Exam 12: Activity Analysis: Costing and Management

The standard quantity per unit for direct materials should not include an allowance for waste, spoilage and other inefficiencies

Throop Company's standards call for one kilogram of materials for each unit of output at a cost of £2 per kilogram for the raw materials. Actual output was 50,000 units of product requiring 45,000 kilograms of raw materials at a cost of £2.10 per kilogram. There were no beginning or ending inventories of raw materials. The direct material price variance and quantity variance were: Price Quantity A. £ 4,500 unfavourable £10,000 favourable B. £ 5,000 favourable £10,500 unfavourable C. £ 5,000 unfavourable £10,500 favourable D. £10,000 favourable £4,500 unfavourable

The materials quantity variance should be computed

Is the main purpose of standard costing to apportion blame for adverse variances? Discuss. You may use the interaction between each director 'Management Accounting in action' on page 478 in Chapter 12 to illustrate this answer if you wish.

Perkins Company, which has a standard cost system, had 500 pounds of raw material X in its inventory at June 1, purchased in May for £1.20 per pound and carried at a standard cost of £1.00 per pound. The following information pertains to raw material X for the month of June: Actual pounds purchased 1,400 Actual pounds used 1,500 Standard pounds allowed for actual production 1,300 Standard cost per pound £1.00 Actual cost per pound £1.10 The unfavourable materials purchase price variance for raw material X for June was

The standard cost per unit is computed by multiplying the standard quantity or hours by the standard price or rate

List the disadvantages of standard costing.

A labour efficiency variance resulting from the use of poor quality materials should be charged to

The following materials standards have been established for a particular product:Standard quantity per unit of output 5.3 meters Standard price $\quad$$\quad$$\quad$$\quad$ £ 17.20 per meter The following data pertain to operations concerning the product for the last month:Actual materials purchased $\quad 8,100$ meters Actual cost of materials purchased $£ 141,345$ Actual materials used in production 7,600 meters Actual output $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 1,400 units What is the materials price variance for the month

Cox Engineering performs cement core tests in its laboratory. The following standards have been set for each core test performed: standard Hours or Quantity standard price or Rate Direct materials 3.0 pounds £0.75 per pound Direct labour 0.4 hours £12.00 per hour Variable manufacturing overhead 0.4 hours £9.00 per hour During March, the laboratory performed 2,000 core tests. On March 1 no direct materials (sand) were on hand. Variable manufacturing overhead is assigned to core tests on the basis of direct labour hours. The following events occurred during March: 8,600 pounds of sand were purchased at a cost of £7,310. 7,200 pounds of sand were used for core tests. 840 actual direct labour hours were worked at a cost of £8,610. Actual variable manufacturing overhead incurred was £3,200. -The labour rate variance for March is

Cox Engineering performs cement core tests in its laboratory. The following standards have been set for each core test performed: standard Hours or Quantity standard price or Rate Direct materials 3.0 pounds £0.75 per pound Direct labour 0.4 hours £12.00 per hour Variable manufacturing overhead 0.4 hours £9.00 per hour During March, the laboratory performed 2,000 core tests. On March 1 no direct materials (sand) were on hand. Variable manufacturing overhead is assigned to core tests on the basis of direct labour hours. The following events occurred during March: 8,600 pounds of sand were purchased at a cost of £7,310. 7,200 pounds of sand were used for core tests. 840 actual direct labour hours were worked at a cost of £8,610. Actual variable manufacturing overhead incurred was £3,200. -The variable overhead efficiency variance for March is

Standard costs greatly increase the complexity of the bookkeeping process

The entry to record an unfavorable material quantity variance is

The Geurtz Company uses standard costing. The company makes and sells a single product called a Roff. The following data are for the month of August: Actual cost of direct material purchased and used: £65,560 Material price variance: £5,960 unfavourable Total materials variance: £22,360 unfavourable Standard cost per pound of material: £4 Standard cost per direct labour hour: £5 Actual direct labour hours: 6,500 hours Labour efficiency variance: £3,500 favourable Standard number of direct labour hours per unit of Roff: 2 hours Total labour variance: £400 unfavourable - The standard material allowed to produce one unit of Roff was

If the labour efficiency variance is unfavourable, then

The following standards for variable manufacturing overhead have been established for a company that makes only one product:Standard hours per unit of output $\quad$$\quad$ 7.0 hours Standard variable overhead rate $\quad$$\quad$ £ 11.35 per hour The following data pertain to operations for the last month: Actual hours 7,500 hours Actual total variable overhead cost £87,000 Actual output 1,000 units - What is the materials quantity variance for the month?

The materials price variance should be computed

The general model for calculating a price variance is

Managers generally find the interpretation of variances to be straightforward

Todco planned to produce 3,000 units of its single product, Teragram, during November. The standard specifications for one unit of Teragram include six pounds of material at £0.30 per pound. Actual production in November was 3,100 units of Teragram. The accountant computed a favourable materials purchase price variance of £380 and an unfavourable materials quantity variance of £120. Based on these variances, one could conclude that