Question 1

Bridget Company manufactures candles.The standard direct materials quantity required to produce one large candle is 1 pound at a cost of $5 per pound.Every candle requires 2 direct labor hours at a standard cost of $3 per direct labor hour.During November,7,200 large candles were produced using 7,500 pounds costing $45,000.At the end of November,an examination of the labor cost records showed that the company used 15,000 direct labor hours (DLHr)at a cost of $4 per hour.
Using the format below,prepare an analysis of the direct labor cost variances.

Accepted Answer

The answer of Bridget Company manufactures candles.The standard direct materials...

Question 2

In a standard cost system,the manufacturing overhead allocated to production equals the standard overhead allocation rate multiplied by the standard quantity of the allocation base allowed for expected output.

Accepted Answer

In a standard cost system,the manufacturing overhead allocated to production equals standard overhead allocation rate × standard quantity of the allocation base allowed for actual output.

Question 3

Cavalaris Products uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Cavalaris had an unfavorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?
A)The actual number of direct labor hours was lower than the budgeted hours.
B)The actual variable overhead costs were higher than the budgeted costs.
C)The actual variable overhead costs were lower than the budgeted costs.
D)The actual number of direct labor hours was higher than the budgeted hours.

Accepted Answer

An unfavorable cost variance for variable overhead costs means that the actual variable overhead costs were higher than the budgeted costs.

Question 4

List the direct labor variances and briefly describe each.

Accepted Answer

The answer of List the direct labor variances and briefly...

Question 5

What does the variable overhead cost variance measure?

Accepted Answer

The answer of What does the variable overhead cost variance...

Question 6

In a standard cost system,the standard overhead allocation rate replaces the predetermined
overhead allocation rate but the concept is the same.

Accepted Answer

The statement is true. In a standard cost system, the standard overhead allocation rate is used to apply overhead costs to products or services, which is similar to the predetermined overhead allocation rate used in traditional cost accounting systems.

Question 7

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing wastage of valuable direct materials.The production manager decided to recruit some highly skilled production workers from another company to bring down the defect rate but was worried that the higher wages of these workers might negatively affect operating income.This would produce a(n)________.
A)unfavorable direct materials cost variance
B)favorable direct labor cost variance
C)favorable direct labor efficiency variance
D)unfavorable direct materials efficiency variance

Accepted Answer

By recruiting highly skilled production workers, the production manager can expect an improvement in the quality of production and a decrease in the number of defects, which would result in a favorable direct labor efficiency variance. The variance measures the difference between actual labor hours required to produce a unit and the standard labor hours allowed for that unit, so any reduction in the required labor hours would be favorable. The higher wages of the skilled workers would be offset by the reduction in direct labor costs due to improved efficiency. The other options are not relevant in this situation as they are related to raw material usage or pricing.

Question 8

Cheapo Sales Company uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Cheapo Sales had a favorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?
A)The actual number of direct labor hours was lower than the budgeted hours.
B)The actual variable overhead costs were higher than the budgeted costs.
C)The actual variable overhead costs were lower than the budgeted costs.
D)The actual number of direct labor hours was higher than the budgeted hours.

Accepted Answer

A favorable efficiency variance for variable overhead costs means that the actual number of direct labor hours was lower than the budgeted hours, resulting in less overhead costs being allocated to production.

Question 9

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing wastage of valuable direct materials.The production manager decided to recruit some highly skilled production workers from another company to bring down the defect rate but was worried that the higher wages of these workers might negatively affect operating income.This would produce a(n)________.
A)unfavorable direct materials cost variance
B)unfavorable direct labor cost variance
C)unfavorable direct labor efficiency variance
D)unfavorable direct materials efficiency variance

Accepted Answer

The scenario describes the production manager's concern about the higher wages of the highly skilled production workers negatively affecting operating income. This concern relates to the cost of labor, which is a direct cost of production. The production manager's decision to recruit these workers suggests that the company is willing to pay a higher wage rate to get higher quality workers who will reduce the defect rate. However, if the actual wage rate paid is higher than the standard rate, it will result in an unfavorable direct labor cost variance, which will negatively affect operating income.

Question 10

To compute the variable overhead cost variance,first compute the difference between actual cost and standard cost.Then,multiple this difference by standard quantity.

Accepted Answer

To compute the variable overhead cost variance,first compute the difference between actual cost and standard cost.Then,multiple this difference by actual quantity.

Question 11

Discount Sales Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Discount Sales had a favorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?
A)The actual number of direct labor hours was lower than the budgeted hours.
B)The actual variable overhead costs were higher than the budgeted costs.
C)The actual variable overhead costs were lower than the budgeted costs.
D)The actual number of direct labor hours was higher than the budgeted hours.

Accepted Answer

A favorable cost variance for variable overhead costs means that the actual costs were lower than the budgeted costs. Therefore, option C - the actual variable overhead costs were lower than the budgeted costs - is a reasonable explanation for this variance. Options A and D relate to direct labor hours and are not relevant to explaining the variance for variable overhead costs. Option B suggests that the actual variable overhead costs were higher than the budgeted costs, which would result in an unfavorable cost variance, not a favorable one.

Question 12

Akao Products uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Akao had an unfavorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?
A)The actual number of direct labor hours was lower than the budgeted hours.
B)The actual variable overhead costs were higher than the budgeted costs.
C)The actual variable overhead costs were lower than the budgeted costs.
D)The actual number of direct labor hours was higher than the budgeted hours.

Accepted Answer

An unfavorable efficiency variance for variable overhead costs indicates that more direct labor hours were used than originally budgeted. This means that the actual number of direct labor hours was higher than the budgeted hours, making option D the likely explanation.

Question 13

A new factory manager was hired for a company that was experiencing slow production rates and lower production volumes than demanded by management.Upon investigation,the manager found that the workers were poorly motivated and not closely supervised.Midway through the quarter,an incentive program was initiated,and cash bonuses were given when workers hit their production targets.Within a short time,production output increased,but the bonuses had to be charged to the direct labor budget,and the manager was worried about the impact of these costs on operating income.This could produce a(n)________.
A)unfavorable direct materials cost variance
B)unfavorable direct materials efficiency variance
C)favorable direct labor efficiency variance
D)favorable direct labor cost variance

Accepted Answer

The incentive program led to increased production output by motivating workers to hit their production targets, which directly relates to a favorable direct labor efficiency variance, indicating that labor was used more efficiently than planned.

Question 14

Elite Brands Company uses standard costs for its manufacturing division.Standards specify 0.1 direct labor hours per unit of product.At the beginning of the year,the static budget for variable overhead costs included the following data:

At the end of the year,actual data were as follows:

How much is the standard cost per direct labor hour for variable overhead? (Round your answer to the nearest cent. )
A)$25.00 per direct labor hour
B)$37.50 per direct labor hour
C)$30.30 per direct labor hour
D)$25.67 per direct labor hour

Accepted Answer

A)Standard direct labor cost per hour = $15,000 / 600 hours = $25.00 per direct labor hour

Question 15

A new factory manager was hired for a company that was experiencing slow production rates and lower production volumes than demanded by management.Upon investigation,the manager found that the workers were poorly motivated and not closely supervised.Midway through the quarter,an incentive program was initiated,and cash bonuses were given when workers hit their production targets.Within a short time,production output increased,but the bonuses had to be charged to the direct labor budget,and the manager was worried about the impact of these costs on operating income.This could produce a(n)________.
A)unfavorable direct materials cost variance
B)unfavorable direct materials efficiency variance
C)unfavorable direct labor efficiency variance
D)unfavorable direct labor cost variance

Accepted Answer

The introduction of cash bonuses to motivate workers to meet production targets would increase the direct labor cost, resulting in an unfavorable direct labor cost variance. The other options (A, B, and C) are not relevant to the situation described in the scenario.

