Exam 11: Standard Costs and Variance Analysis

Hogle Mfg. Co. uses a standard costing system. The standard time to produce one unit is 4 hours, and normal production is 3,000 units monthly. Overhead costs were estimated to be $135,000. The standard variable overhead rate is $5 per machine hour. During April the following results were recorded: Units produced 3,100 Units sold 2,800 Machine hours required 12,800 Actual overhead costs \ 136,000 The fixed overhead production volume variance was:

The direct labour efficiency variance compares:

If a variance is considered material, it should be allocated to work in process inventory, finished goods inventory, and cost of goods sold.

ELM Corporation introduced a new automated production process that has reduced the amount of labour needed, but not affected the use of materials. The standard cost system has not been changed yet to reflect this new process. Assuming the machinery is functioning properly and that workers were properly trained in its use, which of the following variances is most likely to result?

An unfavourable price variance may occur because:

Overhead efficiency variances:

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 total under- or overapplied overhead for the period was:

The variable overhead budget variance is the difference between allocated variable overhead cost and actual variable overhead cost.

Everett, Inc. budgeted $1,488,000 for total overhead. The standard variable overhead rate was $2 per direct labour hour, or $6 per unit, based on an anticipated activity level of 600,000 direct labour hours. During the year 220,000 units were produced. Fixed overhead costs incurred were $300,000. The variable overhead budget variance was $19,800 unfavourable, and the actual variable overhead rate was $2.10 per direct labour hour. The fixed overhead budget variance was:

Managers investigate:

The budget that reflects the level of activity management expects to attain is the:

The production volume variance provides information about:

Normal fluctuations in labour hours may cause a favourable direct labour efficiency variance.

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 efficiency variance was:

Cryolite uses a standard costing system to gauge results for their single product. 70,000 kilograms of direct materials were purchased for $385,000. Two kilograms of direct materials are needed to produce one unit of product. In March, the company produced 12,000 units. The standard cost allowed for direct material was $120,000, and there was an unfavourable direct materials efficiency variance of $2,500. The kilograms of direct materials used in March to produce output totalled:

At the end of 20x5, ELM Corporation's production manager estimated direct labour overtime hours at 200 for the first quarter of 20x6. At the end of the first quarter, actual overtime hours totalled 180. This difference is most likely to lead to:

A favourable variance in one area might be offset by:

In a traditional manufacturing accounting system, the standard cost of a unit of output is the sum of the standard costs of:

The fixed overhead spending variance is normally zero because fixed costs are constant within a relevant range of activity.

LST Corporation entered into a new contract with one of its raw material suppliers. The new contract required the supplier to deliver raw materials with a 24-hour notice from LST. This reduces LST's material handling costs, but has increased the cost of the raw materials delivered. Which of the following variances is most likely to result?