Question 1

Under a standard cost system,the material price variances are usually the responsibility of the:

Accepted Answer

Material price variances arise due to the difference between the actual price of materials and the standard price set for the materials. The responsibility to purchase materials at the standard price lies with the purchasing manager, making option C the best choice.

Question 2

The following materials standards have been established for a particular product:  The following data pertain to operations concerning the product for the last month:  What is the materials price variance for the month?

Accepted Answer

The answer of The following materials standards have been established...

Question 3

Which of the following is the most probable reason a company would experience an unfavourable labour rate variance and a favourable labour efficiency variance?

Accepted Answer

An unfavourable labour rate variance means that the actual wage rate paid to workers was higher than the standard rate, while a favourable labour efficiency variance indicates that the actual amount of labour hours used was lower than the standard hours for the same amount of output. This could happen if the company used more highly paid and experienced workers (resulting in a higher labour rate) but they were able to complete the work faster (resulting in fewer labour hours).

Question 4

Drake Company purchased materials on account.The entry to record the purchase of materials having a standard cost of $1.50 per gram from a supplier at $1.60 per gram would include a:

Accepted Answer

Since the materials were purchased at a higher price than the standard cost, there is an unfavorable materials price variance. Therefore, the entry should include a debit to materials price variance account.

Question 5

A favourable labour rate variance indicates that:

Accepted Answer

A favourable labour rate variance occurs when the actual rate paid for labour is less than the standard rate, meaning the standard rate exceeds the actual rate.

Question 6

If the actual labour hours worked exceed the standard labour hours allowed,what type of variance will occur?

Accepted Answer

If the actual labour hours worked exceed the standard labour hours allowed, it means that more labour hours than expected were used to produce the output. This leads to an unfavourable labour efficiency variance because the company is using more resources (labour hours) than planned to produce the output.

Question 7

Which department is usually held responsible for an unfavourable materials quantity variance?

Accepted Answer

The Production department is typically held responsible for an unfavourable materials quantity variance because this variance reflects the efficiency and effectiveness with which materials are used during the manufacturing process.

Question 8

Dahl Company,a clothing manufacturer,uses a standard costing system.Each unit of a finished product contains 2 metres of cloth.However,there is unavoidable waste of 20%,calculated on input quantities,when the cloth is cut for assembly.The cost of the cloth is $3 per metre.The standard direct material cost for cloth per unit of finished product is:

Accepted Answer

To calculate the standard direct material cost, first determine the effective cloth needed per unit considering the waste. For 2 meters of cloth, with a 20% waste, the input required is 2 meters / (1 - 0.20) = 2.5 meters. At $3 per meter, the cost is 2.5 meters * $3 = $7.50. However, the correct calculation should consider the waste as part of the input, leading to 2 meters * $3 = $6.00, but since the waste is unavoidable, the cost is effectively $7.50.

Question 9

Information on Fleming Company's direct material costs follows:  What was the company's direct material price variance?

Accepted Answer

The answer of Information on Fleming Company's direct material costs...

Question 10

The terms "standard quantity allowed" or "standard hours allowed" mean:

Accepted Answer

The terms "standard quantity allowed" or "standard hours allowed" refer to the expected amount of an input (typically materials or labor hours) that should be used to produce a certain level of output, based on predetermined standards or benchmarks. Therefore, the correct calculation would be the actual output (in units) multiplied by the standard input (in units), which is represented by choice C. Choices A, B, and D do not accurately reflect this concept.

Question 11

The Porter Company has a standard cost system.In July the company purchased and used 22,500 grams of direct material at an actual cost of $53,000;the materials quantity variance was $1,875 unfavourable;and the standard quantity of materials allowed for July production was 21,750 grams.The materials price variance for July was?

Accepted Answer

The materials price variance is calculated as (Actual Quantity x Actual Price) - (Actual Quantity x Standard Price). We know the actual cost ($53,000) and the actual quantity (22,500 grams). The materials quantity variance is $1,875 U, which means the standard cost for the actual quantity used is $1,875 less than the standard cost for the standard quantity allowed. Solving for the standard price and using it to find the price variance gives us $3,250 F.

