The following information describes a company's usage of direct labor in a recent period. The direct labor rate variance is: $\begin{array}{llcc} \text { Actual hours used} &45,000\\ \text {Actual rate per hour } &\$15.00\\ \text { Standard rate per hour} &\$14.50\\ \text { Standard hours for units produced } &47,000\\ \end{array}$

A) $29,000 favorable. B) $29,000 unfavorable. C) $22,500 unfavorable. D) $52,500 favorable. E) $52,500 unfavorable. A) $29,000 favorable. B) $29,000 unfavorable. C) $22,500 unfavorable. D) $52,500 favorable. E) $52,500 unfavorable.

Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is: \[\begin{array} { l c } \text { Direct materials standard (4 lbs. @ \$1/16.) } & \$ 4 \text { per finished unit } \\ \text { Total direct materials cost variarne - unfavorable } & \$ 13,750 \\ \text { Actual direct materials used } & 150,000 \text { lbs } \\ \text { Actual finished units produced } & 30,000 \text { units } \end{array}\]

A) $13,750 unfavorable. B) $16,250 unfavorable. C) $16,250 favorable. D) $30,000 unfavorable. E) $33,000 favorable. A) $13,750 unfavorable. B) $16,250 unfavorable. C) $16,250 favorable. D) $30,000 unfavorable. E) $33,000 favorable.

Exam 8: Flexible Budgets and Standard Costs

Ransom, Inc. budgets direct materials cost at $1.10/liter and each product requires 4 liters per unit of finished product. April's activities show usage of 832 liters to complete 196 units at a cost of $798.72. Compute the direct materials price and quantity variances. Indicate if the variance is favorable or unfavorable.

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Question 1

Correct Answer:

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$\begin{array}{c}\begin{array}{|l|}\hline \text {A Q* A P}\\\hline \text {A Q* S P}\\\hline\\\hline\\\hline \end{array}\begin{array}{l|}\hline \text {832 liters $ * \$ 0.96 / $ liter*}\\\hline \text {832 liters $ * $ * $ \$ 1.10 $ lliter}\\ \hline \text { Direct materials price variance }\\ \hline\\ \hline \end{array}\begin{array}{ll|} \hline\$798.72\\ \hline\underline{915.20}\\ \hline\underline{\$116,48 F}\\ \hline\\ \hline\end{array}\end{array}$

^{* $798.72/832 liters = $0.96/liter}
$\begin{array}{c}\begin{array}{|l|}\hline \text {A Q* S P}\\\hline \text {A Q* S P}\\\hline\\\hline\\\hline \end{array}\begin{array}{l|}\hline \text {832 liters $ * \$ 1.10 / $ liter*}\\\hline \text {832 liters $ * $ * $ \$ 1.10 $ lliter}\\ \hline \text { Direct materials quantity variance }\\ \hline\\ \hline \end{array}\begin{array}{ll|} \hline\$915.20\\ \hline\underline{862.40}\\ \hline\underline{\$52.80 U}\\ \hline\\ \hline\end{array}\end{array}$

^{* 196 units * 4 liters/unit = 784 liters}

In sales variance analysis, the budgeted amount of unit sales is the predicted activity level and the budgeted cost of the goods sold can be treated as a "standard" price.

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Question 2

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False

A budget based on several different levels of activity, often including both a best-case and worst-case scenario, is called a:

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Question 3

Correct Answer:

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C

A company's flexible budget for the range of 35,000 units to 45,000 units of production showed variable overhead costs of $2 per unit and fixed overhead costs of $72,000. The company incurred total overhead costs of $148,800 while operating at a volume of 40,000 units. The total controllable cost variance is:

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Question 4

A budget performance report shows budgeted amounts, actual amounts, and differences between budgeted and actual amounts.

(True/False)

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Question 5

The following information describes a company's usage of direct labor in a recent period. The direct labor rate variance is: Actual hours used 45,000 Actual rate per hour \1 5.00 Standard rate per hour \1 4.50 Standard hours for units produced 47,000

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Question 6

When standard costs are used, factory overhead is assigned to products with a predetermined standard overhead rate.

(True/False)

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Question 7

A company uses the following standard costs to produce a single unit of output. Direct materials 6 pounds at \ 0.90 per pound =\ 5.40 Direct labor 0.5 hour at \ 12.00 per hour =\ 6.00 Marnfacturing overhead 0.5 hour at \ 4.80 per hour =\ 2.40 During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct labor efficiency variance for the month was:

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Question 8

A flexible budget is based on a single predicted amount of sales or other activity measure.

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Question 9

Management by exception means that managers focus on the most significant differences between actual costs and standard costs.

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Question 10

The difference between actual price per unit of input and the standard price per unit of input results in a:

(Multiple Choice)

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Question 11

LJ Co. produces picture frames. It takes 3 hours of direct labor to produce a frame. LJ's standard labor cost is $11.00 per hour. During March, LJ produced 4,000 frames and used 12,400 hours at a total cost of $133,920. What is LJ's labor rate variance for March?

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Question 12

A company provided the following direct materials cost information. Compute the direct materials price variance.

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Question 13

Lavoie Company planned to use 18,500 pounds of material costing $2.50 per pound to make 4,000 units of its product. In actually making 4,000 units, the company used 18,800 pounds that cost $2.54 per pound. Calculate the direct materials price variance.

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Question 14

Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is: Direct materials standard (4 lbs. @ \1 /16.) \ 4 per finished unit Total direct materials cost variarne - unfavorable \ 13,750 Actual direct materials used 150,000 lbs Actual finished units produced 30,000 units

(Multiple Choice)

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Question 15

Standard costs are used in the calculation of:

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Question 16

Which department is often responsible for the direct materials price variance?

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Question 17

Naches Co. assigned direct labor cost to its products in May for 1,300 standard hours of direct labor at the standard $8 per hour rate. The direct labor rate variance for the month was $200 favorable and the direct labor efficiency variance was $150 favorable. Prepare the journal entry to charge Work in Process Inventory for the standard labor cost of the goods manufactured in May and to record the direct labor variances. Assuming that the direct labor variances are immaterial, prepare the journal entry that Naches would make to close the variance accounts.

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Question 18

A fixed budget performance report never provides useful information for evaluating variances.

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Question 19

A company uses the following standard costs to produce a single unit of output. Direct materials 6 pounds at \ 0.90 per pound =\ 5.40 Direct labor 0.5 hour at \ 12.00 per hour =\ 6.00 Manufacturing overhead 0.5 hour at \ 4.80 per hour =\ 2.40 During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct labor rate variance for the month was:

(Multiple Choice)

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Question 20

In sales variance analysis, the budgeted amount of unit sales is the predicted activity level and the budgeted cost of the goods sold can be treated as a "standard" price.

A budget based on several different levels of activity, often including both a best-case and worst-case scenario, is called a:

A budget performance report shows budgeted amounts, actual amounts, and differences between budgeted and actual amounts.

The following information describes a company's usage of direct labor in a recent period. The direct labor rate variance is: Actual hours used 45,000 Actual rate per hour \1 5.00 Standard rate per hour \1 4.50 Standard hours for units produced 47,000

When standard costs are used, factory overhead is assigned to products with a predetermined standard overhead rate.

A flexible budget is based on a single predicted amount of sales or other activity measure.

Management by exception means that managers focus on the most significant differences between actual costs and standard costs.

The difference between actual price per unit of input and the standard price per unit of input results in a:

LJ Co. produces picture frames. It takes 3 hours of direct labor to produce a frame. LJ's standard labor cost is $11.00 per hour. During March, LJ produced 4,000 frames and used 12,400 hours at a total cost of $133,920. What is LJ's labor rate variance for March?

A company provided the following direct materials cost information. Compute the direct materials price variance.

Lavoie Company planned to use 18,500 pounds of material costing $2.50 per pound to make 4,000 units of its product. In actually making 4,000 units, the company used 18,800 pounds that cost $2.54 per pound. Calculate the direct materials price variance.

Standard costs are used in the calculation of:

Which department is often responsible for the direct materials price variance?

A fixed budget performance report never provides useful information for evaluating variances.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Cost Behavior Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Analyzing for Business Transactions

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