Question 1

Boulder Corporation uses a standard costing system. The following factory overhead and production data were reported in September: Standard fixed overhead allocation rate per direct labour hour $2
Estimated monthly direct labour hours 40,000
Standard direct labour hours for actual output in September 42,000
The fixed overhead production volume variance is:

Accepted Answer

Fixed overhead production volume variance = (Standard fixed overhead allocation rate per direct labour hour * Estimated monthly direct labour hours) - (Standard fixed overhead allocation rate per direct labour hour * Standard direct labour hours for actual output in September)= ($2 * 40,000) - ($2 * 42,000)= $80,000 - $84,000= $4,000 underapplied

Question 2

Bellingham, Inc. incurred the following during a recent period: Actual Standard
Machine hours 1,350 1,425
Units produced 570 570
Variable overhead costs $2,775 $2,850
The variable overhead efficiency variance equals:

Accepted Answer

The variable overhead efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate. Here, (1,350 - 1,425) x ($2,850 / 1,425) = -75 x 2 = -150, which is $150 Favourable.

Question 3

Bellingham, Inc. incurred the following during a recent period: Actual Standard
Machine hours 1,350 1,425
Units produced 570 570
Variable overhead costs $2,775 $2,850
The variable overhead spending variance equals:

Accepted Answer

The formula to calculate the variable overhead spending variance is:

Actual variable overhead - (Actual hours worked x Standard variable overhead rate per hour)

The standard variable overhead rate per hour is calculated by dividing the total standard variable overhead cost by the standard machine hours.

Therefore, the standard variable overhead rate per hour is:

$2,850/1,425 = $2 per machine hour

Now, using the formula above:

$2,775 - (1,350 x $2) = $75 Unfavourable.

Question 4

Fixed overhead production volume variances reflect:

Accepted Answer

Fixed overhead production volume variances are caused by the normal fluctuation of the volume of the allocation base, such as changes in production output or operating hours. These variances are not related to out of control costs, production problems, or inefficient productivity.

Question 5

Vashon Corporation had the following activity during a recent period: Standard quantity of direct materials 9,000 kilograms
Actual quantity of direct materials purchased and used 8,800 kilograms
Efficiency variance $2,400 favourable
Total direct materials budget variance $200 favourable
The standard price per kilogram was:

Accepted Answer

The efficiency variance is favourable, which means that the actual quantity of direct materials used was less than the standard quantity. The total direct materials budget variance is also favourable, which means that the actual cost of direct materials was less than the budgeted cost. This can only be the case if the standard price per kilogram is greater than the actual price per kilogram. The only choice that meets this criterion is A) $12.00.

Question 6

Vashon Corporation had the following activity during a recent period: Standard quantity of direct materials 9,000 kilograms
Actual quantity of direct materials purchased and used 8,800 kilograms
Efficiency variance $2,400 favourable
Total direct materials budget variance $200 favourable
The direct materials price variance was:

Accepted Answer

The answer of Vashon Corporation had the following activity during...

Question 7

The standard labour price is $10 per hour. The standard labour hours required per unit are 3. Last month 400 units were produced and 1,500 hours were used. Actual labour cost was $15,750. What are the direct labour price and efficiency variances? Price variance Efficiency variance

Accepted Answer

To calculate the direct labour price variance, we need to compare the actual labour rate with the standard labour rate.

Actual labour rate = Actual labour cost / Actual labour hours = $15,750 / 1,500 = $10.50 per hour

Standard labour rate = $10 per hour

Direct labour price variance = (Actual labour rate - Standard labour rate) x Actual labour hours 
= ($10.50 - $10) x 1,500 = $750 U

To calculate the efficiency variance, we need to compare the actual hours worked with the standard hours allowed for the units produced.

Standard hours allowed = Standard hours per unit x Units produced = 3 x 400 = 1,200

Efficiency variance = (Standard hours allowed - Actual labour hours) x Standard labour rate 
= (1,200 - 1,500) x $10 
= $3,000 U

Therefore, the option B is correct, which is $750 U for the direct labour price variance and $3,000 U for the efficiency variance.