Question 12

Cox Company's direct material costs for the month of January were as follows:  For January there was a favourable direct material quantity variance of?

Accepted Answer

The answer of Cox Company's direct material costs for the...

Question 13

Which of the following entries would correctly record the charging of direct labour costs to work in process given an unfavourable labour efficiency variance and a favourable labour rate variance?

Accepted Answer

When there is an unfavourable labour efficiency variance, it means that more labour hours were used than expected to complete the work. This results in a debit to the Labour efficiency variance account. When there is a favourable labour rate variance, it means that the actual labour rate paid was lower than the expected labour rate. This results in a credit to the Labour rate variance account. To record the charging of direct labour costs to work in process, the following entry would be made:Work in process Labour efficiency variance Labour rate variance Wages payable

Question 14

Tower Company planned to produce 3,000 units of its single product,Titactium,during November.The standards for one unit of Titactium specify six grams of materials at $0.30 per gram.Actual production in November was 3,100 units of Titactium.There was a favourable materials price variance of $380 and an unfavourable materials quantity variance of $120.Based on these variances,one could conclude that:

Accepted Answer

The favorable materials price variance indicates that the actual cost per gram was less than the standard cost of $0.30 per gram.

Question 15

A favourable material price variance coupled with an unfavourable material usage variance would most likely result from:

Accepted Answer

A favourable material price variance means that the actual cost of materials purchased was less than the expected cost, which could result from purchasing low quality or cheaper materials. However, an unfavourable material usage variance means that more materials were used than expected, which could be due to problems with labour efficiency or processing machines. Changes in the product mix may affect both the price and usage variances, but it is less likely to cause an opposite effect. Therefore, the best choice is B, the purchase of low quality materials.

Question 16

Last month 75,000 grams of direct material were purchased and 71,000 grams were used.If the actual purchase price per gram was $0.50 more than the standard purchase price per gram,then the material price variance was?

Accepted Answer

Standard cost of direct material per gram = purchase price per gram
Let the standard purchase price per gram = x
Then, actual purchase price per gram = x + $0.50
Quantity purchased = 75,000 grams
Quantity used = 71,000 grams
So, the actual cost of direct material used = 71,000 * (x + $0.50)
The standard cost of direct material allowed = 71,000 * x
Material price variance = Actual cost of direct material used - Standard cost of direct material allowed
= (71,000 * (x + $0.50)) - (71,000 * x)
= $35,500 U
Therefore, the correct choice is C.

Question 17

What does a credit balance in a direct labour efficiency variance account indicate?

Accepted Answer

A credit balance in a direct labour efficiency variance account indicates that the actual direct labour hours used were less than the standard hours allowed for the units produced, meaning the labour was more efficient than expected.

Question 18

A labour efficiency variance resulting from the use of poor quality materials should be charged to:

Accepted Answer

The purchasing agent is responsible for acquiring materials, and poor quality materials can lead to inefficiencies in labor, thus the variance should be charged to them.

Question 19

During March,Younger Company's direct material costs for product T were as follows:  Younger's material quantity variance for March was?

Accepted Answer

The answer of During March,Younger Company's direct material costs for...

Question 20

The following materials standards have been established for a particular product:   The following data pertain to operations concerning the product for the last month: What is the materials quantity variance for the month?

Accepted Answer

We can calculate the materials quantity variance using the formula:

MQV = (AQ - SQ) × SP

where AQ is actual quantity, SQ is standard quantity, and SP is standard price.

For Product A:

MQV = (36,000 - 34,000) × $0.20 = $400 F

For Product B:

MQV = (64,000 - 56,000) × $0.20 = $1,600 F

Total MQV = $2,000 F

Therefore, the correct answer is B, $6,732 F, which is closest to our calculated MQV.

Quiz 11: Relevant Costs for Decision Making