Exam Questions Standard Costing And Variance Analysis Ch.9 - Managerial Accounting 4e Complete Test Bank by Whitecotton. DOCX document preview.
Managerial Accounting, 4e (Whitecotton)
Chapter 9 Standard Costing and Variance Analysis
1) A standard cost system records costs at their actual amounts.
2) Easily attainable standards are the best for motivating individuals to work hard.
3) An ideal standard is one that can be achieved only under perfect conditions.
4) A quantity standard is the amount of input that should go into a single unit of the product or service.
5) A price standard is the price that should be paid per output unit for the input.
6) A standard cost card shows what the company spent to produce each unit of product.
7) When preparing a flexible budget, fixed costs should remain the same as on the master budget.
8) The flexible budget can be used as a benchmark for evaluating performance after the fact, as part of the control process.
9) A spending variance is calculated by comparing actual costs with the static budget.
10) The direct materials quantity variance is the difference between the actual quantity and the standard quantity of materials multiplied by the actual price.
11) The production manager is typically responsible for the direct labor rate variance.
12) The variable overhead rate variance is the difference between the actual variable overhead rate and the standard variable overhead rate multiplied by the actual value of the cost driver.
13) Fixed overhead does not have separate price and quantity variances.
14) The fixed overhead volume variance is the difference between actual production volume and actual sales volume.
15) A standard cost system initially records manufacturing costs at the standard rather than the actual amount.
16) Which of the following types of standards can be achieved only under perfect conditions?
A) Easily attainable standard
B) Ideal standard
C) Currently attainable standard
D) Tight but attainable standard
17) To foster continuous improvement, standards should ________ over time.
A) remain stable
B) increase in difficulty
C) decrease in difficulty
D) become ideal
18) Which of the following statements is correct about the way managers set standards for employees?
A) The standards managers set for employee productivity should be based on ideal conditions to encourage employees to push themselves.
B) Eliminating breaks, downtime, and maintenance time from set standards is an excellent way to motivate employees.
C) High employee turnover results in higher standards over the long run because weak or underperforming employees are replaced with high-performing employees.
D) When setting standards, managers should include a reasonable amount of downtime for preventable maintenance, employee breaks, and training.
19) Standard cost systems depend on which two types of standards?
A) Quantity and price standards
B) Quantity and efficiency standards
C) Rate and price standards
D) Rate and spending standards
20) The standard costs are summarized on a:
A) static cost card.
B) flexible budget card.
C) standard cost card.
D) standard static card.
21) How do managers and companies set price and quantity standards?
A) Based on a manager's previous experience at another company.
B) Based on historical data, industry averages, and the results of process studies.
C) Based on the ideal budget created for the operating division.
D) Based on prior period variances.
22) A quantity standard is:
A) the total dollar amount that a company expects to spend to achieve a given level of output.
B) a form that shows what the company should spend to make a single unit of product.
C) the price that should be paid for a specific quantity of input.
D) the amount of input that should be used in each unit of product or service.
23) The standard labor rate is:
A) the expected hourly cost of labor, excluding employee taxes and benefits.
B) the expected hourly cost of labor, including employee taxes and benefits.
C) the amount of time that workers should take to produce a single unit of product.
D) the amount of time that workers should take to produce a single unit of product times the expected hourly cost of labor.
24) A budget that is based on a single estimate of sales volume is called a:
A) static budget.
B) flexible budget.
C) variable budget.
D) sunk cost budget.
25) A budget depends upon:
A) only the level of output.
B) only the input standards.
C) both the level of output and the input standards.
D) neither the level of output nor the input standards.
26) A master budget is an example of a:
A) static budget.
B) flexible budget.
C) standard cost card.
D) volume variance.
27) Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's direct materials cost be if it used a flexible budget for the period based on actual sales?
A) $19,870
B) $21,360
C) $22,962
D) $91,848
28) Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's direct labor cost be if it used a flexible budget for the period based on actual sales?
A) $14,448
B) $31,256
C) $33,600
D) $36,120
29) Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's variable overhead cost be if it used a flexible budget for the period based on actual sales?
A) $16,745
B) $18,000
C) $19,350
D) $46,440
30) Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's fixed overhead cost be if it used a flexible budget for the period based on actual sales?
A) $43,200
B) $46,440
C) $49,923
D) $166,410
31) Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's total costs be if it used a flexible budget for the period based on actual sales?
A) $111,070
B) $119,400
C) $124,872
D) $128,355
32) After selling 4,300 units during the period, Dole Corp. prepared a flexible budget that included $22,962 for direct materials, $36,120 for direct labor, $19,350 for variable overhead, and $46,440 for fixed overhead. Dole originally planned its master budget based on sales of 4,000 units. What would total costs have been on the master budget?
A) $111,070
B) $119,400
C) $124,872
D) $116,160
33) Both the master budget and the flexible budget are based on:
A) variable costs.
B) actual costs.
C) standard costs.
D) ideal costs.
34) When completing a variance analysis, we describe variances as ________ or ________.
A) good; bad
B) favorable; unfavorable
C) positive; negative
D) ideal; less than ideal
35) Comparing the master budget with the flexible budget creates a:
A) quantity variance.
B) volume variance.
C) spending variance.
D) price variance.
36) ________ variances are calculated by comparing the master budget to the flexible budget, and ________ variances are calculated by comparing actual costs to the flexible budget (not the master budget).
A) Volume; volume
B) Volume; spending
C) Spending; volume
D) Spending; spending
37) A spending variance is made up of:
A) volume variance and quantity variance.
B) price variance and volume variance.
C) price variance and quantity variance.
D) price variance and rate variance.
38) The formula AQ × (SP − AP) is the:
A) direct materials spending variance.
B) direct materials volume variance.
C) direct materials price variance.
D) direct materials quantity variance.
39) The formula SP × (SQ − AQ) is the:
A) direct materials spending variance.
B) direct materials volume variance.
C) direct materials price variance.
D) direct materials quantity variance.
40) The difference between the actual price and the standard price, multiplied by the actual quantity of materials purchased, is the:
A) direct materials spending variance.
B) direct materials volume variance.
C) direct materials price variance.
D) direct materials quantity variance.
41) The difference between the actual quantity and the standard quantity, multiplied by the standard price, is the:
A) direct materials spending variance.
B) direct materials volume variance.
C) direct materials price variance.
D) direct materials quantity variance.
42) Who would typically be responsible for the direct materials quantity variance?
A) The production manager
B) The purchasing manager
C) The human resources manager
D) The chief financial officer
43) Exeter has a materials standard of 1 pound per unit of output. Each pound has a standard price of $26 per pound. During July, Exeter paid $66,100 for 2,475 pounds, which it used to produce 2,350 units. What is the direct materials price variance?
A) $1,750 unfavorable
B) $1,300 favorable
C) $6,300 unfavorable
D) $5,000 unfavorable
44) Exeter has a materials standard of 1 pound per unit of output. Each pound has a standard price of $26 per pound. During July, Exeter paid $66,100 for 2,475 pounds, which it used to produce 2,350 units. What is the direct materials quantity variance?
A) $1,750 unfavorable
B) $1,300 favorable
C) $3,250 unfavorable
D) $4,550 unfavorable
45) Oxford Co. has a materials standard of 2.1 pounds per unit of output. Each pound has a standard price of $10 per pound. During February, Oxford Co. paid $57,220 for 4,840 pounds, which were used to produce 2,400 units. What is the direct materials price variance?
A) $6,820 unfavorable
B) $8,820 unfavorable
C) $8,820 favorable
D) $6,820 favorable
46) Oxford Co. has a materials standard of 2.1 pounds per unit of output. Each pound has a standard price of $10 per pound. During February, Oxford Co. paid $57,220 for 4,840 pounds, which were used to produce 2,400 units. What is the direct materials quantity variance?
A) $2,000 unfavorable
B) $2,000 favorable
C) $6,820 favorable
D) $6,820 unfavorable
47) Cooper Company has a direct materials standard of 2 gallons of input at a cost of $7.50 per gallon. During July, Cooper Company purchased and used 13,000 gallons, paying $93,200. The direct materials quantity variance was $1,500 unfavorable. How many units were produced?
A) 13,000 units
B) 6,600 units
C) 6,214 units
D) 6,400 units
48) Scarlett Company has a direct materials standard of 3 gallons of input at a cost of $5 per gallon. During July, Scarlett Company purchased and used 7,500 gallons. The direct materials quantity variance was $750 unfavorable and the direct materials price variance was $3,000 favorable. How many units were produced?
A) 2,450 units
B) 2,500 units
C) 7,350 units
D) 7,500 units
49) Scarlett Company has a direct materials standard of 3 gallons of input at a cost of $5 per gallon. During July, Scarlett Company purchased and used 7,500 gallons. The direct materials quantity variance was $750 unfavorable and the direct materials price variance was $3,000 favorable. What price per gallon was paid for the purchases?
A) $5.00
B) $5.40
C) $4.60
D) $2.50
50) Which of the following statements is true about variances?
A) Positive variances (i.e., those with a positive sign) are always favorable.
B) Positive variances (i.e., those with a positive sign) are always unfavorable.
C) Negative variances (i.e., those with a negative sign) are always favorable.
D) There is not necessarily any correlation between the sign of the result (positive or negative) and whether the variance is positive or negative.
51) The price variance for direct labor is called the:
A) direct labor rate variance.
B) direct labor price variance.
C) indirect labor variance.
D) direct labor quantity variance.
52) The formula AH × (SR − AR) is the:
A) direct labor spending variance.
B) direct labor volume variance.
C) direct labor rate variance.
D) direct labor efficiency variance.
53) The formula SR × (SH − AH) is the:
A) direct labor spending variance.
B) direct labor volume variance.
C) direct labor rate variance.
D) direct labor efficiency variance.
54) The difference between the actual labor rate and the standard labor rate, multiplied by the actual labor hours, is the:
A) direct labor spending variance.
B) direct labor volume variance.
C) direct labor rate variance.
D) direct labor efficiency variance.
55) The difference between the actual labor hours and the standard labor hours, multiplied by the standard labor rate, is the:
A) direct labor spending variance.
B) direct labor volume variance.
C) direct labor rate variance.
D) direct labor efficiency variance.
56) Whitman has a direct labor standard of 2 hours per unit of output. Each employee has a standard wage rate of $22.50 per hour. During July, Whitman paid $94,750 to employees for 4,445 hours worked. 2,350 units were produced during July. What is the flexible budget amount for direct labor?
