Exam 10: Standard Costs and Overhead Analysis

(Appendix 10B)Nova Corporation produces a single product and uses a standard cost system to help control costs.Overhead is applied to production on the basis of machine hours.According to the company's flexible budget,the following overhead costs should be incurred at an activity level of 18,000 machine hours (the denominator activity level chosen for the current year): Variable Overhead Costs \ 45,000 Fixed Overhead Costs \ 108,000 Total Overhead Costs \ 15,000 During the current year, the following operating results were recorded Actual Machine Hours Worked 15,000 Standard Machine Hours Allowed 16,000 Actual Variable Overhead Cost Incurred \ 38,000 Actual Fixed Overhead Cost Incurred \ 107,100 At the end of the year, the company's Manufacturing Overhead account showed total debits for actual overhead costs of $145,100 and total credits for overhead actually applied of $136,000. The difference ($9,100) represents underapplied overhead, the cause of which management would like to know. Required: a) Compute the predetermined overhead rate that would have been used during the year, showing separately the variable and fixed components of the rate. b) Show how the $136,000 of "Applied Costs" was computed. c) Analyze the $9,100 underapplied overhead figure in terms of the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances. d) (Appendix 10B) Prepare a journal entry to record the variable overhead costs incurred and applied, including the results of the variance analysis. e) (Appendix 10B) Prepare a journal entry to record the fixed overhead costs incurred and applied, including the results of the variance analysis.

Purchase of poor quality materials will generally result in a favourable materials price variance and an unfavourable labour rate variance.

The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: -What was the materials quantity variance for the month?

King Company estimated that it would operate its manufacturing facilities at 800,000 direct labour hours for the year, which served as the denominator activity in the predetermined overhead rate. The total budgeted manufacturing overhead for the year was $2,000,000, of which $1,600,000 was variable and $400,000 was fixed. The standard variable overhead rate was $2 per direct labour hour. The standard direct labour time was 3 direct labour hours per unit. The actual results for the year are presented below: -What was the fixed overhead budget variance for the year?

(Appendix 10B)Albert Manufacturing Company manufactures a single product.The standard cost of one unit of this product is: During the month of October, 6,000 units were produced. Selected cost data relating to the month's production follow: There was no beginning inventory of raw materials. The variable overhead rate is based on direct labour-hours. Required: a) (Appendix 10B) For direct materials, compute the price and quantity variances for the month, and prepare journal entries to record activity for the month. b) (Appendix 10B) For direct labour, compute the rate and efficiency variances for the month, and prepare a journal entry to record labour activity for the month. c) For variable overhead, compute the spending variance for the month, and prove the efficiency variance given above.

Dori Castings is a job order shop that uses a standard cost system to account for its production costs. Manufacturing overhead costs are applied to production on the basis of direct labour hours. -What amount of fixed overhead would Dori apply to finished production?

The overhead spending variance contains price but not quantity elements.

Which of the following variances would be useful in calling attention to possible problems in the control of spending on overhead items? Variable overhead spending variance Fixed overhead budget variance A) No No B) No Yes C) Yes No D) Yes Yes

To measure controllable production inefficiencies,which of the following is the best basis for a company to use in establishing the standard hours allowed for the output of one unit of product?

Waste or excessive usage of overhead items will show up as part of the variable overhead efficiency variance.

(Appendix 10A) Saskatoon Company uses two raw materials, A and B, in the manufacture of its only product: Zizbo. The materials are very close substitutes. The standard proportions for the manufacture of a unit of Zizbo are 2 units of A and 3 units of B. The unit standard prices of A and B are $10 and $8, respectively. During the month of August, the company used 450 units of A and 750 units of B to produce 230 units of Zizbo. -What were the direct materials quantity variances for raw materials A and B,respectively?

A reason for keeping a constant denominator activity level is to maintain stability in the amount of overhead cost that is applied to each unit of product manufactured over the period.

The Murray Company makes and sells a single product. The company recorded the following activity and cost data for May: The fixed portion of the predetermined overhead rate is $0.95 per direct labour hour. -What was the fixed overhead budget variance for May?

Information on Fleming Company's direct material costs follows: Actual amount of direct materials purchased and used 20,000 kilograms Actual direct material costs \ 40,000 Standard price of direct materials \ 2.10 per kilogram Direct materials quantity variance - favourable \ 3,000 What was the company's direct material price variance?

The standards for direct labour for a product are 2.5 hours at $8 per hour.Last month,9,000 units of the product were made,and the labour efficiency variance was $8,000 favourable.What was the actual number of hours worked during the past period?

The Upton Company employs a standard costing system in which variable overhead is assigned to production on the basis of direct labour hours. Data for the month of February include the following: -What was the variable overhead efficiency variance?

Last month,75,000 kilograms of direct materials were purchased,and 71,000 kilograms were used.If the actual purchase price per kilogram was $0.50 more than the standard purchase price per kilogram,what was the materials price variance?

The Alpha Company produces toys for national distribution. Standards for a particular toy are: Materials: 12 grams per unit at $0.56 per gram. Labour: 2 hours per unit at $2.75 per hour. During the month of December, the company produced 1,000 units. Information for the month follows: Materials: 14,000 grams were purchased and used at a total cost of $7,140. Labour: 2,500 hours worked at a total cost of $8,000. -What was the materials price variance?

A labour efficiency variance resulting from the use of poor quality materials should be charged to which/whom?

The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: -What was the materials price variance for the month?