Question 1

The difference between budgeted volume and practical capacity,multiplied by the fixed overhead rate,is the

Accepted Answer

The answer of The difference between budgeted volume and practical...

Question 2

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the expected (planned)capacity variance?

Accepted Answer

The expected (planned) capacity variance is calculated as follows:

Budgeted Fixed Overhead - (Actual Production * Fixed Overhead per Unit)

Fixed Overhead per Unit = Budgeted Fixed Overhead / Practical Capacity = $150,000 / 6,000 = $25

Budgeted Fixed Overhead = $150,000

Actual Production = 4,800 units

Fixed Overhead per Unit = $25

$150,000 - (4,800 * $25) = $25,000 unfavorable variance

Therefore, the expected (planned) capacity variance is $25,000 unfavorable, which is option B.

Question 3

In a standard cost system,the initial debit to an inventory account is based on

Accepted Answer

In a standard cost system, the initial debit to an inventory account is based on the standard cost rather than actual cost. This allows for easier tracking and comparison of performance against predetermined standards. Actual costs are only used later for variance analysis.

Question 4

Tulip Inc.uses standard costing,and its manufacturing standards are as follows: 2 pounds of materials at $13 per pound,and 3 hours of labor at $10 per hour.Budgeted production last period was 5,000 units,and actual production was 4,800 units.Last period,Tulip purchased and used 9,800 pounds of materials for $135,000,and used 15,000 labor hours,costing $145,000.What is the journal entry to record direct labor costs?

Accepted Answer

The answer of Tulip Inc.uses standard costing,and its manufacturing standards...

Question 5

Beech has budgeted fixed overhead of $202,500 based on budgeted production of 13,500 units.During July,14,100 units were produced and $214,200 was spent on fixed overhead.What is the budgeted fixed overhead rate?

Accepted Answer

The budgeted fixed overhead rate is calculated by dividing the total budgeted fixed overhead by the total budgeted production units. Therefore, $202,500 / 13,500 units = $15.00 per unit.

Question 6

Melrose Inc.uses standard costing.Last period,it spent $145,000 for labor.The direct labor rate variance was $5,000 favorable,and the direct labor efficiency variance was $6,000 unfavorable.In the journal entry to record the use of direct labor,the amount debited to cost of goods sold would be

Accepted Answer

The answer of Melrose Inc.uses standard costing.Last period,it spent $145,000...

Question 7

The difference between actual volume and budgeted production,multiplied by the fixed overhead rate based on practical capacity,is the

Accepted Answer

The difference between actual volume and budgeted production is the volume variance. Multiplying this by the fixed overhead rate based on practical capacity gives the unexpected (unplanned) capacity variance, as it represents the difference between actual fixed overhead costs incurred and the amount that would have been incurred based on the budgeted level of production. The total capacity variance would include both the expected (planned) capacity variance and the unexpected (unplanned) capacity variance. The expected (planned) capacity variance would be the difference between the fixed overhead cost based on the budgeted level of production and the fixed overhead rate based on practical capacity, multiplied by the difference between the practical and budgeted capacity levels.

Question 8

In a standard cost system,a favorable variance will appear as

Accepted Answer

In a standard cost system, favorable variances are usually treated as a credit entry because they indicate that actual costs were lower than expected, resulting in a higher profit margin.

Question 9

In a standard cost system,an unfavorable variance will appear as

Accepted Answer

An unfavorable variance means the actual cost is higher than the standard cost, which results in a higher debit entry and a lower credit entry. Therefore, an unfavorable variance will appear as a debit entry in the standard cost system.

Question 10

At the end of the accounting period,all variances are closed to the _____________ account.

Accepted Answer

Variances are closed to the Cost of Goods Sold account, which represents the cost of goods that have been sold during the accounting period. This ensures that the actual cost of producing the goods is reflected in the cost of goods sold, and any variances are accounted for in the same period. Work in Process and Finished Goods relate to inventory accounts, which are not affected by variances at the end of the accounting period. Cost of Goods Manufactured represents the cost of goods that have been completed during the period and transferred to finished goods inventory, but is not directly related to variances.

Question 11

Melrose Inc.uses standard costing.Last period,its flexible budget for labor was $144,000.The direct labor rate variance was $5,000 favorable,and the direct labor efficiency variance was $6,000 unfavorable.In the journal entry to record the use of direct labor,the amount credited to wages payable would be

Accepted Answer

The flexible budget for labor was $144,000 but due to the favorable direct labor rate variance of $5,000, the total labor cost is $144,000 - $5,000 = $139,000. However, due to the unfavorable direct labor efficiency variance of $6,000, the actual direct labor cost is $139,000 + $6,000 = $145,000. Therefore, the amount credited to wages payable will be $145,000.

Question 12

Beech has budgeted fixed overhead of $202,500 based on budgeted production of 13,500 units.During July,14,100 units were produced and $214,200 was spent on fixed overhead.What is the fixed overhead volume variance?

Accepted Answer

The answer of Beech has budgeted fixed overhead of $202,500...

Question 13

Tulip Inc.uses standard costing,and its manufacturing standards are as follows: 2 pounds of materials at $13 per pound,and 3 hours of labor at $10 per hour.Budgeted production last period was 5,000 units,and actual production was 4,800 units.Last period,Tulip purchased and used 9,800 pounds of materials for $135,000,and used 15,000 labor hours,costing $145,000.What is the journal entry to record the use of materials?

