Question 1

Andrews Corporation purchased 3,000 gallons of raw materials for $9,200. The standard price is $3.00 per gallon. If Andrews records the price variance at the earliest possible time, the entry to record the purchase of the material is:

Accepted Answer

The answer of Andrews Corporation purchased 3,000 gallons of raw...

Question 2

In a standard cost system,when the materials price variance is recorded at the time the material is purchased, the materials purchase price variance is obtained by multiplying the:

Accepted Answer

The materials purchase price variance is obtained by multiplying the actual quantity purchased by the difference between actual price and standard price.

Question 3

The direct labor costs for Boundary Company follow:  What was Boundary's standard direct labor rate?

Accepted Answer

Labor efficiency variance = (actual number of labor hours worked - standard number of labor hours allowed) x standard labor rate per hour
$12,000 F = (33,000 -34,000) x standard labor rate per hour
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Question 4

If the total materials variance (actual cost of materials used compared with the standard cost of the standard amount of materials required) for a given operation is favorable, why must this variance be further evaluated as to price and usage?
A)There is no need to further evaluate the total materials variance if it is favorable.
B)Generally accepted accounting principles require that all variances be analyzed in three stages.
C)All variances must appear in the annual report to equity owners for proper disclosure.
D)It is done so that management can evaluate the efficiency of the purchasing and production functions.

Accepted Answer

Even though a favorable total materials variance indicates that there was a cost savings, it is important to further evaluate the price and usage variances to determine whether the savings were due to more efficient purchasing or production practices. This information can be used by management to identify areas for improvement and make more informed decisions in the future. Therefore, option D is the correct answer. The other options are incorrect because they lack a proper justification for the necessity of further evaluating the variance.

Question 5

Which of the following is not likely to have caused a materials price variance?

Accepted Answer

One of the workers cutting steel to the wrong length would impact the materials quantity variance as he created waste, but not the price variance. The other three situations could impact the price paid for materials.

Question 6

Taking appropriate action on variances includes all of the following except:

Accepted Answer

Management should follow up on the causes of both favorable and unfavorable variances.

Question 7

Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased. Information for raw materials for Product RBI for the month of October follows:  What is the entry to record the purchase of materials?

Accepted Answer

The answer of Thomas Company uses a standard cost system...

Question 8

PHI Company began its operations on January 1 and produces a single product that sells for $35.00 per unit. 5,000 units were produced and 4,000 units were sold during the year. Standard costs per unit follow:  What is entry to record the finished goods?

Accepted Answer

The answer of PHI Company began its operations on January...

Question 9

Earl Company's direct labor costs for the month of January follow:  What was Earl's direct labor efficiency variance?

Accepted Answer

Labor efficiency variance = (actual number of labor hours worked - standard number of labor hours allowed) x standard labor rate per hour
Labor efficiency variance = (18,000 - 19,000) x $6.40*
Labor efficiency variance = 1,000 x 6.40 = $6,400 F (standard exceeded actual)
* The standard labor rate must be calculated prior to calculating the variance above by using the labor rate variance as follows:
Labor rate variance = (actual labor rate per hour - standard labor rate per hour) x actual number of hours worked
$1,800 U = (6.50** - standard labor rate per hour) x 18,000
1,800 U / 18,000 = .10
.10 = 6.50 - standard labor rate per hour
6.40 = standard labor rate per hour (since variance is unfavorable, the standard rate is less than the actual rate)
**Total payroll / actual labor hours worked = actual labor rate per hour
$117,000 / 18,000 = $6.50

Question 10

What is the normal year-end treatment of immaterial variances recognized in a cost accounting system utilizing standards?

Accepted Answer

The normal year-end treatment of immaterial variances of standard costs is to close them to cost of goods sold in the period in which they arose.

Question 11

The following information pertains to Genie Company:  What is the entry to record the direct labor cost and variances?

Accepted Answer

The answer of The following information pertains to Genie Company:...

Question 12

To effectively use variances to improve operations, management should take the following steps except:

Accepted Answer

The use of variances to improve operations normally would not include determination of the impact on the financial statements. Management should break the variances down, determine the cause of the variances, and follow up appropriately.

Question 13

How should an efficiency variance that is material in amount be treated at the end of an accounting period?

Accepted Answer

A variance that is material in amount should be allocated among work in process inventory, finished goods inventory, and cost of goods sold at the end of an accounting period.

Question 14

The following information pertains to Genie Company:  What is the entry to record the direct materials cost and variances, assuming that the price variance is recorded when the materials are put into production?

Accepted Answer

The answer of The following information pertains to Genie Company:...

Question 15

Bobby's Burger Place monitors its variances on an hourly basis. It is not uncommon for Bobby to send workers home early when which of the following variances indicates that he has over-scheduled the shift?

Accepted Answer

If a shift has been over-scheduled, it would show up as an unfavorable labor efficiency variance since there would be too many hours for the amount of activity.

Question 16

Information relating to direct labor for the Newstead Company follow:  The entry to record the direct labor cost is:

Accepted Answer

The answer of Information relating to direct labor for the...

Question 17

If a company follows a practice of isolating variances at the earliest point in time, what would be the appropriate time to isolate and recognize a direct material price variance?

Accepted Answer

The earliest point in time to isolate a direct material price variance is when the material is purchased, because at that time the difference between actual price and standard price is known.

Question 18

Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased. Information for raw materials for Product RBI for the month of October follows:  What is the materials purchase price variance?

Accepted Answer

Materials purchase price variance = (actual unit price of materials - standard unit price of materials) x actual quantity of materials purchased
Materials purchase price variance = ($1.65 - $1.75) x 4,000
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Question 19

Standard costing will produce the same income before extraordinary items as actual costing when standard cost variances are assigned to:

Accepted Answer

If standard cost variances are assigned to cost of goods sold and inventories, the result is the same as actual costing, resulting in the same income before extraordinary items.

Question 20

Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased. Information for raw materials for Product RBI for the month of October follows:  What is the entry to record material usage?

Accepted Answer

The answer of Thomas Company uses a standard cost system...

Quiz 8: Standard Cost Accounting Materials, Labor, and Factory Overhead

Andrews Corporation purchased 3,000 gallons of raw materials for $9,200. The standard price is $3.00 per gallon. If Andrews records the price variance at the earliest possible time, the entry to record the purchase of the material is:

In a standard cost system,when the materials price variance is recorded at the time the material is purchased, the materials purchase price variance is obtained by multiplying the:

The direct labor costs for Boundary Company follow: What was Boundary's standard direct labor rate?

Which of the following is not likely to have caused a materials price variance?

Taking appropriate action on variances includes all of the following except:

Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased. Information for raw materials for Product RBI for the month of October follows: What is the entry to record the purchase of materials?

PHI Company began its operations on January 1 and produces a single product that sells for $35.00 per unit. 5,000 units were produced and 4,000 units were sold during the year. Standard costs per unit follow: What is entry to record the finished goods?

Earl Company's direct labor costs for the month of January follow: What was Earl's direct labor efficiency variance?

What is the normal year-end treatment of immaterial variances recognized in a cost accounting system utilizing standards?

The following information pertains to Genie Company: What is the entry to record the direct labor cost and variances?

To effectively use variances to improve operations, management should take the following steps except:

How should an efficiency variance that is material in amount be treated at the end of an accounting period?

The following information pertains to Genie Company: What is the entry to record the direct materials cost and variances, assuming that the price variance is recorded when the materials are put into production?

Bobby's Burger Place monitors its variances on an hourly basis. It is not uncommon for Bobby to send workers home early when which of the following variances indicates that he has over-scheduled the shift?

Information relating to direct labor for the Newstead Company follow: The entry to record the direct labor cost is:

If a company follows a practice of isolating variances at the earliest point in time, what would be the appropriate time to isolate and recognize a direct material price variance?

Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased. Information for raw materials for Product RBI for the month of October follows: What is the materials purchase price variance?

Standard costing will produce the same income before extraordinary items as actual costing when standard cost variances are assigned to:

Thomas Company uses a standard cost system and recognizes the materials purchase price variance at the time materials are purchased. Information for raw materials for Product RBI for the month of October follows: What is the entry to record material usage?