Chapter 10—Standard Costing: A Managerial Control Tool
Standard costs are developed for direct materials$ direct labor$ and variabl e overhead only.
TRUE/FALSE
1.
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Manager Managers s develop develop quantit quantity y standar standards ds when they they decide decide ANS: * what amount of input should be used per unit of output. No. Standard costs are assigned for direct materials$ direct labor$ and variable and 0%ed overhead. ANS: T Managers Managers develop develop price standards standards when they they determi determine ne The standard quantity of materials allowed can be what amount should be paid for the quantity of input to calculated by multiplying the unit labor standard by the be used. actual output. ANS:
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The standa standard rd cost cost per unit unit of output output for for a particul particular ar input is calculated by multiplying the standard input price by the standard input allowed per unit of output produced. ANS:
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ANS: * The standard quantity of materials allowed can be calculated by multiplying the unit quantity standard by the actual output. To To compute the standard direct labor hours allowed$ multiply the unit labor standard by the actual output.
ANS: T #n setting setting standards$ standards$ historical historical e%perience e%perience should be used with caution because it can perpetuate operating The quantity of each input that should be used to ine&ciencies. produce one unit of output is documented on the standard cost sheet. ANS: T ANS: T (ngineering (ngineering studies studies are often too rigorous rigorous and and may not be achievable by operating personnel. The standard cost sheet provides the input standards needed to compute the total amount of inputs allowed ANS: T for the actual output$ an essential component in computing e&ciency variances. #deal #deal standar standards ds can can be achiev achieved ed under under e&cien e&cientt operating conditions. ANS: T ANS: * The standard unit cost is developed before the standard No. +urrently attainable standards can be achieved costs for direct materials$ direct labor$ and overhead under e&cient operating conditions. #deal standards can be set. demand ma%imum e&ciency and can be achieved only if everything op erates perfectly. ANS: *
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#deal #deal standar standards ds can be be achieved achieved only only if every everythin thing g The unit standard quantity of inputs is vital to the operates perfectly$ meaning that they do not allow for computation of total amount of inputs allowed for the any machine brea-downs$ slac-$ etc. actual output and e&ciency variances. ANS:
.
T
3ne reason reason for adopting a standard standard cost syste system m is to ma-e product costing easi er. ANS:
11.
T
+urrently +urrently attainable attainable standar standards ds can can be achieved achieved under under e&cient operating conditions. ANS:
12.
ANS:
T
+urrently +urrently attainable attainable standar standards ds o/er o/er the the most most behavioral behavioral The total budget variance is the di/erence between the bene0ts because higher performance levels are actual cost of the input and its planned cost. attained through challenging$ yet achievable$ standards. ANS:
.
T
*
The bene0ts bene0ts of of operatio operational nal contro controll under a standa standard rd cost system can e%tend to all manufacturing environments.
ANS:
T
The actual quantity of input at the standard price less than the standard quantity of input at the standard price equals the usage variance. ANS:
T
The actual quantity of input at the actual price l ess the actual quantity of input at the standard price is the price variance. ANS:
T
An unfavorable usage variance would occur when the actual usage of inputs is greater than the standard usage.
ANS: * No. Manufacturing environments that focus on ANS: T continuous improvement and 4#T purchasing and manufacturing do not reali5e the bene0ts of operational An unfavorable price variance occurs whenever the control in a standard cost system. actual prices are greater than the standard prices.
ANS: ".
An accepta acceptable ble range range is establi established shed in in order order to determine if whether variances are signi0cant. The acceptable range is the standard$ plus or minus an allowable deviation. ANS:
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T
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d. e. f. g.
Stan Standar dard d +ost +ost Sheet Sheet pper pper +ontr +ontrol ol ;imi ;imitt +urren +urrently tly Attaina Attainable ble Standar Standards ds 6ai5 6ai5en en Sta Standa ndard rds s
Standards of perfection that require absolute e&ciency. e&ciency. Standards that are rigorous but achievable and re7ect reasonable e&ciency. e&ciency.
The sum sum of the the price price and usage usage varianc variances es will will add up up to the total materials variance only if the materials These re7ect the amount that should be paid for the quantity of input to be used. purchased is equal to the materials used. ANS:
T
These re7ect the amount of input that should be used per unit of output.
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The mater materials ials price price varia variance nce is comput computed ed using using the A tool used to provide the production data needed to actual quantity of materials used$ and the materials usage variance is computed using the actual quantity of calculate the standard unit cost. materials purchased. This is the standard plus the allowable deviation when determining whether variances are signi0cant. ANS: * No. The materials price variance is computed using the This re7ects the planned improvement that is set$ which actual quantity of materials purchased purchased$ and the materials usage variance is computed using the actual will help reduce nonvalue
,.
ANS: *or better control$ control$ the the materials materials price variance variance is computed using actual quantity of materials purchased. ANS: ANS: T ANS: Since it is better to have information on variances earlier rather than later$ the materials price variance uses the actual quantity of materials purchased rather ANS: than the actual quantity of materials used. ANS:
* + A > (
? The sum sum of the labor labor rate rate and and labor labor e&ciency e&ciency vari variance ances s ANS: will always add up to the total labor variance. Match the variance with its correct calculation. a. Actual Actual 8uantit 8uantity y Actual Actual 9rice 9rice ANS: T b. @Actual ours Actual BateC @Standard @Standard ours Standard BateC . 6ai5en 6ai5en costing costing provides provides 0%ed standards standards which which re7ect re7ect c. @Actual 8uantity Actual 9riceC @Standard @Standard continuous improvement e/orts. 8uantity Standard 9riceC d. @Actual @Actual ours ours Standar Standard d oursC oursC Standar Standard d ANS: * Bate Thus$ -ai5en costing di/ers from traditional standard e. @Actual @Actual 9rice 9rice Standar Standard d 9riceC 9riceC Actual Actual costing in that the standard changes frequently$ 8uantity re7ecting continuous improvement e/orts. f. Standar Standard d 8uantit 8uantity y Standard Standard 9rice 9rice !2. A -ai5en -ai5en standard standard re7ects re7ects the reali5ed reali5ed improve improvements ments g. @Actual Bate Standard BateC Actual ours h. @Actual @Actual 8uantity 8uantity Standar Standard d 8uantity 8uantityCC for the past periods and a search for more Standard 9rice improvements for the future. .
ANS: T Setting this new level as a minimum standard for future Actual +osts performance loc-s in the reali5ed improvements and =udgeted +osts initiates simultaneously the maintenance cycle and a search for additional improvement opportunities Total Total Materials Dariance !1.
*avorable variances variances are credits credits and and unfavorabl unfavorable e variances are debits.
Materials 9rice Dariance Materials sage Dariance
ANS:
T ;abor Bate Dariance
MATCHI!
;abor (&ciency Dariance Match each item with the correct statement below. a. 8uant 8uantit ity y Standa Standard rds s b. #deal #deal Standa Standard rds s c. 9ric 9rice e Stand Standar ards ds
Total Total >irect ;abor Dariance ANS:
A
ANS: ".
An accepta acceptable ble range range is establi established shed in in order order to determine if whether variances are signi0cant. The acceptable range is the standard$ plus or minus an allowable deviation. ANS:
'.
T
T
d. e. f. g.
Stan Standar dard d +ost +ost Sheet Sheet pper pper +ontr +ontrol ol ;imi ;imitt +urren +urrently tly Attaina Attainable ble Standar Standards ds 6ai5 6ai5en en Sta Standa ndard rds s
Standards of perfection that require absolute e&ciency. e&ciency. Standards that are rigorous but achievable and re7ect reasonable e&ciency. e&ciency.
The sum sum of the the price price and usage usage varianc variances es will will add up up to the total materials variance only if the materials These re7ect the amount that should be paid for the quantity of input to be used. purchased is equal to the materials used. ANS:
T
These re7ect the amount of input that should be used per unit of output.
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The mater materials ials price price varia variance nce is comput computed ed using using the A tool used to provide the production data needed to actual quantity of materials used$ and the materials usage variance is computed using the actual quantity of calculate the standard unit cost. materials purchased. This is the standard plus the allowable deviation when determining whether variances are signi0cant. ANS: * No. The materials price variance is computed using the This re7ects the planned improvement that is set$ which actual quantity of materials purchased purchased$ and the materials usage variance is computed using the actual will help reduce nonvalue
,.
ANS: *or better control$ control$ the the materials materials price variance variance is computed using actual quantity of materials purchased. ANS: ANS: T ANS: Since it is better to have information on variances earlier rather than later$ the materials price variance uses the actual quantity of materials purchased rather ANS: than the actual quantity of materials used. ANS:
* + A > (
? The sum sum of the labor labor rate rate and and labor labor e&ciency e&ciency vari variance ances s ANS: will always add up to the total labor variance. Match the variance with its correct calculation. a. Actual Actual 8uantit 8uantity y Actual Actual 9rice 9rice ANS: T b. @Actual ours Actual BateC @Standard @Standard ours Standard BateC . 6ai5en 6ai5en costing costing provides provides 0%ed standards standards which which re7ect re7ect c. @Actual 8uantity Actual 9riceC @Standard @Standard continuous improvement e/orts. 8uantity Standard 9riceC d. @Actual @Actual ours ours Standar Standard d oursC oursC Standar Standard d ANS: * Bate Thus$ -ai5en costing di/ers from traditional standard e. @Actual @Actual 9rice 9rice Standar Standard d 9riceC 9riceC Actual Actual costing in that the standard changes frequently$ 8uantity re7ecting continuous improvement e/orts. f. Standar Standard d 8uantit 8uantity y Standard Standard 9rice 9rice !2. A -ai5en -ai5en standard standard re7ects re7ects the reali5ed reali5ed improve improvements ments g. @Actual Bate Standard BateC Actual ours h. @Actual @Actual 8uantity 8uantity Standar Standard d 8uantity 8uantityCC for the past periods and a search for more Standard 9rice improvements for the future. .
ANS: T Setting this new level as a minimum standard for future Actual +osts performance loc-s in the reali5ed improvements and =udgeted +osts initiates simultaneously the maintenance cycle and a search for additional improvement opportunities Total Total Materials Dariance !1.
