Exam 24: Standard Cost Systems

Volume variances Consider the following statement: "No manager should be held responsible for a volume variance." Briefly explain why a volume variance should not be investigated and viewed as the responsibility of some manager in an organization.

Which of the following is not an advantage of using a standard cost system?

Standard cost system-overhead variances Assume the following data for John Company's August operations. (a) Compute the amount of overhead applied to Work-in-Process during August. $________________ (b) Compute the total manufacturing overhead budgeted based on hours worked during August. $________________ (c) Compute the overhead spending variance for August. Indicate whether favorable (F) or unfavorable (U). $________________ (d) Compute the overhead volume variance for August. Indicate whether favorable (F) or unfavorable (U). $________________

The labor rate variance is determined by multiplying the difference between the actual labor rate and the standard labor rate by:

If the actual number of direct labor hours used exceeds the standard direct labor hours allowed, this indicates:

The use of excessive quantities of material in manufacturing a product causes an unfavorable materials quantity variance.

Standard costs are established only for direct labor and direct materials.

Standard cost system labor variance The following computations of March labor variances for Sam's Supply Company are incomplete. The missing items are labeled (a) through (d). Labor rate variance = 4,800 hours x [(a) - $8.50] = $350 favorable Labor efficiency variance = (b) x [(c) - 5,000 hours] = $(d) On the appropriately labeled line, identify each missing item by name (a through c) and show the missing value (a through d). Show supporting computations in the space provided. (a) _________________________ $________________ (b) _________________________ $________________ (c) _________________________ ____________________ hours (d) $_______________ F or U (Circle the correct term.) (e) During March, the supervisor left for vacation without arranging for a replacement. Which variances would have been most affected by this situation? _________________________ Computations

Excessive overtime hours worked by direct labor workers often results in:

The overhead spending variance:

A favorable variance would be credited to a cost variance account.

If fewer units are produced than had been estimated when standard unit costs were determined, there would normally be:

A standard cost is predetermined, that is, determined before actual costs of the current period have been computed.

If the standard quantity of materials is 84,500 units @ $0.15 per unit and the actual quantity is 95,000 units @ $0.12 per unit, then the materials price variance is:

There is an unfavorable labor efficiency variance when:

An unfavorable labor rate variance could most likely result from all of the following except:

Which of the following is the most likely explanation for the types of labor variances resulting from Roman's July operations?

A labor efficiency (usage) variance is most likely to occur if:

Using more direct labor hours for units produced than the amount allowed by the standard results in:

The journal entry to record direct labor costs relating to work performed in April includes: