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Exam 10: Standard Costs and Variances

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Question 1

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Casivant Corporation makes a product that uses a material with the following direct material standards: The company produced 7,300 units in November using 28,710 pounds of the material. During the month, the company purchased 30,800 pounds of the direct material at a total cost of $117,040. The direct materials purchases variance is computed when the materials are purchased.The materials price variance for November is:

A) $5,548 Unfavorable
B) $6,160 Unfavorable
C) $6,160 Favorable
D) $5,548 Favorable

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

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Question 2

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Flick Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor-hours. The company's total budgeted variable and fixed manufacturing overhead costs at the denominator level of activity are $20,000 for variable overhead and $30,000 for fixed manufacturing overhead. The predetermined overhead rate, including both fixed and variable components, is $2.50 per direct labor-hour. The standards call for two direct labor-hours per unit of output produced. Last year, the company produced 11,500 units of product and worked 22,000 direct labor-hours. Actual costs were $22,500 for variable overhead and $31,000 for fixed manufacturing overhead. Required: a. What is the denominator level of activity? b. What were the standard hours allowed for the output last year? c. What was the variable overhead rate variance? d. What was the variable overhead efficiency variance? e. What was the fixed manufacturing overhead budget variance? f. What was the fixed manufacturing overhead volume variance?

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a. Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base $2.50 per direct labor-hour = ($20,000 + $30,000) ÷ Estimated total amount of the allocation base Estimated total amount of the allocation base = ($20,000 + $30,000) ÷ $2.50 per direct labor-hour Estimated total amount of the allocation base = $50,000 ÷ $2.50 per direct labor-hour Estimated total amount of the allocation base = 20,000 direct labor-hours b. Standard hours allowed for the actual output = Actual output × Standard hours per unit = 11,500 units × 2 direct labor-hours per unit = 23,000 direct labor-hours c. Variable overhead rate variance = (Actual hours × Actual rate) − (Actual hours × Standard rate) = $22,500 − (22,000 direct labor-hours × $1.00 per direct labor-hour*) = $22,500 − $22,000 = $500 Unfavorable *$20,000 ÷ 20,000 direct labor-hours = $1.00 per direct labor-hour d. Variable overhead efficiency variance = (Actual hours − Standard hours) × Standard rate = (22,000 direct labor-hours − 23,000 direct labor-hours*) × $1.00 direct labor-hour = −1,000 direct labor-hours × $1.00 direct labor-hour = $1,000 Favorable * 11,500 units × 2 direct labor-hours per unit = 23,000 direct labor-hours e. Budget variance = Actual fixed manufacturing overhead − Budgeted fixed manufacturing overhead = $31,000 − $30,000 = $1,000 Unfavorable f. Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed) = $1.50 per direct labor-hour* × (20,000 direct labor-hours − 23,000 direct labor-hours) = $1.50 per direct labor-hour × −3,000 direct labor-hours = $4,500 Favorable *$30,000 ÷ 20,000 direct labor-hours = $1.50 per direct labor-hour

Question 3

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Siciliano Corporation manufactures one product. 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 concerning raw materials:a. Purchased 34,800 kilos of raw material at a price of $4.60 per kilo.b. Used 32,750 kilos of the raw material to produce 21,900 units of work in process. Required:Record the above transactions in the worksheet that appears below. Because of the width of the worksheet, it is in two parts. In your text, these two parts would be joined side-by-side to make one very wide worksheet. The beginning balances have been provided for each of the accounts, including the Property, Plant, and Equipment (net) account which is abbreviated as PP&E (net).

Hardigree Corporation makes a product that has the following direct labor standards: In May the company's budgeted production was 8,900 units, but the actual production was 8,800 units. The company used 2,820 direct labor-hours to produce this output. The actual direct labor cost was $70,218.The labor rate variance for May is:

Robnett 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 106,900 liters of raw material at a price of $6.80 per liter.b. Used 93,760 liters of the raw material to produce 24,700 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 raw materials used in production are recorded in transaction (b) above, which of the following entries will be made?

Brummer Corporation makes a product whose variable overhead standards are based on direct labor-hours. The quantity standard is 0.1 hours per unit. The variable overhead rate standard is $8.00 per hour. In January the company produced 8,700 units using 910 direct labor-hours. The actual variable overhead rate was $7.90 per hour.The variable overhead efficiency variance for January is:

Krizun Industries makes heavy construction equipment. The standard for a particular crane calls for 20 direct labor-hours at $16 per direct labor-hour. During a recent period1,300 cranes were made. The labor efficiency variance was $5,200 Unfavorable. How many actual direct labor-hours were worked?

Decena 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. Information concerning the direct labor standards 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 15,830 hours at an average cost of $18.50 per hour. The company calculated the following direct labor variances for the year: 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:

Bulluck Corporation makes a product with the following standard costs: The company reported the following results concerning this product in July. 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 July is:

Zaino 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 company calculated the following variances for the year: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $48,750 and budgeted activity of 7,500 hours. During the year, the company completed the following transactions: a. Purchased 45,600 gallons of raw material at a price of $4.90 per gallon.b. Used 40,220 gallons of the raw material to produce 23,600 units of work in process.c. Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 12,400 hours at an average cost of $21.70 per hour.d. Applied fixed overhead to the 23,600 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 $34,050. Of this total, −$23,950 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $58,000 related to depreciation of manufacturing equipment.e. Transferred 23,600 units from work in process to finished goods.f. Sold for cash 23,700 units to customers at a price of $27.20 per unit.g. Completed and transferred the standard cost associated with the 23,700 units sold from finished goods to cost of goods sold.h. Paid $69,000 of selling and administrative expenses.i. Closed all standard cost variances to cost of goods sold.Required:1. Record the above transactions in the worksheet that appears below. The beginning balances have been provided for each of the accounts, including the Property, Plant, and Equipment (net) account which is abbreviated as PP&E (net). 2.Determine the ending balance (e.g., 12/31 balance) in each account.

Leonesio Corporation makes a product that uses a material with the following standards: The company budgeted for production of 3,100 units in August, but actual production was 3,200 units. The company used 27,600 kilos of direct material to produce this output. The company purchased 29,000 kilos of the direct material at a total cost of $118,900. The direct materials purchases variance is computed when the materials are purchased.The materials quantity variance for August is:

Ferrero 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. The company has provided the following information: The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year: When the company closes its standard cost variances, the Cost of Goods Sold will increase (decrease) by:

Solly Corporation produces a product for national distribution. Standards for the product are:Materials: 12 ounces per unit at 60¢ per ounce.Labor: 2 hours per unit at $8 per hour.During the month of December, the company produced 1,000 units. Information for the month follows:Materials: 14,000 ounces purchased and used at a total cost of $7,700.Labor: 2,500 hours worked at a total cost of $20,625.The labor rate variance is:

Turrubiates Corporation makes a product that uses a material with the following standards: The company budgeted for production of 2,300 units in April, but actual production was 2,400 units. The company used 16,410 liters of direct material to produce this output. The company purchased 18,600 liters of the direct material at $1.10 per liter.The direct materials purchases variance is computed when the materials are purchased.The materials price variance for April is:

Mccreary 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. The standard cost of the company's product is $28.00 per unit. During the year the company sold 27,500 units at $36.30 per unit. The actual selling and administrative expenses were $121,000 for the year. The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year: The net operating income for the year is closest to:

Kellems 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. The company has provided the following information: The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year: The adjusted Cost of Goods Sold after closing all of the variances to Cost of Goods Sold will be closest to:

Bohon 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 contains the following information concerning direct materials: During the year, the company completed the following transactions concerning direct materials:a. Purchased 19,700 pounds of raw material at a price of $4.70 per pound.b. Used 18,500 pounds of the raw material to produce 18,400 units of work in process.The company calculated the following direct materials variances for the year: 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:

Ladue Corporation 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. The standards for direct materials for the company's only product specify 3.6 kilos per unit at $7.00 per kilo. During the year, the company purchased 67,600 kilos of raw material at a price of $6.40 per kilo and used 60,220 kilos of the raw material to produce 16,700 units of work in process.Assume that all transactions are recorded on a worksheet as shown in the text. On the left-hand side of the equals sign in the worksheet are columns for Cash, Raw Materials, Work in Process, Finished Goods, and Property, Plant, and Equipment (net) . All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.When recording the raw materials used in production, the Work in Process inventory account will increase (decrease) by:

Camps Incorporated has a standard cost system. The standards for direct materials for one of its products specify 4.4 ounces of a particular input per unit of output at a standard cost of $6.40 per ounce. The company has reported the following actual results for the product for May: Required: a. Compute the materials price variance for this input for May. b. Compute the materials quantity variance for this input for May.

The standards for product G78V specify 5.5 direct labor-hours per unit at $13.50 per direct labor-hour. Last month 1,740 units of product G78V were produced using 9,600 direct labor-hours at a total direct labor wage cost of $122,220.Required:a. What was the labor rate variance for the month?b. What was the labor efficiency variance for the month?