Exam 26: Standard Costing and Variance Analysis

If the actual amount of direct materials used equals the standard amount of direct materials that should have been used, the difference between the standard cost and actual cost of direct materials is called the

The variable overhead spending variance is also called the variable overhead efficiency variance.

Which of the following provides an explanation of why the variable overhead rate is separated from the fixed overhead rate in standard costing?

Variance analysis involves computing the difference between standard and actual costs.

Powerhorse, Inc., manufactures steel hitches for horse trailers. The company's direct labor rates have been set by the terms of the current labor contract. Direct labor rate standards have been assigned for each job classification. In July 20xx, a young apprentice was being trained during regular working hours to become a machine operator on one of the turret lathes. A timekeeper determined that the apprentice had spent a total of 48 hours as a novice machine operator in July. Standard time for the same work output is 34 hours. The apprentice earned $6.80 per hour in July. The standard direct labor rate for machine operators working on turret lathes is $9.50 per hour. a. From the data provided, determine the direct labor efficiency variance and the direct labor rate variance that resulted from the temporary substitution of the apprentice for the regular machine operator. (Note that, according to the labor contract, the apprentice is not entitled to the same rate as a regular machine operator during the training period.) b. Did the company benefit financially from the situation? Why or why not? (Show calculations.)

Using the labor time standard of 0.5 labor hour per unit and a labor cost standard of $10 per labor hour for a 10 pound bag of chocolate and the following actual cost and usage data, compute the direct labor variance. Direct labor haurs used $\quad 4,950$ hours Total cost of direct labor $\quad \$ 53,460$ Number of good urits produced $\quad 9,000$ units

Harrison, Inc., has computed direct labor standards for the manufacture of its product to be 4 hours of labor per product at a cost of $15 per hour. During March, Harrison produced 45 products in 190 hours and incurred direct labor costs of $2,720. Harrison's direct labor efficiency variance was

The direct materials price standard is a carefully derived estimate or projected amount of what a particular type of direct material will cost when purchased during the next accounting period.

Outdoors, Inc., manufactures steel hitches for camping trailers. The company's direct labor rates have been set by the terms of the current labor contract. Direct labor rate standards have been assigned for each job classification. In May 20xx, a young apprentice was being trained during regular working hours to become a machine operator on one of the turret lathes. A timekeeper determined that the apprentice had spent a total of 48 hours as a novice machine operator in May. Standard time for the same work output is 32 hours. The apprentice earned $6.25 per hour in May. The standard direct labor rate for machine operators working on turret lathes is $10 per hour. a. From the data provided, determine the direct labor efficiency variance and the direct labor rate variance that resulted from the temporary substitution of the apprentice for the regular machine operator. (Note that, according to the labor contract, the apprentice is not entitled to the same rate as a regular machine operator during the training period.) b. Did the company benefit financially from the situation? Why or why not? (Show calculations.)

Standard costs are based solely on expected future costs and conditions.

Sweet Dreams manufactures candy. Its records revealed the following data: Number af urits produced 4,000 Standard direct labor hours per unit 2 Standard variable overhead rate \ 2.50 per hour Standard fixed overhead rate \ 5.00 hour Budgeted Eixed overhead costs \ 40,800 Actual variable cverhead costs \ 16,800 Actual fixed overhead costs \ 40,400 Actual labor hours 8,000 direct labor hours Total actual dverhead \ 57,200 The total fixed overhead variance is

The direct materials price variance is best measured and reported to appropriate management personnel at the time

Love-My-Lips specializes in manufacturing lipstick. Legally Pink, one of more than 75 shades produced by the company, is made from castor oil, beeswax, aloe vera, and a base compound. For the next 12 months, the company's purchasing agent believes that the cost of ingredients will be as follows: The direct labor time standard is 4 hours per case at a standard direct labor rate of $10.00 per hour. The standard overhead rates are $16.00 per direct labor hour for the standard variable overhead rate and $12.00 per direct labor hour for the standard fixed overhead rate. a. Using these production standards, compute the standard unit cost of direct materials per case of Legally Pink lipstick if it takes 0.4 gallon of castor oil, 1 pound of beeswax, 0.2 gallon of aloe vera, and 1 gallon of base compound to produce one case. b. Using the standard unit cost of direct materials per case determined in (a) and the production standards given for direct labor and overhead, compute the standard unit cost of one case of Legally Pink lipstick.

Variance analysis includes all of the following except

The direct labor rate standard is either set by a labor contract or defined by the company.

If standard costing is not economically feasible for a company, predetermined overhead rates should not be used.

Ewing Corporation's controller has developed the cost and usage data listed below in preparation of standard unit cost information for the coming year. The total standard unit cost is

During April 2010, production is expected to be 30,000 units with the following costs: direct materials, $195,000; direct labor, $300,000; variable overhead, $120,000; and fixed overhead, $150,000. Prepare a flexible budget for 25,000 and 35,000 units.

Standard costs are useful for all but which of the following?

Under which of the following circumstances would the base used to calculate the variable overhead rate be the same as that used for the fixed overhead rate?