Question 1

Using more highly skilled direct laborers might affect which of the following variances?
A)direct materials usage variance
B)direct labor efficiency variance
C)variable manufacturing overhead efficiency variance
D)all of these

Accepted Answer

Using more highly skilled direct laborers can affect all of these variances. Skilled laborers can work more efficiently, potentially reducing the direct materials usage variance by using materials more efficiently. They can also directly impact the direct labor efficiency variance by completing tasks in less time. Additionally, their efficiency can influence the variable manufacturing overhead efficiency variance, as overhead costs often vary with the amount of labor hours used.

Question 2

Which of the following factors would cause an unfavorable labor rate variance?
A)using higher quality materials
B)using low-efficiency workers
C)using more unskilled workers
D)using more highly skilled workers

Accepted Answer

The answer of Which of the following factors would cause...

Question 3

The standard plus the allowable deviation is called the:
A)standard quantity
B)standard price
C)upper control limit
D)total budget variance

Accepted Answer

The upper control limit is a term used in statistical quality control and refers to the highest value a process variable can reach before it is considered to be out of control. It is calculated based on the standard (expected value) plus an allowable deviation (the range of acceptable variation), making it the correct answer. The other options do not specifically refer to a value that includes both a standard and an allowable deviation in the context of process control or quality management.

Question 4

If variable manufacturing overhead is applied based on direct labor hours and there is an unfavorable direct labor efficiency variance
A)the direct materials usage variance will be unfavorable.
B)the direct labor rate variance will be favorable.
C)the variable manufacturing overhead efficiency variance will be unfavorable.
D)the variable manufacturing overhead spending variance will be unfavorable.

Accepted Answer

If there is an unfavorable direct labor efficiency variance, it means that more labor hours were used than anticipated to produce the goods. Since manufacturing overhead is applied based on direct labor hours, an increase in labor hours will result in an increase in the amount of overhead applied. This will lead to an unfavorable variable manufacturing overhead efficiency variance. The direct materials usage variance and the direct labor rate variance are not affected by the use of variable manufacturing overhead. The variable manufacturing overhead spending variance would be affected by changes in the actual cost of overhead incurred.

Question 5

A variable overhead efficiency variance could be caused by
A)using a poor quality material that needs more labor time to meet production standards.
B)not taking a quantity discount.
C)paying more than the standard rate for labor.
D)price increases on the materials.

Accepted Answer

Variable overhead efficiency variance measures the difference between the actual amount of overhead incurred and the amount of overhead that should have been incurred based on the actual level of output achieved. This variance could be caused by using a poor quality material that needs more labor time to meet production standards, as it would result in a higher amount of overhead being incurred than expected. The other choices are not directly related to the variable overhead efficiency variance.

Question 6

Which is NOT an acceptable method of disposing of variances?
A)closing them to cost of goods sold
B)closing them to raw materials, work-in-process, and finished goods
C)closing them to work-in-process, finished goods, and cost of goods sold
D)all are acceptable methods

Accepted Answer

Closing variances to raw materials is not an acceptable method as raw materials are not impacted by variances. The acceptable methods are closing them to cost of goods sold, work-in-process, or finished goods. Option A and C both include acceptable methods. Option D is technically correct, but option B is the best choice as it specifically identifies the incorrect method.

Question 7

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}
\text { Direct materials: } & 10 \text { pounds } \times \$ 3 \text { per pound } \
\text { Direct labor: } & 2.5 \text { hours } \times \$ 8 \text { per hour } \
\text { Variable manufacturing overhead: } & 2.5 \text { hours } \times \$ 2 \text { per hour }
\end{array}$

$\text { The following activity occurred during the month of June: }$

$\begin{array}{ll}
\text { Materials purchased: } & 125,000 \text { pounds at } \$ 2.60 \text { per pound } \
\text { Materials used: } & 110,000 \text { pounds } \
\text { Units produced: } & 10,000 \text { units } \
\text { Direct labor: } & 24,000 \text { hours at } \$ 7.50 \text { per hour } \
\text { Actual variable manufacturing overhead: } & \$ 51,000
\end{array}$ The company records materials price variances at the time of purchase.
The direct labor rate variance is
A)$12,000 favorable.
B)$8,000 favorable.
C)$12,000 unfavorable.
D)$8,000 unfavorable.

Accepted Answer

The direct labor rate variance is calculated as (Actual Rate - Standard Rate) x Actual Hours. Here, (7.50 - 8.00) x 24,000 = -0.50 x 24,000 = $12,000 favorable.

Question 8

As a general rule, an investigation of a variance should be undertaken only if the
A)variance is isolated
B)anticipated benefits are greater than the expected costs.
C)variance is negative.
D)variance is positive.

Accepted Answer

It is not necessary to investigate all variances as some may not have significant impact on the overall performance of the organization. Therefore, an investigation of a variance should only be undertaken if the anticipated benefits are greater than the expected costs. This ensures that time and resources are utilized effectively and efficiently in dealing with important variances that could improve the organization's performance.

Question 9

Colina Production Company uses a standard costing system. The following information pertains to the current year. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array} { l  }
 \text { Actual production}&5,500 units\
 \text {Actual factory overhead costs $ (\$ 16,500 $ is fixed) }&\$ 40,125 \
 \text {Actual direct labor costs ( 11,250 hours) }&\$ 131,625\
 \text {Standard direct labor for 5,500 units: }&\
 \text { Standard hours allowed}&11,000 hours\
 \text {Labor rate }&\$ 12.00\
\end{array}$

The factory overhead rate is based on an activity level of 10,000 direct labor hours.
 Standard cost data for 5,000 units is as follows:

$\begin{array} { l  }
 \text { Variable factory overhead}&\$22,500\
 \text {Fixed factory overhead }&13,500\
 \text {Total factory overhead }&\$36,000\
\end{array}$
 What is the variable overhead efficiency variance for Colina Production Company?
A)$562.50 (F)
B)$3,000.00 (U)
C)$1,687.50 (F)
D)$562.50 (U)

Accepted Answer

The variable overhead efficiency variance is calculated as the difference between the standard variable overhead cost for the actual production and the actual variable overhead cost. First, calculate the standard variable overhead rate per direct labor hour: $\$22,500 / 10,000 hours = \$2.25 per hour$. Then, calculate the variance: $(11,000 standard hours - 11,250 actual hours) \times \$2.25 = -250 hours \times \$2.25 = -\$562.50$, which is unfavorable (U) because actual hours exceeded standard hours.

Question 10

Which of the following factors would cause an unfavorable material quantity variance?
A)using poorly maintained machinery
B)using higher quality materials
C)using more highly skilled workers
D)receiving discounts for purchasing larger than normal quantities

Accepted Answer

Using poorly maintained machinery can cause issues such as overuse of materials, leading to a higher quantity being used than is necessary, resulting in an unfavorable material quantity variance. Choices B, C, and D would not necessarily result in an unfavorable material quantity variance.

Question 11

Colina Production Company uses a standard costing system. The following information pertains to the current year. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}
\text { Actual production } & 5,500 \text { units } \
\text { Actual factory overhead costs ( } \$ 16,500 \text { is fixed) } & \$ 40,125 \
\text { Actual direct labor costs }(11,250 \text { hours) } & \$ 131,625 \
\text { Standard direct labor for } 5,500 \text { units: } & \
\text { Standard hours allowed } & 11,000 \text { hours } \
\text { Labor rate } & \$ 12.00
\end{array}$
The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000 units is as follows:
$\begin{array}{lr}
\text { Variable factory overhead } & \$ 22,500 \
\text { Fixed factory overhead } & 13,500 \
\text { Total factory overhead } & \mathbf{\underline { 36 , 0 0 0 }}
\end{array}$ What is the fixed overhead volume variance for Colina Production Company?
A)$3,600 (F)
B)$1,350 (F)
C)$4,125 (U)
D)$1,350 (U)

Accepted Answer

The answer of Colina Production Company uses a standard costing...

Question 12

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}
\text { Direct materials: } & 10 \text { pounds } \times \$ 3 \text { per pound } \
\text { Direct labor: } & 2.5 \text { hours } \times \$ 8 \text { per hour } \
\text { Variable manufacturing overhead: } & 2.5 \text { hours } \times \$ 2 \text { per hour }
\end{array}$

$\text { The following activity occurred during the month of June: }$

$\begin{array}{ll}
\text { Materials purchased: } & 125,000 \text { pounds at } \$ 2.60 \text { per pound } \
\text { Materials used: } & 110,000 \text { pounds } \
\text { Units produced: } & 10,000 \text { units } \
\text { Direct labor: } & 24,000 \text { hours at } \$ 7.50 \text { per hour } \
\text { Actual variable manufacturing overhead: } & \$ 51,000
\end{array}$ The company records materials price variances at the time of purchase.
The direct labor efficiency variance is
A)$8,000 unfavorable.
B)$8,000 favorable.
C)$20,000 unfavorable.
D)$20,000 favorable.

Accepted Answer

The direct labor efficiency variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. The standard hours for the actual production (10,000 units) are 2.5 hours/unit * 10,000 units = 25,000 hours. The actual hours worked were 24,000 hours. Therefore, the variance is (24,000 - 25,000) x $8 = -1,000 x $8 = $8,000 favorable, because less hours were worked than expected.

Question 13

Harrangue Company's standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured.
What is the variable overhead efficiency variance for March for Harrangue?
A)$2,200 (U)
B)$2,200 (F)
C)$1,200 (U)
D)$600 (U)

Accepted Answer

The answer of Harrangue Company's standard variable overhead rate is...

Question 14

A materials price variance would NOT be caused by
A)ordering the wrong quality of materials.
B)ordering from the wrong supplier.
C)not taking a quantity discount.
D)requiring laborers to work overtime.

Accepted Answer

A materials price variance is caused by the difference between the actual price paid for materials and the standard price expected. However, requiring laborers to work overtime would affect labor costs, not materials costs.

Question 15

Harrangue Company's standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured.
What is the total variable overhead variance for March for Harrangue?
A)$2,200 (U)
B)$600 (U)
C)$1,000 (U)
D)$1,200 (U)

Accepted Answer

The total variable overhead variance is calculated as the difference between the actual variable overhead costs and the standard variable overhead costs for the actual production. The standard cost for the actual production is calculated as 2,900 units * 2 hours/unit * $6/hour = $34,800. The actual variable overhead costs are $37,000. Therefore, the variance is $37,000 - $34,800 = $2,200 unfavorable (U).

Question 16

Which of the following is true about the variable overhead spending variance?
A)The variable overhead spending variance measures the aggregate effect of differences in the actual variable overhead rate and the standard variable overhead rate.
B)The variable overhead spending variance measures the change in variable overhead consumption that occurs because of efficient (or inefficient) use of direct labor.
C)The variable overhead spending variance is calculated by deducting actual direct labor hours used from standard direct labor hours that should have been used.
D)The variable overhead spending variance is calculated by deducting actual variable overhead from standard variable overhead.

Accepted Answer

The variable overhead spending variance is indeed calculated based on the difference between the actual variable overhead rate incurred and the standard variable overhead rate that was expected or budgeted. This variance helps in understanding how well the company managed its variable overhead costs in relation to the standard rates it had set.

Question 17

Which of the following people is most likely responsible for an unfavorable variable overhead efficiency variance?
A)production supervisor
B)accountant
C)personnel director
D)supplier

Accepted Answer

The production supervisor is responsible for managing and controlling the production process, including the variable overhead costs. If the actual variable overhead costs exceed the budgeted amount due to inefficient use of resources or poor planning, the production supervisor would be held responsible for the unfavorable variance. The other choices (accountant, personnel director, supplier) are not directly involved in the production process and therefore would not have a significant impact on the variable overhead efficiency variance.

Question 18

A five-percent wage increase for all factory employees would affect which of the following variances?
A)direct materials price variance
B)direct labor rate variance
C)direct labor efficiency variance
D)variable manufacturing overhead efficiency variance

Accepted Answer

A five-percent wage increase for all factory employees would only affect the direct labor rate variance, as this variance is specifically concerned with changes in the rate paid to employees for their labor. The other variances listed are not impacted by changes in employee wages.

Question 19

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}
\text { Direct materials: } & 10 \text { pounds } \times \$ 3 \text { per pound } \
\text { Direct labor: } & 2.5 \text { hours } \times \$ 8 \text { per hour } \
\text { Variable manufacturing overhead: } & 2.5 \text { hours } \times \$ 2 \text { per hour }
\end{array}$
$\text { The following activity occurred during the month of June: }$
$\begin{array}{ll}
\text { Materials purchased: } & 125,000 \text { pounds at } \$ 2.60 \text { per pound } \
\text { Materials used: } & 110,000 \text { pounds } \
\text { Units produced: } & 10,000 \text { units } \
\text { Direct labor: } & 24,000 \text { hours at } \$ 7.50 \text { per hour } \
\text { Actual variable manufacturing overhead: } & \$ 51,000
\end{array}$ The company records materials price variances at the time of purchase.
The variable manufacturing overhead efficiency variance is
A)$1,000 favorable.
B)$2,000 favorable.
C)$1,000 unfavorable.
D)$3,000 unfavorable.

Accepted Answer

The standard hours for actual production are 10,000 units x 2.5 hours = 25,000 hours. The actual hours worked were 24,000 hours. The efficiency variance is (25,000 - 24,000) x $2 = $2,000 favorable.

Question 20

The standard overhead cost assigned to each unit of product manufactured is called the
A)total manufacturing cost.
B)predetermined overhead cost.
C)applied overhead cost.
D)estimated overhead cost.

Accepted Answer

The standard overhead cost assigned to each unit of product manufactured is called the applied overhead cost. Predetermined overhead cost is an estimated amount of overhead that is determined in advance of the actual overhead costs being incurred. Estimated overhead cost is a projection of what the overhead costs will be for a given period, based on historical data and expectations for the future. Total manufacturing cost includes both direct and indirect materials, direct and indirect labor, and overhead costs.

Quiz 9: Standard Costing: a Functional-Based Control Approach

Using more highly skilled direct laborers might affect which of the following variances?

Which of the following factors would cause an unfavorable labor rate variance?

The standard plus the allowable deviation is called the:

If variable manufacturing overhead is applied based on direct labor hours and there is an unfavorable direct labor efficiency variance

A variable overhead efficiency variance could be caused by

Which is NOT an acceptable method of disposing of variances?

As a general rule, an investigation of a variance should be undertaken only if the

Which of the following factors would cause an unfavorable material quantity variance?

A materials price variance would NOT be caused by

Which of the following is true about the variable overhead spending variance?

Which of the following people is most likely responsible for an unfavorable variable overhead efficiency variance?

A five-percent wage increase for all factory employees would affect which of the following variances?

The standard overhead cost assigned to each unit of product manufactured is called the