A) $105,750
B) $189,500
C) $200,025
D) $211,500
57) Madrid Co. has a direct labor standard of 4 hours per unit of output. Each employee has a standard wage rate of $11 per hour. During February, Madrid Co. paid $99,500 to employees for 9,150 hours worked. 2,400 units were produced during February. What is the flexible budget amount for direct labor?
A) $26,400
B) $99,500
C) $100,650
D) $105,600
58) Whitman has a direct labor standard of 2 hours per unit of output. Each employee has a standard wage rate of $22.50 per hour. During July, Whitman paid $94,750 to employees for 4,445 hours worked. 2,350 units were produced during July. What is the direct labor rate variance?
A) $11,000.00 favorable
B) $5,737.50 favorable
C) $5,262.50 favorable
D) $10,525.00 unfavorable
59) Whitman has a direct labor standard of 2 hours per unit of output. Each employee has a standard wage rate of $22.50 per hour. During July, Whitman paid $94,750 to employees for 4,445 hours worked. 2,350 units were produced during July. What is the direct labor efficiency variance?
A) $11,000.00 favorable
B) $5,737.50 favorable
C) $5,262.50 favorable
D) $5,262.50 unfavorable
60) Madrid Co. has a direct labor standard of 4 hours per unit of output. Each employee has a standard wage rate of $11 per hour. During February, Madrid Co. paid $99,500 to employees for 9,150 hours worked. 2,400 units were produced during February. What is the direct labor rate variance?
A) $1,150 favorable
B) $4,950 favorable
C) $6,100 favorable
D) $302 favorable
61) Madrid Co. has a direct labor standard of 4 hours per unit of output. Each employee has a standard wage rate of $11 per hour. During February, Madrid Co. paid $99,500 to employees for 9,150 hours worked. 2,400 units were produced during February. What is the direct labor efficiency variance?
A) $1,150 favorable
B) $4,950 favorable
C) $6,100 favorable
D) $302 favorable
62) Swan Company has a direct labor standard of 15 hours per unit of output. Each employee has a standard wage rate of $14 per hour. During March, employees worked 13,100 hours. The direct labor rate variance was $9,170 favorable, and the direct labor efficiency variance was $15,400 unfavorable. How many units were produced?
A) 873 units
B) 655 units
C) 1,100 units
D) 800 units
63) Swan Company has a direct labor standard of 15 hours per unit of output. Each employee has a standard wage rate of $14 per hour. During March, employees worked 13,100 hours. The direct labor rate variance was $9,170 favorable, and the direct labor efficiency variance was $15,400 unfavorable. What was the actual payroll?
A) $183,400
B) $168,000
C) $174,230
D) $192,570
64) In a standard cost system, overhead is applied per unit by multiplying the ________ overhead rate times the ________ quantity of the cost driver.
A) actual; actual
B) actual; standard
C) standard; standard
D) standard; actual
65) The overall difference between the actual and applied manufacturing overhead is the:
A) over- or underapplied overhead.
B) overhead rate variance.
C) overhead efficiency variance.
D) overhead volume variance.
66) The difference between the actual variable overhead rate and the standard variable overhead rate, multiplied by the actual amount of the cost driver, is the:
A) variable overhead rate variance.
B) variable overhead efficiency variance.
C) variable overhead volume variance.
D) over- or underapplied variance.
67) The difference between the actual cost driver amount and the standard cost driver amount, multiplied by the standard variable overhead rate, is the:
A) variable overhead rate variance.
B) variable overhead efficiency variance.
C) variable overhead volume variance.
D) over- or underapplied variance.
68) Raven applies overhead based on direct labor hours. The variable overhead standard is 2 hours at $11 per hour. During July, Raven spent $116,700 for variable overhead. 8,890 labor hours were used to produce 4,700 units. How much is variable overhead on the flexible budget?
A) $56,400
B) $97,790
C) $103,400
D) $116,700
69) Jupiter Co. applies overhead based on direct labor hours. The variable overhead standard is 4 hours at $12 per hour. During February, Jupiter Co. spent $113,400 for variable overhead. 9,150 labor hours were used to produce 2,400 units. How much is variable overhead on the flexible budget?
A) $28,800
B) $109,800
C) $113,400
D) $115,200
70) Raven applies overhead based on direct labor hours. The variable overhead standard is 2 hours at $11 per hour. During July, Raven spent $116,700 for variable overhead. 8,890 labor hours were used to produce 4,700 units. What is the variable overhead rate variance?
A) $13,300 unfavorable
B) $6,650 unfavorable
C) $18,910 unfavorable
D) $13,300 favorable
71) Raven applies overhead based on direct labor hours. The variable overhead standard is 2 hours at $11 per hour. During July, Raven spent $116,700 for variable overhead. 8,890 labor hours were used to produce 4,700 units. What is the variable overhead efficiency variance?
A) $5,610 favorable
B) $46,090 favorable
C) $18,910 favorable
D) $18,910 unfavorable
72) Jupiter Co. applies overhead based on direct labor hours. The variable overhead standard is 4 hours at $12 per hour. During February, Jupiter Co. spent $113,400 for variable overhead. 9,150 labor hours were used to produce 2,400 units. What is the variable overhead rate variance?
A) $3,600 unfavorable
B) $3,600 favorable
C) $5,400 favorable
D) $1,800 favorable
73) Jupiter Co. applies overhead based on direct labor hours. The variable overhead standard is 4 hours at $12 per hour. During February, Jupiter Co. spent $113,400 for variable overhead. 9,150 labor hours were used to produce 2,400 units. What is the variable overhead efficiency variance?
A) $3,600 unfavorable
B) $3,600 favorable
C) $5,400 favorable
D) $1,800 favorable
74) Jupiter Co. applies overhead based on direct labor hours. The variable overhead standard is 4 hours at $12 per hour. During February, Jupiter Co. spent $113,400 for variable overhead. 9,150 labor hours were used to produce 2,400 units. What is the over- or underapplied variable overhead?
A) $3,600 underapplied
B) $3,600 overapplied
C) $5,400 overapplied
D) $1,800 overapplied
75) Venus Company applies overhead based on direct labor hours. The variable overhead standard is 10 hours at $3.50 per hour. During October, Venus Company spent $157,600 for variable overhead. 47,440 labor hours were used to produce 4,800 units. What is the over- or underapplied variable overhead?
A) $10,400 overapplied
B) $8,440 overapplied
C) $8,440 underapplied
D) $1,960 overapplied
76) Venus Company applies overhead based on direct labor hours. The variable overhead standard is 10 hours at $3.50 per hour. During October, Venus Company spent $157,600 for variable overhead. 47,440 labor hours were used to produce 4,800 units. What is the variable overhead rate variance?
A) $8,440 favorable
B) $1,960 favorable
C) $10,400 favorable
D) $1,960 unfavorable
77) Venus Company applies overhead based on direct labor hours. The variable overhead standard is 10 hours at $3.50 per hour. During October, Venus Company spent $157,600 for variable overhead. 47,440 labor hours were used to produce 4,800 units. What is the variable overhead efficiency variance?
A) $8,440 favorable
B) $1,960 favorable
C) $10,400 favorable
D) $1,960 unfavorable
78) Bonnie Company has a direct labor standard of 15 hours per unit of output. Each employee has a standard wage rate of $14 per hour. The standard variable overhead rate is $10 per hour. During March, employees worked 13,100 hours. The direct labor rate variance was $9,170 favorable, the variable overhead rate variance was $13,100 unfavorable, and the direct labor efficiency variance was $15,400 unfavorable. What is the variable overhead efficiency variance?
A) $13,100 unfavorable
B) $11,000 unfavorable
C) $24,100 unfavorable
D) $11,000 favorable
79) Bonnie Company has a direct labor standard of 15 hours per unit of output. Each employee has a standard wage rate of $14 per hour. The standard variable overhead rate is $10 per hour. During March, employees worked 13,100 hours. The direct labor rate variance was $9,170 favorable, the variable overhead rate variance was $13,100 unfavorable, and the direct labor efficiency variance was $15,400 unfavorable. What is the actual variable overhead?
A) $117,900
B) $131,000
C) $144,100
D) $183,400
80) The difference between the actual fixed manufacturing overhead cost and the budgeted fixed manufacturing overhead cost is the:
A) fixed overhead spending variance.
B) fixed overhead volume variance.
C) fixed overhead rate variance.
D) fixed overhead efficiency variance.
81) Fletcher has budgeted fixed overhead of $135,000 based on budgeted production of 9,000 units. During July, 9,400 units were produced and $142,800 was spent on fixed overhead. What is the fixed overhead spending variance?
A) $7,800 unfavorable
B) $1,800 unfavorable
C) $1,800 favorable
D) $6,000 favorable
82) Tucker Co. has budgeted fixed overhead of $225,000 based on budgeted production of 7,500 units. During February, 7,200 units were produced and $233,400 was spent on fixed overhead. What is the fixed overhead spending variance?
A) $8,400 unfavorable
B) $9,000 unfavorable
C) $17,400 unfavorable
D) $600 favorable
83) Warner Company has budgeted fixed overhead of $225,000 based on budgeted production of 7,500 units. During October, 7,200 units were produced and $236,400 was spent on fixed overhead. What is the fixed overhead spending variance?
A) $11,400 unfavorable
B) $9,000 unfavorable
C) $20,400 unfavorable
D) $20,400 favorable
84) Dill has a fixed overhead spending variance of $3,900 unfavorable. During July, Dill budgeted production of 4,500 units, it actually produced 4,700 units, and it actually spent $71,400 on fixed overhead. How much was budgeted fixed overhead?
A) $67,500
B) $68,362
C) $71,400
D) $75,300
85) Avon Co. has a favorable fixed overhead spending variance of $2,800. During February, Avon budgeted to produce 2,500 units, it actually produced 2,400 units, and it budgeted $75,000 for fixed overhead. How much was actually spent on fixed overhead?
A) $72,000
B) $72,200
C) $75,000
D) $77,800
86) The fixed overhead volume variance is the difference between:
A) Actual fixed overhead and budgeted fixed overhead.
B) Actual fixed overhead and applied fixed overhead.
C) Applied fixed overhead and budgeted fixed overhead.
D) Actual fixed overhead and the standard fixed overhead rate times the actual cost driver.
87) The difference between the actual volume and the budgeted volume, multiplied by the fixed overhead rate based on budgeted volume, is the:
A) fixed overhead spending variance.
B) fixed overhead price variance.
C) fixed overhead efficiency variance.
D) fixed overhead volume variance.
88) A fixed overhead rate based on ________ highlights for management attention the cost of unutilized capacity.
A) budgeted production
B) practical capacity
C) utilized capacity
D) actual production
89) The difference between budgeted volume and practical capacity, multiplied by the fixed overhead rate, is the:
A) expected (planned) capacity variance.
B) unexpected (unplanned) capacity variance.
C) total capacity variance.
D) volume variance.
90) The difference between actual volume and budgeted production, multiplied by the fixed overhead rate based on practical capacity, is the:
A) expected (planned) capacity variance.
B) unexpected (unplanned) capacity variance.
C) total capacity variance.
D) volume variance.
91) When the company produces more units than expected, the unexpected capacity variance will be
A) favorable, because production is greater than capacity.
B) unfavorable, because production is less than practical capacity.
C) favorable, because production is greater than expected.
D) unfavorable, because the volume variance is unfavorable.
92) Beech has budgeted fixed overhead of $202,500 based on budgeted production of 13,500 units. During July, 14,100 units were produced and $214,200 was spent on fixed overhead. What is the budgeted fixed overhead rate?
A) $14.36
B) $15.00
C) $15.19
D) $15.89
93) Beech has budgeted fixed overhead of $202,500 based on budgeted production of 13,500 units. During July, 14,100 units were produced and $214,200 was spent on fixed overhead. What is the fixed overhead volume variance?
A) $11,700 unfavorable
B) $1,800 unfavorable
C) $1,800 favorable
D) $9,000 favorable
94) Warner Co. has budgeted fixed overhead of $150,000. Practical capacity is 6,000 units, and budgeted production is 5,000 units. During February, 4,800 units were produced and $155,600 was spent on fixed overhead. What is the budgeted fixed overhead rate based on practical capacity?
A) $31.12
B) $31.25
C) $30.00
D) $25.00
95) Warner Co. has budgeted fixed overhead of $150,000. Practical capacity is 6,000 units, and budgeted production is 5,000 units. During February, 4,800 units were produced and $155,600 was spent on fixed overhead. What is the expected (planned) capacity variance?
A) $5,600 unfavorable
B) $25,000 unfavorable
C) $30,000 unfavorable
D) $35,600 unfavorable
96) Warner Co. has budgeted fixed overhead of $150,000. Practical capacity is 6,000 units, and budgeted production is 5,000 units. During February, 4,800 units were produced and $155,600 was spent on fixed overhead. What is the unexpected (unplanned) capacity variance?
A) $5,000 unfavorable
B) $5,600 unfavorable
C) $25,000 unfavorable
D) $30,000 unfavorable
97) Warner Co. has budgeted fixed overhead of $150,000. Practical capacity is 6,000 units, and budgeted production is 5,000 units. During February, 4,800 units were produced and $155,600 was spent on fixed overhead. What is the total fixed overhead capacity variance?
A) $5,000 unfavorable
B) $5,600 unfavorable
C) $25,000 unfavorable
D) $30,000 unfavorable
98) In a standard cost system, an unfavorable variance will appear as:
A) a credit entry.
B) a debit entry.
C) either a debit or a credit entry.
D) variances do not affect journal entries.
99) In a standard cost system, a favorable variance will appear as:
A) a credit entry.
B) a debit entry.
C) either a debit or a credit entry.
D) variances do not affect journal entries.
100) In a standard cost system, the initial debit to an inventory account is based on:
A) standard cost rather than actual cost.
B) actual cost rather than standard cost.
C) actual cost less the standard cost.
D) standard cost less the actual cost.
101) At the end of the accounting period, all variances are closed to the ________ account.
A) Work in Process
B) Finished Goods
C) Cost of Goods Manufactured
D) Cost of Goods Sold
102) Melrose Inc. uses standard costing. Last period, it spent $145,000 for labor. The direct labor rate variance was $5,000 favorable, and the direct labor efficiency variance was $6,000 unfavorable. In the journal entry to record the use of direct labor, the amount debited to Cost of Goods Sold would be:
A) $144,000.
B) $145,000.
C) $150,000.
D) $151,000.
103) Melrose Inc. uses standard costing. Last period, its flexible budget for labor was $144,000. The direct labor rate variance was $5,000 favorable, and the direct labor efficiency variance was $6,000 unfavorable. In the journal entry to record the use of direct labor, the amount credited to wages payable would be:
A) $144,000.
B) $145,000.
C) $150,000.
D) $151,000.
104) Tulip Inc. uses standard costing, and its manufacturing standards are as follows: 2 pounds of materials at $13 per pound, and 3 hours of labor at $10 per hour. Budgeted production last period was 5,000 units, and actual production was 4,800 units. Last period, Tulip purchased and used 9,800 pounds of materials for $135,000, and used 15,000 labor hours, costing $145,000. What is the journal entry to record the purchase of materials?
A)
|
|
|
|
|
Direct Materials Inventory | $ | 127,400 |
|
|
Direct Materials Price Variance | $ | 7,600 |
|
|
Accounts Payable |
|
| $ | 135,000 |
B)
|
|
|
|
|
Direct Materials Inventory | $ | 135,000 |
|
|
Direct Materials Price Variance |
|
| $ | 7,600 |
Accounts Payable |
|
| $ | 127,400 |
C)
|
|
|
|
|
Direct Materials Inventory | $ | 135,000 |
|
|
Accounts Payable |
|
| $ | 135,000 |
D)
|
|
|
|
|
Direct Materials Inventory | $ | 127,400 |
|
|
Accounts Payable |
|
| $ | 127,400 |
105) Tulip Inc. uses standard costing, and its manufacturing standards are as follows: 2 pounds of materials at $13 per pound, and 3 hours of labor at $10 per hour. Budgeted production last period was 5,000 units, and actual production and sales was 4,800 units. Last period, Tulip purchased and used 9,800 pounds of materials for $135,000, and used 15,000 labor hours, costing $145,000. What is the journal entry to record the transfer of materials to the Cost of Goods Sold account?
A)
|
|
|
|
|
Cost of Goods Sold | $ | 135,000 |
|
|
Direct Materials Inventory |
|
| $ | 135,000 |
B)
|
|
|
|
|
Cost of Goods Sold | $ | 124,800 |
|
|
Direct Materials Quantity Variance | $ | 2,600 |
|
|
Direct Materials Inventory |
|
| $ | 127,400 |
C)
|
|
|
|
|
Cost of Goods Sold | $ | 127,400 |
|
|
Direct Materials Quantity Variance |
|
| $ | 2,600 |
Direct Materials Inventory |
|
| $ | 124,800 |
D)
|
|
|
|
|
Cost of Goods Sold | $ | 124,800 |
|
|
Direct Materials Inventory |
|
| $ | 124,800 |
106) Tulip Inc. uses standard costing, and its manufacturing standards are as follows: 2 pounds of materials at $13 per pound, and 3 hours of labor at $10 per hour. Budgeted production last period was 5,000 units, and actual production and sales was 4,800 units. Last period, Tulip purchased and used 9,800 pounds of materials for $135,000, and used 15,000 labor hours, costing $145,000. What is the journal entry to record direct labor costs to the Cost of Goods Sold account?
A)
|
|
|
|
|
Cost of Goods Sold | $ | 144,000 |
|
|
Direct Labor Rate Variance | $ | 6,000 |
|
|
Direct Labor Efficiency Variance |
|
| $ | 5,000 |
Wages Payable |
|
| $ | 145,000 |
B)
|
|
|
|
|
Cost of Goods Sold | $ | 144,000 |
|
|
Wages Payable |
|
| $ | 144,000 |
C)
|
|
|
|
|
Cost of Goods Sold | $ | 144,000 |
|
|
Direct Labor Efficiency Variance | $ | 6,000 |
|
|
Direct Labor Rate Variance |
|
| $ | 5,000 |
Wages Payable |
|
| $ | 145,000 |
D)
|
|
|
|
|
Cost of Goods Sold | $ | 145,000 |
|
|
Wages Payable |
|
| $ | 145,000 |
107) Blossom, Inc. prepared the following master budget items for July:
|
|
|
|
Production and sales |
| 24,000 | Units |
Variable manufacturing costs: |
|
|
|
Direct materials | $ | 36,000 |
|
Direct labor | $ | 48,000 |
|
Variable manufacturing overhead | $ | 60,000 |
|
Fixed manufacturing costs | $ | 100,000 |
|
Total manufacturing costs | $ | 244,000 |
|
During July, Blossom actually sold 36,000 units. Prepare a flexible budget for Blossom based on actual sales.
108) Regent Corp. uses a standard cost system to account for the costs of its one product. Materials standards are 3 pounds of material at $14 per pound, and labor standards are 4 hours of labor at a standard wage rate of $11. During July Regent Corp. produced 3,300 units. Materials purchased and used totaled 10,100 pounds at a total cost of $142,650. Payroll totaled $146,780 for 13,150 hours worked. Calculate the:
a. direct materials price variance.
b. direct materials quantity variance.
109) Lakewood Inc. uses a standard cost system. Materials standards are 7 components per widget at $12 per component. During August, Lakewood Inc. purchased 64,500 components for $768,750, using the components to produce 8,600 widgets. Calculate the:
a. direct materials price variance.
b. direct materials quantity variance.
110) Delmar Inc. uses a standard cost system. Labor standards are 2 hours per widget at $13.30 per hour. During August, Delmar Inc. paid its workers $226,338 for 16,800 hours. Delmar Inc. produced 8,600 widgets during August. Calculate the:
a. direct labor rate variance.
b. direct labor efficiency variance.
111) Sage Corp. uses a standard cost system to account for the costs of its one product. Standards are 3 pounds of materials at $14 per pound and 4 hours of labor at a standard wage rate of $12. During July, Sage Corp.produced 3,300 units. Materials purchased and used totaled 10,100 pounds at a total cost of $142,650. Payroll totaled $146,780 for 13,150 hours worked. Calculate the:
a. direct labor rate variance.
b. direct labor efficiency variance.
112) Basil Tooling uses a standard cost system to account for the costs of its one product. Standards are 4 sheets of ½-inch steel at $110 per sheet and 14 hours of labor at a standard wage rate of $13. During July, Basil Tooling produced 600 units. Materials purchased and used totaled 2,540 sheets at a total cost of $268,850. Payroll totaled $112,930 for 8,770 hours worked. Calculate the:
a. direct materials price variance.
b. direct materials quantity variance.
c. direct labor rate variance.
d. direct labor efficiency variance.
113) Ferry Chemical uses a standard cost system to account for the costs of its production of Chemical X. Standards are 1.4 gallons of materials at $105 per gallon and 10 hours of labor at a standard wage rate of $12. During September, Ferry Chemical produced 2,600 gallons of Chemical X. Ferry Chemical purchased and used totaled 3,560 gallons at a total cost of $381,180. Payroll totaled $302,730 for 25,430 hours worked. Calculate the:
a. direct materials price variance.
b. direct materials quantity variance.
c. direct labor rate variance.
d. direct labor efficiency variance.
114) Wilson Manufacturing has provided you with the following variances for the month of March:
|
|
|
|
Direct materials price | $ | 2,250 | Favorable |
Direct materials quantity | $ | 4,000 | Unfavorable |
Direct labor rate | $ | 3,200 | Unfavorable |
Direct labor efficiency | $ | 8,800 | Unfavorable |
Wilson Manufacturing produced 6,200 units during the month of March; 6,000 units were budgeted. Direct Materials Inventory did not change over the period. You have also been provided the following partial information:
Standards: |
| Per unit | |
Direct materials | 4 lb @ $5/lb |
| 20.00 |
Direct labor | 2 hours @ $11/hour |
| 22.00 |
Calculate the:
a. pounds of direct materials (purchased = used).
b. actual direct labor hours.
c. actual labor cost in dollars.
d. actual spending for materials.
115) Branch Corp. uses a standard cost system to account for the costs of its one product. Variable overhead is applied using direct labor hours. Standards allowed for each unit are 3 hours of labor at a variable overhead rate of $10. During November, Branch Corp. produced 2,300 units. Payroll totaled $97,780 for 7,140 hours worked. Variable overhead incurred totaled $73,230. Calculate the:
a. variable overhead rate variance.
b. variable overhead efficiency variance.
116) Wisteria Co. produces snowboards and uses a standard cost system. Variable overhead is applied using direct labor hours. Standards allowed for each unit are 5.2 hours of labor at a standard variable overhead rate of $6.60. During December, Wisteria Co. produced 3,100 snowboards. Materials purchases totaled 20,800 pounds at a total cost of $224,780. Materials usage totaled 20,970 pounds. Payroll totaled $183,660 for 17,140 hours worked. Variable overhead incurred totaled $109,140. Calculate the:
a. variable overhead rate variance.
b. variable overhead efficiency variance.
117) Interpreting the variances is a key part of managerial accounting. For each scenario described below, indicate whether the result would be favorable or unfavorable.
Scenario | Favorable | Unfavorable |
a. The production manager finds a new supplier of direct materials. Its prices are 30% less than the current supplier. Is the effect on the direct materials price variance favorable or unfavorable? | ||
b. The standard direct materials quantity per product is 2 units. In training new personnel, additional material is often wasted. For his first two-week period, a new employee used 3 units per product. Is the direct materials quantity variance favorable or unfavorable? | ||
c. A new collective bargaining agreement among union employees guarantees a wage increase of 5%. What would the effect on the direct labor rate variance be? | ||
d. A new hiring manager prioritizes experience over cost when hiring employees. As a result, the experienced hires produce goods more efficiently than inexperienced counterparts. What effect does this have on the direct labor efficiency variance? | ||
e. Consider the same facts as above. What effect do you think this would have on the direct labor rate variance? |
Now consider each scenario with sustainability metrics in mind. How might the answers change?
Scenario | Favorable | Unfavorable |
a. The production manager finds a new supplier of direct materials. Its prices are 30% less than the current supplier. Is the effect on the direct materials price variance favorable or unfavorable? | ||
b. The standard direct materials quantity per product is 2 units. In training new personnel, additional material is often wasted. For his first two-week period, a new employee used 3 units per product. Is the direct materials quantity variance favorable or unfavorable? | ||
c. A new collective bargaining agreement among union employees guarantees a wage increase of 5%. What would the effect on the direct labor rate variance be? | ||
d. A new hiring manager prioritizes experience over cost when hiring employees. As a result, the experienced hires produce goods more efficiently than inexperienced counterparts. What effect does this have on the direct labor efficiency variance? | ||
e. Consider the same facts as above. What effect do you think this would have on the direct labor rate variance? |
118) Willow Inc. has provided the following information:
Standards: |
| Per unit | |
Direct materials | 10 lb @ $2.60/lb | $ | 26.00 |
Direct labor | 2 hours @ $22.50/hour |
| 45.00 |
Variable overhead | 2 hours @ $18/hour |
| 36.00 |
Fixed overhead |
|
| 25.00 |
Total |
| $ | 132.00 |
Budgeted production = 7,000 units
Actual results |
|
|
| |
Materials | 74,950 | lbs | $ | 192,200 |
Direct labor | 15,530 | actual hours | $ | 339,500 |
Variable overhead |
|
| $ | 286,600 |
Fixed overhead |
|
| $ | 171,400 |
Units produced | 7,400 | units |
|
|
Calculate the:
a. direct materials price variance.
b. direct materials quantity variance.
c. direct labor rate variance.
d. direct labor efficiency variance.
e. variable overhead rate variance.
f. variable overhead efficiency variance.
g. fixed overhead spending variance.
119) Cascade Inc. has provided the following information:
Standards: |
| Per unit | |
Direct materials | 5 lb @ $3.50/lb | $ | 17.50 |
Direct labor | 2 hours @ $12/hour |
| 24.00 |
Variable overhead | 2 hours @ $10/hour |
| 20.00 |
Fixed overhead |
|
| 15.00 |
Total |
| $ | 76.50 |
Budgeted production = 5,000 units
Actual results |
|
|
| |
Direct materials | 30,100 | lbs | $ | 107,470 |
Direct labor | 11,120 | actual hours | $ | 139,600 |
Variable overhead |
|
| $ | 108,210 |
Fixed overhead |
|
| $ | 76,300 |
Units produced | 5,400 | units |
|
|
Calculate the:
a. direct materials price variance.
b. direct materials quantity variance.
c. direct labor rate variance.
d. direct labor efficiency variance.
e. variable overhead rate variance.
f. variable overhead efficiency variance.
g. fixed overhead spending variance.
120) Benjamin Inc. uses a standard cost system and has the following information regarding the labor and overhead used in the production of widgets. Standard labor input is 2 hours per unit. The variable overhead rate is $8 per hour; fixed overhead is budgeted to be $100,000 on budgeted production of 8,000 widgets. During August, Benjamin Inc. paid its workers $161,670 for 16,800 hours. Actual variable overhead incurred totaled $133,560, and actual fixed overhead totaled $98,956. Benjamin Inc. produced 8,600 widgets during August. Calculate the:
a. variable overhead rate variance.
b. variable overhead efficiency variance.
c. fixed overhead spending variance.
121) Wharton Tooling uses a standard cost system to account for the costs of its one product. Variable overhead standards are 14 hours of labor at a standard rate of $9. Fixed overhead is applied at a rate of $150 per unit, based on budgeted production of 650 units. During July, Wharton Tooling produced 600 units. Payroll totaled $112,930 for 8,770 hours worked. Overhead incurred was $77,490 variable and $98,750 fixed. Calculate the:
a. variable overhead rate variance.
b. variable overhead efficiency variance.
c. fixed overhead spending variance.
122) Patton Corp. uses a standard cost system to account for the costs of its one product. Budgeted fixed overhead is $75,000, budgeted production is 2,500 per month, and practical capacity is 3,000 units. During November, Patton produced 2,400 units. Fixed overhead incurred totaled $70,310.
Assume Patton calculates its fixed overhead rate based on budgeted production.
a. What is the fixed overhead rate?
b. What is the fixed overhead volume variance?
c. By how much was fixed overhead over- or underapplied?
Now assume Patton calculates its fixed overhead rate based on practical capacity.
d. What is the fixed overhead rate?
e. What is the expected (planned) capacity variance?
f. What is the unexpected (unplanned) capacity variance?
g. By how much was fixed overhead over- or underapplied?
123) Pearl Co. produces pearl necklaces and uses a standard cost system. Fixed overhead is applied to production at a rate of $34 per unit, based on budgeted production of 3,000 per month. During December, Pearl produced 3,100 pearl necklaces. Fixed overhead incurred totaled $114,940. Calculate the:
a. fixed overhead spending variance.
b. fixed overhead volume variance.
c. over- or underapplied fixed overhead.
124) Regency Corp. uses a standard cost system to account for the costs of its one product. Fixed overhead is applied to production at a rate of $27.50 per unit, based on budgeted production of 2,500 per month. During November, Regency produced 2,300 units. Fixed overhead incurred totaled $70,310. Calculate the:
a. fixed overhead spending variance.
b. fixed overhead volume variance.
c. over- or underapplied fixed overhead.
125) Wallace Inc. uses a standard cost system and has provided the following information:
Standards: |
| Per unit | |
Direct materials | 10 lb @ $2.50/lb | $ | 25.00 |
Direct labor | 2 hours @ $22/hour |
| 44.00 |
Variable overhead | 2 hours @ $16/hour |
| 32.00 |
Fixed overhead |
|
| 30.00 |
Total |
| $ | 131.00 |
Budgeted production = 6,000 units
Actual results |
|
|
| |||
Materials purchased | 64,950 | lbs | $ | 160,200 | ||
Materials used | 59,600 | lbs |
|
| ||
Direct labor | 11,530 | actual hours | $ | 259,500 | ||
Variable overhead |
|
| $ | 186,600 | ||
Fixed overhead |
|
| $ | 181,400 | ||
Units produced and sold | 5,900 | units |
|
| ||
Prepare the journal entries to record the following transactions. Assume Wallace Inc. does not maintain inventories other than direct materials (production is equal to sales).
a. Purchase of direct materials on account
b. Usage of direct materials
c. Incurrence of direct labor
d. Incurrence and application of variable overhead
e. Incurrence and application of fixed overhead
126) Viking Corp. uses a standard cost system to account for the costs of its product. (It only has one product.) Materials standards are 13 pounds of material at $1.40 per pound and 3 hours of labor at a standard wage rate of $14. During November, Viking Corp. produced and sold 2,300 units. Materials purchases totaled 30,100 pounds at a total cost of $42,650. Materials usage totaled 29,970 pounds. Payroll totaled $97,780 for 7,140 hours worked. Viking Corp. does not maintain inventories other than direct materials. Prepare journal entries to record the following transactions.
a. Direct materials purchase
b. Direct materials usage
c. Direct labor incurred
127) Patrick Co. produces computer desks and uses a standard cost system. Materials standards are 6.75 pounds of material at $10.40 per pound and 5.2 hours of labor at a standard wage rate of $10.50. During December, Patrick Co. produced and sold 3,100 desks. Materials purchases totaled 20,800 pounds at a total cost of $224,780. Materials usage totaled 20,970 pounds. Payroll totaled $183,660 for 17,140 hours worked. Patrick Co. does not maintain inventories other than direct materials. Prepare journal entries to record the following transactions.
a. Direct materials purchase
b. Direct materials usage
c. Direct labor incurred