Exam 10: Standard Costing and Analysis of Direct Costs

Roberto Ventura operates a commercial painting business in Sacramento, which has a very tight labor market. Much of his work focuses on newly constructed apartments and townhouses. The following data relate to crew no. 5 for a recently concluded period when 85 apartment units were painted: • Three new employees were assigned to crew no. 5. Wages averaged $18.80 per hour for each employee; the crew took 2,550 hours to complete the work. • Based on his knowledge of the operation, articles in trade journals, and conversations with other painters, Ventura established the following standards: Typical hourly wage rate of crew personnel: $15 Anticipated crew time for each unit: 34 hours • The paint quantity variance was $6,070F. • The operation did not go as smoothly as planned, with customer complaints and problems being much higher than expected. Required: A. Compute Ventura's direct-labor variances. B. Is the direct-labor rate variance consistent with what you might expect in a tight labor market? Explain. C. Analyze the information given and that you calculated, and determine what likely happened that would give rise to customer complaints.

Lucie Corporation's purchasing manager obtained a special price on an aluminum alloy from a new supplier, resulting in a direct-material price variance of $9,500F. The alloy produced more waste than normal, as evidenced by a direct-material quantity variance of $2,000U, and was also difficult to use. This slowed worker efficiency, generating a $2,500U labor efficiency variance. To help remedy the situation, the production manager used senior line employees, which gave rise to a $900U labor rate variance. If overall product quality did not suffer, what variance amount is best used in judging the appropriateness of the purchasing manager's decision to acquire substandard material?

Marcie Simone is the long-time catering director of Naples-on-the-Beach, a hotel noted throughout the industry for quality, profitability, and cost control. The hotel recently catered a steak dinner for a 2,000-person convention. Strict standards were in place for the dinner: 0.75 pounds of beef per plate at $9 per pound. A review of the accounting records shortly after the convention showed that 1,680 pounds of beef were purchased and consumed, costing the hotel $13,440. Required: A. Calculate the cost of beef budgeted for the dinner and the total beef variance (i.e., the difference between budgeted and actual cost). Should this variance be of concern to the hotel? Why? B. Assess the job that Simone did in "managing" the beef purchase by performing a variance analysis. Comment on your findings. C. Assume that the hotel received a number of complaints shortly after the dinner concluded. Explain a possible reason behind the conventioneers' unhappiness.

Standard costs:

Which of the following journal entries definitely contains an error?

Which of the following variances cannot occur together during the same accounting period?

Sammons Corporation had a favorable direct-labor efficiency variance of $6,000 for the period just ended. The actual wage rate was $0.50 more than the standard rate of $12.00. If the company's standard hours allowed for actual production totaled 9,500, how many hours did the firm actually work?

Halo Enterprises recently experienced a fire, forcing the company to use incomplete information to analyze operations. Consider the following data and assume that all materials purchased during the period were used in production: Direct materials: Standard price per pound: $9 Actual price per pound: $8 Price variance: $20,000F Total of direct-material variances: $2,000F Direct labor: Actual hours worked: 40,000 Actual rate per hour: $15 Efficiency variance: $28,000F Total of direct-labor variances: $12,000U Halo completed 12,000 units. Required: Determine the following: (1) actual materials used, (2) direct-material quantity variance, (3) direct-labor rate variance, (4) standard labor rate per hour, and (5) standard labor time per finished unit.

Which of the following is a criticism of standard costing, as applied to today's manufacturing environment?

Which of the following variances are most similar with respect to the manner in which they are calculated?

Which department would normally begin an investigation regarding an unfavorable materials quantity variance?

An unfavorable labor efficiency variance is created when:

When considering whether to investigate a variance, managers should consider all of the following except the variance's:

The following data relate to product no. 33 of La Quinta Corporation: Direct labor standard: 5 hours at $14 per hour Direct labor used in production: 45,000 hours at a cost of $639,000 Manufacturing activity: 8,900 units completed The direct-labor efficiency variance is:

Which of the following would not be considered if a company desires to establish a series of practical manufacturing standards?

At the end of the accounting period, most companies close variance accounts to:

Which of the following are methods for setting standards?

Dana, Inc. recently completed 56,000 units of a product that was expected to consume four pounds of direct material per finished unit. The standard price of the direct material was $8.50 per pound. If the firm purchased and consumed 228,000 pounds in manufacturing (cost = $1,881,000), the direct-material quantity variance would be figured as:

A standard cost:

A direct-labor efficiency variance cannot be caused by: