costs for
a. direct material only.
b. direct labor only.
c. direct material and direct labor only.
d. direct material, direct labor, and overhead.
3. 1hich of the following statements regarding standard cost systems is tr2e3
a. 4avorable variances are not necessarily good variances.
b. 5anagers will investigate all variances from standard.
c. The production supervisor is generally responsible for material price variances.
d. Standard costs cannot be used for planning purposes since costs normally change in the
future.
4. 6n a standard cost system, 1or/ in #rocess 6nventory is ordinarily debited with
a. actual costs of material and labor and a predetermined overhead cost for overhead.
b. standard costs based on the level of input activity "such as direct labor hours wor/ed%.
c. standard costs based on production output.
d. actual costs of material, labor, and overhead.
. A standard cost system may be used in
a. 7ob order costing, but not process costing.
b. process costing, but not 7ob order costing.
c. either 7ob order costing or process costing.
d. neither 7ob order costing nor process costing.
(. Standard costs may be used for
a. product costing.
b. planning.
c. controlling.
d. all of the above.
*. A purpose of standard costing is to
a. replace budgets and budgeting.
b. simplify costing procedures.
c. eliminate the need for actual costing for e&ternal reporting purposes.
d. eliminate the need to account for year$end under$applied or over$applied manufacturing
overhead.
+. Standard costs
a. are estimates of costs attainable only under the most ideal conditions.
b. are difficult to use with a process costing system.
c. can, if properly used, help motivate employees.
d. re)uire that significant unfavorable variances be investigated, but do not re)uire that
significant favorable variances be investigated.
-. A bill of material does not include
a. )uantity of component inputs.
b. price of component inputs.
c. )uality of component inputs.
d. type of product output.
1.. An operations flow document
24-
a. trac/s the cost and )uantity of material through an operation.
b. trac/s the networ/ of control points from receipt of a customer8s order through the delivery
of the finished product.
c. specifies tas/s to ma/e a unit and the times allowed for each tas/.
d. charts the shortest path by which to arrange machines for completing products.
11. A total variance is best defined as the difference between total
a. actual cost and total cost applied for the standard output of the period.
b. standard cost and total cost applied to production.
c. actual cost and total standard cost of the actual input of the period.
d. actual cost and total cost applied for the actual output of the period.
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3 efficiency variance
4 variable overhead spending variance.
fi&ed overhead spending variance
( material mi&
*. labor mi&
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3 A
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2.
referred to as the variable overhead spending variance.
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referred to as the variable overhead efficiency variance.
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2. The difference between budgeted variable overhead for actual hours and standard overhead is the variable
overhead efficiency variance.
2(. The difference between budgeted variable overhead for actual hours and standard overhead is the variable
overhead spending variance.
2*. The difference between actual and budgeted fi&ed factory overhead is referred to as a fi&ed overhead spending
variance.
2+. The difference between actual and budgeted fi&ed factory overhead is referred to as a fi&ed overhead volume
variance.
2-. The difference between budgeted and applied fi&ed factory overhead is referred to as a fi&ed overhead volume
variance.
3.. A fi&ed overhead volume variance is a controllable variance.
31. A fi&ed overhead volume variance is a noncontrollable variance.
32. A one$variance approach calculates only a total overhead variance
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33. A budget variance is a controllable variance.
21
34. An overhead efficiency variance is related entirely to variable overhead
3. 5anagers have no ability to control the budget variance,
3(. Dnfavorable variances are represented by debit balances in the overhead account.
3*. Dnfavorable variances are represented by credit balances in the overhead account.
3+. 4avorable variances are represented by credit balances in the overhead account.
3-. 4avorable variances are represented by debit balances in the overhead account.
4.. 4avorable variances are always desirable for production.
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41. 9&pected standards are a valuable tool for motivation and control.
42. #ractical standards are the most effective standards for controlling and motivating wor/ers.
43. 6deal standards are an effective means of controlling variances and motivating wor/ers.
44. 6deal standards do not allow for normal operating delays or human limitations.
4. 9&pected standards generally yield unfavorable variances
4(. 9&pected standards generally yield favorable variances
4*. 6deal standards generally yield favorable variances
4+. 6deal standards generally yield unfavorable variances
4-. Total )uality management "T'5% and 7ust$in$time "C6T% production systems are based on the premise of ideal
production standards.
22
.. 6n a totally automated organi2ation, using theoretical capacity will generally provide the lowest fi&ed overhead
application rate.
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1. 6n a totally automated organi2ation, using theoretical capacity will generally provide the highest fi&ed overhead
application rate.
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2. A conversion variance combines labor and overhead variances.
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3. The effect of substituting a non$standard mi& of materials during the production process is referred to as a
material mi& variance.
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4. The effect of substituting a non$standard mi& of materials during the production process is referred to as a
material yield variance.
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. 1hen multiple labor categories are used, the financial effect of using a different mi& of wor/ers in a production
process is referred to as a labor mi& variance.
(. 1hen multiple labor categories are used, the financial effect of using a different mi& of wor/ers in a production
process is referred to as a labor yield variance.
*. 1hen multiple labor categories are used, the monetary impact of using a higher or lower number of hours than a
standard allows is referred to as a labor mi& variance.
+. 1hen multiple labor categories are used, the monetary impact of using a higher or lower number of hours than a
standard allows is referred to as a labor yield variance.
C*+,LTI*-
1. The difference between total actual cost incurred and total standard cost applied is referred to as
000000000000000000000000000000.
A>SB total variance
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2. The two components of total material!labor variance are 00000000000000000000 and 00000000000000000
A>SB price!rate varianceE )uantity!efficiency variance
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3. The difference between what was paid for inputs and what should have been paid for inputs is referred to as a
00000000000000000000000000.
A>SB price variance
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23
4. The difference between standard )uantity allowed and )uantity used for a unit of output is /nown as an
00000000000000000000000.
A>SB
efficiency variance
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. The difference between actual variable overhead and budgeted variable overhead based upon actual hours is
referred to as the 0000000000000000000000000000000000000.
A>SB variable overhead spending variance.
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(. The difference between budgeted variable overhead for actual hours and standard overhead is the
00000000000000000000000000000000000.
A>SB variable overhead efficiency variance.
24
*. The difference between actual and budgeted fi&ed factory overhead is referred to as a
000000000000000000000000000000000.
A>SB fi&ed overhead spending variance.
+. The difference between budgeted and applied fi&ed factory overhead is referred to as a
000000000000000000000000000.
A>SB fi&ed overhead volume variance.
-. Standards that provide for no human limitations or operating delays are referred to as 00000000000000000.
A>SB ideal standards
1.. Standards that are attainable with reasonable effort are referred to as 00000000000000000000000000000.
A>SB practical standards
11. Standards that reflect what is e&pected to occur are referred to as 0000000000000000000000000000.
A>SB e&pected standards
12. Standards that allow for waste and inefficiency are referred to as 0000000000000000000000000000.
A>SB practical standards
13. 1hen multiple materials are used, the effect of substituting a non$standard mi& of materials during the production
A>SB material mi&
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2
14. 1hen multiple materials are used, the difference between the total )uantity and the standard )uantity of output
when a nonstandard mi& of materials is used is /nown as the 00000000000000000000000000
variance.
A>SB material yield
1. 1hen multiple labor categories are used, the financial effect of using a different mi& of wor/ers in a production
A>SB labor mi&
1(. 1hen multiple labor categories are used, the monetary impact of using a higher or lower number of hours than a
standard allows is referred to as a 000000000000000000000000 variance.
A>SB labor yield
+ULTI,L C1*IC
1. A primary purpose of using a standard cost system is
a. to ma/e things easier for managers in the production facility.
b. to provide a distinct measure of cost control.
c. to minimi2e the cost per unit of production.
d. b and c are correct.
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2. The standard cost card contains )uantities and costs for
a. direct material only.
b. direct labor only.
c. direct material and direct labor only.
d. direct material, direct labor, and overhead.
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3. 1hich of the following statements regarding standard cost systems is tr2e3
a. 4avorable variances are not necessarily good variances.
b. 5anagers will investigate all variances from standard.
c. The production supervisor is generally responsible for material price variances.
d. Standard costs cannot be used for planning purposes since costs normally change in the
future.
2(
4. 6n a standard cost system, 1or/ in #rocess 6nventory is ordinarily debited with
a. actual costs of material and labor and a predetermined overhead cost for overhead.
b. standard costs based on the level of input activity "such as direct labor hours wor/ed%.
c. standard costs based on production output.
d. actual costs of material, labor, and overhead.
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. A standard cost system may be used in
a. 7ob order costing, but not process costing.
b. process costing, but not 7ob order costing.
c. either 7ob order costing or process costing.
d. neither 7ob order costing nor process costing.
(. Standard costs may be used for
a. product costing.
b. planning.
c. controlling.
d. all of the above.
*. A purpose of standard costing is to
a. replace budgets and budgeting.
b. simplify costing procedures.
c. eliminate the need for actual costing for e&ternal reporting purposes.
d. eliminate the need to account for year$end underapplied or overapplied manufacturing
overhead.
+. Standard costs
a. are estimates of costs attainable only under the most ideal conditions.
b. are difficult to use with a process costing system.
c. can, if properly used, help motivate employees.
d. re)uire that significant unfavorable variances be investigated, but do not re)uire that
significant favorable variances be investigated.
-. A bill of material does not include
a. )uantity of component inputs.
b. price of component inputs.
c. )uality of component inputs.
d. type of product output.
2*
1.. An operations flow document
a. trac/s the cost and )uantity of material through an operation.
b. trac/s the networ/ of control points from receipt of a customer8s order through the delivery
of the finished product.
c. specifies tas/s to ma/e a unit and the times allowed for each tas/.
d. charts the shortest path by which to arrange machines for completing products.
A>SB ? A64B 5oderate :@CB *$2
11. A total variance is best defined as the difference between total
a. actual cost and total cost applied for the standard output of the period.
b. standard cost and total cost applied to production.
c. actual cost and total standard cost of the actual input of the period.
d. actual cost and total cost applied for the actual output of the period.
12. The term standard hours allowed measures
a. budgeted output at actual hours.
b. budgeted output at standard hours.
c. actual output at standard hours.
d. actual output at actual hours.
13. A large labor efficiency variance is prorated to which of the following at year$end3
16# 4F
?ost of Foods Sold 6nventory 6nventory
a.
no no no
b.
no yes yes
c.
yes no no
d.
yes yes yes
14. 1hich of the following factors should not be considered when deciding whether to investigate a variance3
a. magnitude of the variance
b. trend of the variances over time
c. li/elihood that an investigation will reduce or eliminate future occurrences of the variance
d. whether the variance is favorable or unfavorable
1. At the end of a period, a significant material )uantity variance should be
a. closed to ?ost of Foods Sold.
b. allocated among =aw 5aterial, 1or/ in #rocess, 4inished Foods, and ?ost of Foods
Sold.
c. allocated among 1or/ in #rocess, 4inished Foods, and ?ost of Foods Sold.
d. carried forward as a balance sheet account to the ne&t period.
1(. 1hen computing variances from standard costs, the difference between actual and standard price multiplied by
actual )uantity used yields a
a. combined price$)uantity variance.
b. price variance.
c. )uantity variance.
d. mi& variance.
1*. A company wishing to isolate variances at the point closest to the point of responsibility will determine its
material price variance when
a. material is purchased.
b. material is issued to production.
2+
c. material is used in production.
d. production is completed.
1+. The material price variance "computed at point of purchase% is
a. the difference between the actual cost of material purchased and the standard cost of
material purchased.
b. the difference between the actual cost of material purchased and the standard cost of
material used.
c. primarily the responsibility of the production manager.
d. both a and c.
1-. The sum of the material price variance "calculated at point of purchase% and material )uantity variance e)uals
a. the total cost variance.
b. the material mi& variance.
c. the material yield variance.
d. no meaningful number.
2.. A company would most li/ely have an unfavorable labor rate variance and a favorable labor efficiency variance if
a. the mi& of wor/ers used in the production process was more e&perienced than the normal
mi&.
b. the mi& of wor/ers used in the production process was less e&perienced than the normal
mi&.
c. wor/ers from another part of the plant were used due to an e&tra heavy production
schedule.
d. the purchasing agent ac)uired very high )uality material that resulted in less spoilage.
2-
21. 6f actual direct labor hours "A;Gs% are less than standard direct labor hours allowed and overhead is applied on a
A;G basis, a"n%
a. favorable variable overhead spending variance e&ists.
b. favorable variable overhead efficiency variance e&ists.
c. favorable volume variance e&ists.
d. unfavorable volume variance e&ists.
22. 6f all sub$variances are calculated for labor, which of the following cannot be determined3
a. labor rate variance
b. actual hours of labor used
c. reason for the labor variances
d. efficiency of the labor force
23. The total labor variance can be subdivided into all of the following e3ce.t
a. rate variance.
b. yield variance.
c. learning curve variance.
d. mi& variance.
24. The standard predominantly used in 1estern cultures for motivational purposes is a"n% 000000000000000000000
standard.
a. e&pected annual
b. ideal
c. practical
d. theoretical
2. 1hich of the following standards can commonly be reached or slightly e&ceeded by wor/ers in a motivated wor/
environment3
6deal #ractical 9&pected annual
a.
no no no
b.
no yes yes
c.
yes yes no
d.
no yes no
2(.
2(. 5anagement would generally e&pect unfavorable variances if standards were based on which of the following
capacity measures3
6deal #ractical 9&pected annual
a.
yes no no
b.
no no yes
c.
no yes yes
d.
no no no
2*. 1hich of the following capacity levels has traditionally been used to compute the fi&ed overhead application rate3
a. e&pected annual
b. normal
c. theoretical
d. prior year
2+. A company has a favorable variable overhead spending variance, an unfavorable variable overhead efficiency
variance, and underapplied variable overhead at the end of a period. The 7ournal entry to record these variances
and close the variable overhead control account will show which of the following3
<:G spending
variance
<:G efficiency
variance <5:G
a.
debit credit credit
b.
credit debit credit
c.
debit credit debit
d.
credit debit debit
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2-. Fallagher ?orporation. incurred 2,3.. direct labor hours to produce (.. units of product. 9ach unit should ta/e 4
direct labor hours. Fallagher ?orporation applies variable overhead to production on a direct labor hour basis. The
variable overhead efficiency variance
a. will be unfavorable.
b. will be favorable.
c. will depend upon the capacity measure selected to assign overhead to production.
d. is impossible to determine without additional information.
2(1
3.. A variable overhead spending variance is caused by
a. using more or fewer actual hours than the standard hours allowed for the production
achieved.
b. paying a higher!lower average actual overhead price per unit of the activity base than the
standard price allowed per unit of the activity base.
c. larger!smaller waste and shrin/age associated with the resources involved than e&pected.
d. both b and c are causes.
A>SB A A64B 5oderate :@CB *$3
31. 1hich of the following are considered controllable variances3
<:G spending Total overhead budget <olume
a.
yes yes yes
b.
no no yes
c.
no yes no
d.
yes yes no
32. A company may set predetermined overhead rates based on normal, e&pected annual, or theoretical capacity. At
the end of a period, the fi&ed overhead spending variance would
a. be the same regardless of the capacity level selected.
b. be the largest if theoretical capacity had been selected.
c. be the smallest if theoretical capacity had been selected.
d. not occur if actual capacity were the same as the capacity level selected.
33. The variance least significant for purposes of controlling costs is the
a. material )uantity variance.
b. variable overhead efficiency variance.
c. fi&ed overhead spending variance.
d. fi&ed overhead volume variance.
34. 4i&ed overhead costs are
a. best controlled on a unit$by$unit basis of products produced.
b. mostly incurred to provide the capacity to produce and are best controlled on a total basis
at the time they are originally negotiated.
c. constant on a per$unit basis at all different activity levels within the relevant range.
d. best controlled as to spending during the production process.
3. The variance &ost useful in evaluating plant utili2ation is the
a. variable overhead spending variance.
b. fi&ed overhead spending variance.
c. variable overhead efficiency variance.
d. fi&ed overhead volume variance.
3(. A favorable fi&ed overhead volume variance occurs if
a. there is a favorable labor efficiency variance.
b. there is a favorable labor rate variance.
c. production is less than planned.
d. production is greater than planned.
3*. The fi&ed overhead application rate is a function of a predetermined activity level. 6f standard hours allowed for
good output e)ual the predetermined activity level for a given period, the volume variance will be
a. 2ero.
b. favorable.
c. unfavorable.
2(2
d. either favorable or unfavorable, depending on the budgeted overhead.
3+. Actual fi&ed overhead minus budgeted fi&ed overhead e)uals the
a. fi&ed overhead volume variance.
b. fi&ed overhead spending variance.
c. noncontrollable variance.
d. controllable variance.
3-. Total actual overhead minus total budgeted overhead at the actual input production level e)uals the
a. variable overhead spending variance.
b. total overhead efficiency variance.
c. total overhead spending variance.
d. total overhead volume variance.
4.. A favorable fi&ed overhead spending variance indicates that
a. budgeted fi&ed overhead is less than actual fi&ed overhead.
b. budgeted fi&ed overhead is greater than applied fi&ed overhead.
c. applied fi&ed overhead is greater than budgeted fi&ed overhead.
d. actual fi&ed overhead is less than budgeted fi&ed overhead.
41. An unfavorable fi&ed overhead volume variance is most often caused by
a. actual fi&ed overhead incurred e&ceeding budgeted fi&ed overhead.
b. an over$application of fi&ed overhead to production.
c. an increase in the level of the finished inventory.
d. normal capacity e&ceeding actual production levels.
2(3
42. 6n a standard cost system, when production is greater than the estimated unit or denominator level of activity,
there will be a"n%
a. unfavorable capacity variance.
b. favorable material and labor usage variance.
c. favorable volume variance.
d. unfavorable manufacturing overhead variance.
43. 6n analy2ing manufacturing overhead variances, the volume variance is the difference between the
a. amount shown in the fle&ible budget and the amount shown in the debit side of the
overhead control account.
b. predetermined overhead application rate and the fle&ible budget application rate times
actual hours wor/ed.
c. budget allowance based on standard hours allowed for actual production for the period and
the amount budgeted to be applied during the period.
d. actual amount spent for overhead items during the period and the overhead amount
applied to production during the period.
44. <ariance analysis for overhead normally focuses on
a. efficiency variances for machinery and indirect production costs.
b. volume variances for fi&ed overhead costs.
c. the controllable variance as a lump$sum amount.
d. the difference between budgeted and applied variable overhead.
4. The efficiency variance computed on a three$variance approach is
a. e)ual to the variable overhead efficiency variance computed on the four$variance
approach.
b. e)ual to the variable overhead spending variance plus the variable overhead efficiency
variance computed on the four$variance approach.
c. computed as the difference between applied variable overhead and actual variable
overhead.
d. computed as actual variable overhead minus the fle&ible budget for variable overhead
based on actual hours wor/ed.
4(. The use of separate variable and fi&ed overhead rates is better than a combined rate because such a system
a. is less e&pensive to operate and maintain.
b. does not result in underapplied or overapplied overhead.
c. is more effective in assigning overhead costs to products.
d. is easier to develop.
2(4
4*. Dnder the two$variance approach, the volume variance is computed by subtracting 000000000 based on standard
input allowed for the production achieved from budgeted overhead.
a. applied overhead
b. actual overhead
c. budgeted fi&ed overhead plus actual variable overhead
d. budgeted variable overhead
4+. The overhead variance calculated as total budgeted overhead at the actual input production level minus total
budgeted overhead at the standard hours allowed for actual output is the
a. efficiency variance.
b. spending variance.
c. volume variance.
d. budget variance.
4-. Analy2ing overhead variances will not help in
a. controlling costs.
b. evaluating performance.
c. determining why variances occurred.
d. planning costs for future production cycles.
.. 6n a 7ust$in$time inventory system,
a. practical standards become ideal standards.
b. ideal standards become e&pected standards.
c. variances will not occur because of the 2ero$defects basis of C6T.
d. standard costing cannot be used.
1. A company using very tight "high% standards in a standard cost system should e&pect that
a. no incentive bonus will be paid.
b. most variances will be unfavorable.
c. employees will be strongly motivated to attain the standards.
d. costs will be controlled better than if lower standards were used.
2(
+arley Co&.any
The following Culy information is for 5arley ?ompanyB
Standards4
5aterial 3.. feet per unit H I4.2. per foot
;abor 2. hours per unit H I*.. per hour
Act2al4
#roduction 2,*. units produced during the month
5aterial +,*.. feet usedE -,... feet purchased H I4.. per foot
;abor *,... direct labor hours H I*.-. per hour
"=ound all answers to the nearest dollar.%
2. =efer to 5arley ?ompany. 1hat is the material price variance "calculated at point of purchase%3
a. I2,*.. D
b. I2,*.. 4
c. I2,(1. 4
d. I2,(1. D
A>SB A
5aterial #rice <ariance J "A# $ S#% , A'
J "I4.. $ I4.2.% , -,... feet purchased
J I2,*.. D
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3. =efer to 5arley ?ompany. 1hat is the material )uantity variance3
a. I3,1. 4
b. I1,.. 4
c. I3,1. D
d. I1,+-. D
A>SB A
5aterial 'uantity <ariance J "A' $ S'% , S#
J "+,*.. $ "2,*. , 3%% , I4.2.
J I1,+-. D
2((
4. =efer to 5arley ?ompany. 1hat is the labor rate variance3
a. I3,4+. D
b. I3,4+. 4
c. I2,+.. D
d. I2,+.. 4
A>SB ?
;abor =ate <ariance J "A# $ S#% , A'
J "I*.-. $ I*..% , *,... hr used
J I2,+.. D
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. =efer to 5arley ?ompany. 1hat is the labor efficiency variance3
a. I1,+* D
b. I-3+ D
c. I1,+* D
d. I1,12 D
A>SB @
;abor 9fficiency <ariance J "A' $ S'% , S#
J "*,... hr $ "2. hr!unit , 2,*. units%% , I*..
J I-3+ D "rounded%
+cCoy Co&.any
5c?oy ?ompany has the following information available for :ctober when 3,.. units were produced "round
answers to the nearest dollar%.
Standards4
5aterial 3. pounds per unit H I4.. per pound
;abor .. hours per unit H I1..2 per hour
Act2al4
5aterial purchased 12,3.. pounds H I4.2
5aterial used 11,*. pounds
1*,3.. direct labor hours H I1..2. per hour
(. =efer to 5c?oy ?ompany. 1hat is the labor rate variance3
a. I+* 4
b. I+( 4
c. I+( D
d. I+* D
A>SB @
J "I1..2. $ I1..2% , 1*,3.. hrs.
J I+( 4
A64B 9asy :@CB *$3
*. =efer to 5c?oy ?ompany. 1hat is the labor efficiency variance3
a. I2,.. 4
b. I2,.. D
c. I2,.4. D
d. I2,.4. 4
A>SB A
;abor efficiency variance J "A' $ S'%, S#
J"1*,3.. hrs $"3,.. units , .. hr!unit%% , I1..2!hr
J I2,.. 4
A64B 9asy :@CB *$3
2(*
+. =efer to 5c?oy ?ompany. 1hat is the material price variance "based on )uantity purchased%3
a. I3,.* D
b. I2,-3+ D
c. I2,-3+ 4
d. I3,.* 4
A>SB A
5aterial price variance J "A# $ S#% , A'
J "I4.2 $ I4..% , 12,3..
J I3,.* 4
A64B 9asy :@CB *$3
-. =efer to 5c?oy ?ompany. 1hat is the material )uantity variance3
a. I2,2. 4
b. I2,2. D
c. I22 4
d. I2,4* D
A>SB A
5aterial )uantity variance J "A' $ S'% , S#
J "11,*. $ "3,.. units , 3. hr!unit%% , I4.2
J I2,2. 4
A64B 9asy :@CB *$3
(.. =efer to 5c?oy ?ompany. Assume that the company computes the material price variance on the basis of
material issued to production. 1hat is the total material variance3
a. I2,+. D
b. I,1++ D
c. I,1++ 4
d. I2,+. 4
A>SB ?
Total <ariance J "11,*. , I4.2% $ "3,.. , 3. , I4..%
J I4-,-3*... $ I,12...
J I1++ 4
Scott +an2$act2ring
The following 5arch information is available for Scott 5anufacturing ?ompany when it produced 2,1.. unitsB
Standard4
5aterial 2 pounds per unit H I.+. per pound
;abor 3 direct labor hours per unit H I1.... per hour
Act2al4
5aterial 4,2. pounds purchased and used H I.( per pound
;abor (,3.. direct labor hours at I-.* per hour
(1. =efer to Scott 5anufacturing. 1hat is the material price variance3
a. I(3*.. D
b. I(3*.. 4
c. I(3.... D
d. I(3.... 4
A>SB @
5aterial price variance J "A# $ S#% , A'
J "I.( $ I.+.% , 4,2. lbs
J I(3*.. 4
A64B 9asy :@CB *$3
(2. =efer to Scott 5anufacturing. 1hat is the material )uantity variance3
2(+
a. I2* 4
b. I2-. 4
c. I2-. D
d. I2* D
A>SB ?
5aterial )uantity variance J "A' $ S'% , S#
J "4,2. $ "2 lbs!unit , 2,1.. units%%, I.+.!unit
J I2-. D
A64B 9asy :@CB *$3
(3. =efer to Scott 5anufacturing. 1hat is the labor rate variance3
a. I1,* D
b. I1,* 4
c. I1,-4 D
d. I.
A>SB @
J"I-.* $ I1....% , (,3.. hrs
J I1,* 4
A64B 9asy :@CB *$3
2(-
(4. =efer to Scott 5anufacturing. 1hat is the labor efficiency variance3
a. I*31.2 4
b. I*31.2 D
c. I*.... 4
d. none of the answers are correct
A>SB A
;abor efficiency variance J "A' $ S'% , S#
J "(,3.. $ "2,1.. units , 3 hrs!unit% , I1....
J I.
A64B 9asy :@CB *$3
"orrest Co&.any
4orrest ?ompany uses a standard cost system for its production process and applies overhead based on direct
labor hours. The following information is available for August when 4orrest made 4,.. unitsB
Standard4
A;G per unit
2.50
<ariable overhead per A;G
$1.75
4i&ed overhead per A;G
$3.10
@udgeted variable overhead
$21,875
@udgeted fi&ed overhead
$38,750
Act2al4
Airect labor hours
10,000
<ariable overhead
$26,250
4i&ed overhead
$38,000
(. =efer to 4orrest ?ompany. Dsing the one$variance approach, what is the total overhead variance3
a. I(,.(2.. D
b. I3,(2... D
c. I-,(+*.. D
d. I(,(2.. D
A>SB ?
Total <ariance J Actual :verhead $ Applied :verhead
J I"2(,2. K 3+,...% $ "I"1.* K 3.1.% , 2.. hrs!unit , 4,.. units%
J I(4,2.... $ I4,4(2..
J I-,(+*..D
A64B 9asy :@CB *$3
2*.
((. =efer to 4orrest ?ompany. Dsing the two$variance approach, what is the controllable variance3
a. I,+12.. D
b. I,+12.. 4
c. I4,3*... D
d. I4,3*... 4
A>SB A
?ontrollable <ariance J Actual :verhead $ @udgeted :verhead @ased on Standard 'uantity
J I(4,2.... $ I""4,.. units , 2. A;G!unit , I1.*% K 3+,*.%
J I"(4,2. $ I+,43*..%
J I,+12.. D
A64B 9asy :@CB *$3
(*. =efer to 4orrest ?ompany. Dsing the two$variance approach, what is the noncontrollable variance3
a. I3,12... 4
b. I3,+*... D
c. I3,+*... 4
d. I(,.(2.. D
A>SB @
Dncontrollable <ariance J @udgeted :verhead @ased on S' $ Applied :verhead
J I"+,43*.. $ 4,(2..%
J I3,+*... D
A64B 9asy :@CB *$3
(+. =efer to 4orrest ?ompany. Dsing the three$variance approach, what is the spending variance3
a. I4,3* D
b. I3,(2 4
c. I+,... D
d. I1,*. D
A>SB ?
:G Spending <ariance J Actual :G $ @udgeted :G based upon 6nputs Dsed
J I(4,2. $ ""1.,... hrs , I1.*% K I3+,*.%
J I"(4,2. $ (,2.%
J I+,...... D
2*1
(-. =efer to 4orrest ?ompany. Dsing the three$variance approach, what is the efficiency variance3
a. I-,-3*.. 4
b. I2,1+*.. 4
c. I2,1+*.. D
d. I2,-3*.. 4
A>SB @
:G 9fficiency <ariance J @udgeted :G based on Actual $ @udgeted :G based on Standard
J ""1.,... , I1.*%K I3+,*.% $ ""4,.. , 2.. , I1.*% K I3+,*.%
J I"(,2.... $ +,43*..%
J I2,1+*.. 4
*.. =efer to 4orrest ?ompany. Dsing the three$variance approach, what is the volume variance3
a. I3,12... 4
b. I3,+*... 4
c. I3,+*... D
d. I(,.(2.. D
A>SB ?
<olume <ariance J @udget @ased on Standard 'uantity $ :verhead Applied
J I"+,43*.. $ 4,(2...%
J I3,+*... D
*1. =efer to 4orrest ?ompany. Dsing the four$variance approach, what is the variable overhead spending variance3
a. I4,3*... D
b. I4,3*... 4
c. I+,*.... D
d. I(,(2.. D
A>SB ?
<ariable :verhead Spending <ariance J Actual <:G $ @udgeted <:G!Actual 'uantity
J I2(,2.... $ "1.,... , I1.*!<:G hr%
J I"2(,2.... $ 1*,.....%
J I+,*.... D
2*2
*2. =efer to 4orrest ?ompany. Dsing the four$variance approach, what is the variable overhead efficiency variance3
a. I2,1+*.. D
b. I-,-3*.. 4
c. I2,1+*.. 4
d. I2,-3*.. 4
A>SB ?
<:G 9fficiency <ariance J @udgeted <:G based on Actual $ @udgeted <:G!Standard 'ty
J ""1.,... , I1.*!hr% $ ""4,.. , 2..hrs!unit , I1.*!hr%%
J I"1*,..... $ 1-,(+*..%
J I2,1+*.. 4
*3. =efer to 4orrest ?ompany. Dsing the four$variance approach, what is the fi&ed overhead spending variance3
a. I*,... D
b. I3,12 4
c. I*. D
d. I*. 4
A>SB A
4i&ed :G Spending <ariance J Actual 4i&ed :G $ Applied 4i&ed :G
J I"3+,... $ 3+,*.%
J I*. 4
A64B 9asy :@CB *$3
*4. =efer to 4orrest ?ompany. Dsing the four$variance approach, what is the volume variance3
a. I3,12 4
b. I3,+* 4
c. I(,.(3 D
d. I3,+* D
A>SB A
<olume <ariance J @udget @ased on Standard 'uantity $ :verhead Applied
J I"+,43*.. $ 4,(2...%
J I3,+*... D
2*3
!ain/o' Co&.any
=ainbow ?ompany uses a standard cost system for its production process. =ainbow ?ompany applies overhead
based on direct labor hours. The following information is available for CulyB
Standard4
Airect labor hours per unit
2.20
<ariable overhead per hour
$2.50
4i&ed overhead per hour
"based on 11,--. A;Gs%
$3.00
Act2al4
Dnits produced
4,400
Airect labor hours
8,800
<ariable overhead
$29,950
4i&ed overhead
$42,300
*. =efer to =ainbow ?ompany Dsing the four$variance approach, what is the variable overhead spending variance3
a. I*,-. D
b. I2 4
c. I*,-* D
d. I1.,-. D
A>SB A
<ariable :G Spending <ariance J Actual <:G $ @udgeted <:G!Actual
J I"2-,-. $ 22,...%
J I*,-.
*(. =efer to =ainbow ?ompany Dsing the four$variance approach, what is the variable overhead efficiency variance3
a. I-,*. 4
b. I-,*. D
c. I2,2.. 4
d. I2,2.. D
A>SB ?
<:G 9fficiency <ariance J @udgeted :G!Actual $ @udgeted :G!Standard
J "+,+.. A;G , I2..!A;G% $ "44.. units,2.2. A;G!unit , I2..%
J I"22,... $ 24,2..%
J I2,2.. 4
2*4
**. =efer to =ainbow ?ompany Dsing the four$variance approach, what is the fi&ed overhead spending variance3
a. I1,-.. D
b. I(,33. D
c. I(,-3. D
d. I-3 4
A>SB @
4i&ed :G Spending <ariance J Actual :G $ Standard 4i&ed :G
J I42,3.. $ "11,--. A;GLs , I3...!A;G%
J I"42,3.. $ 3,-*.%
J I(,33. D
*+. =efer to =ainbow ?ompany Dsing the four$variance approach, what is the volume variance3
a. I(,-3. D
b. I13,2(. D
c. I.
d. I2,(4. 4
A>SB A
<olume <ariance J @udgeted :G!Standard 'uantity $ Standard :verhead Applied
J" 4,4.. units , I2..!hr,2.2. hrs!unit K I3,-*.%$ "4,4.. units,I..!hr,2.2. A;G!unit%
J I(.,1*. $ I3,24.
J I(,-3. D
*-. =efer to =ainbow ?ompany Dsing the three$variance approach, what is the spending variance3
a. I23,+. D
b. I23,+. 4
c. I14,2+. 4
d. I14,2+. D
A>SB A
Spending <ariance J Actual :verhead $ @udget :G!Actual Dse
J I*2,2. $ ""+,+.. hrs , I2..!hr% K I3,-*.%
J I"*2,2. $ *,-*.%
J I14,2+. D
2*
+.. =efer to =ainbow ?ompany Dsing the three$variance approach, what is the efficiency variance3
a. I11,**. 4
b. I2,2.. 4
c. I*,-* D
d. I,** D
A>SB @
9fficiency <ariance J @udget :G!Actual Dse $ @udgeted :G!Standard 'uantity $ Standard
:verhead Applied
J ""+,+.. hrs , I2..!hr% K I3,-*.%$" 4,4.. units , I2..!hr,2.2. hrs!unit K I3,-*.%
J I"*,-*. $ (.,1*.%
J I2,2.. 4
+1. =efer to =ainbow ?ompany Dsing the three$variance approach, what is the volume variance3
a. I13,2(. D
b. I2,(4. 4
c. I(,-3. D
d. I.
A>SB ?
<olume <ariance J @udgeted :G!Standard 'uantity $ Standard :verhead Applied
J I(.,1*. $ I3,24.
J I(,-3. D
+2. =efer to =ainbow ?ompany Dsing the two$variance approach, what is the controllable variance3
a. I21,(. D
b. I1(,4+. D
c. I,** D
d. I12,.+. D
A>SB A
?ontrollable <ariance J Actual :verhead $ @udgeted :verhead @ased on Standard 'uantity
J I*2,2.... $ " 4,4.. units , I2..!hr,2.2. hrs!unit K I3,-*.%
J I"*2,2.$ (.,1*.%
J I12,.+. D
2*(
+3. =efer to =ainbow ?ompany Dsing the two$variance approach, what is the noncontrollable variance3
a. I2(,.4. 4
b. I.
c. I(,-3. D
d. I13,2(. D
A>SB ?
>oncontrollable <ariance J @udgeted :G!Standard 'uantity $ Standard :verhead Applied
J I(.,1*. $ I3,24.
J I(,-3. D
+4. =efer to =ainbow ?ompany Dsing the one$variance approach, what is the total variance3
a. I1-,.1. D
b. I(,3. D
c. I12,*. D
d. I4,*3. D
A>SB A

Total <ariance J Actual :verhead $ Applied :verhead
JI*2,2. $ "4,4.. , 2.2. ,"I2.. K I3...%%
JI*2,2. $ I3,24.
JI1-,.1. D
+. Actual fi&ed overhead is I33,3.. "12,... machine hours% and fi&ed overhead was estimated at I34,... when the
predetermined rate of I3... per machine hour was set. 6f 11,.. standard hours were allowed for actual
production, applied fi&ed overhead is
a. I33,3...
b. I34,....
c. I34,...
d. not determinable without /nowing the actual number of units produced.
A>SB ?
11,.. hrs. , I3...!hr. J I34,..
A64B 9asy :@CB *$3
2**
+(. :ne unit re)uires 2 direct labor hours to produce. Standard variable overhead per unit is I1.2 and standard fi&ed
overhead per unit is I1.*. 6f 33. units were produced this month, what total amount of overhead is applied to the
units produced3
a. I--.
b. I1,-+.
c. I((.
d. cannot be determined without /nowing the actual hours wor/ed
A>SB A
33. units , "I1.2 K I1.*% J I--.
A64B 9asy :@CB *$3
+*. 1estern ?ompany uses a standard cost accounting system. The following overhead costs and production data are
available for AugustB
Standard fi&ed :G rate per A;G
$1
Standard variable :G rate per A;G
$4
@udgeted monthly A;Gs
40,000
Actual A;Gs wor/ed
39,500
Standard A;Gs allowed for actual production
39,000
:verall :G variance$favorable
$2,000
The total applied manufacturing overhead for August should be
a. I1-,....
b. I1-*,....
c. I1-*,...
d. I1--,...
A>SB A
3-,... A; hrs , I...!hr J I1-,...
A64B 9asy :@CB *$3
2*+
++. #aramount ?ompany uses a standard cost system and prepared the following budget at normal capacity for
CanuaryB
Airect labor hours
24,000
<ariable :G
$48,000
4i&ed :G
$108,000
Total :G per A;G
$6.50
Act2al data $or 5an2ary 'ere as $ollo's4
Airect labor hours wor/ed
22,000
Total :G
$147,000
Standard A;Gs allowed for capacity attained
21,000
Dsing the two$way analysis of overhead variances, what is the controllable variance for Canuary3
a. I3,... 4
b. I,... 4
c. I-,... 4
d. I1.,.. D
A>SB A
?ontrollable <ariance J Actual :verhead $ @udget @ased on S' for Actual :utput
J I14*,... $ ""21,... , I2...!hr% K I1.+,...%
J I"14*,... $ 1.,...%
J I3,... 4
+-. The following information is available from the 4it2gerald ?ompanyB
Actual :G
$15,000
4i&ed :G e&penses, actual
$7,200
4i&ed :G e&penses, budgeted
$7,000
Actual hours
3,500
Standard hours
3,800
<ariable :G rate per A;G
$2.50
Assuming that 4it2gerald uses a three$way analysis of overhead variances, what is the overhead spending
variance3
a. I*. 4
b. I*. D
c. I-. 4
d. I1,.. D
A>SB A
Spending <ariance J Actual :verhead $ @udgeted :verhead!Actual Gours
J I1,... $ ""3,.. , I2..% K I*,...%
J I"1,... $ 1,*.%
J I*. 4
2*-
-.. Gagman ?ompany uses a two$way analysis of overhead variances. Selected data for the April production activity
are as followsB
Actual variable :G incurred
$196,000
<ariable :G rate per 5G
$6
Standard 5Gs allowed
33,000
Actual 5Gs
32,000
Assuming that budgeted fi&ed overhead costs are e)ual to actual fi&ed costs, the controllable variance for April is
a. I2,... 4.
b. I4,... D.
c. I4,... 4.
d. I(,... 4.
A>SB A
?ontrollable <ariance J Actual :G $ @udgeted :G based on Standard 'ty
J I1-(,... $ "33,... , I(!hr%
J I2,... 4
-1. :&ygen ?ompany uses a standard cost system. :verhead cost information for :ctober is as followsB
Total actual overhead incurred
$12,600
4i&ed overhead budgeted
$3,300
Total standard overhead rate per 5G
$4
<ariable overhead rate per 5G
$3
Standard 5Gs allowed for actual production
3,500
1hat is the total overhead variance3
a. I1,2.. 4
b. I1,2.. D
c. I1,4.. 4
d. I1,4.. D
A>SB ?
Total :verhead <ariance J Actual :verhead $ Standard :verhead
J I"12,(.. $ "3,.. 5G , I4!5G%%
J I"12,(.. $ 14,...%
J I1,4.. 4
A64B 9asy :@CB *$3
2+.
Uni$or& Co&.any
Dniform ?ompany has developed standard overhead costs based on a capacity of 1+.,... machine hours as
followsB
Standard costs per unitB
<ariable portion 2 hours H I3 J I (
4i&ed portion 2 hours H I J 1.
I1(
Auring April, +,... units were scheduled for production, but only +.,... units were actually produced. The
following data relate to AprilB
Actual machine hours used were 1(,....
Actual overhead incurred totaled I1,3*+,... "I1+,... variable plus I+(.,... fi&ed%.
All inventories are carried at standard cost.
-2. =efer to Dniform ?ompany. The variable overhead spending variance for April was
a. I1,... D.
b. I23,... D.
c. I3+,... 4.
d. I3+,... D.
A>SB @
<ariable :G Spending <ariance J Actual <:G $ @udgeted 4:G!Actual 6nput
J I1+,... $ "1(,... A;G , I3!hr%
J I"1+,... $ 4-,...%
J I23,... D
-3. =efer to Dniform ?ompany. The variable overhead efficiency variance for April was
a. I1,... D.
b. I23,... D.
c. I3+,... 4.
d. I3+,... D.
A>SB A
<ariable :G 9fficiency <ariance J @udgeted <:G!Actual $ @udgeted <:G!Standard
J I4-,... $ "+.,... units , 2 hrs!unit , I3%
J I"4-,... $ 4+.,...%
J I1,... D
2+1
-4. =efer to Dniform ?ompany. The fi&ed overhead spending variance for April was
a. I4.,... D.
b. I4.,... 4.
c. I(.,... 4.
d. I(.,... D.
A>SB @
4i&ed :verhead Spending <ariance J Actual 4i&ed :G $ @udgeted 4i&ed :G
J I"+(.,... $ "1+.,... 5G , I!hr%
J I"+(.,... $ I-..,...%
J I4.,... 4
-. =efer to Dniform ?ompany. The fi&ed overhead volume variance for April was
a. I(.,... D.
b. I(.,... 4.
c. I1..,... 4.
d. I1..,... D.
A>SB A
4i&ed 4:G <olume <ariance J @udgeted 4i&ed 4:G $ Applied 4:G
J I"-..,... $ +..,...%
J I1..,... D
Ultra S%ine Co&.any
Dltra Shine ?ompany manufactures a cleaning solvent. The company employs both s/illed and uns/illed wor/ers.
To produce one $gallon drum of solvent re)uires 5aterials A and @ as well as s/illed labor and uns/illed labor.
The standard and actual material and labor information is presented belowB
Standard4
5aterial AB 3..2 gallons H I1.2 per gallon
5aterial @B 24.* gallons H I2... per gallon
S/illed ;aborB 4 hours H I12 per hour
Dns/illed ;aborB 2 hours H I * per hour
Act2al4
5aterial AB 1.,*1( gallons purchased and used H I1.. per gallon
5aterial @B 1*,4+4 gallons purchased and used H I1.-. per gallon
S/illed labor hoursB 1,-. H I11.-. per hour
Dns/illed labor hoursB 1,3.. H I*.1 per hour
Auring the current month Dltra Shine ?ompany manufactured .. $gallon drums.
=ound all answers to the nearest whole dollar.
2+2
-(. =efer to Dltra Shine ?ompany. 1hat is the total material price variance3
a. I+** 4
b. I+** D
c. I-31 D
d. I-31 4
A>SB ?
