Exam 10: Standard Costing: a Managerial Control Tool

The actual quantity of input at the actual price less the actual quantity of input at the standard price is the price variance.

The benefits of operational control under a standard cost system can extend to all manufacturing environments.

Assume that SQ = Standard Quantity, SP = Standard Price, AQ = Actual Quantity, and AP = Actual Price. The correct entry along with the equation to record the issuance and usage of materials, assuming a favorable materials usage variance, is as follows

The standard quantity of materials allowed can be calculated by multiplying the unit labor standard by the actual output.

Moving Baby Company produces baby strollers. During the year 90,000 strollers were produced. The actual labor used was 225,000 hours at $12.75 per hour. Moving Baby has the following labor standards: 2 hours at $13.00 per hour.

During June, Cisco Company produced 15,000 chainsaw blades. The standard quantity of material allowed per unit was 1.5 pounds of steel per blade at a standard cost of $5 per pound. The actual purchase price was $6.25 per pound. Cisco determined that it had a favorable materials usage variance of $2,500 for June. What is the journal entry to record the issuance and usage of materials?

Figure 10-3Bortello Corporation produces high-quality leather boots. The company has a standard cost system and has set the following standards for materials and labor: During the year Bortello produced 125 boots. Actual leather purchased was 1,700 strips, at $16 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour. -Refer to Figure 10-3. Compute the costs of leather and direct labor that should have been incurred for the production of 125 boots.

Total Materials Variance

For better control, the materials price variance is computed using actual quantity of materials purchased.

The _______________ computes the difference between what was paid to direct laborers and what should have been paid.

During October, 10,000 direct labor hours were worked at a standard cost of $10 per hour. If the direct labor rate variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be

Standard costs are developed for direct materials, direct labor, and variable overhead only.

If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the number of hours allowed, the labor rate variance and labor efficiency variance will be Labor Rate Labor Efficiency Variance Variance

Westminster Company has the following information concerning its direct materials:

The actual quantity of input at the standard price less than the standard quantity of input at the standard price equals the usage variance.

Figure 10-2Highland Company's standard cost is $250,000. The allowable deviation is $\pm$ 10%. Its actual costs for six months are -Refer to Figure 10-2. The variance that is lower than the lower control limit is

Claire Company uses a standard costing system. The following information pertains to direct labor costs for February: How many actual labor hours were worked during February for Claire Company?

In a ____________________, costs are assigned to products using quantity and price standards for all three manufacturing costs: direct materials, direct labor, and overhead.

The __________________ provides the products data needed to calculate the standard unit cost.

It took James 1,400,000 yards at $2.50 per yard to make the 250,000 t-shirts. -Refer to Figure 10-9. What is the entry to record the issuance and usage of materials?