Question 1

Dillon has a standard of 1.5 pounds of materials per unit, at $6 per pound. In producing 2,000 units, Dillon used 3,100 pounds of materials at a total cost of $18,135. Dillon's materials quantity variance is

Accepted Answer

First, we need to calculate the standard quantity of materials that should have been used in producing 2,000 units:

Standard quantity = Standard material per unit × Number of units produced
Standard quantity = 1.5 pounds/unit × 2,000 units
Standard quantity = 3,000 pounds

Next, we can calculate the materials quantity variance:

Materials quantity variance = Actual quantity used - Standard quantity × Standard cost per unit

Actual quantity used = 3,100 pounds
Standard cost per unit = $6/pound

Materials quantity variance = 3,100 pounds - 3,000 pounds × $6/pound
Materials quantity variance = $600 U

Therefore, the answer is C, $600 U.

Question 2

Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of labor at a total cost of $46,970. Dillon's labor price variance is

Accepted Answer

The labor price variance is calculated as (Actual Hourly Rate - Standard Hourly Rate) x Actual Hours Worked. The actual hourly rate is $46,970 / 3,850 hours = $12.20. The standard rate is $12. Therefore, the variance is ($12.20 - $12) x 3,850 = $0.20 x 3,850 = $770 Unfavorable, because the actual rate is higher than the standard rate.

Question 3

When is a variance considered to be 'material'?

Accepted Answer

The answer of When is a variance considered to be...

Question 4

Denmark Corporation's variance report for the purchasing department reports 1,000 units of material A purchased and 2,400 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) * 1,000 = $100 U. For Material B: (Actual Price - Standard Price) * Actual Quantity = ($2.80 - $3.00) * 2,400 = $480 F. The total price variance is $480 F - $100 U = $380 F.

Question 5

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 6

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

Accepted Answer

Manufacturing overhead costs are generally applied on the basis of standard hours allowed. This is because manufacturing overhead costs are indirect costs that cannot be directly traced to specific products. Therefore, a predetermined rate is used based on the expected amount of activity (standard hours) for each product. The actual hours worked and actual overhead costs incurred may differ from the standard hours and predetermined rate, which can result in underapplied or overapplied overhead costs. The ratio of actual variable to fixed costs is not relevant for applying manufacturing overhead costs.

Question 7

The total overhead variance is the difference between the

Accepted Answer

The total overhead variance is calculated by taking the actual overhead costs and subtracting the overhead costs applied based on standard hours allowed. This gives the difference between the expected overhead costs based on the standard hours allowed and the actual overhead costs incurred.

Question 8

Dillon has a standard of 1.5 pounds of materials per unit, at $6 per pound. In producing 2,000 units, Dillon used 3,100 pounds of materials at a total cost of $18,135. Dillon's total variance is

Accepted Answer

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

Question 9

In using variance reports, management looks for

Accepted Answer

Management looks for significant variances in the actual performance compared to the budgeted or expected performance. This helps them identify areas where they can improve efficiency and profitability. The other options may not be relevant in the context of using variance reports.

Question 10

Atkins, Inc. produces a product requiring 8 pounds of material at $1.50 per pound. Atkins produced 10,000 units of this product during 2019 resulting in a $30,000 unfavorable materials quantity variance. How many pounds of direct material did Atkins use during 2019?

Accepted Answer

The answer of Atkins, Inc. produces a product requiring 8...

Question 11

Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of labor at a total cost of $46,970. 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 12

Which of the following is true?

Accepted Answer

The statement in option A is true, as the form, content, and frequency of variance reports differ from one company to another based on their specific needs and requirements.

Question 13

Variance reports are

Accepted Answer

Variance reports are internal reports for management, used to identify and analyze differences between actual results and budgeted or expected results. They are not typically included in external financial reports or required by the SEC. Therefore, choice A and B are incorrect. Choice D is incorrect because variance reports are not external financial reports or SEC financial reports.

Question 14

A company developed the following per unit materials standards for its product: 3 pounds of direct materials at $5 per pound. If 12,000 units of product were produced last month and 37,500 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 15

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, 15,000 units were produced and 73,500 direct labor hours were actually worked at a total cost of $1,350,000. 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 16

Dillon has a standard of 1.5 pounds of materials per unit, at $6 per pound. In producing 2,000 units, Dillon used 3,100 pounds of materials at a total cost of $18,135. Dillon's materials price variance is

Accepted Answer

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

Question 17

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 $150,000 was divided by normal capacity of 30,000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $8,900 variable and $5,400 fixed, and 1,500 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 costs. The applied overhead is based on the predetermined overhead rate multiplied by the actual activity. In this case, the predetermined overhead rate is $5 per direct labor hour, and the standard is 2 hours per unit produced. For 1,500 units, the total direct labor hours are 1,500 units * 2 hours/unit = 3,000 hours. The applied overhead is 3,000 hours * $5/hour = $15,000. The actual overhead is $8,900 (variable) + $5,400 (fixed) = $14,300. The variance is $15,000 (applied) - $14,300 (actual) = $700 favorable, indicating that the actual overhead costs were less than what was applied based on the standard rates and activity.

Question 18

Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of labor at a total cost of $46,970. 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 19

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 $150,000 was divided by normal capacity of 30,000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $9,500 variable and $6,050 fixed, and standard hours allowed for the product produced in June was 3,000 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 20

Clark Company manufactures a product with a standard direct labor cost of two hours at $18.00 per hour. During July, 2,000 units were produced using 4,200 hours at $18.30 per hour. The labor price variance was

Accepted Answer

The labor price variance is calculated as (Actual Rate - Standard Rate) x Actual Hours = ($18.30 - $18.00) x 4,200 = $0.30 x 4,200 = $1,260 Unfavorable, because the actual rate is higher than the standard rate.

Quiz 11: Standard Costs and Balanced Scorecard