*avorable variances variances are credits credits and and unfavorabl unfavorable e variances are debits.
Materials 9rice Dariance Materials sage Dariance
ANS:
T ;abor Bate Dariance
MATCHI!
;abor (&ciency Dariance Match each item with the correct statement below. a. 8uant 8uantit ity y Standa Standard rds s b. #deal #deal Standa Standard rds s c. 9ric 9rice e Stand Standar ards ds
Total Total >irect ;abor Dariance ANS:
A
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The EEEEEEEEEEEEEEEEEEEE EEEEEEEEEEEEEEEEEEEE is the di/erence between the actual cost of the input and its planned cost.
The amount amount of input input tha thatt should be used per unit of output is -nown as the EEEEEEEEEEEEEEE.
ANS: 9rice variance rate variance EEEEEEEEEEE EEEEEEEEEEEEEEEEE EEEEEE occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage.
The EEEEEEEEEEEEEEEEEEEE EEEEEEEEEEEEEEEEEEEE measures the di/erence between the actual costs of materials and their budgeted costs for actual level of activity. ANS: ANS:
EEEEEEEEEEEE EEEEEEEE EEEEEEEE EEEEEEE EEE can provide provide an an initial initial guideline guideline for setting standards$ but should be used with caution because they can perpetuate e%isting ine&ciencies. ANS: ANS:
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ist istor oric ical al e%pe e%peri rien ence ces s mate materi rial als s pri price ce var varia ianc nce e
Standar Standards ds are set by using using histori historical cal e%peri e%perience ences$ s$ EEEEEEEEEEE EEEEEEEEEEEEEEEEEEE$ EEEEEEEE$ and input from operating personnel$ The EEEEEEEEEEEEEEEEEEEEE EEEEEEEEEEEEEEEEEEEEE measures measures the di/erence mar-eting$ and accounting. between the direct materials actually used and the direct materials that should have been used for the ANS: ANS: engi engine neer erin ing g stud studie ies s actual output. ANS: ANS: mate materi rial als s usa usage ge vari varian ance ce EEEEEEEEEEEE EEEEEEEE EEEEEEEE EEEE demands ma%imum e&ciency and can can be achieved only if everything operates perfec tly. tly. The EEEEEEEEEEEEEEE EEEEEEEEEEEEEEE computes the di/erence between what was paid to direct laborers and what should have AN S: S: #d ea eal s ta tan da dard s been paid. ANS: ANS: labo laborr rat rate e var varia ianc nce e #n a EEEEEE EEEEEEEEEE EEEEEEEE EEEEEEEE EEEEEE$ EE$ costs costs are are assigned assigned to products products using quantity and price standards for all three The EEEEEEEEEEEEEEEEEEE EEEEEEEEEEEEEEEEEEE measures the di/erence di/erence manufacturing costs: direct materials$ direct labor$ and between the labor hours that were actually used and overhead. the labor hours that should have been used. ANS: ANS:
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tota totall vari varianc ance e for for mater material ials s
The EEEEEEEEEEEEEEEEEEEE EEEEEEEEEEEEEEEEEEEE measures the di/erence between what should have been paid for raw materials and what was actually paid. ANS: ANS:
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nfa nfavo vora rabl ble e vari varian ance ces s
The The amo amoun untt tha thatt should be paid for the quantity of the input to be used is -nown as the EEEEEEEEEEEEEE. ANS: pricing decision standard price
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tota totall budg budget et vari varian ance ce
EEEEEEEEEEE EEEEEEEEEEEEEEEEEEEE EEEEEEEEE is the di/erence di/erence between the actual and standard unit price of an input multiplied by the number of inputs used.
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Stan Standa darrd hou hours rs allo allowe wed d
+ost co control
ANS: quantity decision standard quantity !.
unit unit quan quanti tity ty stan standa dard rds s
EEEEEEEEEEE EEEEEEEEEEEEEEEEEEE EEEEEEEE is calculated by multiplying the unit labor standard by the actual output.
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EEEEEEEEEEEE EEEEEEEE EEEEEEE EEE often often means the di/erence di/erence between success and failure or between above
The EEEEEEEEEEEEEEEEEEEEEE EEEEEEEEEEEEEEEEEEEEEE can be used to compute the total amount of inputs allowed for the actual output.
stan standa darrd cost costin ing g sys syste tem m
The EEEEE EEEEEEEEE EEEEEEEE EEEEEEEE EEEEE E provides provides the products products data needed to calculate the standard unit cost. ANS: ANS:
ANS: ANS:
labo laborr e&c e&cie ienc ncy y var varia ianc nce e
EEEEEEEEEEE EEEEEEEEEEEEEE EEE focuses on the continuous reduction of the manufacturing costs of e%isting products and processes.
stand tandar ard d cost cost sheet heet ANS:
6a i5 i5en co costing
b. They are often achievable by operating A EEEEEEEEEEEEEE is the di/erence between the sales personnel. price needed to capture a predetermined mar-et share c. They provide very rigorous guidelines. and the desired per
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9rice standards are based on a. the amount of input that should be used per unit of output. b. the amount that should be paid for the total quantity of input to be used. c. the amount that should be paid per unit of output. d. the amount that should be paid per unit of input purchased. e. None of these.
#deal standards a. do not allow for machine brea-downs$ slac-$ or lac- of s-ill @even momentarilyC. b. demand ma%imum e&ciency. c. can be achieved only if everything operates perfectly. d. All of these. e. None of these.
Fhich of the following is true regarding currently attainable standardsG a. They can be achieved under e&cient operating conditions. ANS: = 9rice standards are based on the pricing decision$ whichb. Allowance is made for normal brea-downs$ is the amount that should be paid for the quantity of interruptions$ etc. c. They are challenging but achievable. input to be used. d. They tend to achieve higher performance levels from personnel. e. All of these. !. The sources of quantitative standards include a. historical e%perience. ANS: ( b. engineering studies. c. input from operating personnel. d. historical e%perience$ engineering studies$ and Standard cost systems are adopted a. to improve planning and control. input from operating personnel. b. to facilitate product costing. e. None of these. c. to improve planning and control$ and to facilitate product costing. d. to enhance the operational control of 0rms that ANS: > emphasi5e continuous improvement. e. for all of these reasons. ". Fhich of the following is true regarding historical e%perience in standard settingG a. #t provides very rigorous guidelines. b. 3perating personnel may not be able to achieve ANS: + The bene0ts of operational control in a standard cost operating standards based on historical e%perience. system may not e%tend to the manufacturing environments that emphasi5e continuous improvement c. #t should be used with caution because it can and Hust
11.
Fhich of the following is true regarding standard cost and direct labor to products using a systems in manufacturing environments that emphasi5e predetermined rate. continuous improvement and Hust#*: >i&culty: Moderate 3=4: ;3: 12<1 NAT: =S9B3?: Analytic ANS: + STA: A#+9A: *N#*: >i&culty: Moderate costing over normal costing and actual costingG 3=4: ;3: 12<1 a. A greater capacity for control. NAT: =S9B3?: Analytic b. Ability to easily distinguish the *#*3 and STA: A#+9A: *N<>ecision Modeling I #MA: 9erformance weighted average methods of accounting for Measurement I A+=S9: A9+<,#*: >i&culty: (asy 3=4: ;3: 12<1 NAT: =S9B3?: Analytic STA: A#+9A: *N
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The standard cost system di/ers from the actual cost system in the assignment of a. direct materials. b. direct labor. c. overhead. d. all of the manufacturing inputs. e. none of the manufacturing inputs.
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<1 NAT: =S9B3?: Analytic STA: A#+9A: *N
ANS: > 9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12<1 NAT: =S9B3?: Analytic STA: A#+9A: *N
ANS: A 9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12< NAT: =S9B3?: Analytic STA: A#+9A: *N
Fhich of the following is not true regarding normal costing systemsG a. A normal costing system predetermines overhead costs. b. A normal costing system assigns direct materials
Standard hours allowed are computed using the equation a. unit labor standard actual output. b. unit labor standard standard output. c. unit labor standard actual input.
d. unit labor standard standard input. e. not shown here. ANS: A 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12< NAT: =S9B3?: Analytic STA: A#+9A: *N
9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12< NAT: =S9B3?: Analytic STA: A#+9A: *N
Befer to *igure 12<1. +ompute the standard number of The standard quantity of materials allowed is computed sheets of aluminum allowed for a volume of 12$222 by the equation airplanes. a. unit quantity standard standard output. a. 1'$222 sheets b. unit quantity standard actual input. b. 12$222 sheets c. unit quantity standard standard input. c. ,$'22 sheets d. unit quantity standard actual output. d. 11$'2 sheets e. not shown here. ANS: > 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12< NAT: =S9B3?: Analytic STA: A#+9A: *N
1.
S O nit labor standard Actual output S O ) 12$222 O )2$222.
An accountant would refer to a cost sheet to perform which of the following actionsG a. +alculate standard cost per unit. b. +alculate e&ciency variances. c. +alculate the total amount of inputs allowed for the actual output. d. All of these. ANS: > 9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12< NAT: =S9B3?: Analytic STA: A#+9A: *N
ANS: = S8 O nit quantity standard Actual output. S8 O 12$222 1 O 12$222 sheets. 9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12< NAT: =S9B3?: Analytic STA: A#+9A: *N#*: >i&culty: Moderate 3=4: ;3: 12
Fig$re 10%1& *lying igh +ompany manufactures model airplanes. >uring the month$ it manufactured 12$222 airplanes. (ach one used an average of ).' direct labor hours and The di/erence between the actual cost of the input and an average of 1.' sheets of aluminum. #t normally its planned cost is manufactures ,$'22 airplanes. Materials and labor a. the total budget variance. standards for ma-ing the airplanes are: b. the usage variance. c. the price variance. >irect Materials @1 sheet of aluminum 12.22 d. the e&ciency variance. 12.22C e. the budget variance. >irect Materials @other accessories .,' .,'C >irect ;abor @) hours ,.22C ".22 ANS: A 9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12
b. c. d. e.
standard unit price of an input multiplied by the number of inputs used. #t is the di/erence between the actual and standard unit price of an output multiplied by the number of inputs used. #t is the di/erence between the actual and standard unit price of an input multiplied by the number of inputs purchased. #t is the di/erence between the actual and standard unit price of an output multiplied by the number of inputs purchased. None of these.
variance analysis on a case#*: >i&culty: Moderate 3=4: ;3: 12
ANS: + 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12 #n current practice$ control limits are set subHectively$ using past e%perience$ Hudgment$ and intuition. ANS: A 9TS: 1 >#*: >i&culty: Moderate 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12#*: c. ''2$222 and '22$222 >i&culty: Moderate d. ','$222 and '2$222 3=4: ;3: 12#*: >i&culty: (asy a. the investigation should be underta-en only if 3=4: ;3: 12
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Fhich of the following is not true concerning direct materials variancesG a. The sum of the price and usage variances will Fig$re 10%'& ighland +ompanyLs standard cost is '2$222. The add up to the total materials variance only if the allowable deviation is 12P. #ts actual costs for si% materials purchased is equal to the materials months are used. b. The materials price variance uses the actual 4anuary !'$222 quantity of materials purchased rather than the *ebruary 2$222 actual quantity of materials used. March "'$222 c. The materials price variance always uses the April )'$222 actual quantity of materials used rather than the May ,2$222 actual quantity of materials purchased. 4une 2$222 d. The materials usage variance uses the actual quantity of materials used. e. Separate materials variances can be computed !2. Befer to *igure 12<. The upper and lower control limits for each type of material used. are$ respectively$ a. '2$222 and '$222 b. !2'$222 and 1'$222 ANS: + c. ,'$222 and '2$222 Typically$ the quantity of material purchased is used to d. ,'$222 and '$222 determine the materials price variance. ANS: > The upper control limit is ,'$222 @'2$222 Q @'2$222 12PCC. The lower control limit is '$222 @'2$222 @'2$222 12PCC.
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" NAT: =S9B3?: Analytic STA: A#+9A: *N
9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12 9TS: 1 >#*: >i&culty: Moderate ANS: = 9TS: 1 >#*: 3=4: ;3: 12<" NAT: =S9B3?: Analytic >i&culty: (asy STA: A#+9A: *N#*: e. None of these. >i&culty: (asy 3=4: ;3: 12#*: Measurement I A+=S9: A9+<,i&culty: Moderate *eaturesJ+osts 6(K: 3=4: ;3: 12<" NAT: =S9B3?: Analytic =loomLs: Application STA: A#+9A: *N
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Fhich of the following is not true regarding the use of materials variance informationG a. The purchasing agent has the responsibility for controlling the materials price variance. b. The production manager is generally responsible for materials usage. c. The production manager is concerned with minimi5ing scrap$ waste$ and rewor-. d. The purchasing department is responsible for acquiring quality materials. e. All of these are true.
Measurement I A+=S9: A9+<,uring 4une$ +isco +ompany produced 1$222 chainsaw blades. The standard quantity of material allowed per unit was 1.' pounds of steel per blade at a standard cost of per pound. +isco determined that it had a favorable materials usage variance of 1$222 for 4une. +alculate the actual quantity of materials +isco used. a. 1,$,' pounds b. 1$1' pounds c. 11$,' pounds d. 1$1' pounds
ANS: ( 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" NAT: =S9B3?: Analytic ANS: A STA: A#+9A: *N
>uring the month of March$ =a-erLs (%press purchased 12$222 pounds of 7our at 1 per pound. At the end of March$ =a-erLs (%press found that it had an unfavorable materials price variance of '22. The standard cost per pound must be a. 1.' b. 1.22 c. 1.2' d. 2.' ANS: M9D '22 S9
3r 1$222 blades 1.' pounds O 1""$222 1$222 O 1"!$222J O 1,$,' pounds
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" NAT: =S9B3?: Analytic STA: A#+9A: *N
> O @A9 S9CA8 O @1 S9C12$222 O 2.'
>uring 4une$ +isco +ompany produced 1$222 chainsaw blades. The standard quantity of material allowed per unit was 1.' pounds of steel per blade at a standard cost of per pound. The actual cost was , per pound. The actual pounds of steel that +isco purchased were 1$'22 pounds. All materials purchased were used. 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" +alculate +iscoLs materials usage variance. a. 12$'22 NAT: =S9B3?: Analytic STA: A#+9A: *Nuring the month of March$ =a-erLs (%press purchased 1$222 blades 1.' pounds O 1$222 pounds of steel 12$222 pounds of 7our at 1 per pound. At the end of March$ =a-erLs (%press found that it had a favorable MD O @A8 S8CS9 materials price variance of '22. The standard cost per O @1$'22 1$222C pound must be O 1$222 a. 2.' b. 1.22 c. 1.2' 9TS: 1 >#*: >i&culty: (asy d. 1.' 3=4: ;3: 12<" NAT: =S9B3?: Analytic STA: A#+9A: *N
1 >#*: >i&culty: Moderate ;3: 12<" =S9B3?: Analytic A#+9A: *N
9erfect =uilders ma-es all sorts of moldings. #ts standard quantity of material allowed is 1 foot of wood per 1 foot of molding at a standard price of .22 per foot. >uring August$ it purchased '22$222 feet of wood at a cost of 1.2 per foot$ which produced only "$222 feet of molding. +alculate the materials price variance and the materi als usage variance$ respectively.
a. b. c. d.
'2$222 "$22 '2$222 "$22
ANS: M9D MD
* and $222 and $222 * * and 1$22 * and 1$22
output Actual output
Boberts +ompany reports its material price variances at the time of purchase. Fhat is the material usage variance for Boberts +ompanyG a. 22 * b . 1$'2 * c. $'2 * d. 22
A O @A9 S9CA8 O @1.2 .22C'22$222 O '2$222 * O @A8 S8CS9 O @"$222 '22$222C.22 O $222
ANS: A @$'2 !$222C
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" NAT: =S9B3?: Analytic STA: A#+9A: *N
1$222 units
1 O 22 *
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" NAT: =S9B3?: Analytic STA: A#+9A: *N
Mover +ompany has developed the following standards >uring August$ 12$222 units were produced. The for one of its products: standard quantity of material allowed per unit was 12 pounds at a standard cost of ! per pound. #f there was >irect materials: ,.' pounds per an unfavorable usage variance of 1$,'2 for August$ pound the actual quantity of materials used must be >irect labor: hours 1 per hour a. 12)$'2 pounds. b. !$,'2 pounds. The following activity occurred during March: c. !1$,' pounds. d. !$"! pounds. Mater ials pu rch ased: '$222 pou nds costing "$'22 Materials used: !$)22 pounds ANS: A nits produced: '22 units 12$222 12 ! O !22$222 >irect labor: 1$1'2 hours at !22$222 Q 1$,'2 O !1$,'2 11.2Jhour !1$,'2J! O 12)$'2 pounds The company records materials price variances at the 9TS: 1 >#*: >i&culty: Moderate time of purchase. The variable standard cost per unit for3=4: ;3: 12<" materials and labor is NAT: =S9B3?: Analytic a. . STA: A#+9A: *Nirect materials @,.' pounds >irect labor @ hours 1C
C
)2 " "
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" NAT: =S9B3?: Analytic STA: A#+9A: *N
>uring September$ "2$222 units were produced. The standard quantity of material allowed per unit was ' pounds at a standard cost of .'2 per pound. #f there was a favorable usage variance of '$222 for September$ the actual quantity of materials used must have been a. 12$222 pounds. b. 12$222 pounds. c. 12'$222 pounds. d. '$222 pounds.
ANS: = "2$222 ' .'2 O '22$222 '22$222 '$222 O ",'$222 "!. Boberts +ompany uses a standard costing system. The ",'$222J.'2 O 12$222 pou nds following information pertains to direct materials for the 4uly: 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" Standard price per lb. 1.22 NAT: =S9B3?: Analytic Actual purchase price per lb. 1).'2 STA: A#+9A: *N
N3T: ").
! min.
;eather @1 strips 2C
>irect labor @12 hours 1C Ma% +ompany has developed the following standards for one of its products. Total prime cost >irect materials:
1' pounds 1) per pound " hours " per hour " hours 1" per hour
>irect labor: Dariable overhead:
The following activity occurred during the month of 3ctober: Mater ials pu rch ased:
12$222 pound s co stin g 1,2$222 ,$22 pounds '22 units $!22 hours at !.)2Jhour
Materials used: nits produced: >irect labor:
The company records materials price variances at the time of purchase. The direct materials price variance is a. '2$222 *. b. '2$222 . c. 12$222 . d. 12$222 *.
"2 12 !)2
>uring the year =ortello produced 1' boots. Actual leather purchased was 1$,22 strips$ at 1) per strip. There were no beginning or ending inventories of leather. Actual direct labor was 1$'22 hours at 1' per hour. Befer to *igure 12
MD O @A8 < S8C % S9 @1$,22 < 1$'22C2 O "$222
ANS: + 1,2$222
@12$222
1)C O 12$222
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" NAT: =S9B3?: Analytic STA: A#+9A: *N
All of the following are true except a. A favorable labor e&ciency variance could result from using higher quality materials that result in fewer inspections. b. A favorable labor rate variance could result from lower wage wor-ers quitting. c. A favorable materials price variance could result from purchasing identical materials from another supplier at a lower price. d. An unfavorable materials usage variance could result from not e&ciently utili5ing raw materials$ thus causing waste. e. An unfavorable labor e&ciency variance can be caused by machine downtime$ and poor quality materials. ANS: = 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" I ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" NAT: =S9B3?: Analytic STA: A#+9A: *N
;(D O @A < SCSB @1$'22 < 1$'2C1 O !$222
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
c. 1!'$222 * d. 1,2$222 ANS:
=
Materials ;abor
Actual +ostR ,$22
=udgeted +ost !2$222
Dariance $22 *
ANS: A M9DO @A9
$'22
1'$222
,$'22
@.22 < .'C % "22$222 122$222 *
R@1$,22 % 1)C @1$'22 % 1'C =udgeted Materials: @S8 % SBC % A8 O "2 % 1' O !2$222 =udgeted ;abor: @S % SBC % A8 O 12 % 1' O 1'$222
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" NAT: =S9B3?: Analytic STA: A#+9A: *N
9TS: 1 >#*: >i&culty: Moderate 3= 4: ;3: 12<" I ;3: 12< ' NAT: =S9B3?: Analytic STA: A#+9A: *N a. !)$222 and !)$222 b. ")$'22 and !,$'22 @.' % "22$222C < @.' % !2$222C c. !,$22 and 2$222 "'$222 d. !2$222 and 1'$222 ANS: > Materials: @S8 % SBC % A8 O "2 % 1' O !2$222 ;abor: @S % SBC % A8 O 12 % 1' O 1'$222
9TS: 1 >#*: >i&culty: Moderate 3= 4: ;3: 12<" I ;3: 12< ' NAT: =S9B3?: Analytic STA: A#+9A: *Nuring the year 12$222 picture frames were produced. Materials and labor standards for producing the picture frames are as follows:
>irect materials @ pieces of wood .'C >irect labor @ hours 12C
Befer to *igure 12<'. Fhat is SeasideLs labor rate varianceG a. 12$222 * b. 12$222 c. '$222 d. 1,$'22 * ANS: = ;BD O @AB < SBCA @12.'2 < 12.22C % !)2$222 12$222
".'2 2.22
Seaside purchased and used "22$222 pieces of wood at .22 each and its actual labor hours were !)2$222 hours at a wage rate of 12.'2.
'.
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" NAT: =S9B3?: Analytic STA: A#+9A: *N
Befer to *igure 12<'. Fhat is the materials price varianceG a. 122$222 * b. 11$'22
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
d. 12$222 ANS: A @!)2$222 % 12.'2C < @!2$222 % 12.22C 2$222 *
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
Fhich of the following is true regarding direct labor variancesG a. The labor e&ciency variance measures the di/erence between what was paid to direct laborers and what should have been paid. b. The labor rate and labor e&ciency variances will always add up to the total labor variance. c. The labor rate variance measures the di/erence between the labor hours that were actually used and the labor hours that should have been used. d. The labor rate variance measures the di/erence between the labor hours that were originally budgeted and the labor hours that should have been used. e. The labor rate variance measures the di/erence between the labor hours that were actually used and the labor hours that were originally budgeted.
Actual oursC. c. @Actual ours Standard BateC @Standard ours Standard BateC. d. @Standard ours Actual BateC @Actual ours Actual BateC. e. None of these.
ANS: + 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
ANS: = 9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N#*: >i&culty: Moderate e. None of these. 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N<>ecision Modeling I #MA: 9erformance ANS: > 9TS: 1 >#*: Measurement I A+=S9: A9+<,i&culty: Moderate *eaturesJ+osts 6(K: 3=4: ;3: 12<' NAT: =S9B3?: Analytic =loomLs: 6nowledge STA: A#+9A: *N
traditional costing systems. ANS: > 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N<>ecision Modeling I #MA: Strategic 9lanning I A+=S9: A9+<,
+laire +ompany uses a standard costing system. The following information pertains to direct labor costs for *ebruary: Standard direct labor rate per 1'.22 hour Actual direct labor rate per hour 1!.'2 ;abor rate variance 1$222 * Actual output 1$222 units Standard hours allowed for actual 12$222 hours production Fhat is the total labor budget variance for +laire +ompanyG a. 1$222 * b. 1$222 * c. 1$222 d. 1$222 ANS: > 1$222J@1'.22 1!.'2C O 1$222 actual hours @1$222 1!.'2C @12$222 1'C O 1$222 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
)!.
+laire +ompany uses a standard costing system. The following information pertains to direct labor costs for *ebruary: Standard direct labor rate per 1'.22 hour Actual direct labor rate per hour 1!.'2 ;abor rate variance 1$222 * Actual output 1$222 units Standard hours allowed for actual 12$222 hours production ow many actual labor hours were wor-ed during *ebruary for +laire +ompanyG a. 12$222 hours b. $222 hours c. 1$22 hours d. 1$222 hours ANS: > 1$222J@1'.22
1!.'2C O 1$222 hours
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
*eaturesJ+osts =loomLs: Application N3T: " min.
6(K:
#f the actual labor rate e%ceeds the standard labor rate and the actual labor hours e%ceed the number of hours allowed$ the labor rate variance and labor e&ciency variance will be La*or Rate .arian,e a. *avorable b. *avorable c. nfavorable d. nfavorable
La*or E+,ien,.arian,e *avorable nfavorable *avorable nfavorable
ANS: > 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *Nuring 4anuary$ ,$222 direct labor hours were wor-ed at a standard cost of 2 per hour. #f the direct labor rate variance for 4anuary was 1,$'22 favorable$ the actual cost per direct labor hour must be a. 1,.'2. b . 2.22. c. .'2. d . '.22. ANS: A ,$222 2 O 1"2$222 1"2$222 1,$'22 O 1$'22 1$'22J,$222 O 1,.'2 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *Nuring 3ctober$ 12$222 direct labor hours were wor-ed at a standard cost of 12 per hour. #f the direct labor rate variance for 3ctober was "$222 unfavorable$ the actual cost per direct labor hour must be a. 12."2. b . 12.22. c. .)2. d . .2. ANS: A 12$222 12 O 122$222 122$222 Q "$222 O 12"$222 12"$222J12$222 O 12."2 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
),.
Befer to *igure 12<". Fhat was igh *liersL total labor =ender +orporation produced 122 units of 9roduct AA. varianceG The total standard and actual costs for materials and a. )1$'22 * direct labor for the 122 units of 9roduct AA are as b. ,)$'22 * follows: c. ,)$'22 d. )1$'22 Materials: Standard Actual Standard: 22 pounds at )22 !.22 per pound ANS: = Actual: 2 pounds at ), .' per pound ;(DO @A < SCSB >irect labor: Standard: Actual:
@1"$222 < 2$222C % 11 "22 hours at 1'.22 per hour !) hours at 1).'2 per hour
)$222
;(D O ))$222 * )$2,
Fhat is the labor e&ciency variance for =ender +orporationG a. "2 b. '' * c. '' d. "2 * ANS: > @!) "22C
1' O "2 *
9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
Total variance O ))$222 Q 12$'22 O ,)$'22
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *Nuring the year$ it constructed 1 homes using 1$222 labor hours per home and a rate of per hour.
Befer to *igure 12<). +alculate the (%treme =uildersL labor rate variance. a. '"2$222 Fig$re 10%& b. '"2$222 * igh *liers +ompany produces model airplanes. >uring c. )"$222 the month of November$ it produced $222 planes. The d. )"$222 * actual labor hours were , hours per plane. #ts standard labor hours are 12 hours per plane. The standard labor rate is 11 per hour. At the end of November$ igh + *liers found that it had a favorable labor rate variance ANS: ;BDO @AB < SBCA of 12$'22. ).
Befer to *igure 12<". Fhat was igh *liersL actual cost per labor hourG a. 1.,' b. 11.'2 c. 12.'2 d. 12.' ANS:
>
;BD O @AB < SBCA @12$'22C O @AB < 11.22C@$222 % ,C AB O 12.'
@ < 'C1)$222 )"$222
9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
22$222
9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
Assume that S8 O Standard 8uantity$ S9 O Standard 9rice$ A8 O Actual 8uantity$ and A9 O Actual 9rice. The correct entry along with the equation to record the issuance and usage of materials$ assuming a favorable materials usage variance$ is as follows a. For- in 9rocess S8 S9 Materials sage Dariance @A8 S8CS9 Materials A8 S9 b. For- in 9rocess S8 S9 Materials sage Dariance @A8 S8CS9 Materials A8 S9 c. For- in 9rocess A8 A9 Materials sage Dariance @A8 S8CS9 Materials A8 S9 d. For- in 9rocess A8 A9 Materials sage Dariance @A8 S8CS9 Materials A8 S9 e. None of these. ANS: A 3nly standard quantities and standard prices are used to assign costs to For- in 9rocess. 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<) NAT: =S9B3?: Analytic STA: A#+9A: *N
,!.
Fhich of the following is true regarding the disposition of materials and labor variancesG a. The variances for materials and labor are closed directly to +ost of ?oods Sold regardless of materiality. b. #f the materials price variance is material$ it is prorated among Materials #nventory$ Materials sage Dariance$ For- in 9rocess$ and *inished ?oods. c. The materials usage variance and the labor variances$ if material$ are prorated among Forin 9rocess$ *inished ?oods$ and +ost of ?oods Sold. d. The materials usage variance and the labor variances are always prorated among For- in 9rocess$ *inished ?oods$ and +ost of ?oods Sold. e. The materials usage variance and the labor variances are always closed to +ost of ?oods Sold.
#f the materials price variance is material$ it is prorated among Materials #nventory$ Materials sage Dariance$ For- in 9rocess$ *inished ?oods$ and +ost of ?oods Sold. 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<) NAT: =S9B3?: Analytic STA: A#+9A: *Nuring September$ a small roo0ng company purchased '22 bundles of a certain type of shingle at a price of !' per bundle$ ' less than the standard price. #ts standard quantity of this type of shingle is ''2 bundles. Fhat is the Hournal entry to record the purchase of materialsG a. Materials 2$222 Materials 9rice Dariance $'22 Accounts 9ayable 1,$'22 b. Materials 2$222 Materials 9rice Dariance $'22 Accounts 9ayable $'22 c. Materials 1,$'22 Materials 9rice Dariance $'22 Accounts 9ayable 1'$222 d. Materials 2$222 Materials 9rice Dariance $,'2 Accounts 9ayable 1,$'2 ANS: A Materials O S9 A8 O "2 M9D O @A9 S9CA8 O @!'
'22 O 2$222 "2C'22 O $'22 *
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<) NAT: =S9B3?: Analytic STA: A#+9A: *Nuring 4une$ +isco +ompany produced 1'$222 chainsaw blades. The standard quantity of material allowed per unit was 1.' pounds of steel per blade at a standard cost of ' per pound. The actual purchase price was ).' per pound. +isco determined that it had a favorable materials usage variance of $'22 for 4une. Fhat is the Hournal entry to record the issuance and usage of materialsG a. For- in 9rocess 11$'22 Materials sage Dariance $'22 Materials 112$222 b. For- in 9rocess 112$222 Materials sage Dariance $'22 Materials 11$222 c. For- in 9rocess 11$'22 Materials sage Dariance $'22 Materials 11'$222 d. For- in 9rocess 1"2$)' Materials sage Dariance $'22 Materials 1!$1'
ANS: + ANS: A The variances for materials and labor are closed directly 1'$222 blades 1.' pounds O $'22 pounds of steel to +ost of ?oods Sold only if immaterial. MD O @A8 S8CS9 O @A8 $'22C' $'22 A8 O $222 pounds
3=4: ;3: 12<) NAT: =S9B3?: Analytic STA: A#+9A: *N
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<) NAT: =S9B3?: Analytic STA: A#+9A: *N
Fig$re 10%2& The 9erfect Tool +ompany @South America >ivisionC produced 2$222 saw blades during the y ear. #t too- 1.' hours of labor per blade at a rate of .'2 per hour. owever$ its standard labor rate is .22. #ts labor e&ciency variance was an unfavorable "2$222.
Befer to *igure 12<. Fhat is 9erfectLs standard hours allowed for a volume of 2$222 bladesG Fig$re 10%& >uring April$ a small roo0ng company purchased ,22 a. 12$222 hours bundles of a certain type of shingle at a price of !' perb. 1$222 hours bundle$ more than the standard price. #ts standard c. 11'$222 hours d. 1'$222 hours quantity of this type of shingle is ,' bundles. ,).
Befer to *igure 12<,. Fhat is the Hournal entry to record the issuance and usage of materials assuming that the roo0ng company purchased and used ,22 bundlesG a. For- in 9rocess 1$22 Materials sage Dariance ),' Materials 1$',' b. For- in 9rocess 1$',' Materials sage Dariance ),' Materials 1$22 c. For- in 9rocess "$'22 Materials sage Dariance ,' Materials '$!,' d. For- in 9rocess '$!,' Materials sage Dariance ,' Materials "$'22 ANS: = For- in 9rocess O S8 S9 O ,' , O 1$',' MD O @A8 S8CS9 O @,22 ,'C, O ),' * Materials O A8 S9 O ,22 , O 1$22
ANS: + ;(D O @A < SC % SB "2$222 O @12$222 < SC % 11'$222 hours
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<) NAT: =S9B3?: Analytic STA: A#+9A: *N
Befer to *igure 12<,. Fhat is the Hournal entry to record )2$222 the purchase of materialsG a. Materials 1$',' Materials 9rice Dariance '$22 9TS: 1 >#*: >i&culty: Moderate Accounts 9ayable '$!,' 3=4: ;3: 12<' b. Materials "$'22 NAT: =S9B3?: Analytic Materials 9rice Dariance '$)22 STA: A#+9A: *N#*: >i&culty: Moderate
Accrued 9ayroll 1$2',$'22 c. For- #n 9rocess 2$222 ;abor Bate Dariance )2$222 ;abor (&ciency Dariance "2$222 Accrued 9ayroll "2$222 d. For- #n 9rocess )2$222 ;abor Bate Dariance ',$'22 ;abor (&ciency Dariance "2$222 Accrued 9ayroll ,,$'22
Measurement I A+=S9: A9+<,
ANS: A O @AB < SBCA ANS:
@.'2 < C % 12$222
=
)2$222
O @A8 < S8CS9
Accrued 9ayroll O @2$222 % 1.'C % .'2 O 1$22$222
@1$"22$222 < 1$'22$222C % ! !22$2222 *
For- in 9rocess O S % SB O 11'$222 % O 2$222
S8 O 1$'22$222 O '2$222 % )
;(D O @A < SC % SB "2$222 O @12$222 < SC % 11'$222 hours
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<) NAT: =S9B3?: Analytic STA: A#+9A: *N
9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12<" NAT: =S9B3?: Analytic STA: A#+9A: *N
Fig$re 10%3& ANS: + 4ames +ompany manufactures turing the year$ @AB < SBCA it manufactured '2$222 t
>irect materials @) yards of fabric ! per yardC >irect labor @." hours .22 per hourC
1 1,
#t too- 4ames 1$"22$222 yards at .'2 per yard to ma-e the '2$222 t
Befer to *igure 12<. Fhat is 4amesU materials price variance assuming that materials purchased equals materials usedG a. ,'2$222 * b. ,22$222 * c. ,22$222 d. ,'2$22 ANS: = M9D O @A9 < S9C % A8 @.'2 < !.22C % 1$"22$222
A O '22$222 O '2$222 %
9TS: 1 >#*: >i&culty: (asy 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N
,22$222 * ANS: + @A < SCSB 9TS: 3=4: NAT: STA:
1 >#*: >i&culty: (asy ;3: 12<" =S9B3?: Analytic A#+9A: *N
@'22$222 < )22$222C % 22$222 *
3=4: ;3: 12<) NAT: =S9B3?: Analytic STA: A#+9A: *N
A O '22$222 O '2$222 % S O )22$222 O '2$222 % ."
9TS: 1 >#*: >i&culty: (asy Befer to *igure 12<. Fhat is the entry to close the 3=4: ;3: 12<' variances of labor and materialsG NAT: =S9B3?: Analytic a. Materials 9rice Dariance ,22$222 STA: A#+9A: *N#*: >i&culty: (asy 3=4: ;3: 12<) NAT: =S9B3?: Analytic STA: A#+9A: *N
d. +ost of ?oods Sold 1$'2$222 Materials 9rice Dariance ,'2$222 Materials sage Dariance '2$222 ;abor (&ciency Dariance '2$222 ;abor Bate Dariance +ost of ?oods Sold
!22$222 !22$222
ANS: A ;abor (&ciency Dariance O @A < SCSB O @'22$222 < )22$222C O 22$222 * Material sage Dariance O @A8 < S8CS9 O @1$"22$222 < 1$'22$222C! O !22$222 * Material 9rice Dariance O @A9 < S9CA8 O @.'2 < !.22C1$"222$222O ,22$222 * ;BD O @AB < SBCA O @.'2 < .22C'22$222 O '2$222
Befer to *igure 12<. Fhat is the entry to record the 9TS: 1 >#*: >i&culty: +hallenging issuance and usage of materialsG 3=4: ;3: 12<) a. For- in 9rocess "$'22$222 NAT: =S9B3?: Analytic Materials sage Dariance !22$222 STA: A#+9A: *Nuring the d. For- in 9rocess "$'22$222 year Top Notch Music produced ,$222 stereos. Materials Materials sage Dariance !22$222 and labor standards for producing these units are as Materials "$22$222 follows: ANS: > Materials O S 9 % A8 O ! % 1$"22$222 O "$22$222 For- in 9rocess O S8 % S9 O @'2$222 % )C % ! O "$'22$222 Material sage Dariance O @1$"22$222 < @'2$222 % )CC ! O !22$222 *
>irect materials @1 electronic component -it 1'C >irect materials @ plastic casing "'C
1'
>irect labor @ hours 1'C
12
Re5$ired:
9TS:
1
>#*:
>i&culty: (asy
2
A. +ompute the standards hours allowed for a volume of ,$222 stereos and the planned cost. =. +ompute the standard number of -its and casings allowed for a value of ,$222 units and the planned cost for each direct material. +. +ompute the total budget variances for materials and labor assuming that actual number of electronic -its purchased and used were ,$!22 at a price of 1, and actual plastic casings purchased were 1"$"22 at a price of "!. Actual labor was ',$22 hours at 1'.,' per hour.
ANS: A. S O hours % ,$222 O ')$222
O @'22 ",'C1".'2 O !).'2 =.
Standard ;abor +ost O ",' 1".'2 O )$,.'2 12P O ).,'. The unfavorable ;(D of !).'2 is greater than the 122 rule but not the 12P rule. ence$ the variance should be investigated.
9TS: 1 >#*: >i&culty: Moderate 3=4 : ;3: 12
9+ O 1' % ')$222 O "2$222
=.
A materials usage variance will be investigated when the variance is greater than either '$222 or 12P of the standard cost.
S8 O 1 % ,$222 O ,$222 electronic -its S8 O % ,$222 O 1"$222 plastic casings 9+ O ,$222 % 1' O 1$'$222 electronic -its 9+ O 1"$222 % "' O )!2$222 plastic casings
+.
>uring 4une$ the company purchased and used $'22 pounds of concrete for ' per pound. #t was able to ma-e 2$222 bric-s. #ts standard quantity of materials allowed is 2."' pound of concrete per bric- at a standard price of ) per pound. A.
Actual =udgeted Dariance +ost +ost 1$!2)$ 1$'$ 11$,2 ,22 222 2
Materials @electronic component -itsC Materials @plastic casingsC ;abor
=.
ANS: )1$ 22 22$ 22
)!2$ 222 "2$ 222
@12$2* 2C )2$2 2
A.
=. 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12< I ;3: 12
>etermine AcmeLs material usage variance and whether it is favorable or unfavorable. Should the variance be investigatedG
MD
O @A8 S8CS9 O @$'22 $222C) O !$222
Standard Materials +ost O $222 ) O '"$222 12P O '$"22. The unfavorable MD of !$222 is not greater than the '$222 rule or greater than 12P of the standard cost. ence$ the variance should not be investigated.
9TS: 1 >#*: >i&culty: (asy 3=4 : ;3: 12uring September$ the company used '22 direct labor concerning its direct materials: hours at a rate of 1' per hour. #ts standard rate is ",' >irect Materials: direct labor hours at a rate of 1".'2 per hour. Standard 8uantity 122$222 Actual 8uantity 2$222 A. >etermine the companyLs labor e&ciency Standard 9rice ! variance and whether it is favorable or Actual 9rice " unfavorable. =. Should the variance be investigatedG A. >etermine the materials price variance and whether it is favorable or unfavorable. =. >etermine the materials usage variance and ANS: whether it is favorable or unfavorable. +. Festminster has set control limits stating that A. ;(D O @A SCSB ;eeds +ompany uses the following rule to determine whether labor e&ciency variances should be investigated:
actual costs should be investigated if they fall outside the acceptable range of the standard materials cost V12P. i. Fhat is the standard materials costG ii. Fhat are the upper and lower control limitsG iii. Fhat is the actual materials costG iv. Should the actual materials cost be investigatedG
=. MD O @A8 < S8C % S9 @,$!2$222 < ,$22$222C % 2.2 O $)22
9TS: 1 >#*: >i&culty: (asy 3=4 : ;3: 12
ANS: A.
M9D
=.
MD
+.
i. ii.
iii. iv.
'.
O @A9 S9CA8 O @" !C2$222 O 2$222
Mc>aniel +ompany manufactures 122
O @A8 S8CS9 O @2$222 122$222C! O )2$222 * The standard materials cost O 122$222 ! O !22$222. The upper control limit O !22$222 Q @!22$222 12PC O !!2$222. The lower control limit O !22$222 @!22$222 12PC O ,2$222. The actual materials cost O 2$222 " O !2$222. No$ !2$222 falls between ,2$222 and !!2$222.
>irect materials @122 lbs. 1.22 per lb.C >irect labor @2.' hours at " per hourC Total standard prime cost per 122 lb. bag
122.22 1.22 11.22
The following activities were recorded for 3ctober: W W
1$222 bags were manufactured. '$222 lbs. of materials costing ,)$222 were purchased. 12$'22 lbs. of materials were used. 1$222 was paid for ",' hours of direct labor.
W W
9TS: 1 >#*: >i&culty: Moderate There were no beginning or ending wor-irect materials @2 o5. 2.2C
,.2
ANS: A.
X,)$222
>uring the 0rst month of operations the company e%perienced the following results: A. ?allon units produced: 2$222 =. 3unces of materials purchased and used: ,$!2$222 ounces at 2.2, +. No beginning or ending inventories of raw materials
Material price variance:
@'$222
1.22CY O 1$222 *
Material usage variance X12$'22 1$222@122CY =.
;abor rate variance X1$222 @",' hrs.
1.22 O $'22
"CY O )22
;abor e&ciency variance X@",' '22CY" O )22 * Re5$ired:
A. +ompute the materials price variance indicating if it is favorable or unfavorable. =. +ompute the materials usage variance indicating if it is favorable or unfavorable. ANS: A. M9D O @A9 < S9C % A8 @2.2, < 2.2C % ,$!2$222 O ,!$22 *
+.
All of the material price variances could be caused by out
with higher wages. ;abor e&ciency variance: The 0rm could be using a more e%perienced wor- force than desired.
(. ;BD O @AB
9TS: 1 >#*: >i&culty: +hallenging *. 3=4: ;3: 12
9TS: 1 >#*: >i&culty: Moderate >uBoss +ompany produces coats. The company uses a 3=4: ;3: 12irect labor @ hours 1C !) 12 min. Total prime cost " Moving =aby +ompany produces baby strollers. >uring the year 2$222 strollers were produced. The actual >uring the year >uBoss produced ''$222 coats. Actual labor used was '$222 hours at 1.,' per hour. fabric purchased was ")2$222 yards at '.,' per yard. Moving =aby has the following labor standards: hours There were no beginning or ending inventories of fabric. at 1!.22 per hour. Actual direct labor was 12$222 hours at 1.' per hour. Re5$ired: Re5$ired:
A. +ompute the cost of leather and direct labor that should be incurred for the production of ''$222 coats. =. +ompute the total budget variances for materials and labor. +. +ompute the materials price variance.
A. +ompute the labor rate variance$ indicating if it is favorable or unfavorable. =. +ompute the labor e&ciency variance$ indicating if it is favorable or unfavorable. ANS: A.
>. +ompute the materials usage variance.
;BD O @AB < SBC % A
(. +ompute the labor rate variance.
@1.,' < 1!.22C % '$222 O ')$'2 *
*. +ompute the labor e&ciency variance. =. ;(D O @A < SC % SB
ANS: A.
@'$222 < 12$222C % 1!.22 O ''$222
Materials O " % ''$222 O $)"2$222 ;abor O !) % ''$222 O 1$2$222
=.
Materials ;abor
Actual +ost =udgeted Dariance +ost $)"'$ $)"2$ '$2 222 222 22 $!12$ 1$2$ !!2$ 222 222 222
+. M9D O @A9 < S9C % A8 @'.,' < )C % ")2$222 O 11'$222 *
>.
9TS: 1 >#*: >i&culty: Moderate 3=4 : ;3: 12irect labor: hours per hour
!2 1)
The company records materials price variances at the time of purchase.
MD O @A8 < S8C % S9 @")2$222 < ""2$222C % ) O 12$222
The following activity occurred during >ecember:
Materials purchased: Materials used: nits produced: >irect labor: Re5$ired: A. +alculate =. +alculate +. +alculate >. +alculate
'$22 yards costing $22 "$,'2 yards 1$222 units $122 hours costing 1,$'2
the direct materials price variance. the direct materials usage variance. the direct labor rate variance. the direct labor e&ciency variance.
6(K: =loomLs: Application 12 min.
+rawford +orporation has the following information: >irect Materials: Standard 1$'22 8uantity Actual 8uantity 1$"22 Standard 9rice 2 Actual 9rice 1,.'2 A.
ANS: A. =. +. >.
=.
1$!22 * 1$'22 * 1$2'2 22
$22 @'$22 )C ) @"$,'2 '$222C 1,$'2 @$122 C @$122 $222C
+. >.
(astminster +ompany has the following information: >irect Materials: Standard 12$222 8uantity Actual 8uantity 1$222 Standard 9rice 1" Actual 9rice 1 A.
>irect ;abor: Stan dard $222 ours Actual ours 1$,' Standard Bate 12 Actual Bate 11
>etermine the materials price variance and whether it is favorable or unfavorable. >etermine the materials usage variance and whether it is favorable or unfavorable. >etermine the labor rate variance and whether it is favorable or unfavorable. >etermine the labor e&ciency variance and whether it is favorable or unfavorable.
=. +. >.
ANS: A.
=.
+.
>.
M9D
MD
;BD
;(D
O @A9 S9CA8 O @1 1"C1$222 O "$222 * O @A8 S8CS9 O @1$222 12$222C1" O $222 O @AB SBCA O @11 12C1$,' O 1$,' O @A SCSB O @1$,' $222C12 O 1$'2 *
9TS: 1 >#*: >i&culty: Moderate 3= 4: ;3: 12<" I ;3: 12< ' NAT: =S9B3?: Analytic STA: A#+9A: *N
>irect ;abor: Standard ours Actual ours Standard Bate Actual Bate
'22 '' 1" 1"
>etermine the materials price variance and whether it is favorable or unfavorable. >etermine the materials usage variance and whether it is favorable or unfavorable. >etermine the labor rate variance and whether it is favorable or unfavorable. >etermine the labor e&ciency variance and whether it is favorable or unfavorable.
ANS: 9TS: 1 >#*: >i&culty: Moderate 3= 4: ;3: 12<" I ;3: 12< ' NAT: =S9B3?: Analytic A. M9D STA: A#+9A: *N
N3T:
O @A9 S9CA8 O @1,.'2 2C1$"22 O !$'22 * O @A8 S8CS9 O @1$"22 1$'22C2 O $222 *
+.
;BD
O @AB SBCA O @1" 1"C'' O 2
>.
;(D
O @A SCSB O @'' '22C1" O !'2
9TS: 1 >#*: >i&culty: Moderate 3=4 : ;3: 12<" I ;3: 12< ' NAT: =S9B3?: Analytic STA: A#+9A: *N
"'.22 '1.22
The following operating data were ta-en from the records for November: 1. . !. ". '. ). ,.
nits completed: '$22 units =udgeted output: )$222 units Materials purchased: )2$222 -ilograms Total actual labor costs: !2)$)22 Actu al hour s of lab or: !)$'22 hour s Material usage variance:$'2 Total material variance: "'2
+ompute the following: A. =. +.
;abor rate variance ;ab or e&c ien cy var ianc e Actual -ilograms of material used in the
production process Actual cost paid per -ilogram of material
>.
>.
it is favorable or unfavorable. >etermine the labor e&ciency variance and whether it is favorable or unfavorable.
ANS: ANS: Actual Actual 8uantity A. M9D +ost >i/erence or ours Dariance
A. Standard +ost ;abor Bate Dariance
.'2Jhr. ."2Jhr.R
.12 @fav.C
!)$'22 hrs.=.
MD
R !2)$)22 labor costJ!)$'22 hours wor-ed O ."2 per hour =.
Standard 8uantity or ours ;abor (&ciency Dariance
Actual +. ;BD 8uantity Standard or ours >i/erence +ost Dariance
!"$22 hrs.RR
RR '$22 units produced +.
!)$'22 1$,22 hrs. .'2Jhr. >. hrs. @unfav.C
;(D
O @A9 S9CA8 O @.' .22C'!$222 O 1!$'2 O @A8 S8CS9 O @'!$222 '2$222C O )$222 O @AB SBCA O @.22 ,.'2C1$222 O 12$'22 O @A SCSB O @1$222 2$222C,.'2 O ,$'22
) hrs allowed O !"$22
Standard 8uantity of 6g.
Actual 9TS: 1 >#*: >i&culty: Moderate 8uantity Standard 3=4 : ;3: 12<" I ;3: 12< ' of 6g. >i/erence +ost Dariance NAT: =S9B3?: Analytic Materials STA: A#+9A: *Nirect materials @2 yards 1.' per !,.22 >. ActualyardC Standard Actual 8uantity>irect labor @" hours 1.22 per ".22 +ost +ost >i/erence of 6g.hourC Dariance Materials 9rice ".'2J-g. n-nown 2.2!ZZ )2$222 Standards are based on normal monthly production Dariance @fav.C -g. involving $222 direct labor hours @'22 units of outputC. ZZ 1$22J)2$222 O 2.2! @roundedC The following information pertains to 4uly: For-ing bac-: ".'2 .2! O ".", @*avorable variance is subtracted from standardC >irect materials purchased @1)$222 $22 yards 1.2 per yardC >irect materials used @$"22 yardsC 9TS: 1 >#*: >i&culty: +hallenging >irect labor @1$2 hours 1.2 per $!) 3= 4: ;3: 12<" I ;3: 12< ' hourC NAT: =S9B3?: Analytic Actual production in 4uly: ")2 units STA: A#+9A: *Nuring the year$ it manufactured '$222 hedgers$ using ". hours of 1. Materials purchase price variance direct labor per hedger at a rate of . The materials . Materials usage variance and labor standards for manufacturing the hedgers are: !. ;ab or rate var ian ce ". ;abor e&ciency variance >irect materials @12 units C 2 >irect labor @" hours ,.'2 per hourC !2 =. ?ive potential reasons for each of the variances. =e sure to consider inter< ?ardenerLs Mar-et actually purchased and used '!$222 relationships among variances. units of direct materials at a price of .' per unit. Re5$ired: A. >etermine the materials price variance and whether it is favorable or unfavorable. =. >etermine the materials usage variance and whether it is favorable or unfavorable. +. >etermine the labor rate variance and whether
ANS: A.
Materials purchase price variance O @Actual unit price standard unit priceC actual quantity of materials purchased Materials purchase price variance O @1.2
1.'C 1)$222 O 22 favorable @actual price less than standard priceC
ANS: A.
Materials quantity variance O @Actual quantity of materials used standard quantity of materials allowedC standard unit price Materials quantity variance O @$"22 $22RC 1.' O !,2 unfavorable @actual quantity e%ceeds standard quantityC R ")2 units 2 yards per unit O $22 ;abor rate variance O @Actual rate per hour standard rate per hourC Actual hours wor-ed ;abor rate variance O @1.2 1.22C 1$2 O !,) unfavorable @actual rate e%ceeds standard rateC ;abor e&ciency variance O @Actual hours wor-ed standard hours allowedC standard rate ;abor efficiency variance O @1$2 1$"2RRC 1.22 O "2 unfavorable @actual hours e%ceed standard hours allowedC RR ")2 units " hours per unit O 1$"2 =.
The favorable purchase price variance may have occurred because the purchasing manager purchased materials at a lower price that were of lesser quality. The wor-ers encountered production problems as a result of the lesser quality materials which resulted in using more materials and ta-ing more time than anticipated. The supervisor also had to assign more e%perienced wor-ers to this production$ which resulted in a higher average wage rate.
M9D for =eef M9D for =ags Total M9D
O @A9
S9CA8
O @1.12 1.22C!$!22 O !!2 O @2.1' 2.'C!$222 O !22 * O !2
=.
MD
O @A8 S8CS9 O @!$!22 !$222C1.22 O !22
+.
;BD
O @AB SBCA O @.22 .22C,'2 O 2 Neither favorable nor unfavorable
>.
;(D
O @A SCSB O @,'2 22C.22 O 1$!'2 *
9TS: 1 >#*: >i&culty: Moderate 3=4 : ;3: 12<" I ;3: 12< ' NAT: =S9B3?: Analytic STA: A#+9A: *N
>irect materials @! pounds of rubber 1.'2 9TS: 1 >#*: >i&culty: +hallenging 2.'2C 3= 4: ;3: 12<" I ;3: 12< ' >irect labor @2.' hours 1).22C !.22 NAT: =S9B3?: Analytic STA: A#+9A: *NogLs =est *riend manufactures dog food. >uring the +. >etermine the materials usage variance and month$ it manufactured !$222 bags of -ibble$ using 2.' whether it is favorable or unfavorable. hour of direct labor per bag at a rate of .22 per hour. >. >etermine the labor e&ciency variance and The materials and labor standards for manufacturing whether it is favorable or unfavorable. the bags of -ibble are: >irect materials @1 pound of beef 1.22 per poundC >irect materials @1 bag 2.'C >irect labor @2.!2 hour .22C
1.22 2.' .,2
ANS: A.
M9D )2 A9
O @A9 S9CA8 O @A9 2.'2C!$122 O 2.!2 per pound
;BD 22 AB
O @AB SBCA O @AB 1).22C"'2 O 1.22 per hour
+.
MD
O @A8 S8CS9 O @!$122 !$222C2.'2 O '2
>.
;(D
O @A SCSB O @"'2 '22C1) O 22 *
The company actually used !$!22 pounds of beef at a price of 1.12 per pound. #t also purchased !$222 bags =. at a price of 2.1' per bag. A. =. +. >.
>etermine the total materials price variance and whether it is favorable or unfavorable. >etermine the materials usage variance for beef and whether it is favorable or unfavorable. >etermine the labor rate variance and whether it is favorable or unfavorable. >etermine the labor e&ciency variance and whether it is favorable or unfavorable.
9TS:
1
>#*:
>i&culty: Moderate
3= 4: ;3: 12<" I ;3: 12< ' NAT: =S9B3?: Analytic STA: A#+9A: *N
9urchase of raw materials #ssuance of raw materials Addition of labor to For- in 9rocess +losing of variances to +ost of ?oods Sold
9ontefract +ompany produced $'22 widgets during November using "$222 units of materials at a cost of ANS: '.22 each. #t also used '$222 direct labor hours at a A. rate of ,.22. #ts direct materials standard is units per widget. #ts direct labor standard is .' hours per widget. M9D O @A9 < S9C % A8 @1.! < 1.2C % 1'2$222 O "$'22 #ts materials price variance was a favorable $222 and its labor rate variance was an unfavorable 1$222. A. =. +.
+alculate the standard materials price per unit. +alculate the standard labor rate. >etermine the materials usage variance and whether it is favorable or unfavorable. >etermine the labor e&ciency variance and whether it is favorable or unfavorable.
>.
MD O @A8 < S8C % S9 @1'2$222 < 122$222C % 1.2 O )2$222
=. ;BD O @AB< SBC % A @.' < .22C % !)$22 O $22
ANS: A.
M9D $222 S9
O @A9 S9CA8 O @'.22 S9C"$222 O ,.22 per pound
;(D O @A < SC % SB
;BD 1$222 SB
O @AB SBCA O @,.22 SBC'$222 O ).2 per hour
+.
+.
MD
O @A8 S8CS9 O @"$222 '$222C,.22 O ,$222 *
>.
;(D
O @A SCSB O @'$222 )$'2C).2 O $'22 *
=.
@!)$22 < !,$'22C % O )$!22 *
Materials Materials 9rice Dariance
"$'22
Accounts 9ayable
For- in 9rocess Materials sage Dariance
1.
12$222
Materials 9TS: 1 >#*: >i&culty: +hallenging 3= 4: ;3: 12<" I ;3: 12< ' NAT: =S9B3?: Analytic STA: A#+9A: *Nirect materials @" yards of denim 1.2C >irect labor @1.' hours C
1!.'2
Standard prime cost
1.!2
1"$'22
12$222 )2$222 12$222
!!,$'22 $22
)$!22 !"2$"22
".2
>uring the year '$222 pairs of Heans were produced. 1'2$222 yards of denim were purchased and used at 1.! per yard. Actual direct labor hours were !)$22 at .' per hour. Re5$ired:
A. +ompute the materials variances and indicate if they are favorable or unfavorable. =. +ompute the labor variances and indicate if they are favorable or unfavorable. +. 9repare the Hournal entries for the following:
+ost of ?oods Sold
,!$,22
Materials 9rice Dariance Materials sage Dariance ;abor Bate Dariance
;abor (&ciency Dariance +ost of ?oods Sold
9TS: 3=4: NAT: STA:
"$'22 )2$222 $22
)$!22 )$!22
1 >#*: >i&culty: +hallenging ;3: 12
Measurement I A+=S9: A9+<2)
Materials 9rice ' Dariance Materials '22 sage Dariance ;abor Bate 22 Dariance +ost of ?oods Sold
>uring April$ Bain ?ear nlimited produced '$'22 umbrellas from nylon that costs 2."' per yard$ which is 2.2' cheaper than the standard cost. #t also used 1$)' !$222 direct labor hours at a rate of ).'2. #ts direct materials standard is 1 yard per umbrella. #ts direct labor standard is 2.' hour per umbrella. 9TS: 1 >#*: >i&culty: +hallenging 3=4: ;3: 12<" I ;3: 12<' I ;3: 12<) NAT: #ts materials usage variance was a favorable '22 and =S9B3?: Analytic its labor rate variance was a favorable 22. STA: A#+9A: *Netermine the materials price variance and N3T: 1' min. whether it is favorable or unfavorable. >. >etermine the labor e&ciency variance and (ider +ompany has the following information: whether it is favorable or unfavorable. (. Becord the entries for the materials purchase$ >irect Materials: >irect ;abor: the issuance and usage of materials$ and the Standard 122$222 S tand ard 1$222 labor variances. 8uantity ours *. 9rovide the closing entries. Actual 8uantity $'22 Actual ours 1$2'2 Standard 9rice ' Standard Bate 1 Actual 9rice " Actual Bate 1! ANS: A. >etermine the materials price variance and A. MD O @A8 S8CS9 whether it is favorable or unfavorable. O @A8 '$'22C2.'2 =. >etermine the materials usage variance and '22 A8 O "$'22 whether it is favorable or unfavorable. +. >etermine the labor rate variance and whether =. ;BD O @AB SBCA it is favorable or unfavorable. O @).'2 SBC!$222 >. >etermine the labor e&ciency variance and 22 SB O ).2 per hour whether it is favorable or unfavorable. (. 9rovide the Hournal entries to record the +. M9D O @A9 S9CA8 purchase of materials$ the issuance and usage O @2."' 2.'2C"$'22 of materials$ and direct labor variances. O ' * *. 9rovide the closing entries for the immaterial variances. >. ;(D O @A SCSB O @!$222 $,'2C).2 O 1$,22 ANS: (. Materials
$'2
Materials 9rice Dariance Accounts 9ayable For- in $,'2 9rocess Materials sage Dariance Materials For- in 9rocess
1$,22
;abor 1$,22 (&ciency Dariance ;abor Bate Dariance Accrued 9ayroll
@"$'22 2.'2C '
M9D
O @A9 S9CA8 O @" 'C$'22 O $'22 *
=.
