Exam 11: Standard Costs and Variance Analysis

Hyteck, Inc. is a capital intensive firm. Indirect costs make up nearly 70% of the product costs. The company has no direct material costs because customers provide the direct materials used for each job. To plan and control such costs, the firm employs flexible budgets and standard costs. Overhead rates, based on direct labour hours, are derived from the master budget. Master Actual Budget Results Units produced 2,000 1,820 Direct labour hours 10,000 9,200 Fixed overhead \ 100,000 \ 98,000 Variable overhead \ 160,000 \ 150,000 Direct labour \ 100,000 \ 90,000 The fixed overhead spending variance was:

White, Inc. produces a chemical product whose primary component is purchased on credit and any discounts are always taken. The following material and labour elements make up the costs of the product: Purchase price for material $30 per litre Freight and handling $130 per 100 litres Each container of the chemical product contains 5.7 quarts of material. During the process 5% of the material is lost due to waste. Each container of product also requires 1.2 hours of labour. Each day 2 hours are taken for set-up, cleaning, and breaks. Also, the wage rate is $15 per hour and fringes/payroll taxes are 20% of wages. Clients can take a 3% discount if they pay invoices within 10 days; otherwise, the entire invoice amount is due within 30 days. 1 litre equals 4 quarts. The standard price per quart for materials is:

Hyteck, Inc. is a capital intensive firm. Indirect costs make up nearly 70% of the product costs. The company has no direct material costs because customers provide the direct materials used for each job. To plan and control such costs, the firm employs flexible budgets and standard costs. Overhead rates, based on direct labour hours, are derived from the master budget. Master Actual Budget Results Units produced 2,000 1,820 Direct labour hours 10,000 9,200 Fixed overhead \ 100,000 \ 98,000 Variable overhead \ 160,000 \ 150,000 Direct labour \ 100,000 \ 90,000 The direct labour price variance was:

Welch Company budgeted the following cost standards for the current year: Direct materials $= 1.40$ kilograms per unit $@\$ 1.50$ per kilogram Direct labour $= 0.75$ hours per unit $@ \$ 6$ per hour Actual production and costs were as follows: Units produced $= 2,800$ Direct materials used $= 4,500 \mathrm {~kg}$ Direct materials purchased $= 5,000 \mathrm {~kg}@$ a cost of $\$ 5,850$ Direct labour incurred $= 2,000$ hours at a cost of $\$ 13,000$ The labour price variance was:

Which of the following is not a typical step in variance analysis?

Baldwin, Inc uses a standard job cost system and purchased 25,000 kg of material at $6 per kg, and used it all. The standard amount allowed for the output achieved is 22,500 kg, and the standard price is $6.50 per kg. The company also incurred 37,500 direct labour hours for $450,000. The standard hourly price was $11 per hour, and 39,000 hours were allowed at standard. Assuming all variances are immaterial, answer the following questions: The entry to record the direct material price variance will include a:

Theft of raw materials is most likely to lead to:

If more direct materials were used than expected at standard:

Mason, Inc. uses a standard costing system. Overhead costs are allocated based on direct labour hours. The standard variable overhead and fixed overhead rates are $1 and $5 per direct labour hour, respectively. Data relevant for the current period include: The cost of direct materials added to work in process would be:

Variances are usually investigated when they are:

Mason, Inc. uses a standard costing system. Overhead costs are allocated based on direct labour hours. The standard variable overhead and fixed overhead rates are $1 and $5 per direct labour hour, respectively. Data relevant for the current period include: The purchase of direct materials would be recorded in direct materials inventory at:

The total direct labour variance can be broken down into two components: the efficiency variance and the price variance.

The fixed overhead budget variance can be broken down into two parts: the spending variance and the production volume variance.

If a variance is investigated and determined to be random, managers should:

Welch Company budgeted the following cost standards for the current year: Direct materials $= 1.40$ kilograms per unit $@\$ 1.50$ per kilogram Direct labour $= 0.75$ hours per unit $@ \$ 6$ per hour Actual production and costs were as follows: Units produced $= 2,800$ Direct materials used $= 4,500 \mathrm {~kg}$ Direct materials purchased $= 5,000 \mathrm {~kg}@$ a cost of $\$ 5,850$ Direct labour incurred $= 2,000$ hours at a cost of $\$ 13,000$ The material price variance for materials purchased was:

The expected costs per unit of input are called:

Given the following account balances at the end of the first year of operations: Direct materials inventory \ 60,000 Work in process inventory 120,000 Finished goods inventory 180,000 Cost of goods sold 600,000 Direct material price variance 65,000 Direct material efficiency 195,000 Assuming that variances are considered material, the entry and amount of the direct material price variance allocated to Cost of Goods Sold is:

Variance analysis can be used for both costs and revenues.

Which department is customarily responsible for an unfavourable material price variance?

During the period Richeleau produced 1,000 units of product. The flexible budget for standard costs is: Direct materials \ 43,000 Direct labour 67,000 Variable overhead 30,000 Fixed overhead 25,000 Variances for the period are: Direct materials price 400 Direct materials efficiency 500 Direct labour price 600 Direct labour efficiency 200 Variable overhead spending 300 Variable overhead efficiency 100 Fixed overhead spending 500 Fixed overhead production volume 1,000 The budgeted fixed overhead was: