Exam 10: Standard Costing and Analysis of Direct Costs

If a company has an unfavorable direct-material quantity variance, then:

Consider the following statements: I. The standard cost per unit of materials is used to calculate a materials price variance. II. The standard cost per unit of materials is used to calculate a materials quantity variance. III. The standard cost per unit of materials cannot be determined until the end of the period. Which of the above statements is (are) true?

Taylor Enterprises purchased 56,000 pounds (cost = $420,000) of direct material to be used in the manufacture of the company's sole product. According the production specifications, each completed unit requires five pounds of direct material at a standard cost of $7.80 per pound. Direct materials consumed by the end of the period totaled 53,500 pounds in the manufacture of 10,900 finished units. An examination of Taylor's payroll records revealed that the company worked 22,000 labor hours (cost = $319,000) during the period, and specifications called for each completed unit requiring two hours of labor at a standard cost of $14.80 per hour. Assume that the company computes variances at the earliest point in time. Taylor's direct-labor efficiency variance was:

Which of the following combinations of direct-material variances might prompt management to undertake a detailed variance investigation?

The following data relate to product no. 89 of Des Moines Corporation: Direct material standard: 3 square feet at $2.50 per square foot Direct material purchased: 30,000 square feet at $2.60 per square foot Direct material consumed: 29,200 square feet Manufacturing activity: 9,600 units completed Assume that the company computes variances at the earliest point in time. The direct-material quantity variance is:

Justin Company recently purchased materials from a new supplier at a very attractive price. The materials were found to be of poor quality, and the company's laborers struggled significantly as they shaped the materials into finished product. In a desperation move to make up for some of the time lost, the manufacturing supervisor brought in more-senior employees from another part of the plant. Which of the following variances would have a high probability of arising from this situation?

Howard Company has established the following standards: Direct materials: 2.0 pounds at $4.10 Direct labor: 1.5 hours at $7 per hour Additional information was extracted from the accounting records: Actual production: 32,000 completed units Direct materials purchased: 70,000 pounds at $3.82, or $267,400 Direct materials consumed: 65,000 pounds Actual labor incurred: 51,000 hours at $6.30, or $321,300 Direct-labor rate variance: $35,700 favorable Direct-labor efficiency variance: $21,000 unfavorable Assume that the company computes variances at the earliest point in time. Required: Prepare journal entries to record the: A. Purchase of direct materials. B. Usage of direct materials. C. Incurrence of direct labor costs.

Soloman Corporation recently purchased 25,000 gallons of direct material at $5.60 per gallon. Usage by the end of the period amounted to 23,000 gallons. If the standard cost is $6.00 per gallon and the company believes in computing variances at the earliest point possible, the direct-material price variance would be calculated as:

Upstart, Inc. manufactures a product that has the following standard costs: Direct materials: 40 yards at \ 2.70 per yard \ 108 Direct labor: 8 hours at \ 18.00 per hour Total The following information pertains to July: Direct material purchased: 42,500 yards at $2.78 per yard, or $118,150 Direct material used: 36,000 yards Direct labor: 7,500 hours at $18.30 per hour, or $137,250 Actual completed production: 1,050 units Assume that the company computes variances at the earliest point in time. Required: Calculate the direct-material price and quantity variances, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.

Most companies base the calculation of the material price variance on the:

Which of the following choices correctly indicates the use of the standard price per unit of direct material when calculating the materials price variance and the material quantity variance?

Newbill Enterprises recently used 24,000 labor hours to produce 8,600 completed units. According to manufacturing specifications, each unit is anticipated to take 2.75 hours to complete. The company's actual payroll cost amounted to $456,000. If the standard labor cost per hour is $19.20, Newhart's labor rate variance is:

DiAngelo Products uses a standard costing system to assist in the evaluation of operations. The company has had considerable employee difficulties in recent months, so much so that management has hired a new production supervisor (Joe Simms). Simms has been on the job for six months and has seemingly brought order to an otherwise chaotic situation. The vice-president of manufacturing recently commented that "¼ Simms has really done the trick. Joe's team-building/morale-boosting exercises have truly brought things under control." The vice-president's comments were based on both a plant tour, where he observed a contented work force, and review of a performance report that showed a total labor variance of $14,000F. This variance is truly outstanding, given that it is less than 2% of the company's budgeted labor cost. Additional data follow. • Total completed production amounted to 20,000 units. • A review of the firm's standard cost records found that each completed unit requires 2.75 hours of labor at $14 per hour. DiAngelo's production actually required 42,000 labor hours at a total cost of $756,000. Required: A. As judged by the information contained in the performance report, should the vice-president be concerned about the company's labor variances? Why? B. Calculate DiAngelo's direct-labor variances. C. On the basis of your answers to requirement "B," should DiAngelo be concerned about its labor situation? Why? D. Briefly analyze and explain the direct-labor variances.

A production supervisor generally has little influence over the:

A direct-material quantity variance can be caused by all of the following except:

Which of the following individuals is least likely to become involved in the setting of either direct material standards or direct labor standards?

A perfection standard:

Which of the following choices correctly notes a characteristic associated with perfection standards and one associated with practical standards?

A manufacturing company is expected to complete a task in 45 minutes. During a recent accounting period, 3,200 completed units were produced, resulting in the following labor variances: Labor rate variance: $520 favorable Labor efficiency variance: $2,800 unfavorable The standard labor rate is $14 per hour. Required: Calculate (1) the standard hours allowed for the work performed, (2) the actual hours worked, and (3) the actual wage rate.

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 rate variance is: