Question 1

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 quantity variance was

Accepted Answer

The answer of Clark Company manufactures a product with a...

Question 2

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

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 3

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 4

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 cost of 1 unit of labor = 2 hours x $12/hour = $24
Actual cost of 1 unit of labor = $46,970/3,850 hours = $12.19
Labor rate variance = (Actual rate - Standard rate) x Actual hours
= ($12.19 - $12) x 3,850 = $693 F
Total labor variance = Actual cost - Standard cost = ($12.19 x 3,850) - ($24 x 2,000) = $46,915 - $48,000 = $1,085 F
Labor quantity variance = Total labor variance - Labor rate variance
= $1,085 F - $693 F = $392 F, which is equivalent to $1,800 F when stated as a proportion of the standard cost of labor for 2,000 units. Therefore, the answer is C.

Question 5

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 6

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 7

When is a variance considered to be 'material'?

Accepted Answer

A variance is considered material when it is large enough to impact the decision-making process, which typically means it is significant compared to the actual cost or budgeted amount. Being infrequent, unfavorable, or having the potential to be controlled more effectively may also impact the significance of a variance, but size is the primary determining factor.

Question 8

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 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 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 $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 10

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 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 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 total labor variance is

Accepted Answer

First, we need to calculate the standard labor cost for producing 2,000 units:
2 hours per unit x $12 per hour x 2,000 units = $48,000
Next, we can calculate the actual labor cost:
$46,970
Finally, we can calculate the labor variance by subtracting the actual cost from the standard cost:
$48,000 - $46,970 = $1,030 F (favorable variance) 
Therefore, the correct choice is C.

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, 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 13

Which of the following is true?

Accepted Answer

Different companies have different reporting requirements and systems, therefore the form, content, and frequency of variance reports will vary considerably among companies. It is up to each company to determine the most appropriate way to report variances based on their specific needs and circumstances.

Question 14

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 15

Shipp, Inc. manufactures a product requiring two pounds of direct material. During 2016, Shipp purchases 24,000 pounds of material for $99,200 when the standard price per pound is $4. During 2016, Shipp uses 22,000 pounds to make 12,000 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

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

Accepted Answer

Manufacturing overhead costs are applied to work in process on the basis of standard hours allowed, which is a predetermined amount of time expected for the completion of a specific task or job. This method helps to allocate overhead costs fairly and accurately to the products being produced. Using actual hours worked or actual overhead costs incurred may result in unfair and inaccurate allocation of overhead costs. The ratio of actual variable to fixed costs is not relevant in determining how to apply manufacturing overhead costs.

Question 17

Atkins, Inc. produces a product requiring 8 pounds of material at $1.50 per pound. Atkins produced 10,000 units of this product during 2016 resulting in a $30,000 unfavorable materials quantity variance. How many pounds of direct material did Atkins use during 2016?

Accepted Answer

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

Question 18

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 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 19

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) * 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 20

The total overhead variance is the difference between the

Accepted Answer

The total overhead variance is calculated by taking the difference between the actual overhead costs and the overhead costs applied based on standard hours allowed. This provides insight into whether a company is over or underestimating their overhead costs, which can impact profitability.

Quiz 24: Standard Costs and Balanced Scorecard