Question 1

During January, 7,000 direct labor hours were worked at a standard cost of $20 per hour. If the direct labor rate variance for January was $17,500 favorable, the actual cost per direct labor hour must be
A) $17.50.
B) $20.00.
C) $22.50.
D) $25.00.

Accepted Answer

The direct labor rate variance is calculated as (Standard Rate - Actual Rate) x Actual Hours. Given a favorable variance of $17,500 and 7,000 hours worked, we can set up the equation: ($20 - Actual Rate) x 7,000 = $17,500. Solving for the Actual Rate gives us $17.50 per hour.

Question 2

Extreme Builders constructs houses. The standard labor rate is $25 per hour and the standard number of hours is 15,000 hours per home. During the year, it constructed 12 homes using 18,000 labor hours per home and a rate of $28 per hour.
-Refer to Figure 10-6. Calculate the Extreme Builders' labor rate variance.
A) $540,000 U
B) $540,000 F
C) $648,000 U
D) $648,000 F

Accepted Answer

Labor rate variance = (Actual labor rate - Standard labor rate) x Actual labor hours

For each home, the standard cost would be:

$25 x 15,000 = $375,000

The actual cost per home would be:

$28 x 18,000 = $504,000

Therefore, the labor rate variance per home would be:

($28 - $25) x 18,000 = $54,000

For 12 homes, the total labor rate variance would be:

$54,000 x 12 = $648,000 U (unfavorable)

Therefore, the correct answer is C.

Question 3

Bender Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows:  What is the labor efficiency variance for Bender Corporation?
A) $480 U
B) $552 F
C) $552 U
D) $480 F

Accepted Answer

The answer of Bender Corporation produced 100 units of Product...

Question 4

Which of the following is true regarding the disposition of materials and labor variances?
A) The variances for materials and labor are closed directly to Cost of Goods Sold regardless of materiality.
B) If the materials price variance is material, it is prorated among Materials Inventory, Materials Usage Variance, Work in Process, and Finished Goods.
C) The materials usage variance and the labor variances, if material, are prorated among Work in Process, Finished Goods, and Cost of Goods Sold.
D) The materials usage variance and the labor variances are always prorated among Work in Process, Finished Goods, and Cost of Goods Sold.
E) The materials usage variance and the labor variances are always closed to Cost of Goods Sold.

Accepted Answer

The materials usage variance and the labor variances, if material, are prorated among Work in Process, Finished Goods, and Cost of Goods Sold. This is because these variances affect the cost of production, and thus the cost of the goods sold, and should be appropriately allocated among the inventory accounts and cost of goods sold. The materials price variance, on the other hand, is closed directly to Cost of Goods Sold if it is material, as it does not affect the quantity of materials used in production.

Question 5

If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the number of hours allowed, the labor rate variance and labor efficiency variance will be Labor Rate Labor Efficiency
Variance Variance
A) Favorable Favorable
B) Favorable Unfavorable
C) Unfavorable Favorable
D) Unfavorable Unfavorable

Accepted Answer

When the actual labor rate is higher than the standard, it results in an unfavorable labor rate variance because more is being paid per hour than planned. Similarly, when more hours are worked than allowed, it leads to an unfavorable labor efficiency variance, as it indicates lower efficiency or productivity than expected.

Question 6

High Fliers Company produces model airplanes. During the month of November, it produced 2,000 planes. The actual labor hours were 7 hours per plane. Its standard labor hours are 10 hours per plane. The standard labor rate is $11 per hour. At the end of November, High Fliers found that it had a favorable labor rate variance of $10,500.
-Refer to Figure 10-4. What was High Fliers' actual cost per labor hour?
A) $12.75
B) $11.50
C) $10.50
D) $10.25

Accepted Answer

The actual cost per labor hour can be calculated using the labor rate variance formula: Labor Rate Variance = (Actual Hourly Rate - Standard Hourly Rate) x Actual Hours Worked. Given a favorable labor rate variance of $10,500, we know the actual cost was lower than the standard. The actual hours worked are 2,000 planes x 7 hours = 14,000 hours. Rearranging the formula to solve for the Actual Hourly Rate gives us: Actual Hourly Rate = (Labor Rate Variance / Actual Hours Worked) + Standard Hourly Rate. Plugging in the numbers: ($10,500 / 14,000 hours) + $11 = $0.75 + $11 = $10.75. However, since $10.75 is not an option and considering the need for correction, the closest correct option provided is $10.25, indicating a possible miscalculation in the explanation process. The correct calculation should directly involve the given variance and the standard rate to find the actual rate, which was not accurately represented in the initial explanation.

Question 7

Claire Company uses a standard costing system. The following information pertains to direct labor costs for February:  What is the total labor budget variance for Claire Company?
A) $18,000 F
B) $12,000 F
C) $18,000 U
D) $12,000 U

Accepted Answer

The answer of Claire Company uses a standard costing system....

Question 8

Extreme Builders constructs houses. The standard labor rate is $25 per hour and the standard number of hours is 15,000 hours per home. During the year, it constructed 12 homes using 18,000 labor hours per home and a rate of $28 per hour.
-Refer to Figure 10-6. Calculate the labor efficiency variance.
A) $1,008,000 F
B) $900,000 U
C) $1,008,000 U
D) $900,000 F

Accepted Answer

The labor efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate. Here, (18,000 hours/home - 15,000 hours/home) x 12 homes x $25/hour = $900,000 Unfavorable.

Question 9

Which of the following is true regarding direct labor variances?
A) The labor efficiency variance measures the difference between what was paid to direct laborers and what should have been paid.
B) The labor rate and labor efficiency variances will always add up to the total labor variance.
C) The labor rate variance measures the difference between the labor hours that were actually used and the labor hours that should have been used.
D) The labor rate variance measures the difference between the labor hours that were originally budgeted and the labor hours that should have been used.
E) The labor rate variance measures the difference between the labor hours that were actually used and the labor hours that were originally budgeted.

Accepted Answer

The labor rate variance measures the difference between the actual rate paid to direct laborers and the standard rate that should have been paid, while the labor efficiency variance measures the difference between the actual labor hours worked and the standard hours that should have been worked. Therefore, the total labor variance is the sum of these two variances.

Question 10

Assume that SQ = Standard Quantity, SP = Standard Price, AQ = Actual Quantity, and AP = Actual Price. The correct entry along with the equation to record the issuance and usage of materials, assuming a favorable materials usage variance, is as follows
A) Work in Process SQ * SP
Materials Usage Variance (AQ - SQ )SP.
Materials AQ * SP
B) Work in Process SQ * SP.
Materials Usage Variance (AQ - SQ)SP
Materials AQ * SP,
C) Work in Process AQ * AP
Materials Usage Variance (AQ - SQ)SP
Materials AQ * SP
D) Work in Process AQ * AP
Materials Usage Variance (AQ - SQ)SP.,
Materials AQ * SP
E) None of these.

Accepted Answer

The correct entry for a favorable materials usage variance is to debit Work in Process for the standard quantity at the standard price (SQ * SP), credit Materials for the actual quantity at the standard price (AQ * SP), and record the materials usage variance as a credit if favorable, calculated as (AQ - SQ)SP.

Question 11

High Fliers Company produces model airplanes. During the month of November, it produced 2,000 planes. The actual labor hours were 7 hours per plane. Its standard labor hours are 10 hours per plane. The standard labor rate is $11 per hour. At the end of November, High Fliers found that it had a favorable labor rate variance of $10,500.
-Refer to Figure 10-4. What was High Fliers' total labor variance?
A) $61,500 F
B) $76,500 F
C) $76,500 U
D) $61,500 U

Accepted Answer

Step 1: Calculate the actual labor hours
Actual labor hours = Number of planes produced * Actual labor hours per plane = 2,000 * 7 = 14,000

Step 2: Calculate the standard labor hours
Standard labor hours = Number of planes produced * Standard labor hours per plane = 2,000 * 10 = 20,000

Step 3: Calculate the labor efficiency variance
Labor efficiency variance = (Standard labor hours - Actual labor hours) * Standard labor rate = (20,000 - 14,000) * $11 = $66,000 F

Step 4: Calculate the total labor variance
Total labor variance = Labor efficiency variance + Labor rate variance = $66,000 F + $10,500 F = $76,500 F

Therefore, the best choice is B, $76,500 F.

Question 12

Claire Company uses a standard costing system. The following information pertains to direct labor costs for February:  How many actual labor hours were worked during February for Claire Company?
A) 10,000 hours
B) 2,000 hours
C) 1,200 hours
D) 12,000 hours

Accepted Answer

The answer of Claire Company uses a standard costing system....

Question 13

The labor rate variance is computed by
A) (Actual Rate * Actual Hours) - (Standard Rate * Standard Hours).
B) (Standard Rate * Actual Rate) - (Actual Rate * Actual Hours).
C) (Actual Rate * Standard Hours) - (Standard Rate *Actual Hours).
D) (Actual Rate * Actual Hours) - (Standard Rate * Actual Hours).
E) None of these.

Accepted Answer

The labor rate variance is calculated by comparing the actual cost of labor (actual rate times actual hours) to what the labor should have cost at the standard rate (standard rate times actual hours). This is accurately represented in option D.

Question 14

The labor efficiency variance is calculated by the equation
A) (Standard Hours * Actual Hours) - (Actual Hours * Standard Rate).
B) (Actual Rate * Actual Hours) - (Standard Rate * Actual Hours).
C) (Actual Hours * Standard Rate) - (Standard Hours * Standard Rate).
D) (Standard Hours* Actual Rate) - (Actual Hours * Actual Rate).
E) None of these.

Accepted Answer

The labor efficiency variance is calculated by comparing the standard hours allowed for the actual output with the actual hours taken to produce that output, and multiplying the difference by the standard labor rate per hour. Therefore, the equation for the labor efficiency variance is (Actual Hours × Standard Rate) − (Standard Hours × Standard Rate), which is option C. Options A, B, D, and E are incorrect equations for the labor efficiency variance.

Question 15

Which of the following is not true regarding the use of labor variance information?
A) The actual wage rate is almost always different from the standard rate.
B) Unexpected overtime can cause variation in the labor rate.
C) An average wage rate is chosen as the labor rate standard.
D) The production manager controls the use of labor.
E) The actual wage rate is used in determining the labor rate variance.

Accepted Answer

Typically, the actual wage rate is equal to the standard rate.

Question 16

Kaizen costing involves
A) changing the standards frequently.
B) changing management.
C) outsourcing processes.
D) major ad campaigns.

Accepted Answer

Kaizen costing is a cost reduction technique that involves continuously making small improvements in processes and products to reduce costs. This is achieved by changing standards frequently, streamlining processes, and simplifying designs. Therefore, the best option is A, changing the standards frequently. B, changing management, and C, outsourcing processes, are not directly related to Kaizen costing, and D, major ad campaigns, is irrelevant to the cost reduction technique.

Question 17

During October, 10,000 direct labor hours were worked at a standard cost of $10 per hour. If the direct labor rate variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be
A) $10.40.
B) $10.00.
C) $9.60.
D) $9.20.

Accepted Answer

The direct labor rate variance is calculated as (Actual Hourly Rate - Standard Hourly Rate) x Actual Hours Worked. Given an unfavorable variance of $4,000 and 10,000 hours worked, the actual rate must be higher than the standard. The calculation is $4,000 / 10,000 hours = $0.40. Adding this to the standard rate of $10 gives an actual rate of $10.40 per hour.

Question 18

Figure 10-5 
-Refer to Figure 10-5. What is Seaside's total labor variance?
A) $20,000 F
B) $20,000 U
C) $112,500 F
D) $120,000 U

Accepted Answer

The answer of Figure 10-5 
-Refer to Figure 10-5. What...

Question 19

During September, a small roofing company purchased 500 bundles of a certain type of shingle at a price of $35 per bundle, $5 less than the standard price. Its standard quantity of this type of shingle is 550 bundles. What is the journal entry to record the purchase of materials?

Accepted Answer

The answer of During September, a small roofing company purchased...

Question 20

Which of the following is not true about Kaizen Standards?
A) Kaizen standards are the standards used for continuous improvement.
B) Kaizen standards are a currently attainable standard that reflects planned improvement.
C) Kaizen standards are constantly changing.
D) Kaizen standards are the standards used in traditional costing systems.

Accepted Answer

Kaizen standards are not the standards used in traditional costing systems. Instead, they are used to establish a current level of performance that reflects a planned improvement, and they are constantly changing to reflect ongoing improvement efforts.

Quiz 10: Standard Costing: a Managerial Control Tool

During January, 7,000 direct labor hours were worked at a standard cost of $20 per hour. If the direct labor rate variance for January was $17,500 favorable, the actual cost per direct labor hour must be

Bender Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows: What is the labor efficiency variance for Bender Corporation?

Which of the following is true regarding the disposition of materials and labor variances?

If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the number of hours allowed, the labor rate variance and labor efficiency variance will be Labor Rate Labor Efficiency Variance Variance

Claire Company uses a standard costing system. The following information pertains to direct labor costs for February: What is the total labor budget variance for Claire Company?

Which of the following is true regarding direct labor variances?

Assume that SQ = Standard Quantity, SP = Standard Price, AQ = Actual Quantity, and AP = Actual Price. The correct entry along with the equation to record the issuance and usage of materials, assuming a favorable materials usage variance, is as follows

Claire Company uses a standard costing system. The following information pertains to direct labor costs for February: How many actual labor hours were worked during February for Claire Company?

The labor rate variance is computed by

The labor efficiency variance is calculated by the equation

Which of the following is not true regarding the use of labor variance information?

Kaizen costing involves

During October, 10,000 direct labor hours were worked at a standard cost of $10 per hour. If the direct labor rate variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be

Figure 10-5 -Refer to Figure 10-5. What is Seaside's total labor variance?

During September, a small roofing company purchased 500 bundles of a certain type of shingle at a price of $35 per bundle, $5 less than the standard price. Its standard quantity of this type of shingle is 550 bundles. What is the journal entry to record the purchase of materials?

Which of the following is not true about Kaizen Standards?