Test Bank Chapter 17 Additional Topics in Variance Analysis

Fundamentals of Cost Accounting, 6e (Lanen)

Chapter 17 Additional Topics in Variance Analysis

1) The variable production cost variances are computed using the units produced instead of the units sold.

2) If variances are not prorated at the end of the accounting period, they are closed to the Cost of Goods Sold.

3) If the number of units produced exceeds the number of units sold, the full-absorption operating profit will be lower than variable costing operating profit.

4) The direct materials price variance is based on the quantity of materials purchased when the quantity purchased is different from the quantity used.

5) The market share variance is more controllable by the marketing department than the industry volume variance.

6) The industry volume variance is the portion of the sales activity variance due to a change in the company's proportion of sales in the markets in which they operate.

7) An increase in an industry's volume and a decrease in a company's market share implies that the company's sales price variance is unfavorable.

8) The general approach in variance analysis is to separate the variance into components based on a budgeting formula.

9) If a company sells two products, it is possible for both products to have a favorable sales mix variance.

10) The sales quantity variance is the same as the sales activity variance on a flexible budget performance report.

11) If a company sells two products, it is possible for both products to have an unfavorable sales quantity variance.

12) The production yield variance is conceptually the same as the sales quantity variance.

13) The production mix variance measures the impact of substituting one material for another material during the production process.

14) The direct labor yield variance is unfavorable when the total hours worked during a period are less than the total standard hours allowed for the actual number of units produced.

15) The basic variance analysis framework used for manufacturing companies can also be used in service organizations.

16) Labor variances are more important than material variances in service organizations.

17) Professional accounting firms could not compute a labor mix and labor yield variance for their auditors because labor in accounting is not substitutable.

18) Output is usually defined as sales units in merchandising, but service organizations use measures of activity units, like patient days.

19) Two important characteristics to consider when deciding how many variances to review are is the impact of the variance and the extent to which the variance can be controlled.

20) The only variances that should be investigated are those for which the expected benefits of correction exceed the costs of investigating and correcting.

21) Some variances are the result of accounting errors and omissions, including timing differences.

22) Some variances are the result of standards that are inaccurate or do not reflect the current production process.

23) Which of the following statements is(are) true?

(A) If variances are prorated at the end of the accounting period, an unfavorable direct materials price variance will, when prorated, increase the value of the Finished Goods Inventory.

(B) Insignificant variances are not generally prorated at the end of the accounting period and are closed to the Cost of Goods Sold.

A) Only A is true.

B) Only B is true.

C) Both of these are true.

D) Neither of these is true.

24) Standards are estimates and should be based on:

A) perfect performance.

B) an average of past conditions.

C) the most likely level of performance.

D) current conditions.

25) In a standard costing system, overhead is applied to production on a basis of:

A) the denominator hours chosen for the period.

B) the budgeted hours for the normal production level of activity.

C) the actual hours required to complete the output of the period.

D) the standard hours allowed to complete the output of the period.

26) One advantage of using a standard costing system is that it: 

A) makes the record keeping process more complex and difficult.

B) never requires updating if standard costs have been carefully determined.

C) reduces the amount of information available to a manager.

D) provides managers with information that is useful in making decisions to improve performance.

27) Which of the following statements is(are) false?

(A) All variances should be prorated to inventories and cost of goods sold at the end of the accounting period.

(B) If the number of units produced exceeds the number of units sold, the full-absorption operating profit will be lower than variable costing operating profit.

A) Only A is false.

B) Only B is false.

C) Both of these are false.

D) Neither of these is false.

28) If raw materials are carried in the Materials Inventory at standard cost, then it is reasonable to assume that the:

A) price variance is recognized when materials are purchased.

B) price variance is recognized when materials are placed into production.

C) company does not follow generally accepted accounting principles.

D) efficiency variance is recognized when the materials are purchased.

29) Ingredient A12H is a material used to make Calvin Corporation's major product. The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output. Data concerning the compound for October appear below:

The material was purchased on account and Calvin Corporation uses a standard costing system.

The debit to the Materials Inventory account for October would total:

A) $52,900.

B) $52,440.

C) $48,760.

D) $53,130.

30) Ingredient A12H is a material used to make Calvin Corporation's major product. The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output. Data concerning the compound for October appear below:

The material was purchased on account and Calvin Corporation uses a standard costing system.

The credit to the Materials Inventory account for October would total:

A) $52,440.

B) $48,760.

C) $52,900.

D) $53,130.

31) Ingredient A12H is a material used to make Calvin Corporation's major product. The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output. Data concerning the compound for October appear below:

The material was purchased on account and Calvin Corporation uses a standard costing system.

The Material Price Variance for October would be recorded as a:  

A) debit of $230.

B) credit of $212.

C) debit of $212.

D) credit of $230.

32) Ingredient A12H is a material used to make Calvin Corporation's major product. The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output. Data concerning the compound for October appear below:

The material was purchased on account and Calvin Corporation uses a standard costing system.

The Material Efficiency Variance for October would be recorded as a:

A) credit of $3,680.

B) debit of $4,140.

C) credit of $4,140.

D) debit of $3,680.

33) Ingredient B4376 is used to make Razor Corporation's major product. The standard cost of Ingredient B4376 is $24.50 per ounce and the standard quantity is 6.1 ounces per unit of output. In the most recent month, 5,030 ounces of the compound were used to make 700 units of the output. When recording the use of materials in production under a standard costing system, Materials Inventory would be:

A) credited for $123,235.

B) debited for $123,235.

C) debited for $104,615.

D) credited for $104,615.

34) Barium Corporation has provided the following data concerning its most important raw material, Compound XYY2:

When recording the use of materials in production under a standard costing system, Materials Inventory would be:

A) debited for $55,930.

B) debited for $54,264.

C) credited for $55,930.

D) credited for $54,264.

35) When the actual amount of a material used in production is greater than the standard amount allowed for the actual output, the journal entry would include:

A) debit to Materials Inventory; credit to Materials Efficiency Variance.

B) debit to Work-In-Process Inventory; credit to Materials Efficiency Variance.

C) debit to Materials Inventory; debit to Materials Efficiency Variance.

D) debit to Work-In-Process Inventory; debit to Materials Efficiency Variance.

36) The Fantasy Gifts Company, a maker of Holiday novelties, needs your help immediately. The company's accountant resigned without leaving adequate records or explanations for what she did. In reviewing the records, you find the following information for May:

You find a copy of the budget which shows that materials were budgeted at $0.60/unit. You know that the material price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers, which indicate the following:

What was the total actual cost of the direct materials purchased during May?

A) $9,000.

B) $11,800.

C) $12,000.

D) $12,200.

37) The Fantasy Gifts Company, a maker of Holiday novelties, needs your help immediately. The company's accountant resigned without leaving adequate records or explanations for what she did. In reviewing the records, you find the following information for May:

You find a copy of the budget which shows that materials were budgeted at $0.60/unit. You know that the material price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers, which indicate the following:

What was the total standard cost of direct materials purchased during May?

A) $9,150.

B) $11,800.

C) $12,000.

D) $12,200.

38) The Fantasy Gifts Company, a maker of Holiday novelties, needs your help immediately. The company's accountant resigned without leaving adequate records or explanations for what she did. In reviewing the records, you find the following information for May:

You find a copy of the budget which shows that materials were budgeted at $0.60/unit. You know that the material price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers, which indicate the following:

What was the total standard cost of direct materials purchased during May?

A) $8,260.

B) $8,400.

C) $9,440.

D) $9,600.

39) Which of the following sales variances is further analyzed into the market share and industry volume variances?

A) Quantity.

B) Efficiency.

C) Mix.

D) Activity.

40) Which of the following statements is (are) true? 

(A)The market share variance is more controllable by the marketing department than the industry volume variance.

(B)The industry volume variance is the portion of the sales activity variance due to a change in the company's proportion of sales in the markets in which they operate.

A) Only A is true.

B) Only B is true.

C) Both of these are true.

D) Neither of these is true.

41) The sales activity variance is equal to the sum of the market share variance and the:

A) selling price variance.

B) industry volume variance.

C) sales quantity variance.

D) sales mix variance.

42) Using the abbreviations listed below, what is the formula for the industry volume variance?

AMS = actual market share

BMS = budgeted market share

BCM = budgeted contribution margin per unit

ACM = actual contribution margin per unit

ATM = actual total market

BTM = budgeted total market

A) (ATM − BTM) (BMS) (ACM)

B) (ATM – BTM) (BMS) (BCM)

C) (AMS – BMS) (ATM) (ACM)

D) (AMS – BMS) (ATM) (BCM)

43) Using the abbreviations listed below, what is the market share variance?

AMS = actual market share

BMS = budgeted market share

BCM = budgeted contribution margin per unit

ACM = actual contribution margin per unit

ATM = actual total market

BTM = budgeted total market

A) (ATM − BTM) (BMS) (ACM)

B) (ATM − BTM) (BMS) (BCM)

C) (AMS −BMS) (ATM) (ACM)

D) (AMS − BMS) (ATM) (BCM)

44) The budget for a given cost during a given period was $80,000. The actual cost for the period was $72,000. Considering these facts, the plant manager has done a better-than-expected job in controlling the cost if: (CPA adapted)

A) the cost is variable and actual production was 90% of budgeted production.

B) the cost is variable and actual production equals budgeted production.

C) the cost is variable and actual production was 80% of budgeted production.

D) the cost is a discretionary fixed cost and actual production equals budgeted production.

45) The exhibit below reflects a summary of performance for a single item of a retail store's inventory for the month ended April 30: (CIA adapted)

The sales activity variance is:

A) $20,000 favorable.

B) $20,000 unfavorable.

C) $11,000 favorable.

D) $12,000 unfavorable.

46) Danner Fashions sells a line of women's dresses. Danner's performance report for November is shown below: (CMA adapted)

The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

The effect of the sales activity variance on the contribution margin for November is:

A) $30,000 unfavorable.

B) $18,000 unfavorable.

C) $20,000 unfavorable.

D) $15,000 unfavorable.

47) Danner Fashions sells a line of women's dresses. Danner's performance report for November is shown below: (CMA adapted)

The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

The sales price variance for November is:

A) $30,000 unfavorable.

B) $18,000 unfavorable.

C) $20,000 unfavorable.

D) $15,000 unfavorable.

48) Danner Fashions sells a line of women's dresses. Danner's performance report for November is shown below: (CMA adapted)

The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

The variable costs flexible budget variance for November is:

A) $5,000 favorable.

B) $5,000 unfavorable.

C) $4,000 favorable.

D) $4,000 unfavorable.

49) Danner Fashions sells a line of women's dresses. Danner's performance report for November is shown below: (CMA adapted)

The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

What additional information is needed for Danner to calculate the dollar impact of a change in market share on operating income for November? (CMA adapted)

A) Danner's budgeted market share and the budgeted total market size.

B) Danner's budgeted market share, the budgeted total market size, and average market selling price.

C) Danner's budgeted market share and the actual total market size.

D) Danner's actual market share and the actual total market size.

50) For a company that produces more than one product, the sales activity variance can be divided into which two of the following additional variances? (CMA adapted)

A) Sales price variance and flexible budget variance.

B) Sales mix variance and sales price variance.

C) Sales efficiency variance and sales price variance.

D) Sales quantity variance and sales mix variance.

51) Actual and budgeted information about the sales of a product are presented below for June: (CIA adapted)

The sales price variance for June was:

A) $8,000 favorable.

B) $8,000 unfavorable.

C) $10,000 unfavorable.

D) $10,500 unfavorable.

52) Which of the following income statement items is analyzed using the sales mix and the sales quantity variances?

A) Operating expenses.

B) Cost of goods sold.

C) Gross margin.

D) Contribution margin.

53) The sales mix variance would be:

A) favorable when a company sells relatively fewer of the products that have contribution margins lower than average.

B) favorable when a company sells relatively more of the products that have contribution margins higher than average.

C) unfavorable when a company sells relatively fewer of the products that have selling prices higher than average. 

D) unfavorable when a company sells more of the products that have selling prices lower than average.

54) The sales quantity variance would be favorable when a company sells:

A) relatively fewer of the products bearing contribution margins lower than average.

B) relatively more of the products bearing contribution margins higher than average.

C) more total units than budgeted, holding the sales mix constant.

D) less total units than budgeted, holding the sales mix constant.

55) The Morton Company gathered the following information for the year.

What is the total sales mix variance?

A) $705,600.

B) $403,200.

C) $302,400.

D) $100,800.

56) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

What is the sales activity variance for the basic model?

A) $1,280,000.

B) $1,600,000.

C) $11,200,000.

D) $12,800,000.

57) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

Is the sales activity variance for the basic model favorable or unfavorable?

A) Favorable.

B) Unfavorable.

58) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

What is the sales activity variance for the deluxe model?

A) $400,000.

B) $800,000.

C) $1,600,000.

D) $2,400,000.

59) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

Is the sales activity variance for the deluxe model favorable or unfavorable?

A) Favorable.

B) Unfavorable.

60) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

What is the sales mix variance for the basic model?

A) $256,000.

B) $1,344,000.

C) $1,600,000.

D) $2,520,000.

61) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

Is the sales mix variance for the basic model favorable or unfavorable?

A) Favorable.

B) Unfavorable.

62) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

What is the sales quantity variance for the basic model?

A) $120,000.

B) $256,000.

C) $1,344,000.

D) $1,600,000.

63) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

Is the sales quantity variance for the basic model favorable or unfavorable?

A) Favorable.

B) Unfavorable.

64) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

What is the sales mix variance for the deluxe model?  

A) $1,176,000.

B) $1,344,000.

C) $2,400,000.

D) $2,520,000.

65) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

Is the sales mix variance for the deluxe model favorable or unfavorable?

A) Favorable.

B) Unfavorable.

66) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

What is the sales quantity variance for the deluxe model?

A) $120,000.

B) $256,000.

C) $1,344,000.

D) $1,600,000.

67) A machine distributor sells two models, basic and deluxe. The following information relates to its master budget.

Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for both models.

Is the sales quantity variance for the basic model favorable or unfavorable?

A) Favorable.

B) Unfavorable.

68) The Vargas Company had the following expectations for the year:

What is Vargas' industry volume variance?

A) $37,296.88.

B) $40,906.25.

C) $35,700.00.

D) $32,550.00.

69) The Vargas Company had the following expectations for the year:

Is the industry volume variance favorable or unfavorable?  

A) Unfavorable.

B) Favorable.

70) The next year's budget for Trend, Inc., a multi-product company, is given below:

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Trend, Inc. analyzes the effects its sales variances have on the profitability of the company.

What is the total sales price variance?

A) $22,203.50.

B) $28,442.50.

C) $50,646.50.

D) $79,088.50.

71) The next year's budget for Trend, Inc., a multi-product company, is given below:

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Trend, Inc. analyzes the effects its sales variances have on the profitability of the company.

Is the total sales price variance favorable or unfavorable?

A) Favorable.

B) Unfavorable.

72) The next year's budget for Trend, Inc., a multi-product company, is given below:

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Trend, Inc. analyzes the effects its sales variances have on the profitability of the company.

What is the total sales mix variance?

A) $12,478.00.

B) $20,815.00.

C) $33,915.00.

D) $40,553.50.

73) The next year's budget for Trend, Inc., a multi-product company, is given below:

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Trend, Inc. analyzes the effects its sales variances have on the profitability of the company.

Is the total sales mix variance favorable or unfavorable?

A) Favorable.

B) Unfavorable.

74) The next year's budget for Trend, Inc., a multi-product company, is given below:

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Trend, Inc. analyzes the effects its sales variances have on the profitability of the company.

What is the total sales quantity variance?

A) $3,570.00.

B) $20,815.00.

C) $33,915.00.

D) $40,553.50.

75) The next year's budget for Trend, Inc., a multi-product company, is given below:

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Trend, Inc. analyzes the effects its sales variances have on the profitability of the company.

Is the total sales quantity variance favorable or unfavorable?

A) Favorable

B) Unfavorable

76) A manufacturer of industrial equipment has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

The following data pertain to operations for the most recent period:

What is the predetermined overhead rate to the nearest cent?

A) $16.97.

B) $17.25.

C) $16.59.

D) $17.65.

77) A manufacturer of industrial equipment has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

The following data pertain to operations for the most recent period:

How much overhead was applied to products during the period to the nearest dollar?

A) $44,712.

B) $44,125.

C) $43,125.

D) $44,850.

78) The labor yield variance is actual total hours at:

A) actual mix times actual labor rates less actual total hours at actual mix times standard labor rates.

B) actual mix times standard labor rates less standard total hours at standard mix times standard labor rates.

C) actual mix times standard labor rates less actual total hours at standard mix times standard labor rates.

D) standard mix times standard labor rates less standard total hours at standard mix times standard labor rates.

79) The labor mix variance is actual total hours at:

A) actual mix times actual labor rates less actual total hours at actual mix times standard labor rates.

B) actual mix times standard labor rates less standard total hours at standard mix times standard labor rates.

C) actual mix times standard labor rates less actual total hours at standard mix times standard labor rates.

D) standard mix times standard labor rates less standard total hours at standard mix times standard labor rates.

80) The computation of the material yield variance does not require the:

A) standard material mix.

B) standard material price.

C) standard output units.

D) total material actually acquired.

81) A credit balance in the labor yield variance implies:

A) the total units produced was greater than the expected number of units given the total labor hours actually used.

B) the total units produced was less than the expected number of units given the total labor hours actually used.

C) the total units produced was greater than the expected number of units given the total standard hours allowed.

D) the total units produced was less than the expected number of units given the total standard hours allowed.

82) What is the correct journal entry to record a favorable materials mix variance assuming all material variances are recognized when the direct materials are issued to production?

A)

B)

C)

D)

83) What is the correct journal entry to record direct labor when the actual labor mix is favorable and the total standard hours allowed is greater than the total actual hours worked?

A)

B)

C)

D)

84) The Shum Company makes a product, Z, from two materials: X and Y. The standard prices and quantities are as follows:

In May, 21,000 units of Z were produced by Shum Company, with the following actual prices and quantities of materials used:

What is the total direct materials mix variance for May?

A) $12,000.

B) $24,000.

C) $36,000.

D) $60,000.

85) The Shum Company makes a product, Z, from two materials: X and Y. The standard prices and quantities are as follows:

In May, 21,000 units of Z were produced by Shum Company, with the following actual prices and quantities of materials used:

Is the total direct materials mix variance favorable or unfavorable?

A) Favorable.

B) Unfavorable.

86) The Shum Company makes a product, Z, from two materials: X and Y. The standard prices and quantities are as follows:

In May, 21,000 units of Z were produced by Shum Company, with the following actual prices and quantities of materials used:

What is the total direct material yield variance for May?

A) $45,000.

B) $81,000.

C) $109,800.

D) $117,000.

87) The Shum Company makes a product, Z, from two materials: X and Y. The standard prices and quantities are as follows:

In May, 21,000 units of Z were produced by Shum Company, with the following actual prices and quantities of materials used:

Is the total direct material yield variance favorable or unfavorable?

A) Favorable.

B) Unfavorable.

88) The Becton Enterprises (BE) produces a gasoline additive, Charger Power. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process. Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. Loss of output and efficiency may result if the controls are not effective.

The standard cost of producing a 500-liter batch of Charger Power is $135. The standard materials mix and related standard cost of each chemical used in a 500-liter batch are:

The quantities of chemicals purchased and used during the current production period are shown in the schedule below. A total of 140 batches of Charger Power were manufactured during the current production period. The controller of BE has determined its costs and chemical usage variations at the end of the production period.

If BE recognizes all variances at the earliest possible moment, what is the total material price variance?

A) $160.

B) $540.

C) $890.

D) $1,270.

89) The Becton Enterprises (BE) produces a gasoline additive, Charger Power. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process. Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. Loss of output and efficiency may result if the controls are not effective.

The standard cost of producing a 500-liter batch of Charger Power is $135. The standard materials mix and related standard cost of each chemical used in a 500-liter batch are:

The quantities of chemicals purchased and used during the current production period are shown in the schedule below. A total of 140 batches of Charger Power were manufactured during the current production period. The controller of BE has determined its costs and chemical usage variations at the end of the production period.

Is the total material price variance favorable or unfavorable? 

A) Favorable.

B) Unfavorable.

90) The Becton Enterprises (BE) produces a gasoline additive, Charger Power. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process. Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. Loss of output and efficiency may result if the controls are not effective.

The standard cost of producing a 500-liter batch of Charger Power is $135. The standard materials mix and related standard cost of each chemical used in a 500-liter batch are:

The quantities of chemicals purchased and used during the current production period are shown in the schedule below. A total of 140 batches of Charger Power were manufactured during the current production period. The controller of BE has determined its costs and chemical usage variations at the end of the production period.

What is the total material yield variance?

A) $388.50.

B) $294.50.

C) $280.00.

D) $94.50.

91) The Becton Enterprises (BE) produces a gasoline additive, Charger Power. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process. Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. Loss of output and efficiency may result if the controls are not effective.

The standard cost of producing a 500-liter batch of Charger Power is $135. The standard materials mix and related standard cost of each chemical used in a 500-liter batch are:

The quantities of chemicals purchased and used during the current production period are shown in the schedule below. A total of 140 batches of Charger Power were manufactured during the current production period. The controller of BE has determined its costs and chemical usage variations at the end of the production period.

Is the material yield variance favorable or unfavorable?

A) Favorable.

B) Unfavorable.

92) The Becton Enterprises (BE) produces a gasoline additive, Charger Power. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process. Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. Loss of output and efficiency may result if the controls are not effective.

The standard cost of producing a 500-liter batch of Charger Power is $135. The standard materials mix and related standard cost of each chemical used in a 500-liter batch are:

The quantities of chemicals purchased and used during the current production period are shown in the schedule below. A total of 140 batches of Charger Power were manufactured during the current production period. The controller of BE has determined its costs and chemical usage variations at the end of the production period.

What is the total material mix variance?  

A) $476.00.

B) $420.00.

C) $388.50.

D) $280.00.

93) The Becton Enterprises (BE) produces a gasoline additive, Charger Power. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process. Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. Loss of output and efficiency may result if the controls are not effective.

The standard cost of producing a 500-liter batch of Charger Power is $135. The standard materials mix and related standard cost of each chemical used in a 500-liter batch are:

The quantities of chemicals purchased and used during the current production period are shown in the schedule below. A total of 140 batches of Charger Power were manufactured during the current production period. The controller of BE has determined its costs and chemical usage variations at the end of the production period.

Is the material mix variance favorable or unfavorable?

A) Favorable.

B) Unfavorable.

94) A company makes a product using two materials, one of which is interchangeable with a third material. The standards for producing one 200-pound batch are presented below. The last 200-pound batch was produced using 140 pounds of M and 90 pounds of O. The price of M was $0.03 per pound and the actual price of O was $0.10.

What is the material mix variance?

A) $1.68.

B) $3.00.

C) $1.32.

D) $0.84.

95) A company makes a product using two materials, one of which is interchangeable with a third material. The standards for producing one 200-pound batch are presented below. The last 200-pound batch was produced using 140 pounds of M and 90 pounds of O. The price of M was $0.03 per pound and the actual price of O was $0.10.

Is the material mix variance favorable or unfavorable?  

A) Favorable.

B) Unfavorable.

96) A company makes a product using two materials, one of which is interchangeable with a third material. The standards for producing one 200-pound batch are presented below. The last 200-pound batch was produced using 140 pounds of M and 90 pounds of O. The price of M was $0.03 per pound and the actual price of O was $0.10.

What is the material yield variance?  

A) $1.12.

B) $1.68.

C) $3.00.

D) $1.32.

97) A company makes a product using two materials, one of which is interchangeable with a third material. The standards for producing one 200-pound batch are presented below. The last 200-pound batch was produced using 140 pounds of M and 90 pounds of O. The price of M was $0.03 per pound and the actual price of O was $0.10.

Is the material yield variance favorable or unfavorable?

A) Favorable.

B) Unfavorable.

98) Bonner Company's direct labor cost for March was as follows:

What was Bonner's direct labor yield variance?

A) $13,450.

B) $9,675.

C) $9,225.

D) $5,000.

99) Bonner Company's direct labor cost for March was as follows:

Is the direct labor yield variance favorable or unfavorable?

A) Favorable.

B) Unfavorable.

100) Prince Inc. has the following information:

What was the standard direct labor rate?

A) $3.50.

B) $3.80.

C) $4.00.

D) $5.80.

101) Prince Inc. has the following information:

What was Prince's actual direct labor rate?

A) $3.60.

B) $3.70.

C) $3.80.

D) $3.90.

102) Which of the following statements would be false regarding application of the variance analysis model to nonmanufacturing costs?

A) The basic framework used for manufacturing is also used for nonmanufacturing costs.

B) Merchandising and service organizations focus on marketing and administrative costs to measure efficiency and control costs.

C) The need for analysis of price and efficiency variances in nonmanufacturing settings is increasing.

D) Service organizations are unable to substitute different types of labor.

103) The Foxmoore Company experienced a $100,000 shortfall in sales revenues for the year. Top management is quite disturbed about this and has decided to use variance analysis in assigning the responsibility for the decline. Which of the following variances would most likely be within the control of the marketing department?

A) Sales mix.

B) Market share.

C) Sales quantity.

D) Industry volume.

104) Which of the following factors should not be considered when deciding whether to investigate a variance?

A) Absolute or relative magnitude of the variance.

B) Trend or pattern of the variance over time.

C) Chance that an "out-of-control" situation can be corrected.

D) Whether the variance is favorable or unfavorable.

105) There are several reasons why actual results differ from standards. Which of the following does not represent a reason why a variance might occur?

A) Inaccurate information from the accounting system.

B) Increasing the accuracy of a variance report by decreasing its timeliness.

C) Standards which do not reflect the current economic conditions.

D) Operating conditions that are consistently inefficient.

106) Fremont, Inc., builds storage boxes to custom order. Materials include 20 board feet of lumber at $1.25/board foot. Standards call for 2 hours of labor at $15 per hour.

During March, 4,200 boxes were built. Materials purchased totaled $103,890 for 86,300 board feet of lumber. Actual lumber usage in production was 82,310 board feet. The March payroll was $139,360 for 9,150 hours.

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the direct material price variance.

b. Compute the direct material efficiency variance.

c. Compute the direct labor rate variance.

d. Compute the direct labor efficiency variance.

107) Malloy Corporation has provided the following data concerning its most important raw material, compound I51D:

The raw material was purchased on account.

Required:

a. Record the purchase of the raw material at standard cost in a journal entry.

b. Record the use of the raw material in production in a journal entry.

108) The data below relate to a product of Omaha Company.

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the direct material price variance.

b. Compute the direct material efficiency variance.

c. Compute the direct labor rate variance.

d. Compute the direct labor efficiency variance.

109) Compound Y23Z is used by Carrington Corporation to make one of its products. The standard cost of compound Y23Z is $38.70 per ounce and the standard quantity is 4.6 per unit of output. Data concerning the compound in the most recent month appear below:

The raw material was purchased on account.

Required:

a. Record the purchase of the raw material at standard cost in a journal entry.

b. Record the use of the raw material in production in a journal entry.

110) The following standards have been established for a raw material used to make product P62:

The following data pertain to a recent month's operations:

Required:

a. What is the material price variance for the month?

b. What is the material efficiency variance for the month?

111) High Tech builds fence panels to custom order. Materials include 15 units of lumber at $2.25 per unit. Standards call for 3 hours of labor at $25 per hour.

During October, 3,121 fence panels were built. Materials purchased totaled $113,650 for 51,100 units of lumber. Actual lumber usage in production was 51,069 units. The October payroll was $248,000 for 9,500 hours.

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the direct material price variance.

b. Compute the direct material efficiency variance.

c. Compute the direct labor rate variance.

d. Compute the direct labor efficiency variance.

112) The Oregon Company produces and sells a single product. Standards have been established for the product as follows:

Direct materials: 5 pounds @ $3.50 per pound = $17.50

Direct labor: 3 hours @ $5.50 per hour = $16.50

Actual cost and usage figures for the past month follow:

Required:

Prepare journal entries to record:

a. The purchase of raw materials.

b. The usage of raw materials in production.

c. The incurrence of direct labor cost.

113) The data below relate to a product of Bullfrog Company.

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the direct material price variance.

b. Compute the direct material efficiency variance.

c. Compute the direct labor rate variance.

d. Compute the direct labor efficiency variance.

114) Next year's budget for Howard, Inc., a multi-product company, is given below:

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Howard analyzes the effects its sales variances have on the profitability of the company.

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the sales activity variance for each product.

b. Compute the market share variance for each product.

c. Compute the industry volume variance for each product.

115) The Buffett Company had the following expectations:

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute Buffett's sales activity variance.

b. Compute Buffett's market share variance.

c. Computer Buffett's industry volume variance.

116) Next year's budget for Alton, Inc., is given below:

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold:

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the sales activity variance for each product.

b. Compute the market share variance for each product.

c. Compute the industry volume variance for each product.

117) The Stangle Company had the following expectations:

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute Stangle's sales activity variance.

b. Compute Stangle's market share variance.

c. Computer Stangle's industry volume variance. 

118) Porcini Enterprises produces two products, AR and QT. Actual and budgeted information for the year ending April 30 is provided below:

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the sales activity variance for each product.

b. Compute the sales mix variance for each product.

c. Compute the sales quantity variance for each product.

119) Next year's budget for Canfield, Inc., a multi-product company, is given below:

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold. Canfield analyzes the effects its sales variances have on the profitability of the company.

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the sales activity variance for each product.

b. Compute the sales mix variance for each product.

c. Compute the sales quantity variance for each product.

120) Virginia Enterprises produces two products, Standard and Deluxe. Actual and budgeted information for the year is provided below:

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the sales activity variance for each product.

b. Compute the sales mix variance for each product.

c. Compute the sales quantity variance for each product.

121) Next year's budget for Temper, Inc., is given below:

At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the following units per product line were sold:

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the sales activity variance for each product.

b. Compute the sales mix variance for each product.

c. Compute the sales quantity variance for each product.

122) A chemical company in the Midwest produces a solvent used by manufacturers of plastics. Three basic chemicals go into this solvent. The standards for one-liter of this product are:

Chemical A: 500 ml. @ $10 per liter

Chemical B: 100 ml. @ $50 per liter

Chemical C: 400 ml. @ $20 per liter

During the last period, 10,000 liters of the solvent were produced and the company purchased the following amounts of each chemical:

Chemical A: 6,400 liters @ $9.00 per liter

Chemical B: 900 liters @ $75.00 per liter

Chemical C: 4,200 liters @ $20.00 per liter

Because these chemicals are volatile, the company uses them immediately upon purchase, so there are no beginning and ending inventories.

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the direct material price variances for the three basic chemicals.

b. Compute the direct material efficiency variances for the three basic chemicals.

c. Compute the direct material mix variances for the three basic chemicals.

d. Compute the direct material yield variances for the three basic chemicals.  

123) A chemical company produces a product used by manufacturers of plastics. Two basic chemicals go into this product. The standards for one-liter of this product are:

Chemical 1: 800 ml. @ $50 per liter

Chemical 2: 200 ml. @ $200 per liter

During the last period, 5,000 liters of the solvent were produced and the company purchased the following amounts of each chemical:

Chemical 1: 5,400 liters @ $59.00 per liter

Chemical 2: 900 liters @ $225.00 per liter

Because these chemicals are volatile, the company uses them immediately upon purchase, so there are no beginning and ending inventories.

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the direct material price variances for the two basic chemicals.

b. Compute the direct material efficiency variances for the two basic chemicals.

c. Compute the direct material mix variances for the two basic chemicals.

d. Compute the direct material yield variances for the two basic chemicals.  

124) A company's direct labor standards for a given operation and the actual results for the current period are provided below:

Standard rates:

Level One: $20 per hour

Level Two: $15 per hour

Time to produce one unit:

Two (2) Level One workers at 15-minutes each

Three (3) Level Two workers at 10 minutes each

Actual Results:

Units produced: 10,000

Labor used:

4,000 hours of Level One workers at $25 per hour

6,800 hours of Level Two workers at $15 per hour

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the labor rate variances for each worker level.

b. Compute the labor efficiency variances for each worker level.

c. Compute the labor mix variances for each worker level.

d. Compute the labor yield variances for each worker level.

