Exam 25: Budgetary Control and Responsibility Accounting

Ratliff Industries provided the following information about its standard costing system for 2011: 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)
= (75,000 × $4.20) - (75,000 × $4) = $15,000 Unfavorable
Identification of price variances at the time of production:
Materials price variance = (Actual quantity used × Actual price) - (Actual quantity used × Standard price)
= (61,500 × $4.20) - (61,500 × $4) = $12,300 Unfavorable
Difference = $15,000 - $12,300 = $2,700 Unfavorable

George Company has a standard costing system. The following data are available for July: a. Actual manufacturing overhead cost incurred: $22,000 b. Actual machine hours worked: 1,600 c. Overhead volume variance: $3,600 Unfavorable d. Total overhead variance: $1,000 Unfavorable e. Overhead is assigned to production on the basis of machine hours Instructions Determine the amount of (1) the controllable overhead variance and (2) the overhead applied.

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Question 2

Correct Answer:

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(1) Volume variance plus controllable variance = total overhead variance
$3,600 U + X = $1,000 U; so controllable variance = $2,600 F
(2) Overhead applied = $21,000 ($22,000 - $1,000)

A standard cost system may be used with a job order cost system but not with a process cost system.

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(True/False)

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Question 3

Correct Answer:

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False

The following information was taken from the annual manufacturing overhead cost budget of Coen Company. During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $75,600. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Coen's volume overhead variance is

(Multiple Choice)

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Question 4

Once set, normal standards should not be changed during the year.

(True/False)

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Question 5

Setting standard costs is relatively simple because it is done entirely by accountants.

(True/False)

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Question 6

Normal standards incorporate normal contingencies of production into the standards.

(True/False)

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Question 7

The total materials variance is equal to the

(Multiple Choice)

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Question 8

Which of the following statements about overhead variances is false?

(Multiple Choice)

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Question 9

If 10,000 pounds of direct materials are purchased for $7,200 on account and the standard cost is $.70 per pound, the journal entry to record the purchase is

(Short Answer)

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Question 10

If the labor quantity variance is unfavorable and the cause is inefficient use of direct labor, the responsibility rests with the

(Multiple Choice)

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Question 11

Budget data are not journalized in cost accounting systems with the exception of

(Multiple Choice)

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Question 12

The formula for the labor price variance is

(Multiple Choice)

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Question 13

Which one of the following describes the total overhead variance?

(Multiple Choice)

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Question 14

The difference between actual hours times the actual pay rate and actual hours times the standard pay rate is the labor _________________ variance.

(Short Answer)

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Question 15

When is a variance considered to be 'material'?

(Multiple Choice)

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Question 16

The total overhead variance is the difference between actual overhead costs and overhead costs applied to work done.

(True/False)

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Question 17

Which of the following statements is false?

(Multiple Choice)

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Question 18

Standard costs may be used by

(Multiple Choice)

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Question 19

In developing a standard cost for direct materials, a price factor and a quantity factor must be considered.

(True/False)

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Question 20

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Exam 25: Budgetary Control and Responsibility Accounting

Ratliff Industries provided the following information about its standard costing system for 2011: 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?

A standard cost system may be used with a job order cost system but not with a process cost system.

Once set, normal standards should not be changed during the year.

Setting standard costs is relatively simple because it is done entirely by accountants.

Normal standards incorporate normal contingencies of production into the standards.

The total materials variance is equal to the

Which of the following statements about overhead variances is false?

If 10,000 pounds of direct materials are purchased for $7,200 on account and the standard cost is $.70 per pound, the journal entry to record the purchase is

If the labor quantity variance is unfavorable and the cause is inefficient use of direct labor, the responsibility rests with the

Budget data are not journalized in cost accounting systems with the exception of

The formula for the labor price variance is

Which one of the following describes the total overhead variance?

The difference between actual hours times the actual pay rate and actual hours times the standard pay rate is the labor _________________ variance.

When is a variance considered to be 'material'?

The total overhead variance is the difference between actual overhead costs and overhead costs applied to work done.

Which of the following statements is false?

Standard costs may be used by

In developing a standard cost for direct materials, a price factor and a quantity factor must be considered.

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