Total 5aterial #rice <ariance J Actual 5i&,'ty,#rice $ Actual 5i&,'uantity,Std #rice
J I"4-,2-4 $ 4+,3(3%
J I-31 D
-*. =efer to Dltra Shine ?ompany. 1hat is the total material mi& variance3
a. I3,-( 4
b. I3,-( D
c. I4,+(4 4
d. I4,+(4 D
A>SB @
Total 5aterial 5i& <ariance J Actual 5i&,'ty, Std #rice $ Std 5i&, #rice,Actual 'ty
J I"4+,3(3 $ 44,*(*%
J I3,-( D
A64B Aifficult :@CB *$(
-+. =efer to Dltra Shine ?ompany. 1hat is the total material yield variance3
a. I1,111 D
b. I1,111 4
c. I2,(*. D
d. I2,(*. 4
A>SB A
5aterial Mield <ariance J Std 5i&, Std #rice,Actual 'ty $ Std 5i&, 'ty, #rice
J I"44,*(* $ I43,((%
J I1,111 D
--. =efer to Dltra Shine ?ompany. 1hat is the labor rate variance3
a. I.
b. I1,.+3 D
c. I2,+3 D
d. I1,.+3 4
A>SB A
;abor =ate <ariance J Actual 5i&, 'ty,#rice $ Actual 5i&,'ty,Std #rice
J I"32,.. $ 32,..%
J I.
2+3
1... =efer to Dltra Shine ?ompany. 1hat is the labor mi& variance3
a. I1,.+3 D
b. I2,++ D
c. I1,.+3 4
d. I2,++ 4
A>SB ?
;abor 5i& <ariance J Actual 5i&,'ty, Std #rice $ Std 5i&, Actual 'ty, Std #rice
J I"32,.. $ 33,+3%
J I1,.+3 4
1.1. =efer to Dltra Shine ?ompany. 1hat is the labor yield variance3
a. I2,+3 D
b. I2,+3 4
c. I1,13+ 4
d. I1,13+ D
A>SB A
;abor Mield <ariance J Std 5i&, Act 'ty, Std #rice $ Std 5i&, 'ty, #rice
J I"33,+3 $ I31,...%
J I2,+3 D
1.2. The sum of the material mi& and material yield variances e)uals
a. the material purchase price variance.
b. the material )uantity variance.
c. the total material variance.
d. none of the above.
A>SB @ A64B 9asy :@CB *$(
1.3. The sum of the labor mi& and labor yield variances e)uals
a. the labor efficiency variance.
b. the total labor variance.
c. the labor rate variance.
d. nothing because these two variances cannot be added since they use different costs.
A>SB A A64B 9asy :@CB *$(
2+4
S1*!T A-S#!
1. ;ist and discuss briefly the three standards of attainability.
A>SB
9&pected standards reflect what is actually e&pected to occur in the future period. This standard ta/es into
consideration waste and inefficiencies and ma/es allowances for them.
#ractical standards can be reached or e&ceeded most of the time with reasonable effort. This standard allows for
normal, unavoidable time problems or delays.
6deal standards provide for no inefficiencies of any type. This standard does not allow for normal operating delays
or human limitations.
2. Aiscuss briefly the type of information contained on "a% a bill of materials and "b% an operations flow document.
A>SB
"a% A bill of materials contains the identification of components, a description of components, and the )uantity of
each material re)uired for a product. "b% An operations flow document contains an identification number,
descriptions of the tas/s to be performed, the departments doing the wor/, and standard number of hours and!or
minutes to perform each tas/.
3. Aefine the following termsB standard cost system, total variance, material price variance, and labor efficiency
variance.
A>SB
A standard cost system records both standard costs and actual costs in the accounting records. This process allows
for better cost control because actual costs can be easily compared to standard costs.
A total variance is the difference between actual input cost for material or labor and the standard cost for material
or labor for the output produced.
The material price variance is the difference between the actual price paid for material and the standard price of
the material times the actual )uantity used or purchased.
The labor efficiency variance compares the number of hours actually wor/ed with the standard hours allowed for
the production achieved and values this difference at the standard labor rate.
2+
4. Aiscuss how establishing standards benefits the following management functionsB performance evaluation and
decision ma/ing.
A>SB
#erformance evaluation is enhanced by the use of standard costs because it allows management to pinpoint
deviations from standard costs and points out variances. The variances are analy2ed and individual responsibility
can be assessed for the variances, depending on the nature of the causes.
The availability of standard cost information facilitates many decisions. These costs can be used in budgeting,
cost estimates for 7obs, and determining contributions made by various product linesE and, thus, can be used to
decide whether to add new lines or drop old lines.
. Aiscuss why standards may need to be changed after they have been in effect for some period of time.
A>SB
Standards may need to be changed from time to time because of changing economic conditions, availability of
materials, )uality of materials, and labor rates or s/ill levels. Standards should be reviewed periodically to assure
management that current standards are being established and used.
(. Aiscuss how variable and fi&ed overhead application rates are calculated.
A>SB
The variable overhead application rate is calculated by dividing total budgeted variable overhead by its related
level of activity. Any level of activity within the relevant range may be selected since <:G cost per unit is
constant throughout the relevant range. The fi&ed overhead application rate is calculated by dividing total
budgeted fi&ed overhead by the specific capacity level e&pected for the period.
*. 1hy are fi&ed overhead variances considered noncontrollable3
A>SB
5anagement has limited ability to control fi&ed overhead costs in the short run because these costs are incurred to
provide the capacity to produce. 4i&ed costs can be controllable to a limited e&tent at the point of commitmentE
therefore, the 4:G spending variance can be considered, in part, controllable.
:n the other hand, the volume variance arises solely because management has selected a specific level of activity
on which to calculate the 4:G application rate. 6f actual activity differs at all from this selected base, a volume
variance will occur. #roduction levels are controllable to a very limited e&tent in the production area. #roduction
is more often related to ability to sell and demandE thus, these levels are not controllable by the production
manager.
2+(
+. #rovide the correct term for each of the following definitionsB
a. a cost that fluctuates with large changes in level of activity
b. a range of activity over which costs behave as predicted
c. the capacity level at which a firm believes it will operate at during the coming
production cycle
d. the difference between actual variable overhead and budgeted variable overhead
based on inputs
e. the difference between total actual overhead and total applied overhead
f. the difference between total budgeted overhead based on inputs and applied
overhead
g. the difference between total actual overhead and total budgeted overhead based on
output
h. the difference between actual fi&ed overhead and budgeted fi&ed overhead
A>SB
a. step fi&ed cost
b. relevant range
c. e&pected annual capacity
d. variable overhead spending variance
e. total overhead variance
f. volume variance
g. efficiency variance
h. fi&ed overhead spending variance
,!*BL+
"it6%2g% Co&.any
4it2hugh ?ompany has the following information available for the current yearB
Standard4
5aterial 3. feet per unit H I2.(. per foot
;abor direct labor hours H I+.. per unit
Act2al4
5aterial -,(2 feet used "1..,... feet purchased H I2.. per foot%
;abor 122,4.. direct labor hours incurred per unit H I+.3 per hour
2,.. units were produced
1. =efer to 4it2hugh ?ompany. ?ompute the material purchase price and )uantity variances.
2+*
A>SB
5aterial price varianceB
1..,... I2.. J
$250,000
1..,... I2.(. J
260,000
$ 10,000 F
5aterial )uantity varianceB
-,(2 I2.(. J
$248,625
+-,2. I2.(. J
232,050
$ 16,575 U
2. =efer to 4it2hugh ?ompany. ?ompute the labor rate and efficiency variances.
A>SB
;abor rate varianceB
122,4.. I+.3 J
$1,022,040
122,4.. I+.. J
1,040,400
$ 18,360 F
;abor efficiency varianceB
122,4.. I+.. J
$1,040,400
12*,.. I+.. J
1,083,750
$ 43,350 F
Taylor Co&.any
Taylor ?ompany applies overhead based on direct labor hours and has the following available for >ovemberB
Standard4
Airect labor hours per unit
5
<ariable overhead per A;G
$.75
4i&ed overhead per A;G
"based on +,-.. A;Gs%
$1.90
Act2al4
Dnits produced
1,800
Airect labor hours
8,900
<ariable overhead
$6,400
4i&ed overhead
$17,500
2++
3. =efer to Taylor ?ompany. ?ompute all the appropriate variances using the two$variance approach.
A>SB
Actual "I(,4.. K I1*,..%
$23,900
B2dget Variance4
$240 U
@4:G "+,-.. I1.-.%
$16,910
<:G "1,+.. I.*%
6,750 $23,660
Vol2&e Variance4
$190 F
Applied :GB
"1,+.. I2.(%
$23,850
4. =efer to Taylor ?ompany. ?ompute all the appropriate variances using the four$variance approach.
A>SB
Actual <:G
$6,400
Varia/le S.ending Variance4
$275 F
4le&. @ud. @ased on Actual
6nput Gours "+,-.. I.*%
$6,675
Varia/le $$iciency Variance4
$75 F
Applied <:G
"1,+.. I.*%
$6,750
Actual 4:G
$17,500
"*1 S.ending Variance4
$590 U
@DAF9T9A 4:G
$16,910
"*1 Vol2&e Variance4
$190 F
Applied 4:G
"1,+.. I1.-.%
$17,100
2+-
. =efer to Taylor ?ompany. ?ompute all the appropriate variances using the three$variance approach.
A>SB
Actual
$23,900
S.ending Variance4
$315 U
4le&ible @udget @ased on Actual 6nput
@4:G
$16,910
<:G "+,-.. I.*%
6,675 $23,585
$$iciency Variance4
$75 F
4le&ible @udget @ased on Standard A;Gs
@4:G
$16,910
<:G "1,+.. I.*%
6,750 $23,660
Vol2&e Variance4
$190 F
Applied :GB
"1,+.. I2.(%
$23,850
(. The 5ichigan ?ompany has made the following information available for its production facility for the month of
Cune. 4i&ed overhead was estimated at 1-,... machine hours for the production cycle. Actual machine hours for
the period were 1+,-.., which generated 3,-.. units.
5aterial purchased "+.,... pieces%
$314,000
5aterial )uantity variance
$6,400 U
5achine hours used "1+,-.. hours%
<:G spending variance
$50 U
Actual fi&ed overhead
$60,000
Actual labor cost
$40,120
Actual labor hours
5,900
5ichiganLs standard costs are as followsB
Airect material 2. pieces H I4 per piece
Airect labor 1. hours H I( per hour
<ariable overhead
"applied on a machine hour basis% 4.+ hours H I2.. per hour
4i&ed overhead
"applied on a machine hour basis% 4.+ hours H I3 per hour
2-.
Aetermine the following itemsB
a. material purchase price variance
b. standard )uantity allowed for material
c. total standard cost of material allowed
d. actual )uantity of material used
e. labor rate variance
f. standard hours allowed for labor
g. total standard cost of labor allowed
h. labor efficiency variance
i. actual variable overhead incurred
7. standard machine hours allowed
/. variable overhead efficiency variance
l. budgeted fi&ed overhead
m. applied fi&ed overhead
n. fi&ed overhead spending variance
o. volume variance
p. total overhead variance
A>SB
a. actual material cost
$314,000
actual pieces at standard cost "+.,... I4%
320,000
material purchase price variance
$ 6,000 F
b. 3,-.. units 2. pieces per unit J *+,... standard )uantity allowed
c. total standard cost of material "*+,... I4% I312,...
d. standard cost of actual material used
I312,... K I(,4.. D )uantity variance
$318,400
I31+,4.. N I4 J *-,(.. actual pieces used
e. actual labor cost
$ 40,120
,-.. actual A;Gs I(
35,400
labor rate variance
$ 4,720 U
f. 3,-.. units 1. standard hours per unit
5,850 SHA
g. ,+. SGA I(
$ 35,100
h. actual hours standard rate "from e%
$ 35,400
standard cost of labor allowed "from g%
35,100
labor efficiency variance
$ 300 U
i. actual machine hours standard <:G rate "1+,-.. I2..%
$ 47,250
<:G spending variance
50 U
actual <:G
$ 47,300
7. 3,-.. units 4.+ standard hours per unit J 1+,*2. 5G allowed
/. standard hours allowed "from 7% standard <:G rate
"1+,*2. I2..%
$ 46,800
actual machine hours standard rate "from i%
"1+,-.. I2..%
47,250
variable overhead efficiency variance
$ 450 U
l. 1-,... machine hours I3
$ 57,000
m. 3,-.. units 4.+ hours per unit I3...
$ 56,160
n. actual fi&ed overhead
$ 60,000
budgeted fi&ed overhead "from l%
57,000
fi&ed overhead spending variance
$ 3,000 U
2-1
o. budgeted fi&ed overhead "from l%
$ 57,000
applied fi&ed overhead "from m%
56,160
volume variance
$ 840 U
p. total actual overhead
$107,300
OI(.,... K I4*,3.. "from i%P
total applied overhead "1+,*2. SGA I..%
102,960
Total overhead variance
$ 4,340 U
A64B Aifficult :@CB *$3
#%itestone Co&.any
The following information is available for 1hitestone ?ompany for the current yearB
Standard4
5aterial QB 3.. pounds per unit H I4.2. per pound
5aterial MB 4. pounds per unit H I3.3. per pound
?lass S laborB 3 hours per unit H I1... per hour
?lass DS laborB * hours per unit H I+... per hour
Act2al4
5aterial QB 3.( pounds per unit H I4... per pound "purchased and used%
5aterial MB 4.4 pounds per unit H I3.2 per pound "purchased and used%
?lass S laborB 3.+ hours per unit H I1..(. per hour
?lass DS laborB .* hours per unit H I*.+. per hour
1hitestone ?ompany produced a total of 4,*. units.
*. =efer to 1hitestone ?ompany. ?ompute the material price, mi&, and yield variances "round to the nearest dollar%.
A>SB
StandardB Q 3..!*. J 4.R
M 4.!*. J (.R

Act2al4
Q 3.( 4,*. I4... J
$ 658,800
M 4.4 4,*. I3.2 J
654,225
$1,313,025
$43,005 F price
Act2al Standard ,rices4
Q 3.( 4,*. I4.2. J
$ 691,740
M 4.4 4,*. I3.3. J
664,290
$1,356,030
$16,470 U i!
Standard Qty( Act2al +i3 Standard ,rices4
Q 4.R 3((,..., I4.2. J
$ 614,880
M (.R 3((,... I3.3. J
724,680
$1,339,560 $83,722 U yie"d
Standard Standard4
Q 4.R 343,12,, I4.2. J
$ 576,450
M (.R 343,12 I3.3. J
679,388
$1,255,838
,"4,*. + J 3((,...%
,,"4,*. *. J 343,12%
2-2
+. =efer to 1hitestone ?ompany. ?ompute the labor rate, mi&, and yield variances "round to the nearest dollar%.
A>SB
StandardB S 3!1. J 3.R ActualB S 3.+!-. J 4.R
DS *!1. J *.R DS .*!-. J (.R
Act2al Act2al ,rices4
S 3.+ 4,*. I1..(. J
$1,842,810
DS .* 4,*. I*.+. J
2,034,045
$3,876,855

$34,770 F r#te
Act2al Standard ,rices4
S 3.+ 4,*. I1... J
$1,825,425
DS .* 4,*. I +... J
2,086,200
$3,911,625

$108,656 U i!
Standard Qty( Act2al +i3 Standard ,rices4
S 3.R 434,(2, I1... J
$1,369,069
DS *.R 434,(2 I +... J
2,433,900
$3,802,969

$200,156 F yie"d
Standard Standard4
S 3.R 4*,..,, I1... J
$1,441,125
DS *.R 4*,.. I +... J
2,562,000
$4,003,125
,"4,*. -. J 434,(2%
,,"4,*. 1. J 4*,..%
-. #eoria ?orporation produces a product using the following standard proportions and costs of materialB
#ounds
?ost #er
#ound Amount
5aterial A
50 $5.00 $250.00
5aterial @
40 6.00 240.00
5aterial ?
60 3.00 180.00
150 4.4667 $670.00
Standard shrin/age "33 1!3R%
50
>et weight and cost
100 6.70 $670.00
A recent production run yielding 1.. output pounds re)uired an input ofB
Amount
?ost #er
#ound
5aterial A
40 $5.15
5aterial @
50 6.00
5aterial ?
65 2.80
!e72ired4 5aterial price, mi&, and yield variances.
A>SB
5AT9=6A; #=6?9 <A=6A>?9
5AT9=6A; A "I.1 $ ...% 4. J
$ 6 U
5AT9=6A; @ "I(... $ (...% . J
0
5AT9=6A; ? "I2.+. $ 3...% ( J
13 F
$ 7 F
2-3
56Q <A=6A>?9 M69;A <A=6A>?9
A 40 $5 $ $200 51 2%3 $5 $ $258.33 50 $5 $ $250
@ 50 $6 $ $300 41 1%3 $6 $ $248.00 40 $6 $ $240
? 65 $3 $ $195 62 $3 $ $186.00 60 $3 $ $180
$695 $692.33 $670
$2.67 U&F $22.33 U&F
1.. Spar/le ?ompany began business early in Canuary using a standard costing for its single product. 1ith standard
capacity set at 1.,... standard productive hours per month, the following standard cost sheet was set up for one
unit of productB
Airect material$ pieces H I2...
$10.00
Airect labor "variable%$1 sph H I3...
3.00
5anufacturing overheadB
4i&ed$1 sph H I3...
$3.00
<ariable$1 sph H I2...
2.00 5.00
4i&ed costs are incurred evenly throughout the year. The following unfavorable variances from standard costs
were recorded during the first month of operationsB
5aterial price
$ 0
5aterial usage
4,000
;abor rate
800
;abor efficiency
300
:verhead volume
6,000
:verhead budget "2 variance analysis%
1,000
!e72ired4 Aetermine the followingB "a% fi&ed overhead budgeted for a yearE "b% the number of units completed
during Canuary assuming no wor/ in process at Canuary 31E "c% debits made to the 1or/ in #rocess account for
direct material, direct labor, and manufacturing overheadE "d% number of pieces of material issued during CanuaryE
"e% total of direct labor payroll recorded for CanuaryE "f% total of manufacturing overhead recorded in Canuary.
A>SB
a. I3 1.,... 12 J I3(.,...
b.
I(,...!I3 J 2,... under 1.,... $ 2,... J +,... units
c. A5 J +,... I1. J I+.,..., A; J +,... I3 J I24,...,
5:G J +,... I J I4.,...
d. STA ' J 4.,... "Q $ 4.,...% I2 J I4,... unit, Q J 42,... pieces issued
e. I24,... K I+.. K I3.. J I2,1..
f. I4.,... K I(,... K I1,... J I4*,...
11. A firm producing one product has a budgeted overhead of I1..,..., of which I2.,... is variable. The budgeted
direct labor is 1.,... hours.
!e72ired4 4ill in the blan/s.
a.
#roduction 4le&ible @udget Applied
<olume
<ariance
2-4
12.R 000000000000 000000000000 000000000000
1..R 000000000000 000000000000 000000000000
+.R 000000000000 000000000000 000000000000
(.R 000000000000 000000000000 000000000000
b. 1hat is the budget variance at the +. percent level if the actual overhead incurred is
I+*,...3
A>SB
T:TA; ?:ST 9'DAT6:> J I+.,... 46Q K 2.,... "I2% variable
1.,... per unit
a. A J I+.,... K "12,... I2% J I1.4,...
@ J I+.,... K "1.,... I2% J I1..,...
? J I+.,... K " +,... I2% J I -(,...
A J I+.,... K " (,... I2% J I -2,...
A##;6?AT6:> =AT9 J I1..,...
1.,... D>6TS J I1.!unit
b. @DAF9T <A=6A>?9 J A?TDA; 4:G $ @DAF9T9A 4:G
I-,... 4A< J I+*,... $ I-(,...
12. @ugs >o5ore ?ompany manufactures a product effective in controlling beetles. The company uses a standard
cost system and a fle&ible budget. Standard cost of a gallon is as followsB
Airect materialB
2 )uarts of A
$14
4 )uarts of @
16
Total direct material
$30
Airect laborB
2 hours
16
5anufacturing overhead
12
Total
$58
The fle&ible budget system provides for I.,... of fi&ed overhead at normal capacity of 1.,... direct labor
hours. <ariable overhead is pro7ected at I1 per direct labor hour.
Actual results for the period indicated the followingB
#roductionB ,... gallons
Airect materialB
A 12,... )uarts purchased at a cost of I*.2.!)uartE 1.,.. )uarts used
@ 2.,... )uarts purchased at a cost of I3.-.!)uartE 1-,+.. )uarts used
Airect laborB -,+.. hours wor/ed at a cost of I*-,3+.
:verheadB 4i&ed I4+,1..
<ariable 21,...
Total overhead I(-,1..
!e72ired4
1. 1hat is the application rate per direct labor hour, the total overhead cost e)uation, the
standard )uantity for each material, and the standard hours3
2. ?ompute the following variancesB
a. Total material price variance
b. Total material )uantity variance
c. ;abor rate variance
d. ;abor efficiency variance
2-
e. 5:G volume variance
f. 5:G efficiency variance
g. 5:G spending variance, both fi&ed and variable
2-(
A>SB
1. App rate J I(!A;G
T:G? J I.,... K I1!A;G
Std : "A% ,... 2 J 1.,...
"@% ,... 4 J 2.,...
Std Grs. ,... 2 J 1.,...
2. a. 1. "I*.2. $ I*...% 12,... J
$2,400 U
2. "I3.-. $ I4...% 2.,... J
2,000 F
$ 400 U
b. 1. "1.,.. $ 1.,...% I*... J
$3,500 U
2. "1-,+.. $ 2.,...% I4... J
800 F
$2,700 U
c. I*-,3+. $ "-,+.. I+% J I-+. D
d. "-,+.. $ 1.,...% I+ J I1(.. 4
e. "1.,... $ 1.,...% I J .
f. "-,+.. $ 1.,...% I1 J I2.. 4
g. 4i& Spd I4+,1.. $ I.,... J I1,-.. 4
<ar Spd I21,... $ "-,+.. I1% J I11,2.. D
13. Thompson ?ompany operates a factory. :ne of its departments has three /inds of employees on its direct labor
payroll, classified as pay grades A, @, and ?. The employees wor/ in 1.$person crews in the following
proportionsB
>o. of Standard Standard
1or/ers in Gourly ?ost per
#ay Frade Standard ?rew 1age =ate ?rew Gour
A
6 $4 $24
@
3 6 18
?
1 8 8
Total
10 $50
The wor/ crews can8t wor/ short$handed. To /eep a unit operating when one of the regular crew members is
absent, the head of the department first tries to reassign one of the department8s other wor/ers from indirect labor
operations.
6f no one in the department is able to step in, plant management will pull maintenance department wor/ers off
their regular wor/, if possible, and assign them temporarily to the department. These maintenance wor/ers are all
classified as Frade A employees, with a standard wage rate of I1. an hour.
The following data relate to the operations of the department during the month of 5ayB
1. Actual wor/ time, 1,... crew hours.
2. Actual direct labor hoursB
Frade A, ,4.. hours.
Frade @, 3,2.. hours.
Frade ?, 1,3.. hours.
Frade A, 1.. hours.
3. Standard crew hours for actual output, -+..
!e72ired4 ?ompute labor rate, mi&, and yield variances.
2-*
A>SB
56Q <A=6A>?9 M69;A <A=6A>?9
A 5,400 $4 $
$21,600
6,000 $4 $
$24,000
5,880 $4 $
$23,520
@ 3,200 $6 $
19,200
3,000 $6 $
18,000
2,940 $6 $
17,640
? 1,300 $8 $
10,400
1,000 $8 $
8,000
980 $8 $
7,840
A 100 $10 $
1,000 $50,000 $49,000
$52,200
56Q <A=6A>?9 J I2,2.. D>4
M69;A <A=6A>?9 J I1,... D>4
=AT9 <A=6A>?9 J I +.. D>4 "I3,... $ I2,2..%
2-+
14. Auloc/ ?ompany manufactures a certain product by mi&ing three /inds of materials in large batches. The
blendmaster has the responsibility for maintaining the )uality of the product, and this often re)uires altering the
proportions of the various ingredients. Standard costs are used to provide material control information. The
standard material inputs per batch areB
'uantity
"pounds%
#rice
"per pound%
Standard ?ost
of 5aterial
5aterial A
420 $0.06 $25.20
5aterial @
70 0.12 8.40
5aterial ?
10 0.25 2.50
Total batch
500 $36.10
The finished product is pac/ed in .$pound bo&esE the standard material cost of each bo& is, therefore, I3.(1.
Auring Canuary, the following materials were put in processB
5aterial A
181,000
lbs.
5aterial @
33,000
5aterial ?
6,000
Total
220,000
lbs.
6nventories in process totaled ,... pounds at the beginning of the month and +,... pounds at the end of the
month. 6t is assumed that these inventories consisted of materials in their standard proportions. 4inished output
during Canuary amounted to 4,1.. bo&es.
!e72ired4 ?ompute the total material )uantity variance for the month and brea/ it down into mi& and yield
components.
A>SB
5aterial 'uantity <arianceB
A "1+1,... $ 1*2,2..% I...( J
$ 528 D>4
@ "33,... $ 2+,*..% I..12 J
516 D>4
? "(,... $ 4,1..% I..2 J
475 D>4
$1,519
A 181,000 $0.06 $ $10,860 184,800 $0.06 $ $11,076 172,200 $0.06 $ $10,332
@ 33,000 $0.12 $ 3,960 30,800 $0.12 $ 3,696 28,700 $0.12 $ 3,444
? 6,000 $0.25 $ 1,500 4,400 $0.25 $ 1,100 4,100 $0.25 $ 1,025
$16,320 $15,872 $14,801
'() *A+(A&,- $ $ 436 U&F
.(-/0 *A+(A&,- $ $1,083 U&F
1ot#" $1,519 U&F
2--

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ACCTG 8 QUIZ 2/22/12

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