Accepted Answer

The journal entry to record the use of materials under standard costing is:

Work in process inventory   $25,200 (2 lbs x $13 x 4,800 units)
Materials price variance       $9,800 (9,800 actual – 9,600 standard x $13)
Raw materials inventory        $135,000

Option A is incorrect because it only records the materials purchased, but not their use in production.

Option C is incorrect because the entry overstates the materials price variance by using the actual labor hours instead of the standard hours.

Option D is incorrect because it only records the materials purchased, but not their use in production, and it also understates the materials price variance.

Question 14

The difference between budgeted volume and practical capacity,multiplied by the fixed overhead rate,is the

Accepted Answer

The expected (planned) capacity variance is calculated by taking the difference between the budgeted volume and practical capacity, then multiplying it by the fixed overhead rate. This variance reflects the difference between what was planned and what is practically achievable.

Question 15

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the budgeted fixed overhead rate based on practical capacity?

Accepted Answer

The answer of Warner Co.has budgeted fixed overhead of $150,000.Practical...

Question 16

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the unexpected (unplanned)capacity variance?

Accepted Answer

The answer of Warner Co.has budgeted fixed overhead of $150,000.Practical...

Question 17

The difference between the actual volume and the budgeted volume,multiplied by the fixed overhead rate based on budgeted volume,is the

Accepted Answer

The formula given describes the fixed overhead volume variance. This variance measures the difference between the actual volume of production and the budgeted volume of production, multiplied by the fixed overhead rate based on the budgeted volume. It indicates whether fixed overhead costs were under or over-applied based on the actual level of production.

Question 18

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the total fixed overhead capacity variance?

Accepted Answer

To calculate fixed overhead capacity variance, we use the formula:
Fixed Overhead Capacity Variance = Budgeted Fixed Overhead - (Actual Production x (Budgeted FO/Practical Capacity))
Budgeted Fixed Overhead = $150,000
Actual Production = 4,800 units
Budgeted FO/Practical Capacity = $150,000/6,000 units = $25 per unit
Fixed Overhead Capacity Variance = $150,000 - (4,800 x $25) = $150,000 - $120,000 = $30,000 unfavorable. Therefore, the answer is D.

Question 19

Tulip Inc.uses standard costing,and its manufacturing standards are as follows: 2 pounds of materials at $13 per pound,and 3 hours of labor at $10 per hour.Budgeted production last period was 5,000 units,and actual production was 4,800 units.Last period,Tulip purchased and used 9,800 pounds of materials for $135,000,and used 15,000 labor hours,costing $145,000.What is the journal entry to record the purchase of materials?

Accepted Answer

The journal entry to record the purchase of materials is:
Raw Material Inventory Debit $135,000
Accounts Payable Credit $135,000

Option A correctly records the purchase of materials at the actual cost of $135,000. Option B records the purchase of materials at the standard cost rather than the actual cost, which would not reflect the true cost of materials used. Option C records the purchase of materials at the budgeted cost rather than the actual cost, which would also not reflect the true cost of materials used. Option D does not record the transaction at all.

Question 20

A fixed overhead rate based on _______________ highlights for management attention the cost of unutilized capacity.

Accepted Answer

A fixed overhead rate based on practical capacity highlights the cost of unutilized capacity because practical capacity represents the maximum production level that can be achieved with the available resources. Therefore, if the actual production level is lower than the practical capacity, there is excess capacity that incurs fixed overhead costs without generating revenue. By using practical capacity as the basis for the fixed overhead rate, management can identify and monitor the cost of unused capacity, and take actions to improve capacity utilization and reduce fixed overhead costs.

Quiz 9: Standard Costing and Variances

The difference between budgeted volume and practical capacity,multiplied by the fixed overhead rate,is the

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the expected (planned) capacity variance?

In a standard cost system,the initial debit to an inventory account is based on

Beech has budgeted fixed overhead of $202,500 based on budgeted production of 13,500 units.During July,14,100 units were produced and $214,200 was spent on fixed overhead.What is the budgeted fixed overhead rate?

Melrose Inc.uses standard costing.Last period,it spent $145,000 for labor.The direct labor rate variance was $5,000 favorable,and the direct labor efficiency variance was $6,000 unfavorable.In the journal entry to record the use of direct labor,the amount debited to cost of goods sold would be

The difference between actual volume and budgeted production,multiplied by the fixed overhead rate based on practical capacity,is the

In a standard cost system,a favorable variance will appear as

In a standard cost system,an unfavorable variance will appear as

At the end of the accounting period,all variances are closed to the _____________ account.

Beech has budgeted fixed overhead of $202,500 based on budgeted production of 13,500 units.During July,14,100 units were produced and $214,200 was spent on fixed overhead.What is the fixed overhead volume variance?

The difference between budgeted volume and practical capacity,multiplied by the fixed overhead rate,is the

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the budgeted fixed overhead rate based on practical capacity?

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the unexpected (unplanned) capacity variance?

The difference between the actual volume and the budgeted volume,multiplied by the fixed overhead rate based on budgeted volume,is the

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the total fixed overhead capacity variance?

A fixed overhead rate based on _______________ highlights for management attention the cost of unutilized capacity.