MD
O @A8 S8CS9 O @$'22 122$222C' O $'22 *
+.
;BD
O @AB SBCA O @1! 1C1$2'2 O 1$2'2
>.
;(D
O @A SCSB O @1$2'2 1$222C1 O )22
(.
Materials ",$'22 Materials 9rice Dariance Accounts 9ayable
$'22 !$222
For- in 9rocess '22$222 Materials sage Dariance Materials
$'22 ",$'22
$2'
'22 $'2 @2.' '$'22 ).2C
22 1$'22
*. +ost of ?oods 1$,22 Sold ;abor (&ciency Dariance
A.
1$,22
For- in 9rocess ;abor (&ciency Dariance ;abor Bate Dariance
1$222 )22 1$2'2
Accrued 9ayroll *.
1!$)'2
>.
;(D
+ost of ?oods Sold 1$)'2 ;abor (&ciency Dariance ;abor Bate Dariance
)22 1$2'2
(.
Materials
"$22
Mater ials sage Daria nce +ost of ?oods Sold
$'22 Materials 9rice Dariance Accounts 9ayable
1$!'
For- in 9rocess
"$'2
$'22
Since the materials price variance is material$ @$'22C it is prorated among Materials #nventory$ Materials sage Dariance$ For- in 9rocess$ *inished ?oods$ and +ost of ?oods Sold. 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<" I ;3: 12<' I ;3: 12<) NAT: =S9B3?: Analytic STA: A#+9A: *N
>irect materials @1 pound of tuna 2.'2 per poundC >irect materials @1 can 2.!'C >irect labor @2.2 hour ,.22C
2.'2 2.!' 1."2
The company actually used "$22 pounds of tuna at a price of 2.)' per pound. #t also purchased '$222 cans *. at a price of 2."' per can.
=. +. >. (.
*.
>etermine the total materials price variance and whether it is favorable or unfavorable. >etermine the materials usage variance for tuna and whether it is favorable or unfavorable. >etermine the labor rate variance and whether it is favorable or unfavorable. >etermine the labor e&ciency variance and whether it is favorable or unfavorable. Ma-e all necessary Hournal entries to record the purchase of materials$ the issuance and usage of materials$ and the direct labor variances. 9rovide the closing entries.
ANS: A.
M9D for Tuna M9D for +ans Total M9D
=.
+.
MD
;BD
O @A9
S9CA8
O @2.)' 2.'2C"$22 O ,!' O @2."' 2.!'C'$222 O '22 O 1$!' O @A8 S8CS9 O @"$22 '$222C2.'2 O '2 * O @AB SBCA O @.22 ,.22C'22 O '22
@'$222 2.'2C Q @'$222 2.!'C '2 "$22@"$22 2.'2C Q @'$222 2.!'C
For- in 9rocess ;abor Bate Dariance ;abor (&ciency Dariance Accrued 9ayroll
,$222 '22
+ost of ?oods Sold Materials 9rice Dariance ;abor Bate Dariance
1$,!'
Materials sage Dariance ;abor (&ciency Dariance +ost of ?oods Sold
@"$22 2.'2C Q @'$222 2.!'C '$"!'
Materials sage Dariance Materials
The +atLs Meow manufactures gourmet cat food. >uring the month$ it manufactured '$222 cans of tuna$ using 2.12 hour of direct labor per can at a rate of .22 per hour. The materials and labor standards for manufacturing the cans of tuna are as follows:
A.
O @A SCSB O @'22 1$222C,.22 O !$'22 *
!$'22 "$222
1$!' '22 '2 !$'22 !$''2
9TS: 1 >#*: >i&culty: +hallenging 3=4: ;3: 12<" I ;3: 12<' I ;3: 12<) NAT: =S9B3?: Analytic STA: A#+9A: *Nirect labor @' hours C Total prime cost
' ) "2 ,1
>uring the month$ the company produced 1$222 goose (&ciency down pillows. Actual geese purchased were '$122$ at " Dariance per goose. Actual fabric purchased was $22 yards at ;abor Bate 1$!22 .12 per yard. There were no beginning or ending Dariance inventories of geese or fabric. Actual direct labor was Accrued 9ayroll "2$!22 '$22 hours at ,.,' per hour. *. +ost of ?oods 1$22 A. >etermine the total materials price variance Sold and whether it is favorable or unfavorable. Materials sage !22 =. >etermine the total materials usage variance Dariance and whether it is favorable or unfavorable. ;abor (&ciency 1$)22 +. >etermine the labor rate variance and whether Dariance it is favorable or unfavorable. >. >etermine the labor e&ciency variance and Materials 9rice "$12 whether it is favorable or unfavorable. Dariance (. Ma-e all necessary Hournal entries to record ;abor Bate 1$!22 the purchase of materials$ the issuance and Dariance usage of materials$ and the direct labor +ost of ?oo ds Sold )$112 variances. *. 9rovide the closing entries. 9TS: 1 >#*: >i&culty: +hallenging 3=4: ;3: 12<" I ;3: 12<' I ;3: 12<) NAT: ANS: =S9B3?: Analytic STA: A#+9A: *N
O 22 * O '22
A.
22 * O !22
+.
;BD
O @AB SBCA O @,.,' .22C'$22 O 1$!22 *
>.
;(D
O @A SCSB O @'$22 '$222C.22 O 1$)22
=.
ANS: A.
(. Materials
!1$!22
Materials 9rice Dariance Accounts 9ayable For- in 9rocess Materials sage Dariance Materials
For- in 9rocess ;abor
!1$222
@'$122 '.22C Q @$22 .22C "$12 )$"2 @'$222 '.22C Q @!$222 .22C
#dentify the -ai5en and maintenance labor standards in place at the beginning of the 0rst quarter. (%press the standards in both physical and 0nancial terms. +alculate the e%pected cost reduction and actual cost reduction.
=.
Maintenance: 9hysical standard: 2 minutes *inancial standard: ".22 @1
2J)2 hoursC
6ai5en: 9hysical standard: 1' minutes *inancial standard: !.22 @1
1'J)2 hoursC
(%pected cost reduction: ".22 !.22 O 1.22 per unit Actual cost reduction: ".22 @1 1"J)2 hoursC O 1.2 per unit
!22 !1$!22@'$122 '.22C Q @$22 .22C "2$222 1$)22
9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' NAT: =S9B3?: Analytic STA: A#+9A: *N<>ecision Modeling I #MA: Strategic 9lanning I A+=S9: A9+<,
".
Filtshire ;imited produces woolen blan-ets and clothing. >uring Kear 1$ Filtshire produced 12$222 items A. of blan-ets and clothing using "$'2 bundles of wool at =. a price of 12 per bundle. Standard bundles of wool Standard price
"$222 2 per bundle
+.
+alculate 3verlandLs target cost. +alculate the total costs per car after 3verland redesigns its processes and schedules to buy cost
The di/erence between the actual quantity of material s and the standard quantity of materials is due to waste. At the end of Kear 1$ Filtshire developed a new process ANS: that would cut down on the waste by )2P. =y the end of Kear $ the company had actually cut down its waste A. 2$222 '$222 O 1'$222 by '2P. =. >irect materials costs 12$222 A. #dentify the -ai5en and materials standards in >irect labor costs !$222 place at the beginning of Kear . (%press the 3verhead costs "$222 standards in both physical and 0nancial terms. Total 1,$222 =. +alculate the e%pected cost reduction. ;ess: +. +alculate the actual cost reduction. Dalue analysis $222 9rocess redesign 1$222 Total +osts 1"$222 ANS: +. Kes$ 3verland should manufacture the car A. Materials: because the total costs of 1"$222 is less than 9hysical "$222 its target cost. #ts e%pected pro0t is now standard: bundles )$222 @2$222 1"$222C. *inancial '$222 @2 "$'2C standard: 9TS: 1 >#*: >i&culty: (asy 6ai5en: 3=4: ;3: 12<' 9hysical "$122 X"$'2 @@"$'2 NAT: =S9B3?: Analytic standard: bundles "$222C )2PCY STA: A#+9A: *N<>ecision Modeling I #MA: Strategic *inancial $222 @2 "$122C 9lanning I A+=S9: A9+<,irect ;abor: bundles Standard ours )$'22 "$1' 2 O $'22 Actual ours )$!'2 Standard Bate 1' Actual Bate 1 9TS: 1 >#*: >i&culty: Moderate 3=4: ;3: 12<' A. >etermine the labor rate variance and whether NAT: =S9B3?: Analytic it is favorable or unfavorable. STA: A#+9A: *N<>ecision Modeling I #MA: Strategic =. >etermine the labor e&ciency variance and 9lanning I A+=S9: A9+<,
3verland Automotive +ompany is considering on manufacturing a new brand of car. ?iven the current product and process designs$ the cost data are: >irect materials costs @per carC >irect labor costs @per carC 3verhead costs @per carC
12$222 !$222 "$222
The company e%pects the selling price to be 2$222 and has set a target pro0t of '$222.
ANS: A.
;BD
O @AB SBCA O @1 1'C)$!'2 O 1$2'2
=.
;(D
O @A SCSB O @)$!'2 )$'22C1' O $'2 *
+. For- in 9rocess ,$'22 A supplier told 3verland that it could purchase a couple ;abor Bate Dariance 1$2'2 of similar components under a di/erent brand name at ;abor (&ciency Dariance $'2 a lower price. This would result in cost savings of Accrued 9ayroll 11"$!22 $222 per car. *urthermore$ the comp any found that it could redesign its manufacturing process to cut down on both inspection labor and wor-er labor$ which would 9TS: 1 >#*: >i&culty: (asy result in cost savings of 1$222 per car. 3=4 : ;3: 12<' I ;3: 12< )
