Question 1

Benton Company produces one product, a putter called PAR-putter. Benton uses a standard cost system and determines that it should take one hour of direct labor to produce one PAR-putter. The normal production capacity for this putter is 100,000 units per year. The total budgeted overhead at normal capacity is $600,000 comprised of $200,000 of variable costs and $400,000 of fixed costs. Benton applies overhead on the basis of direct labor hours.
During the current year, Benton produced 85,000 putters, worked 89,000 direct labor hours, and incurred variable overhead costs of $180,000 and fixed overhead costs of $400,000.
Instructions
(a) Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.
(b) Compute the applied overhead for Benton for the year.
(c) Compute the total overhead variance.

Accepted Answer

The answer of Benton Company produces one product, a putter...

Question 2

The overhead ______________ variance is the difference between normal capacity hours and standard hours allowed times the fixed overhead rate.

Accepted Answer

The answer of The overhead ______________ variance is the difference...

Question 3

The following direct labor data pertain to the operations of Nagel Manufacturing Company for the month of November:  
Instructions
Prepare a matrix and calculate the labor variances.

Accepted Answer

The answer of The following direct labor data pertain to...

Question 4

A company purchases 20,000 pounds of materials. The materials price variance is $3,000 favorable. What is the difference between the standard and actual price paid for the materials?

Accepted Answer

A)  $.75 
B)  $.15 
C)  $3.75 
D)  Cannot be determined from the data provided.

Question 5

Manufacturing overhead data for the production of Product B by Elliott Company are as follows.  
Instructions
Compute the controllable and volume overhead variances.

Accepted Answer

The answer of Manufacturing overhead data for the production of...

Question 6

Landis Company planned to produce 20,000 units of product and work 100,000 direct labor hours in 2011. Manufacturing overhead at the 100,000 direct labor hours level of activity was estimated to be:  
At the end of 2011, 21,000 units of product were actually produced and 108,000 actual direct labor hours were worked. Total actual overhead costs for 2011 were $1,025,000.
Instructions
(a) Compute the total overhead variance.
(b) Compute the overhead controllable variance.
(c) Compute the overhead volume variance.

Accepted Answer

The answer of Landis Company planned to produce 20,000 units...

Question 7

Vega Company has developed the following standard costs for its product for 2011:  
The company expected to produce 25,000 units of Product A in 2011 and work 75,000 direct labor hours.
Actual results for 2011 are as follows:
$\bullet$26,000 units of Product A were produced.
$\bullet$Actual direct labor costs were $630,800 for 76,000 direct labor hours worked.
$\bullet$Actual direct materials purchased and used during the year cost $283,500 for 105,000 pounds.
$\bullet$Actual variable overhead incurred was $130,000 and actual fixed overhead incurred was $170,000.
Instructions
Compute the following variances showing all computations to support your answers. Indicate whether the variances are favorable or unfavorable.
(a) Materials quantity variance.
(b) Total direct labor variance.
(c) Direct labor quantity variance.
(d) Direct materials price variance.
(e) Total overhead variance.

Accepted Answer

The answer of Vega Company has developed the following standard...

Question 8

Which of the following statements about standard costs is false?

Accepted Answer

A)  Properly set standards should promote efficiency. 
B)  Standard costs facilitate management planning. 
C)  Standards should not be used in "management by exception." 
D)  Standard costs can simplify the costing of inventories.

Question 9

Keller Company has a materials price standard of $2.00 per pound. Five thousand pounds of materials were purchased at $2.20 a pound. The actual quantity of materials used was 5,000 pounds, although the standard quantity allowed for the output was 4,500 pounds.
Keller Company's materials price variance is

Accepted Answer

A)  $100 U. 
B)  $1,000 U. 
C)  $900 U. 
D)  $1,000 F.

Question 10

An unfavorable materials quantity variance would occur if

Accepted Answer

A)  more materials were purchased than were used. 
B)  actual pounds of materials used were less than the standard pounds allowed. 
C)  actual labor hours used were greater than the standard labor hours allowed. 
D)  actual pounds of materials used were greater than the standard pounds allowed.

Question 11

Kitselman Inc. produces a product requiring 3 direct labor hours at $20.00 per hour. During January, 2,000 products are produced using 6,300 direct labor hours. Kitselman's actual payroll during January was $122,850. What is the labor quantity variance?

Accepted Answer

A)  $2,850 U 
B)  $6,000 F 
C)  $3,150 F 
D)  $6,000 U

Question 12

If the standard hours allowed are less than the standard hours at normal capacity,

Accepted Answer

A)  the overhead volume variance will be unfavorable. 
B)  variable overhead costs will be underapplied. 
C)  the overhead controllable variance will be favorable. 
D)  variable overhead costs will be overapplied.

Question 13

A materials quantity variance is calculated as the difference between the standard direct materials price and the actual direct materials price multiplied by the actual quantity of direct materials used.

Accepted Answer

A) True 
 B)False

Question 14

The overhead volume variance relates only to

Accepted Answer

A)  variable overhead costs. 
B)  fixed overhead costs. 
C)  both variable and fixed overhead costs. 
D)  all manufacturing costs.

Question 15

If production exceeds normal capacity, the overhead volume variance will be favorable.

Accepted Answer

A) True 
 B)False

Question 16

Standards which represent optimum performance under perfect operating conditions are called _______________ standards, but most companies use _________________ standards which are rigorous but attainable.

Accepted Answer

The answer of Standards which represent optimum performance under perfect...

Question 17

A credit to a Materials Quantity Variance account indicates that the actual quantity of direct materials used was greater than the standard quantity of direct materials allowed.

Accepted Answer

A) True 
 B)False

Question 18

The standard quantity allowed for the units produced was 6,500 pounds, the standard price was $2.50 per pound, and the materials quantity variance was $375 favorable. Each unit uses 1 pound of materials. How many units were actually produced?

Accepted Answer

A)  6,350 
B)  6,500 
C)  15,875 
D)  6,650

Question 19

Kwik Repair Service, Inc. is trying to establish the standard labor cost of a typical engine tune-up. The following data have been collected from time and motion studies conducted over the past month.  
Instructions
(a) Determine the standard direct labor hours per tune-up
(b) Determine the standard direct labor hourly rate.
(c) Determine the standard direct labor cost per tune-up.
(d) If a tune-up took 1.5 hours at the standard hourly rate, what was the direct labor quantity variance?

Accepted Answer

The answer of Kwik Repair Service, Inc. is trying to...

Question 20

A standard which represents an efficient level of performance that is attainable under expected operating conditions is called a(n)

Accepted Answer

A)  ideal standard. 
B)  loose standard. 
C)  tight standard. 
D)  normal standard.

Exam 25: Budgetary Control and Responsibility Accounting

The overhead ______________ variance is the difference between normal capacity hours and standard hours allowed times the fixed overhead rate.

The following direct labor data pertain to the operations of Nagel Manufacturing Company for the month of November: Instructions Prepare a matrix and calculate the labor variances.

A company purchases 20,000 pounds of materials. The materials price variance is $3,000 favorable. What is the difference between the standard and actual price paid for the materials?

Manufacturing overhead data for the production of Product B by Elliott Company are as follows. Instructions Compute the controllable and volume overhead variances.

Which of the following statements about standard costs is false?

An unfavorable materials quantity variance would occur if

Kitselman Inc. produces a product requiring 3 direct labor hours at $20.00 per hour. During January, 2,000 products are produced using 6,300 direct labor hours. Kitselman's actual payroll during January was $122,850. What is the labor quantity variance?

If the standard hours allowed are less than the standard hours at normal capacity,

A materials quantity variance is calculated as the difference between the standard direct materials price and the actual direct materials price multiplied by the actual quantity of direct materials used.

The overhead volume variance relates only to

If production exceeds normal capacity, the overhead volume variance will be favorable.

Standards which represent optimum performance under perfect operating conditions are called _ standards, but most companies use ___ standards which are rigorous but attainable.

A credit to a Materials Quantity Variance account indicates that the actual quantity of direct materials used was greater than the standard quantity of direct materials allowed.

The standard quantity allowed for the units produced was 6,500 pounds, the standard price was $2.50 per pound, and the materials quantity variance was $375 favorable. Each unit uses 1 pound of materials. How many units were actually produced?

A standard which represents an efficient level of performance that is attainable under expected operating conditions is called a(n)