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Exam 10: Standard Costs and Variances

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Question 181

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Kartman Corporation makes a product with the following standard costs: In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931.The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The materials price variance for June is:

A) $7,620 Unfavorable
B) $6,825 Unfavorable
C) $6,825 Favorable
D) $7,620 Favorable

E) None of the above
F) C) and D)

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Question 182

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Geschke Corporation, which produces commercial safes, has provided the following data: Supplies cost is an element of variable manufacturing overhead.The variable overhead rate variance for supplies is closest to:

A) $10,828 Favorable
B) $10,947 Unfavorable
C) $10,828 Unfavorable
D) $10,947 Favorable

E) A) and B)
F) None of the above

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Question 183

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Tharaldson Corporation makes a product with the following standard costs: The company reported the following results concerning this product in June. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The variable overhead efficiency variance for June is:

Khat Incorporated makes a single product--a cooling coil used in commercial refrigerators. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: Required: Determine whether overhead was underapplied or overapplied for the year and by how much.

Doogan Corporation makes a product with the following standard costs: The company produced 5,300 units in January using 39,410 grams of direct material and 2,390 direct labor-hours. During the month, the company purchased 44,500 grams of the direct material at $1.80 per gram. The actual direct labor rate was $20.30 per hour and the actual variable overhead rate was $6.90 per hour.The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The variable overhead rate variance for January is:

Jakeman Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead.The standard cost card for the company's only product is as follows: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $351,000 and budgeted activity of 27,000 hours.During the year, the company completed the following transactions:Purchased 76,600 gallons of raw material at a price of $7.90 per gallon.Used 70,960 gallons of the raw material to produce 20,900 units of work in process.Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 18,710 hours at an average cost of $19.40 per hour.Applied fixed overhead to the 20,900 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs for the year were $334,600. Of this total, $252,600 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $82,000 related to depreciation of manufacturing equipment.Completed and transferred 20,900 units from work in process to finished goods.Sold (for cash) 17,700 units to customers at a price of $74.30 per unit.Transferred the standard cost associated with the 17,700 units sold from finished goods to cost of goods sold.Paid $93,000 of selling and administrative expenses.Closed all standard cost variances to cost of goods sold.The company calculated the following variances for the year: To answer the following questions, it would be advisable to record transactions a through i in the worksheet below. This worksheet is similar to the worksheets in your text except that it has been split into two parts to fit on the page. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. The adjusted Cost of Goods Sold after closing all of the variances to Cost of Goods Sold will be closest to:The net operating income for the year is closest to:

Puvo, Incorporated, manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product: During March, the following activity was recorded by the company:The company produced 2,400 units during the month.A total of 19,400 pounds of material were purchased at a cost of $13,580.There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,620 pounds of material remained in the warehouse.During March, 1,090 direct labor-hours were worked at a rate of $30.50 per hour.Variable manufacturing overhead costs during March totaled $14,061.The direct materials purchases variance is computed when the materials are purchased.The materials quantity variance for March is:

Ravena Labs., Incorporated makes a single product which has the following standards:Direct materials: 2.5 ounces at $20 per ounceDirect labor: 1.4 hours at $12.50 per hourVariable manufacturing overhead: 1.4 hours at 3.50 per hourVariable manufacturing overhead is applied on the basis of standard direct labor-hours. The following data are available for October:3,750 units of compound were produced during the month.There was no beginning direct materials inventory.Direct materials purchased: 12,000 ounces for $225,000.The ending direct materials inventory was 2,000 ounces.Direct labor-hours worked: 5,600 hours at a cost of $67,200.Variable manufacturing overhead costs incurred amounted to $18,200.Variable manufacturing overhead applied to products: $18,375. The labor efficiency variance for October is:

Freiling Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows: During the year, the company assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 14,890 hours at an average cost of $22.80 per hour.Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. When recording the direct labor costs, the Work in Process inventory account will increase (decrease) by:

Balladares Incorporated has a standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. The standard for variable manufacturing overhead is 0.10 hours at $6.30 per hour. The company has reported the following actual results for the product for May: Required: a. Compute the variable overhead rate variance for May. b. Compute the variable overhead efficiency variance for May.

Hofbauer Incorporated has provided the following data concerning one of the products in its standard cost system. The company has reported the following actual results for the product for September: The labor rate variance for the month is closest to:

Neuhaus Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows: During the year, the company completed the following transactions:a. Purchased 52,900 gallons of raw material at a price of $7.60 per gallon.b. Used 46,820 gallons of the raw material to produce 27,600 units of work in process.Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. When recording the raw materials purchases in transaction (a) above, the Raw Materials inventory account will increase (decrease) by:

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours. The following data pertain to operations for the last month: What is the variable overhead efficiency variance for the month?

In the Excel spreadsheet approach in Appendix 10B in the text, each variance has its own clearing account that appears on the right-hand side of the "=" sign. This enables us to record all favorable variances as increases to their respective clearing accounts and all unfavorable variances as decreases to their accounts.

Fortes Incorporated has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. The company has reported the following actual results for the product for April: Required:a. Compute the materials price variance for April.b. Compute the materials quantity variance for April.c. Compute the labor rate variance for April.d. Compute the labor efficiency variance for April.e. Compute the variable overhead rate variance for April.f. Compute the variable overhead efficiency variance for April.

Miguez Corporation makes a product with the following standard costs: The company budgeted for production of 2,600 units in September, but actual production was 2,500 units. The company used 5,440 liters of direct material and 1,680 direct labor-hours to produce this output. The company purchased 5,800 liters of the direct material at $7.20 per liter. The actual direct labor rate was $24.10 per hour and the actual variable overhead rate was $1.90 per hour.The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The labor efficiency variance for September is:

A favorable labor rate variance indicates that

A quantity standard indicates how much of an input should be used to make a unit of product or provide a unit of service.

Neuhaus Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows: During the year, the company completed the following transactions:a. Purchased 52,900 gallons of raw material at a price of $7.60 per gallon.b. Used 46,820 gallons of the raw material to produce 27,600 units of work in process.Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. When the purchase of raw materials is recorded in transaction (a) above, which of the following entries will be made?

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours. The following data pertain to operations for the last month: What is the variable overhead efficiency variance for the month?