Question 1

Which one of the following describes the total overhead variance?

Accepted Answer

The total overhead variance is calculated as the difference between the actual overhead costs incurred and the overhead costs that were applied based on the standard cost system. This measures how well the company controlled its overhead costs in relation to what was expected or planned.

Question 2

Clark Company manufactures a product with a standard direct labor cost of two hours at $18.00 per hour. During July 2000 units were produced using 4200 hours at $18.30 per hour. The labor price variance was

Accepted Answer

The labor price variance is calculated as (Actual Hourly Rate - Standard Hourly Rate) x Actual Hours Worked. Here, it is ($18.30 - $18.00) x 4200 = $0.30 x 4200 = $1260 Unfavorable (U), because the actual rate is higher than the standard rate.

Question 3

Dillon has a standard of 2 hours of labor per unit at $12 per hour. In producing 2000 units Dillon used 3850 hours of labor at a total cost of $46970. Dillon's labor quantity variance is

Accepted Answer

Standard labor hours per unit = 2
Standard rate per hour = $12

Standard cost per unit = 2 x $12 = $24

Actual hours of labor = 3850
Actual cost of labor = $46970

Actual cost per unit = $46970 / 2000 = $23.485

Labor Quantity Variance = (Actual Hours - Standard Hours) x Standard Rate

= (3850 - 4000) x $12

= $1800 F

Question 4

The total overhead variance is the difference between the

Accepted Answer

The total overhead variance is calculated by subtracting the overhead costs applied based on standard hours allowed (sometimes called budgeted overhead) from the actual overhead costs incurred. This calculates the difference between what was budgeted and what was actually spent. Answer B is incorrect because it compares actual overhead costs with overhead costs applied based on actual hours, which doesn't make sense since the overhead rate is usually based on standard hours allowed, not actual hours worked. Answer C is incorrect because it compares two estimates of overhead costs, rather than actual costs. Answer D is incorrect because it compares two completely different types of costs (overhead vs. direct labor).

Question 5

Denmark Corporation's variance report for the purchasing department reports 1000 units of material A purchased and 2400 units of material B purchased. It also reports standard prices of $2 for Material A and $3 for Material B. Actual prices reported are $2.10 for Material A and $2.80 for Material B. Denmark should report a total price variance of

Accepted Answer

The total price variance is calculated by comparing the actual cost to the standard cost for the actual quantity of materials purchased. For Material A: (Actual Price - Standard Price) * Actual Quantity = ($2.10 - $2.00) * 1000 = $100 U. For Material B: (Actual Price - Standard Price) * Actual Quantity = ($2.80 - $3.00) * 2400 = $480 F. The total price variance is $480 F - $100 U = $380 F.

Question 6

Dillon has a standard of 1.5 pounds of materials per unit at $6 per pound. In producing 2000 units Dillon used 3100 pounds of materials at a total cost of $18135. Dillon's materials price variance is

Accepted Answer

The answer of Dillon has a standard of 1.5 pounds...

Question 7

Dillon has a standard of 2 hours of labor per unit at $12 per hour. In producing 2000 units Dillon used 3850 hours of labor at a total cost of $46970. Dillon's total labor variance is

Accepted Answer

First, calculate the standard labor cost per unit:

2 hours/unit x $12/hour = $24/unit

Then, calculate the standard labor cost for the production of 2000 units:

$24/unit x 2000 units = $48,000

Next, calculate the actual labor cost for the production of 2000 units:

$46970

Finally, calculate the labor variance:

Actual labor cost - Standard labor cost
= $46970 - $48000
= $1030 F

Question 8

Dillon has a standard of 1.5 pounds of materials per unit at $6 per pound. In producing 2000 units Dillon used 3100 pounds of materials at a total cost of $18135. Dillon's materials quantity variance is

Accepted Answer

The standard quantity of materials for producing 2000 units is calculated as follows:

1.5 pounds per unit × 2000 units = 3000 pounds

The actual quantity of materials used was 3100 pounds, indicating a unfavorable variance of 100 pounds.

The materials quantity variance can be calculated as follows:

Materials quantity variance = (Standard quantity - Actual quantity) × Standard price 
= (3000 pounds - 3100 pounds) × $6 per pound = $600 U.

Therefore, the correct answer is (C) $600 U.

Question 9

The predetermined overhead rate for Zane Company is $5 comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours to arrive at the predetermined overhead rate of $5. Actual overhead for June was $9500 variable and $6050 fixed and standard hours allowed for the product produced in June was 3000 hours. The total overhead variance is

Accepted Answer

Actual hours worked = 3000
Actual variable overhead = $9500
Actual fixed overhead = $6050
Total actual overhead = $15550

Flexible overhead budget = Actual hours worked x predetermined overhead rate
Flexible overhead budget = 3000 x $5
Flexible overhead budget = $15000

Variance = Total actual overhead - Flexible overhead budget
Variance = $15550 - $15000
Variance = $550 U

Therefore, the total overhead variance is $550 U. Option C is correct.

Question 10

Atkins Inc. produces a product requiring 8 pounds of material at $1.50 per pound. Atkins produced 10000 units of this product during 2016 resulting in a $30000 unfavorable materials quantity variance. How many pounds of direct material did Atkins use during 2016?

Accepted Answer

The unfavorable materials quantity variance is calculated as the difference between the actual quantity of materials used and the standard quantity of materials allowed for the actual output. In this case, the unfavorable variance is $30,000, which means that Atkins used more materials than allowed. The standard quantity of materials allowed is 8 pounds per unit, and Atkins produced 10,000 units, so the standard quantity of materials allowed is 80,000 pounds. The actual quantity of materials used is the standard quantity plus the unfavorable variance, which is 80,000 + 30,000 = 110,000 pounds.

Question 11

Dillon has a standard of 1.5 pounds of materials per unit at $6 per pound. In producing 2000 units Dillon used 3100 pounds of materials at a total cost of $18135. Dillon's total variance is

Accepted Answer

The answer of Dillon has a standard of 1.5 pounds...

Question 12

The standard direct labor cost for producing one unit of product is 5 direct labor hours at a standard rate of pay of $20. Last month 15000 units were produced and 73500 direct labor hours were actually worked at a total cost of $1350000. The direct labor quantity variance was

Accepted Answer

The direct labor quantity variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. Standard hours for 15000 units = 15000 units * 5 hours/unit = 75000 hours. The variance is (73500 - 75000) x $20 = -1500 x $20 = -$30000, which is favorable because actual hours worked were less than the standard hours allowed.

Question 13

The predetermined overhead rate for Zane Company is $5 comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours to arrive at the predetermined overhead rate of $5. Actual overhead for June was $8900 variable and $5400 fixed and 1500 units were produced. The direct labor standard is 2 hours per unit produced. The total overhead variance is

Accepted Answer

The total overhead variance is calculated by comparing the actual overhead costs to the applied overhead based on the standard cost system. The applied overhead for 1500 units produced, at 2 hours per unit, is 3000 hours. At a predetermined rate of $5 per hour, the applied overhead is $15,000 ($5 * 3000 hours). The actual overhead is the sum of actual variable and fixed overheads, which is $8900 + $5400 = $14,300. The difference between the applied overhead ($15,000) and the actual overhead ($14,300) is $700, indicating a favorable variance since the actual costs were less than what was applied based on the standards.

Question 14

Dillon has a standard of 2 hours of labor per unit at $12 per hour. In producing 2000 units Dillon used 3850 hours of labor at a total cost of $46970. Dillon's labor price variance is

Accepted Answer

The labor price variance is calculated as (Actual Hours x Actual Rate) - (Actual Hours x Standard Rate). Here, the Actual Hours are 3850, and the Actual Rate can be found by dividing the total cost by the actual hours ($46970 / 3850 = $12.20). The Standard Rate is $12. So, the calculation is (3850 x $12.20) - (3850 x $12) = $59370 - $46200 = $770 Unfavorable.

Question 15

Shipp Inc. manufactures a product requiring two pounds of direct material. During 2016 Shipp purchases 24000 pounds of material for $99200 when the standard price per pound is $4. During 2016 Shipp uses 22000 pounds to make 12000 products. The standard direct material cost per unit of finished product is

Accepted Answer

Standard direct material cost per unit of finished product:

= Standard direct material cost for 2 pounds of material / Number of finished products produced with 2 pounds of material
= ($4 per pound x 2 pounds) / 1
= $8

Therefore, the standard direct material cost per unit of finished product is $8. Choice C is the best answer.

Question 16

Clark Company manufactures a product with a standard direct labor cost of two hours at $18.00 per hour. During July 2000 units were produced using 4200 hours at $18.30 per hour. The labor quantity variance was

Accepted Answer

The labor quantity variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. Here, (4200 - 4000) x $18 = $3600 Unfavorable.

Question 17

All Urban Company produces a product requiring 4 pounds of material costing $3.50 per pound. During December All Urban purchased 4200 pounds of material for $14112 and used the material to produce 500 products. What was the materials price variance for December?

Accepted Answer

The materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The standard price is $3.50 per pound, and the actual price can be found by dividing the total cost of materials purchased ($14112) by the quantity purchased (4200 pounds), which equals $3.36 per pound. The variance is then ($3.36 - $3.50) x 4200 = -$0.14 x 4200 = -$588, indicating a $588 favorable variance since the actual price per pound is less than the standard price.

Question 18

A company developed the following per unit materials standards for its product: 3 pounds of direct materials at $5 per pound. If 12000 units of product were produced last month and 37500 pounds of direct materials were used the direct materials quantity variance was

Accepted Answer

Standard quantity of direct materials for 12,000 units = 3 pounds per unit x 12,000 units = 36,000 pounds
Direct materials quantity variance = Actual quantity of direct materials used - Standard quantity of direct materials allowed x Standard price per pound

= 37,500 pounds - 36,000 pounds x $5 per pound

= $7,500 unfavorable variance.

Question 19

Which of the following is true?

Accepted Answer

The statement in option A is correct - the form, content, and frequency of variance reports can vary considerably among companies as it depends on the specific needs and requirements of each organization. Therefore, option A is the best answer.

Question 20

Manufacturing overhead costs are applied to work in process on the basis of

Accepted Answer

Manufacturing overhead costs are applied to work in process based on the standard hours allowed. This method helps to allocate overhead costs in a more accurate and consistent manner, rather than relying on actual hours worked which can be affected by factors such as worker efficiency and production delays.

Quiz 25: Standard Costs and Balanced Scorecard