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Exam 8: Standard Costing and Variance Analysis

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Question 31

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The direct materials price variance is the difference between the actual price and the standard price, multiplied by the standard quantity.

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verified

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Question 32

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Another name for a flexible budget is a variable budget.

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Question 33

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A standard cost accounting system can be used for

When a manufacturing company employs standard costs, all costs affecting the three inventory accounts and the Cost of Goods Sold account are stated in terms of standard or predetermined costs rather than in terms of actual costs incurred.

Outdoors, Inc., manufactures steel hitches for camping trailers. The company's direct labor rates have been set by the terms of the current labor contract. Direct labor rate standards have been assigned for each job classification. In May 20xx, a young apprentice was being trained during regular working hours to become a machine operator on one of the turret lathes. A timekeeper determined that the apprentice had spent a total of 48 hours as a novice machine operator in May. Standard time for the same work output is 32 hours. The apprentice earned $6.25 per hour in May. The standard direct labor rate for machine operators working on turret lathes is $10 per hour. a. From the data provided, determine the direct labor efficiency variance and the direct labor rate variance that resulted from the temporary substitution of the apprentice for the regular machine operator. (Note that, according to the labor contract, the apprentice is not entitled to the same rate as a regular machine operator during the training period.) b. Did the company benefit financially from the situation? Why or why not? (Show calculations.)

It is not necessary to provide an area on the performance report for a manager's reasons for variances.

The direct materials price variance is best measured and reported to appropriate management personnel at the time

Performance reports normally include all of the following except

If actual capacity used exceeds expected capacity, the fixed overhead volume variance is favorable.

The direct labor efficiency variance is the difference between the standard hours allowed and the actual hours multiplied by the actual labor rate.

Using the standard costs of $5 per pound for a 10 pound bag of chocolate and the following actual cost and usage data, compute the direct materials price variance. $\begin{array}{lr}\text { Direct materials purchased and used}&\text {99,000 pounds }\\\text {Price paid for direct materials }&\text { \$ 4.00 per pound}\\\text {Number of good units prochuced }&\text {9,000 units }\\\end{array}$

The Silent Door Company manufactures soundproof doors. Each door requires two pieces of 16-gauge sheet steel measuring 94 inches by 50 inches. The standard cost of each piece of steel is $150. During the month of July, 2,040 doors were started and completed, and there were no beginning or ending work in process inventories. Accounting records revealed that 4,200 pieces of sheet steel were purchased during July at a cost of $623,700. All 4,200 pieces were used during the month. Compute the direct materials price and direct materials quantity variances for July production, assuming the price variance is isolated at the time of purchase. Note whether the variances are favorable or unfavorable. Round to the nearest dollar.

Sweet Dreams manufactures candy. Its records revealed the following data: $\begin{array}{ll}\text {Number of units produced }&\text { 4,000}\\\text {Standard direct labor hours per unit }&\text { 2}\\\text {Standard variable overhead rate }&\text { \$ 2.50 per hour }\\\text { Standard fixed overhead rate}&\text { \( \$ 5.00 \) per hour}\\\text {Budgeted fixed overhead costs }&\text {\$ 40,800 }\\\text { Actual variable overhead costs}&\text { \$ 16,800 }\\\text {Actual fixed overhead costs }&\text {\$ 40,400 }\\\text {Actual labor hours }&\text { 8,000 direct labor hours}\\\text {Total actual overhead }&\text { \$ 57,200}\\\end{array}$ - The total overhead variance is

Variance analysis includes all of the following except

The importance of direct labor standards and variances has been reduced.

Which of the following statements is not true?

The direct materials price standard is determined by averaging costs of current purchases.

Ewing Corporation's controller has developed the cost and usage data listed below in preparation of standard unit cost information for the coming year. $\begin{array}{|l|l|}\hline \text { Direct materials quantity standard } & 3 \text { pounds per prochuct } \\\hline \text { Direct labor time standard } & 5 \text { hours per product } \\\hline \text { Direct materials price standard } & \$ 10 \text { per pound } \\\hline \text { Direct labor rate standard } & \$ 9 \text { per hour } \\\hline \text { Standard variable overhead rate } & \$ 5 \text { per labor hour } \\\hline \text { Standard fixed overhead rate } & \$ 10 \text { per labor hour } \\\hline \end{array}$ -The standard unit cost for overhead is

During April 20xx, production is expected to be 30,000 units with the following costs: direct materials, $195,000; direct labor, $300,000; variable overhead, $120,000; and fixed overhead, $150,000. Prepare a flexible budget for 25,000 and 35,000 units.

A summary of expected costs for a range of activity levels that is geared to changes in the level of productive output is the definition of a