Question 16

When investigating overhead variances,management needs to determine whether cost increases were controllable or if the cost standard needs to be updated.

Accepted Answer

When investigating overhead variances, management should analyze whether the cost increases were controllable, such as overspending on materials, or whether the cost standard needs to be updated, such as changes in the cost of utilities or rent.

Question 17

Glendale Brands Company uses standard costs for its manufacturing division.Standards specify 0.1 direct labor hours per unit of product.At the beginning of the year,the static budget for variable overhead costs included the following data:

At the end of the year,actual data were as follows:

What is the variable overhead efficiency variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )
A)$2,036 F
B)$2,036 U
C)$2,955 F
D)$2,955 U

Accepted Answer

B)Variable overhead efficiency variance = (Actual quantity - Standard quantity)× Standard cost
Variable overhead efficiency variance = (495 DLHr - 400 DLHr)× $21.43 per direct labor hour = $2,036 Unfavorable
Note:
Standard quantity or standard direct labor hours for 4,000 units = 4,000 units × 0.1 direct labor hour per unit = 400 direct labor hours
Standard cost per direct labor hour = Budgeted variable overhead costs / Budgeted direct labor hours = $13,500 / 630 direct labor hours = $21.43 per direct labor hour

Question 18

Austin Brands Company uses standard costs for its manufacturing division.Standards specify 0.1 direct labor hours per unit of product.At the beginning of the year,the static budget for variable overhead costs included the following data:

At the end of the year,actual data were as follows:

What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )
A)$14,000 U
B)$15,000 F
C)$4,334 U
D)$5,689 F

Accepted Answer

C)Variable overhead cost variance = (Actual cost - Standard cost)× Actual quantity
Standard cost per direct labor hour = Budgeted variable overhead costs / Budgeted direct labor hours = $14,000 / 630 direct labor hours = $22.22 per direct labor hour
Actual cost per direct labor hour = Actual variable overhead costs / Actual direct labor hours = $15,000 / 480 direct labor hours = $31.25 per direct labor hour
Variable overhead cost variance = ($31.25 - $22.22)× 480 units = $4,334 Unfavorable

Question 19

The following information relates to Leonard Manufacturing's overhead costs for the month:
  
Leonard allocates manufacturing overhead to production based on standard direct labor hours.
Leonard reported the following actual results for last month: actual variable overhead,$14,500;actual fixed overhead,$5,400;actual production of 4,700 units at 0.22 direct labor hours per unit.The standard direct labor time is 0.20 direct labor hours per unit.
Compute the fixed overhead cost variance.

Accepted Answer

The answer of The following information relates to Leonard Manufacturing's...

Question 20

The following information relates to Regency Manufacturing's overhead costs for the month:
  
Regency allocates manufacturing overhead to production based on standard direct labor hours.
Regency reported the following actual results for last month: actual variable overhead,$14,500;actual fixed overhead,$5,400;actual production of 4,700 units at 0.22 direct labor hours per unit.The standard direct labor time is 0.20 direct labor hours per unit.
Compute the variable overhead cost variance.(Round the answer to the nearest dollar. )

Accepted Answer

The answer of The following information relates to Regency Manufacturing's...

Quiz 23: Flexible Budgets and Standard Cost Systems

In a standard cost system,the manufacturing overhead allocated to production equals the standard overhead allocation rate multiplied by the standard quantity of the allocation base allowed for expected output.

Cavalaris Products uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Cavalaris had an unfavorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

List the direct labor variances and briefly describe each.

What does the variable overhead cost variance measure?

In a standard cost system,the standard overhead allocation rate replaces the predetermined overhead allocation rate but the concept is the same.

Cheapo Sales Company uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Cheapo Sales had a favorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

To compute the variable overhead cost variance,first compute the difference between actual cost and standard cost.Then,multiple this difference by standard quantity.

Discount Sales Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Discount Sales had a favorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

Akao Products uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Akao had an unfavorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

When investigating overhead variances,management needs to determine whether cost increases were controllable or if the cost standard needs to be updated.