Question 1

Jacksonville uses a standard cost system for each of its refineries. For the Louisiana refinery, the monthly fixed overhead budget is $8,000 for a planned output of 5,000 barrels. For September, the actual fixed cost was $8,750 for 5,100 barrels.
If fixed overhead is applied on a per-barrel basis, the fixed overhead volume variance is:

Accepted Answer

Fixed overhead rate = $8,000 / 5,000 = $1.60/barrel
 11ee47ca_0846_afc8_9bb5_f3c0f15e3a48_TBCB1008_00

Question 2

Illinois Instruments sells handheld communication devices for $75 during August as a back-to-school special. The normal selling price is $125. The standard variable cost for each device is $95. Sales for August had been budgeted for 400 units nationwide; however, due to the slowdown in the economy, sales were only 300.
The sales price variance and sales volume variance are:

Accepted Answer

Sales price variance = (AP F1F1F1S1?F1F1F10 BP) × AQ
= ($75 F1F1F1S1?F1F1F10 $125) × 300
= $15,000 U
Sales volume variance = (AQ F1F1F1S1?F1F1F10 BQ) × BP
= (300 F1F1F1S1?F1F1F10 400) × $125
= $12,500 U

Question 3

Old Stone Company management is analyzing the company's standard cost variances for direct materials for the most recent period. The following information was available from company records.
 $$\begin{array} { l r } 
\text { Actual quantity of materials used } & 48,000 \text { units } \
\text { Budgeted quantity of materials used } & 44,000 \text { units } \
\text { Actual price paid for materials } & \$ 4 \text { per unit } \
\text { Budgeted price paid for materials } & \$ 6 \text { per unit }
\end{array}$$ There were no increases or decreases in inventories during the period. Calculate the materials quantity variance for the period.

Accepted Answer

The answer of Old Stone Company management is analyzing the...

Question 4

Next Generation Company management is analyzing the company's standard cost variances for direct materials for the most recent period. The following information was available from company records.
 $$\begin{array} { l l } 
\text { Actual quantity of materials used } & 12,000 \text { units } \
\text { Budgeted quantity of materials used } & 11,000 \text { units } \
\text { Actual price paid for materials } & \$ 16 \text { per unit } \
\text { Budgeted price paid for materials } & \$ 24 \text { per unit }
\end{array}$$ There were no increases or decreases in inventories during the period. Calculate the materials price variance for the period.

Accepted Answer

The answer of Next Generation Company management is analyzing the...

Question 5

CRS Engineering Company uses a standard cost system. The following information pertains to 2017:
 $$\begin{array} { l r } 
\text { Actual total direct labor costs } & \$ 320,000 \
\text { Total standard labor hours allowed } & 24,000 \mathrm{~ hrs} \
\text { Actual labor rate } & \$ 8 \text { per hour } \
\text { Standard labor rate } & \$ 9 \text { per hour }
\end{array}$$ Calculate CRS's labor efficiency variance.

Accepted Answer

The answer of CRS Engineering Company uses a standard cost...

Question 6

The management of Kaplan Enterprises is analyzing variable overhead variances for the fiscal period just ended. During the period, Kaplan's management used 5,000 hours of direct labor. It had budgeted to use 8,000 hours of direct labor. Hours of direct labor is the single overhead driver of variable overhead. Variable overhead consists of two items. Indirect labor was budgeted as $2.00 per hour of direct labor. Indirect materials was budgeted as $1.00 per hour of direct labor. Actual variable overhead was $30,000. 
Calculate Kaplan's variable overhead efficiency variance.

Accepted Answer

The answer of The management of Kaplan Enterprises is analyzing...

Question 7

The management of Kaplan Enterprises is analyzing variable overhead variances for the fiscal period just ended. During the period, Kaplan's management used 5,000 hours of direct labor. It had budgeted to use 8,000 hours of direct labor. Hours of direct labor is the single overhead driver of variable overhead. Variable overhead consists of two items. Indirect labor was budgeted as $2.00 per hour of direct labor. Indirect materials was budgeted as $1.00 per hour of direct labor. Actual variable overhead was $30,000. 
Calculate Kaplan's variable overhead spending variance.

Accepted Answer

The answer of The management of Kaplan Enterprises is analyzing...

Question 8

Cameron Company's budgeted sales were 4,000 units at $30 per unit. During 2017 it had actual sales of 3,800 units at $33 per unit. Budgeted variable costs were $15 per unit. 
Calculate Cameron's sales volume variance.

Accepted Answer

The answer of Cameron Company's budgeted sales were 4,000 units...

Question 9

The following budgeted and actual volume and cost data are for July of this year:
 $$\begin{array} { l r r } 
& \underline { \text { Budqet } } & \underline { \text { Actual } } \
\text { Volume } & 20,000 & 18,000 \
\text { Budgeted manufacturing costs: } & & \
\quad \text { Variable costs per unit: } & & \
\quad \text { Direct materials } & \$ 17.00 & \
\quad \text { Direct labor } & 7.00 & \
\quad \text { Overhead } & 2.00 & \
\text { Total fixed overhead costs } & \$ 220,000 & \
\text { Actual manufacturing costs: } & & \$ 310,000 \
\quad \text { Direct materials } & & 135,000 \
\quad \text { Direct labor } & & 36,000 \
\quad \text { Variable overhead } & & 210,000
\end{array}$$ a. Prepare a static budget analysis of production costs for July of this year.
b. Prepare a flexible budget analysis of production costs for July of this year.

Accepted Answer

The answer of The following budgeted and actual volume and...

Question 10

Xing Pahang Products had the following variances for the year 2017:
 $$\begin{array} { l l } 
\text { Labor rate variance } & \$ 16,000 \mathrm{U} \
\text { Total flexible budget labor variance } & \$ 44,000 \mathrm{U}
\end{array}$$ These variances were based on a standard of 12,000 total labor hours allowed (to produce 2,000 actual units) and a standard of $10 per hour of labor.
How many total hours did it actually take Xing Pahang employees to make 2,000 units?

Accepted Answer

The answer of Xing Pahang Products had the following variances...

Question 11

Al Fabricating Company uses a standard cost system. The following information pertains to 2017:
 $$\begin{array} { l r } 
\text { Actual labor hours used } & 5,100 \text { hours } \
\text { Total standard labor hours allowed } & 4,000 \text { hours } \
\text { Actual labor rate } & \$ 12 \text { per hour } \
\text { Total flexible budget labor variance } & \$ 22,000(\mathrm{U})
\end{array}$$ Calculate Al's standard labor rate for 2017.

Accepted Answer

The answer of Al Fabricating Company uses a standard cost...

Question 12

The management of Sawmill Industries is analyzing variable overhead variances for the fiscal period just ended. It notices that the total flexible budget variable overhead variance was $120,000 Favorable and that the variable overhead spending variance was $260,000 Favorable. However, Sawmill's accountants had failed to calculate the variable overhead efficiency variance. Management examined the budget and discovered that the flexible budget had allowed for $600,000 variable overhead. It also discovered that actual usage of direct materials (the single variable overhead cost driver) was 100,000 pounds. 
Calculate Sawmill's variable overhead efficiency variance.

Accepted Answer

The answer of The management of Sawmill Industries is analyzing...

Question 13

Instant Manufacturing Company has the following information for this year. Standard factory overhead based on normal monthly activity of 40,000 direct labor-hours for 40,000 units is:
 $$\begin{array} { l r } 
\text { Variable } & \$ 3 \text { per hour } \
\text { Fixed } & \underline{2 \text { per hour }} \
\text { Total } & \$ 5 \text { per hour }
\end{array}$$ Actual costs for 38,000 labor-hours were $196,000, of which $76,000 was fixed. Actual production was 38,400 units.
Calculate the following variances:
a. Variable overhead spending
b. Variable overhead efficiency
c. Fixed overhead budget

Accepted Answer

The answer of Instant Manufacturing Company has the following information...

Question 14

Jasmin Company's budgeted sales were 2,000 units at $50 per unit. During 2017 it had actual sales of 1,800 units at $55 per unit. Budgeted variable costs were $30 per unit. 
Calculate Jasmin's net sales volume variance.

Accepted Answer

The answer of Jasmin Company's budgeted sales were 2,000 units...

Question 15

Prince Company uses standard costs to control materials costs. The standards call for 3 pounds of materials for each finished unit produced. The standard cost per pound of materials is $2.00. During May, 5,000 finished units were manufactured, 10,000 pounds of materials were used. The price paid for materials was $2.25 per pound. There were no beginning or ending materials inventories. 
Required:
a. Determine the flexible budget materials cost for the manufacture of 5,000 finished units.
b. Determine the actual materials cost incurred for the manufacture of 5,000 finished units, and compute the total (flexible budget) materials variance.
c. How much of the difference between the answers to requirements (a) and (b) was related to the price paid for the purchase of materials?
d. How much of the difference between the answers to requirements (a) and (b) was related to the quantity of materials used?

Accepted Answer

The answer of Prince Company uses standard costs to control...

Question 16

The Red Company manufactures decorative scarecrows that have a standard cost of $1.75 per pound for direct materials used in the manufacturing process. During October, 15,000 pounds of materials were purchased for $2.00 per pound, and 12,000 pounds were actually used in making 5,000 scarecrows. There were no beginning inventories.
Required:
a. Determine the materials price variance assuming that materials costs are the responsibility of the materials purchasing manager.
b. Determine the materials price variance assuming that materials costs are the responsibility of the production manager.
c. Determine the material quantity variance if the standard materials for each scarecrow are 3 pounds.
d. Discuss the issues involved in determining the price variance at the point of purchase versus the point of consumption.

Accepted Answer

The answer of The Red Company manufactures decorative scarecrows that...

Question 17

Charlene Company has set labor costs at $24 per unit of output, based on 3 hours allowed to produce each finished unit. Last month, 1,500 direct labor hours were used, and 750 units of output were manufactured at a total cost of $36,000.
Required:
a. Determine the labor rate variance.
b. Determine the labor efficiency variance.
c. If the company used fewer direct labor hours than those reflected in the standards, which variance would be affected? Explain.

Accepted Answer

The answer of Charlene Company has set labor costs at...

Question 18

Liquid Company manufactures a single product that has a standard materials cost of $20 (2 units of raw materials at $10 per unit), standard direct labor cost of $18 (1 hour per unit), and standard variable overhead cost of $8 (based on direct labor-hours). Fixed overhead is budgeted at $34,000 per month. 
The following data pertain to operations for May of this year:
 $$\begin{array} { l r } 
\text { Raw materials purchased } & 3,600 \text { units costing } \$ 31,620 \
\text { Raw materials used in production of } 1,500 \text { units of finished product } & 3,200 \text { units of raw materials } \
\text { Direct labor used } & 1,500 \text { hours costing } \$ 30,000 \
\text { Variable overhead costs incurred } & \$ 11,920 \
\text { Fixed overhead costs incurred } & \$ 35,000
\end{array}$$ Required:
a. Compute the following variances (show calculations):
1. Materials quantity variance
2. Labor rate variance
3. Labor efficiency variance
4. Variable overhead spending variance
5. Variable overhead efficiency variance
6. Fixed overhead budget variance
b. Give one possible explanation for each of the six variances computed in requirement (a).

Accepted Answer

The answer of Liquid Company manufactures a single product that...

Question 19

Early in September of this year, Frank Company's long-time supplier, the Lloyd Company, was closed unexpectedly because of a labor strike. Frank was forced to seek a backup supply source. After considerable delay, raw materials were obtained, but they were of significantly lower quality than those Lloyd provided, and they were more expensive because of special handling required to rush the orders. The delay created an unusual increase in idle time during the month; and once production resumed, the poor quality raw materials produced reductions in labor and machine productivity and increases in materials waste. Noticing a decline in employee morale, the plant manager decided to provide a company-sponsored employee picnic at the end of the month. By the beginning of October, Lloyd Company employees were back to work and Frank's operations were back to normal.
Required:
Identify factors from the problem that would likely cause the Frank Company to experience unfavorable variances. Indicate which of the following variance(s) was most likely affected by the factors identified in your answer.
.Materials price variance
.Materials quantity variance
.Labor efficiency variance
.Variable overhead spending variance
.Variable overhead efficiency variance
.Fixed overhead budget variance

Accepted Answer

The answer of Early in September of this year, Frank...

Question 20

The following budgeted and actual contribution statement is for a component sold by Jana, Inc. for July of this year:
 $$\begin{array}{lrr} 
& \underline{\text { Actual }} & \underline{\text { Budget }} \
\text { Unit sales } & 18,000 & 20,000 \
\text { Unit selling price } & \$ 3.70 & \$ 4.00 \
\text { Sales revenue } & \$ 66,600 & \$ 80,000 \
\text { Cost of goods sold (variable) } & \underline{36,000} & \underline{40,000} \
\text { Contribution Margin } & \$ 30,600 & \$ 40,000 \
\text { Operating costs (all fixed) } & \underline{20,000} & \underline{24,000} \
\text { Contribution to corporate costs and profits } & \$ 10,600 & \$ 16,000
\end{array}$$ Required:
a. Compute the sales price variance, the net sales volume variance, and the operating cost variance for July.
b. How would you evaluate the performance of Jana, Inc.'s manager?

Accepted Answer

The answer of The following budgeted and actual contribution statement...

Quiz 10: Standard Costs and Performance Reports

Cameron Company's budgeted sales were 4,000 units at $30 per unit. During 2017 it had actual sales of 3,800 units at $33 per unit. Budgeted variable costs were $15 per unit. Calculate Cameron's sales volume variance.

Jasmin Company's budgeted sales were 2,000 units at $50 per unit. During 2017 it had actual sales of 1,800 units at $55 per unit. Budgeted variable costs were $30 per unit. Calculate Jasmin's net sales volume variance.