125) A company's direct labor standards for a given operation and the actual results for the current period are provided below:

Standard rates:

Class A: $24 per hour

Class B: $12 per hour

Time to produce one unit:

Three (3) Class A workers at 20 minutes each

Two (2) Class B workers at 15-minutes each

Actual Results:

Units produced: 6,000

Labor used:

5,800 hours of Class A workers; total payroll: $156,600

3,500 hours of Class B workers; total payroll: $49,000

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the labor rate variances for each worker level.

b. Compute the labor efficiency variances for each worker level.

c. Compute the labor mix variances for each worker level.

d. Compute the labor yield variances for each worker level.

126) The Foggybottom Chemicals produces a product by mixing three ingredients to make a finished product. The standard cost of producing a 50-gallon drum of the product is $19.50. The standard materials mix and related standard cost of each chemical used in a 50-gallon batch are:

The quantities of chemicals purchased and used during the current production period are shown in the schedule below. A total of 520 batches were manufactured during the current production period. The costs and chemical usage variations at the end of the production period are:

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. If variances are recorded at the earliest possible moment, what is the material price variance (in total and for each ingredient)?

b. What is the material efficiency variance (in total and for each ingredient)?

c. What is the material yield variance (in total and for each ingredient)?

d. What is the material mix variance (in total and for each ingredient)?

127) A company's direct labor standards for a given operation and the actual results for the current period are provided below:

Standard rates:

Advanced: $18 per hour

Trained: $15 per hour

Novice: $10 per hour

Actual Results:

Units produced: 4,000

Labor used:

2,200 hours of Advanced workers

4,300 hours of Trained workers

1,900 hours of Novice workers

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the labor efficiency variances for each worker level.

b. Compute the labor mix variances for each worker level.

c. Compute the labor yield variances for each worker level.

128) Tallon & Associates is a consulting firm specializing in business location studies. The results for last year, along with the budget, are as follows:

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Prepare a flexible budget using billable hours as the measure of output.

b. Prepare a sales activity variance analysis.

c. Compute the sales price variance.

129) The standard direct labor cost for room cleaning at Texas Hotels is $2.50 per room ($10 per hour in wages divided by 4 rooms cleaned per hour). Actual labor costs were $11,330 for the month. During the period there were 1,100 labor hours worked; 3,920 rooms were cleaned during the month.

Required:

(Be sure to indicate whether the variance is favorable or unfavorable.)

a. Compute the labor price variance for the period.

b. Compute the labor efficiency variance for the period.

130) What is the advantage of recognizing materials price variances at the time of purchase rather than at the time of use?

131) Explain the difference between the market share variance and the industry volume variance.

132) Explain the difference between the sales mix variance and the sales quantity variance.

133) When deciding how many variances to calculate, what two items need to be considered? Be sure to define your terms.

134) Explain what production mix and production yield variances measure. How do these variances relate to efficiency variances?

135) Olsen Company uses a standard cost system for its only product. The bickering between purchasing and production that occurs every month after the material variances are developed has the production vice president, Mr. Becker, at his wits end. He has checked the job descriptions of the individuals involved and notes that the purchasing department is responsible for the price at which materials and supplies are purchased and the manufacturing department is responsible for the quantity of material used. This seems very clear cut to him so he has gone to the cost accountant for some additional help.

Required:

As the cost accountant, explain to Mr. Becker why, or why not, this division of duties solves the conflict between price and quantity variances.

136) Advantage Co. sells two types of drives—standard and specialty. The budget is based on a combination of last year's information as well as forecasted industry sales and the company's market share. The following information is provided for June:

Required:

1) Prepare a static budget and flexible budget for the company for June.

2) What is the sales activity variance?  

137) Maxine Watters, the managerial accountant, has been asked by the President of Coolare Ceiling Fan Company to prepare an analysis of the effectiveness of the new management team. The company manufactures paper fans.

2020 standards:

Direct materials - 4 parts @ $2 per part

Direct labor - one half hour (0.5) @ $10 per hour

Estimated production - 100,000

Actual results 2020:

Direct materials - 585,000 parts at a total cost of $1,462,500 were purchased and used

Direct labor - 51,000 hours at a cost of $561,000

Actual production - 130,000 fans

Required:

Requirement: Compute the direct material and direct labor price and efficiency variances.

138) Resolution Company is meeting with the consultants it hired to help it with problems arising from its increasing sales and increasing production to meet them. The consultants have informed the company that they need to make price concessions in order to have their product sold over a large area. To do this, costs need to be reduced and controlled. They recommended installation of a standard costing system and a flexible budgeting system.

The CEO took the recommendations back to the company management, explained to all, and a team was set up to develop the standards. The team was composed of the purchasing manager, processing manager, production engineer, and V.P. of sales. Each member of the team, rather than working to develop standards, came up with reasons why they wouldn't work. The team made its report to the CEO who told them to come up with the standards or he would have the consultants set them.

Required:

(a) What are the advantages and disadvantages of standard costing?

(b) What has gone wrong in this situation and will having the outside consultant do the work change anything?