Exam 25: Standard Costs and Balanced Scorecard

Lumberman Manufacturing provided the following information about its standard costing system for 2016: Instructions Determine the amount of the materials price variance. By how much will the materials price variances differ if the price variance is determined at the time of production?

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Question 1

Correct Answer:

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Identification of price variances at the time of purchase:
Materials price variance = (Actual quantity purchased × Actual price) - (Actual quantity purchased x Standard price)
= (50000 × $4.30) - (50000 × $4) = $15000 Unfavorable
Identification of price variances at the time of production:
Materials price variance = (Actual quantity used × Actual price) - (Actual quantity used × Standard price)
= (41000 × $4.30) - (41000 × $4) = $12300 Unfavorable
Difference = $15000 - $12300 = $2700 Unfavorable

The following direct materials data pertain to the operations of Wright Co. for the month of December. Standard materials price $5.00 per pound Actual quantity of materials purchased and used 16500 pounds The standard cost card shows that a finished product contains 4 pounds of materials. The 16500 pounds were purchased in December at a discount of 4% from the standard price. In December 4000 units of finished product were manufactured. Instructions Prepare a matrix for materials and calculate the materials variances.

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Question 2

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Pedra Inc. incurred direct labor costs of $54000 for 6000 hours. The standard labor cost was $55200. During the month Pedra assigned 6000 direct labor hours costing $54000 to production. The standard hours were 6200. Instructions Journalize the transactions for Pedra Inc. to account for this activity.

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Question 3

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(a)
$\begin{array}{llr} \text { Factory Labor } &55,,200\\ \text {Labor Price Variance } &&1,200\\ \text {Factory Wages Payable } &&54,00\end{array}$

(b)
$\begin{array}{llr} \text { Work in Process Inventory $ \left(6,200 \times \$ 9.20^{*}\right) $} &57,040\\ \text { Labor Quantity Variance } &&1,840\\ \text {Factory Labor } &&55,200\\\\ \text {$ * \$ 9.20=\$ 55.200 \div 6.000 $ hours } &\end{array}$

The overhead ______________ variance is the difference between normal capacity hours and standard hours allowed times the fixed overhead rate.

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Question 4

If actual direct materials costs are greater than standard direct materials costs it means that

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Question 5

A company developed the following per unit materials standards for its product: 3 pounds of direct materials at $5 per pound. If 12000 units of product were produced last month and 37500 pounds of direct materials were used the direct materials quantity variance was

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Question 6

The matrix approach to variance analysis

(Multiple Choice)

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Question 7

Budgeted overhead for Haft Inc. at normal capacity of 60000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May $310000 of overhead was incurred in working 63000 hours when 64000 standard hours were allowed. - The overhead volume variance is

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Question 8

A credit to a Materials Quantity Variance account indicates that the actual quantity of direct materials used was greater than the standard quantity of direct materials allowed.

(True/False)

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Question 9

If standard costs are incorporated into the accounting system

(Multiple Choice)

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Question 10

The following information was taken from the annual manufacturing overhead cost budget of Cinnamon Manufacturing: Variable manufacturing overhead costs \ 186,000 Fixed manufacturing overhead costs \ 124,000 Normal production level in direct labor hours 62,000 Normal production level in units 31,000 During the year 30000 units were produced 64000 hours were worked and the actual manufacturing overhead costs were $322000. The actual fixed manufacturing overhead costs did not deviate from the budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Instructions (a) Compute the total fixed and variable predetermined manufacturing overhead rates. (b) Compute the total controllable and volume overhead variances.

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Question 11

BE 197 Using the data in BE 195 and BE 196 compute the manufacturing overhead volume variance. Normal capacity was 50000 direct labor hours.

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Question 12

The per-unit standards for direct labor are 1.5 direct labor hours at $15 per hour. If in producing 2400 units the actual direct labor cost was $46000 for 3000 direct labor hours worked the total direct labor variance is

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Question 13

A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month 1500 pounds of direct materials were purchased for $5700. The direct materials price variance for last month was

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Question 14

Normal standards incorporate normal contingencies of production into the standards.

(True/False)

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Question 15

Match the appropriate code letter of the following item.

A double-entry system of accounting in which standard costs are used in making entries and variances are recognized in the accounts.

Ideal standards

The difference between actual overhead incurred and overhead budgeted for the standard hours allowed.

Standard costs

Standards based on an efficient level of performance that are attainable under expected operating conditions.

Standard cost accounting system

Correct Answer:

Verified

A double-entry system of accounting in which standard costs are used in making entries and variances are recognized in the accounts.

The difference between actual overhead incurred and overhead budgeted for the standard hours allowed.

Standards based on an efficient level of performance that are attainable under expected operating conditions.

The difference between normal capacity hours and standard hours allowed times the fixed overhead rate.

The hours that should have been worked for the units produced.

Predetermined unit costs that are measures of performance.

The difference between actual hours times the standard rate and standard hours times the standard rate.

The difference between the actual quantity times the actual price and the actual quantity times the standard price.

Standards based on the optimum level of performance under perfect operating conditions.

The difference between total actual costs and total standard costs.

(Matching)

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Question 16

A debit to the Overhead Volume Variance account indicates that the standard hours allowed for the output produced was greater than the standard hours at normal capacity.

(True/False)

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Question 17

Manufacturing overhead data for the production of Product B by North Bank Inc. are as follows. Overhead incurred for 69,000 actual direct labor hours worked \0 6,000 Overhead rate (variable \ 2.00 ; fixed \ 1.00 ) at normal capacity of 72,000 direct labor hours \3 .00 Standard hours allowed for work done 69,000 Instructions Compute the controllable and volume overhead variances.

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Question 18

The total materials variance is equal to the

(Multiple Choice)

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Question 19

A is expressed as a unit amount whereas a _ is expressed as a total amount.

(Short Answer)

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Question 20

Exam 25: Standard Costs and Balanced Scorecard

Lumberman Manufacturing provided the following information about its standard costing system for 2016: Instructions Determine the amount of the materials price variance. By how much will the materials price variances differ if the price variance is determined at the time of production?

The overhead ______________ variance is the difference between normal capacity hours and standard hours allowed times the fixed overhead rate.

If actual direct materials costs are greater than standard direct materials costs it means that

A company developed the following per unit materials standards for its product: 3 pounds of direct materials at $5 per pound. If 12000 units of product were produced last month and 37500 pounds of direct materials were used the direct materials quantity variance was

The matrix approach to variance analysis

Budgeted overhead for Haft Inc. at normal capacity of 60000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May $310000 of overhead was incurred in working 63000 hours when 64000 standard hours were allowed. - The overhead volume variance is

A credit to a Materials Quantity Variance account indicates that the actual quantity of direct materials used was greater than the standard quantity of direct materials allowed.

If standard costs are incorporated into the accounting system

BE 197 Using the data in BE 195 and BE 196 compute the manufacturing overhead volume variance. Normal capacity was 50000 direct labor hours.

The per-unit standards for direct labor are 1.5 direct labor hours at $15 per hour. If in producing 2400 units the actual direct labor cost was $46000 for 3000 direct labor hours worked the total direct labor variance is

A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month 1500 pounds of direct materials were purchased for $5700. The direct materials price variance for last month was

Normal standards incorporate normal contingencies of production into the standards.

A debit to the Overhead Volume Variance account indicates that the standard hours allowed for the output produced was greater than the standard hours at normal capacity.

The total materials variance is equal to the

A ________________ is expressed as a unit amount whereas a _________________ is expressed as a total amount.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Incremental Analysis and Capital Budgeting

Time Value of Money

Filters

A is expressed as a unit amount whereas a _ is expressed as a total amount.