Question 8

(Appendix 11A)Contribution margin sales volume variance can be further subdivided into

Accepted Answer

Contribution margin sales volume variance can be broken down into contribution margin sales quantity variance, which measures the difference between the actual and budgeted quantities sold, and contribution margin sales mix variance, which measures the difference between the actual and budgeted product mix.

Question 9

The direct labour efficiency variance compares:

Accepted Answer

The direct labour efficiency variance compares the standard direct labour hours that should have been used for the output produced with the actual direct labour hours used. This variance measures how effectively the workforce is being utilized and identifies whether the actual labour hours used differed from the standard labour hours.

Question 10

Standard costs are used to:

Accepted Answer

The answer of Standard costs are used to:
...

Question 11

Variances are usually investigated when they are:

Accepted Answer

Variances are usually investigated when they are material in amount, meaning that they are significant or sizeable enough to potentially affect the overall performance or financial results of the entity.

Question 12

(Appendix 11A)All of the following are profit related variances except:

Accepted Answer

Fixed overhead production volume variance is related to cost control and efficiency, not directly to profit.

Question 13

The fixed overhead spending variance measures:

Accepted Answer

The fixed overhead spending variance measures the difference between the actual fixed overhead costs incurred and the expected fixed overhead costs for a specific period.

Question 14

Standard costs are developed using:

Accepted Answer

Standard costs are developed using information that has been updated for future expectations. This includes factors such as changes in prices, labor rates, and other material costs. Using last period's costs or this period's costs may not accurately reflect the current state of the economy or changes in the industry. Information obtained from tax authorities may be useful for tax purposes, but is not necessarily reflective of market prices or costs.

Question 15

The variable overhead spending variance is calculated by comparing:

Accepted Answer

The variable overhead spending variance is calculated by comparing the actual variable overhead cost incurred with the standard variable overhead rate times the actual amount of allocation base used during the period. This variance measures the difference between the actual cost of variable overhead and the expected or budgeted cost of variable overhead based on the actual amount of allocation base used in production. Therefore, option A is the best choice. Options B, C, and D are not relevant to the calculation of variable overhead spending variance.

Question 16

The direct materials price variance compares:

Accepted Answer

The direct materials price variance compares the standard price for direct materials with the actual price paid. This variance measures whether the company paid more or less than it expected to for its materials.

Question 17

If more direct materials were used than expected at standard:

Accepted Answer

If more direct materials were used than expected at standard, it means that there was inefficiency in managing the materials. This results in a direct materials efficiency variance, which compares the actual quantity of materials used with the expected quantity at standard. If more materials were used, the variance would be unfavourable, indicating that the company used more materials than it should have to produce a given level of output. Therefore, option D is the correct choice.

Question 18

Vashon Corporation had the following activity during a recent period: Standard quantity of direct materials 9,000 kilograms
Actual quantity of direct materials purchased and used 8,800 kilograms
Efficiency variance $2,400 favourable
Total direct materials budget variance $200 favourable
The actual price per kilogram was:

Accepted Answer

The efficiency variance formula is:
(Standard quantity - Actual quantity) x Standard price
$2,400 = (9,000 - 8,800) x Standard price
Therefore, the standard price is $1

The total direct materials budget variance formula is:
Actual quantity x (Actual price - Standard price)
$200 = 8,800 x (Actual price - $1)

Solving for Actual price, we get:
Actual price = $12.25

Question 19

At the end of the period:

Accepted Answer

Material variances must be prorated to inventory and cost of goods sold at the end of the period to ensure accurate inventory and cost of goods sold balance. Immateral variances can be ignored. Option A is not always true as some variances may need to be recorded in other accounts such as direct labor or overhead. Option B is incorrect as variances must be recorded to ensure accurate financial reporting.

Question 20

(Appendix 11A)The contribution margin sales volume variance calculates:

Accepted Answer

The answer of (Appendix 11A)The contribution margin sales volume variance...

Quiz 11: Standard Costs and Variance Analysis

Bellingham, Inc. incurred the following during a recent period: Actual Standard Machine hours 1,350 1,425 Units produced 570 570 Variable overhead costs $2,775 $2,850 The variable overhead efficiency variance equals:

Bellingham, Inc. incurred the following during a recent period: Actual Standard Machine hours 1,350 1,425 Units produced 570 570 Variable overhead costs $2,775 $2,850 The variable overhead spending variance equals: