Question 1

A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. What is the direct labor efficiency variance?

Accepted Answer

A)  $22,000 unfavorable. 
B)  $22,000 favorable. 
C)  $16,000 unfavorable. 
D)  $16,000 favorable. 
E)  $6,000 unfavorable.

Question 2

Which of the following is not part of the flow of events in variance analysis:

Accepted Answer

A)  Preparing a standard cost performance report. 
B)  Identifying questions and their explanations. 
C)  Taking corrective and strategic actions. 
D)  Computing and analyzing variances. 
E)  Working to ensure that all variances are favorable.

Question 3

Should both favorable and unfavorable variances be investigated, or only the unfavorable ones? Explain.

Accepted Answer

The answer of Should both favorable and unfavorable variances be...

Question 4

Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. The direct materials price variance is: $$\begin{array} { l l } 
\text { Direct materials standard } ( 7 \mathrm {~kg} @ \$ 2 / \mathrm { kg } ) & \$ 014 \text { per finished unit } \
\text { Actual cost of materials purchased } & \$ 322,500 \
\text { Actual direct materials purchared and used } & 150,000 \text { lbs. }
\end{array}$$

Accepted Answer

A)  $27,500 unfavorable. 
B)  $50,000 unfavorable. 
C)  $50,000 favorable. 
D)  $22,500 unfavorable. 
E)  $22,500 favorable.

Question 5

Wren Company determined that in the production of their products last period; they had a favorable price variance and an unfavorable quantity variance for direct materials. What might be the cause(s) of this pattern of variances?

Accepted Answer

The answer of Wren Company determined that in the production...

Question 6

Maxwell Co. collected the following information about its production activities for the current year.
a. Compute the direct materials price and quantity variances and indicate whether each is favorable or unfavorable.
b. Prepare the journal entry to record the issuance of direct materials into production.
Actual costs and quantities:
Direct materials used 95,000 lbs. @ $6.30 per lb.
Units completed during the year, 50,000 units
Standard costs and quantities:
Price per lb. of direct material, $6.05
Two lbs. of direct material per unit

Accepted Answer

The answer of Maxwell Co. collected the following information about...

Question 7

A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased inferior materials.

Accepted Answer

A) True 
 B)False

Question 8

Milltown Company specializes in selling used cars. During the month, the dealership sold 22 cars at an average price of $15,000 each. The budget for the month was to sell 20 cars at an average price of $16,000. Compute the dealership's sales price variance for the month.

Accepted Answer

A)  $22,000 unfavorable. 
B)  $10,000 favorable. 
C)  $22,000 favorable. 
D)  $32,000 unfavorable. 
E)  $32,000 favorable.

Question 9

Flexible budgets may be prepared before or after an actual period of activity. Why would management prepare such budgets at differing time frames?

Accepted Answer

The answer of Flexible budgets may be prepared before or...

Question 10

If Mercury Company's actual overhead incurred during a period was $32,700 and the company reported a favorable overhead controllable variance of $1,200 and an unfavorable overhead volume variance of $900, how much standard overhead cost was assigned to the products produced during the period?

Accepted Answer

The answer of If Mercury Company's actual overhead incurred during...

Question 11

Summerlin Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units. What is the direct materials price variance?

Accepted Answer

A)  $400 unfavorable. 
B)  $450 unfavorable. 
C)  $2,500 unfavorable. 
D)  $2,550 unfavorable. 
E)  $2,950 unfavorable.

Question 12

When there is a difference between the actual volume of production and the standard volume of production, which of the following, based solely on fixed overhead, occurs:

Accepted Answer

A)  Production variance. 
B)  Volume variance. 
C)  Overhead cost variance. 
D)  Quantity variance. 
E)  Controllable variance.

Question 13

Standard costs are:

Accepted Answer

A)  Actual costs incurred to produce a specific product or perform a service. 
B)  Preset costs for delivering a product or service under normal conditions. 
C)  Established by the IMA. 
D)  Rarely achieved. 
E)  Uniform among companies within an industry.

Question 14

Tiger, Inc. budgeted the following overhead costs for the current year assuming operations at 80% of capacity, or 40,000 units:
  The standard cost per unit when operating at this same 80% capacity level is:
  The actual production achieved in the current year was 60% of capacity, or 30,000 units. The actual costs were:
  Calculate the following variances and indicate whether each is favorable or unfavorable.
 $$\begin{array}{l}

\begin{array} { | c | l |} 
\hline  \text { Direct materials: }&\quad\quad\quad\quad\quad\quad\quad\
\hline \text { Price variance } & \
\hline \text { Quantity variance } & \
\hline \text { Direct labor: } & \
\hline \text { Rate variance } & \
\hline \text { Efficiency variance } & \
\hline \text { Variable overhead: } & \
\hline \text { Spending variance } & \
\hline \text { Efficiency variance } & \
\hline \text { Fixed overhead: } & \
\hline \text { Spending variance } & \
\hline \text { Volume variance } & \
\hline
\end{array}
\end{array}$$

Accepted Answer

The answer of Tiger, Inc. budgeted the following overhead costs...

Question 15

A volume variance is the difference between overhead at maximum volume of production and the standard volume of production.

Accepted Answer

A) True 
 B)False

Question 16

A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. What is the direct labor rate variance?

Accepted Answer

A)  $22,000 unfavorable. 
B)  $22,000 favorable. 
C)  $16,000 unfavorable. 
D)  $16,000 favorable. 
E)  $6,000 unfavorable.

Question 17

Fletcher Company collected the following data regarding production of one of its products. Compute the total direct labor cost variance. $\begin{array}{lrl}
\text { Direct labor standard (2hrs. @, } \$ 12.75 / \mathrm{hr} .) & \$ 5.50&\text {per finished} \
&&\text {unit}\
\text { Actual direct labor hours } & 81,500 &\text {hrs.} \
\text { Actual finished units produced } & 40,000&\text {units}\
\text { Actual cost of direct labor } & \$ 1,100,250
\end{array}$

Accepted Answer

A)  $80,250 unfavorable. 
B)  $80,250 favorable. 
C)  $61,125 favorable. 
D)  $61,125 unfavorable. 
E)  $19,125 favorable.

Question 18

When recording the journal entry for labor, the Work in Process Inventory account is

Accepted Answer

A)  Debited for standard labor cost. 
B)  Debited for actual labor cost. 
C)  Credited for standard labor cost. 
D)  Credited for actual labor cost. 
E)  Not used.

Question 19

Lavoie Company planned to use 18,500 pounds of material costing $2.50 per pound to make 4,000 units of its product. In actually making 4,000 units, the company used 18,800 pounds that cost $2.54 per pound. Calculate the direct materials quantity variance.

Accepted Answer

The answer of Lavoie Company planned to use 18,500 pounds...

Question 20

An unfavorable variance is recorded with a debit because it reflects additional costs higher than the standard cost.

Accepted Answer

A) True 
 B)False

Exam 8: Flexible Budgets and Standard Costs

A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. What is the direct labor efficiency variance?

Which of the following is not part of the flow of events in variance analysis:

Should both favorable and unfavorable variances be investigated, or only the unfavorable ones? Explain.

Wren Company determined that in the production of their products last period; they had a favorable price variance and an unfavorable quantity variance for direct materials. What might be the cause(s) of this pattern of variances?

A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased inferior materials.

Milltown Company specializes in selling used cars. During the month, the dealership sold 22 cars at an average price of $15,000 each. The budget for the month was to sell 20 cars at an average price of $16,000. Compute the dealership's sales price variance for the month.

Flexible budgets may be prepared before or after an actual period of activity. Why would management prepare such budgets at differing time frames?

If Mercury Company's actual overhead incurred during a period was $32,700 and the company reported a favorable overhead controllable variance of $1,200 and an unfavorable overhead volume variance of $900, how much standard overhead cost was assigned to the products produced during the period?

Summerlin Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units. What is the direct materials price variance?

When there is a difference between the actual volume of production and the standard volume of production, which of the following, based solely on fixed overhead, occurs:

Standard costs are:

A volume variance is the difference between overhead at maximum volume of production and the standard volume of production.

A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. What is the direct labor rate variance?

When recording the journal entry for labor, the Work in Process Inventory account is

Lavoie Company planned to use 18,500 pounds of material costing $2.50 per pound to make 4,000 units of its product. In actually making 4,000 units, the company used 18,800 pounds that cost $2.54 per pound. Calculate the direct materials quantity variance.

An unfavorable variance is recorded with a debit because it reflects additional costs higher than the standard cost.