Test Bank - Chapter10 Standard Costing

Chapter 10

Standard Costs and the Balanced Scorecard

True/False

1.FEasy

Standard costs should generally be based on the actual costs of prior periods.

2.FEasy

The standard direct labor rate should not include fringe benefits.

3.FMedium

From a standpoint of cost control, the most effective time to recognize material price variances is when the materials are placed into production.

4.FMedium

The material quantity variance is computed based on the quantity of all materials purchased during the period.

5.FMedium

Purchase of poor quality materials will generally result in a favorable materials price variance and an unfavorable labor rate variance.

6.TEasy

A balanced scorecard is an integrated set of performance measures that support management's strategy throughout the organization.

7.FMedium

The performance measures on a balanced scorecard tend to fall into four groups: financial measures, customer measures, internal business process measures, and external business process measures.

8.TEasy

The emphasis in the balanced scorecard is on improvement rather than meeting a preset standard.

9.FMedium

A balanced scorecard should contain every performance measure that can be expected to influence a company's profits.

10.TEasy

Process Time is the only value-added component of Throughput Time.

Managerial Accounting, 9/e 358

11.TMedium

(Appendix) A favorable labor efficiency variance would result in a credit balance in the labor efficiency variance account.

12.TEasy

Management by exception means that a manager's attention is directed toward those parts of the organization where things are not proceeding according to plans.

13.TEasy

The production manager is usually held responsible for the labor efficiency variance.

14.TEasy

Quantity standards indicate how much of an input should be used for manufacturing a unit of product or in providing a unit of service.

15.FEasy

All cost variances should be considered exceptions that require the attention of management.

Multiple Choice

16.CEasy

The standards that allow for no machine breakdowns or other work interruptions and that require peak efficiency at all times are referred to as:a. normal standards.b. practical standards.c. ideal standards.d. budgeted standards.

17.CMediumCPA adapted

To measure controllable production inefficiencies, which of the following is the best basis for a company to use in establishing the standard hours allowed for the output of one unit of product?a. Average historical performance for the last several years.b. Engineering estimates based on ideal performance.c. Engineering estimates based on attainable performance.d. The hours per unit that would be required for the present workforce to satisfy expected demand over the long run.

18.CEasyCMA adapted

Which of the following statements concerning practical standards is incorrect?a. Practical standards can be used for product costing and cash budgeting.b. Practical standards can be attained by the average worker.c. When practical standards are used, there is no reason to adjust standards if an old machine is replaced by a newer, faster machine.d. Under practical standards, large variances are less likely than under ideal standards.

19.BEasyCPA adapted

If a company follows a practice of isolating variances at the earliest point in time, what would be the appropriate time to isolate and recognize a direct material price variance?a. When material is issued.b. When material is purchased.c. When material is used in production.d. When production is completed.


An unfavorable labor efficiency variance indicates that:a. The actual labor rate was higher than the standard labor rate.b. The labor rate variance must also be unfavorable.c. Actual labor hours worked exceeded standard labor hours for the production level achieved.d. Overtime labor was used during the period.

Managerial Accounting, 9/e359

21.DEasy

A favorable labor rate variance indicates thata. actual hours exceed standard hours.b. standard hours exceed actual hours.c. the actual rate exceeds the standard rate.d. the standard rate exceeds the actual rate.

22.BHardCPA adapted

(Appendix) What does a credit balance in a direct labor efficiency variance account indicate?a. the average wage rate paid to direct labor employees was less than the standard rate.b. the standard hours allowed for the units produced were greater than actual direct labor hours used.c. actual total direct labor costs incurred were less than standard direct labor costs allowed for the units produced.d. the number of units produced was less than the number of units budgeted for the period.

23.CEasy

If the actual labor hours worked exceed the standard labor hours allowed, what type of variance will occur?a. Favorable labor efficiency variance.b. Favorable labor rate variance.c. Unfavorable labor efficiency variance.d. Unfavorable labor rate variance.


24.AMediumCPA adapted

Which of the following is the most probable reason a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance?a. The mix of workers assigned to the particular job was heavily weighted towards the use of higher paid, experienced individuals.b. The mix of workers assigned to the particular job was heavily weighted towards the use of new relatively low paid, unskilled workers.c. Because of the production schedule, workers from other production areas were assigned to assist this particular process.d. Defective materials caused more labor to be used in order to produce a standard unit.

25.DEasyCPA adapted

Which department is usually held responsible for an unfavorable materials quantity variance?a. Marketingb. Purchasingc. Engineeringd. Production

26.BEasyCMA adapted

A favorable material price variance coupled with an unfavorable material usage variance would MOST likely result from:a. problems with processing machines.b. the purchase of low quality materials.c. problems with labor efficiency.d. changes in the product mix.

27.CMediumCMA adapted

Tower Company planned to produce 3,000 units of its single product, Titactium, during November. The standards for one unit of Titactium specify six pounds of materials at P0.30 per pound. Actual production in November was 3,100 units of Titactium. There was a favorable materials price variance of P380 and an unfavorable materials quantity variance of P120. Based on these variances, one could conclude that:a. more materials were purchased than were used.b. more materials were used than were purchased.c. the actual cost per pound for materials was less than the standard cost per pound.d. the actual usage of materials was less than the standard allowed.

28.BMedium

A labor efficiency variance resulting from the use of poor quality materials should be charged to:a. the production manager.b. the purchasing agent.c. manufacturing overhead.d. the engineering department.

29.DEasy

Which of the following represents value-added time in the manufacturing cycle?a. Inspection time.b. Queue time.c. Move time.d. Process time.

30.DMedium

Throughput time consists of:a. Process time.b. Inspection time and move time.c. Process time, inspection time, and move time.d. Process time, inspection time, move time, and queue time.

31.CEasy

Manufacturing Cycle Efficiency (MCE) is computed as:a. Throughput Time ÷ Delivery Cycle Timeb. Process Time ÷ Delivery Cycle Timec. Value-Added Time ÷ Throughput Timed. Value-Added Time ÷ Delivery-Cycle Time


32.DMedium

(Appendix) Drake Company purchased materials on account. The entry to record the purchase of materials having a standard cost of P1.50 per pound from a supplier at P1.60 per pound would include a:a. credit to Raw Materials Inventory.b. debit to Work in Process.c. credit to Materials Price Variance.d. debit to Materials Price Variance.

33.AMedium

(Appendix) Which of the following entries would correctly record the charging of direct labor costs to Work in Process given an unfavorable labor efficiency variance and a favorable labor rate variance?a. Work in Process Labor Efficiency Variance Labor Rate Variance Wages Payableb. Work in Process Wages Payablec. Work in Process Labor Efficiency Variance Labor Rate Variance Wages Payabled. Work in Process Labor Rate Variance Labor Efficiency Variance Wages Payable


34.CEasyCMA adapted

Under a standard cost system, the material price variances are usually the responsibility of the:a. production manager.b. sales manager.c. purchasing manager.d. engineering manager.

35.CMedium

The terms "standard quantity allowed" or "standard hours allowed" mean:a. the actual output in units multiplied by the standard output allowed.b. the actual input in units multiplied by the standard output allowed.c. the actual output in units multiplied by the standard input allowed.d. the standard output in units multiplied by the standard input allowed.

36.DMediumCPA adapted

Dahl Company, a clothing manufacturer, uses a standard costing system. Each unit of a finished product contains 2 yards 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 P3 per yard. The standard direct material cost for cloth per unit of finished product is:a. P4.80.b. P6.00.c. P7.00.d. P7.50.

37.CHard

Cox Company's direct material costs for the month of January were as follows:

Actual quantity purchased ............. 18,000 kilograms Actual unit purchase price ............ P 3.60 per kilogram Materials price variance-- unfavorable (based on purchases) .... P 3,600 Standard quantity allowed for actual production ............... 16,000 kilograms Actual quantity used .................. 15,000 kilograms

For January there was a favorable direct material quantity variance of:a. P3,360.b. P3,375.c. P3,400.d. P3,800.

38.CHard

The Porter Company has a standard cost system. In July the company purchased and used 22,500 pounds of direct material at an actual cost of P53,000; the materials quantity variance was P1,875 Unfavorable; and the standard quantity of materials allowed for July production was 21,750 pounds. The materials price variance for July was:a. P2,725 F.b. P2,725 U.c. P3,250 F.d. P3,250 U.


Information on Fleming Company's direct material costs follows:

Actual amount of direct materials used ...... 20,000 pounds Actual direct material costs ................ P40,000 Standard price of direct materials .......... P2.10 per pound Direct material efficiency variance--favorable P3,000

What was the company's direct material price variance?a. P1,000 favorable.b. P1,000 unfavorable.c. P2,000 favorable.d. P2,000 unfavorable.


40.CEasy

Last month 75,000 pounds of direct material were purchased and 71,000 pounds were used. If the actual purchase price per pound was P0.50 more than the standard purchase price per pound, then the material price variance was:a. P2,000 F.b. P37,500 F.c. P37,500 U.d. P35,500 U.

41.AMediumCPA adapted

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

Actual unit purchase price ............... P6.50 per meter Standard quantity allowed for actual production ............................. 2,100 meters Quantity purchased and used for actual production ............................. 2,300 meters Standard unit price ...................... P6.25 per meter

Younger's material quantity variance for March was:a. P1,250 unfavorable.b. P1,250 favorable.c. P1,300 unfavorable.d. P1,300 favorable.


42.BEasy

The following materials standards have been established for a particular product:

Standard quantity per unit of output .. 1.7 meters Standard price ........................ P19.80 per meter

The following data pertain to operations concerning the product for the last month:

Actual materials purchased ............ 5,800 meters Actual cost of materials purchased .... P113,680 Actual materials used in production ... 5,100 meters Actual output ......................... 3,200 units

What is the materials quantity variance for the month?a. P13,720 Ub. P6,732 Fc. P13,860 Ud. P6,664 F

43.AEasy


Standard quantity per unit of output .. 8.3 grams Standard price ........................ P19.15 per gram


Actual materials purchased ............ 7,500 grams Actual cost of materials purchased .... P141,375 Actual materials used in production ... 7,100 grams Actual output ......................... 700 units

What is the materials price variance for the month?a. P2,250 Fb. P7,540 Uc. P24,317 Ud. P7,660 U


44.CHardCPA adapted

Information on Kennedy Company's direct material costs follows:

Standard price per pound of raw materials ....... P3.60 Actual quantity of raw materials purchased ...... 1,600 pounds Standard quantity allowed for actual production.. 1,450 pounds Materials purchase price variance--favorable .... P 240

What was the actual purchase price per unit, rounded to the nearest penny?a. P3.06.b. P3.11.c. P3.45.d. P3.75.

45.BHard

The Fletcher Company uses standard costing. The following data are available for October:

Actual quantity of direct materials used ... 23,500 pounds Standard price of direct materials ......... P2 per pound Material quantity variance ................. P1,000 favorable

The standard quantity of material allowed for October production is:a. 23,000 lbs.b. 24,000 lbs.c. 24,500 lbs.d. 25,000 lbs.

46.BEasyCPA adapted

Yola Company manufactures a product with standards for direct labor of 4 direct labor-hours per unit at a cost of P12.00 per direct labor-hour. During June, 1,000 units were produced using 4,100 hours at P12.20 per hour. The direct labor efficiency variance was:a. P1,200 favorable.b. P1,200 unfavorable.c. P2,020 favorable.d. P2,020 unfavorable.

47.DEasy

The following labor standards have been established for a particular product:

Standard labor hours per unit of output .. 8.3 hours Standard labor rate ...................... P12.10 per hour


Actual hours worked ...................... 6,100 hours Actual total labor cost .................. P71,370 Actual output ............................ 900 units

What is the labor efficiency variance for the month?a. P19,017 Fb. P19,017 Uc. P16,029 Fd. P16,577 F


48.AEasy

The following labor standards have been established for a particular product: Standard labor hours per unit of output .. 1.7 hours Standard labor rate ...................... P14.05 per hour


Actual hours worked ...................... 3,700 hours Actual total labor cost .................. P50,690 Actual output ............................ 2,300 unitsWhat is the labor rate variance for the month?a. P1,295 Fb. P2,877 Fc. P4,246 Fd. P4,246 U

49.DHardCPA adapted

Lab Corp. uses a standard cost system. Direct labor information for Product CER for the month of October follows:

Standard direct labor rate ................. P6.00 per hour Actual direct labor rate paid .............. P6.10 per hour Standard hours allowed for actual production 1,500 hours Labor efficiency variance--unfavorable ..... P600

What are the actual hours worked?a. 1,400.b. 1,402.c. 1,598.d. 1,600.

50.DHard

The standards for direct labor for a product are 2.5 hours at P8 per hour. Last month, 9,000 units of the product were made and the labor efficiency variance was P8,000 F. The actual number of hours worked during the past period was:a. 23,500.b. 22,500.c. 20,500.d. 21,500.

51.CHard

In a certain standard costing system the following results occurred last period: labor rate variance, P1,000 U; labor efficiency variance, P2,800 F; and the actual labor rate was P0.20 more per hour than the standard labor rate. The number of actual direct labor hours used last period was:a. 9,000.b. 5,400.c. 5,000.d. 4,800.

52.AHard

The Reedy Company uses a standard costing system. The following data are available for November:

Actual direct labor hours worked ... 5,800 hours Standard direct labor rate ......... P9 per hour Labor rate variance ................ P1,160 favorable

The actual direct labor rate for November is:a. P8.80.b. P8.90.c. P9.00.d. P9.20.


53.AHardCPA adapted

For the month of April, Thorp Co.'s records disclosed the following data relating to direct labor:

Actual cost ............... P10,000 Rate variance ............. P 1,000 favorable Efficiency variance ....... P 1,500 unfavorable

For the month of April, actual direct labor hours amounted to 2,000. In April, Thorp's standard direct labor rate per hour was:a. P5.50.b. P5.00.c. P4.75.d. P4.50.

54.BHard

Borden Enterprises uses standard costing. For the month of April, the company reported the following data:

• Standard direct labor rate: P10 per hour • Standard hours allowed for actual production: 8,000 • Actual direct labor rate: P9.50 per hour • Labor efficiency variance: P4,800 F

The labor rate variance for April is:a. P3,760 U.b. P3,760 F.c. P2,850 F.d. P2,850 U.

55.BEasy

The following standards for variable manufacturing overhead have been established for a company that makes only one product:

Standard hours per unit of output ...... 7.8 hours Standard variable overhead rate ........ P12.55 per hour

The following data pertain to operations for the last month:

Actual hours ........................... 2,900 hours Actual total variable overhead cost .... P36,975 Actual output .......................... 200 units

What is the variable overhead efficiency variance for the month?a. P17,397 Ub. P16,817 Uc. P312 Fd. P17,085 U

56.BEasy





What is the variable overhead spending variance for the month?a. P112 Fb. P130 Uc. P4,450 Ud. P4,338 U


Reference: 10-1Bryan Company employs a standard cost system in which direct materials inventory is carried at standard cost. Bryan has established the following standards for the prime costs of one unit of product: Standard Standard Standard Quantity Price Cost Direct materials .... 6 pounds P 3.50/pound P21.00 Direct labor ........ 1.3 hours P11.00/hour 14.30 P35.30

During March, Bryan purchased 165,000 pounds of direct material at a total cost of P585,750. The total factory wages for March were P400,000, 90 percent of which were for direct labor. Bryan manufactured 25,000 units of product during March using 151,000 pounds of direct material and 32,000 direct labor hours.

57.BMediumRefer To: 10-1

The price variance for the direct material acquired by the company during March is:a. P7,550 favorable.b. P8,250 unfavorable.c. P7,550 unfavorable.d. P8,250 favorable.

58.AMediumRefer To: 10-1

The direct material quantity variance for March is:a. P3,500 unfavorable.b. P3,550 favorable.c. P3,500 favorable.d. P3,550 unfavorable.

59.CMediumRefer To: 10-1

The direct labor rate variance for March is:a. P 8,000 favorable.b. P48,000 unfavorable.c. P 8,000 unfavorable.d. P48,000 favorable.


The direct labor efficiency variance for March is:a. P5,625 unfavorable.b. P5,500 favorable.c. P5,625 favorable.d. P5,500 unfavorable.


Reference: 10-2The Litton Company has established standards as follows:

Direct material 3 lbs. @ P4/lb. = P12 per unit Direct labor 2 hrs. @ P8/hr. = P16 per unit Variable manuf. overhead 2 hrs. @ P5/hr. = P10 per unit

Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased.

Units produced 600 Direct material used 2,000 lbs. Direct material purchased (3,000 lbs.) P11,400 Direct labor cost (1,100 hrs.) P 9,240 Variable manuf. overhead cost incurred P 5,720

The company applies variable manufacturing overhead to products on the basis of direct labor hours.

61.CEasyRefer To: 10-2

The materials price variance is:a. P400 U.b. P400 F.c. P600 F.d. P600 U.

62.AEasyRefer To: 10-2

The materials quantity variance is:a. P800 U.b. P4,000 U.c. P760 U.d. P760 F.

63.DEasyRefer To: 10-2

The labor rate variance is:a. P480 F.b. P480 U.c. P440 F.d. P440 U.


The labor efficiency variance is:a. P800 F.b. P800 U.c. P840 F.d. P840 U.

65.BEasyRefer To: 10-2

The variable overhead spending variance is:a. P240 U.b. P220 U.c. P220 F.d. P240 F.



The variable overhead efficiency variance is:a. P520 F.b. P520 U.c. P500 U.d. P500 F.

Reference: 10-3The Albright Company uses standard costing and has established the following standards for its single product:

Direct materials .......... 2 gallons at P3 per gallon Direct labor .............. 0.5 hours at P8 per hour Variable manuf. overhead .. 0.5 hours at P2 per hour

During November, the company made 4,000 units and incurred the following costs:

Direct materials purchased ........ 8,100 gallons at P3.10 per gallon Direct materials used ............. 7,600 gallons Direct labor used ................. 2,200 hours at P8.25 per hour Actual variable manuf. overhead ... P4,175

The company applies variable manufacturing overhead to products on the basis of direct labor hours.


The material price variance for November was:a. P2,310 U.b. P2,310 F.c. P810 U.d. P810 F.


The material quantity variance for November was:a. P1,200 U.b. P1,200 F.c. P300 U.d. P1,500 F.


The labor rate variance for November was:a. P1,050 U.b. P550 U.c. P2,150 U.d. P2,150 F.


The labor efficiency variance for November was:a. P1,050 U.b. P550 U.c. P1,600 F.d. P1,600 U.


The total variable overhead variance for November was:a. P175 U.b. P225 F.c. P225 U.d. P400 U.

Reference: 10-4Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:

Standard Standard Quantity Cost per Bag Direct material ........... 20 pounds P8.00


Direct labor .............. 0.1 hours 1.10 Variable manuf. overhead .. 0.1 hours .40

The company had no beginning inventories of any kind on Jan. 1. Variable manufacturing overhead is applied to production on the basis of direct labor hours. During January, the following activity was recorded by the company:

• Production of Fastgro: 4,000 bags • Direct materials purchased: 85,000 pounds at a cost of P32,300 • Direct labor worked: 390 hours at a cost of P4,875 • Variable manufacturing overhead incurred: P1,475 • Inventory of direct materials on Jan. 31: 3,000 pounds

72.CMediumRefer To: 10-4

The materials price variance for January is:a. P1,640 F.b. P1,640 U.c. P1,700 F.d. P1,300 U.


The materials quantity variance for January is:a. P800 U.b. P300 U.c. P300 F.d. P750 F.

74.DMediumRefer To: 10-4

The labor rate variance for January is:a. P475 F.b. P475 U.c. P585 F.d. P585 U.


The labor efficiency variance for January is:a. P475 F.b. P350 U.c. P130 U.d. P110 F.


The total variance for variable overhead for January is:a. P85 F.b. P40 F.c. P100 U.d. P125 F.

Reference: 10-5(Appendix) The Dexon Company makes and sells a single product called a Mip and employs a standard costing system. The following standards have been established for one unit of Mip:

Standard Quantity Standard Cost or Hours per Mip Direct materials .. 6 board feet P9.00 Direct labor ...... 0.8 hours P9.60

There were no inventories of any kind on August 1. During August, the following events occurred:

• Purchased 15,000 board feet at the total cost of P24,000. • Used 12,000 board feet to produce 2,100 Mips. • Used 1,700 hours of direct labor time at a total cost of P20,060.



To record the purchase of direct materials, the general ledger would include what entry to the Materials Price Variance Account?a. P1,500 creditb. P1,500 debitc. P6,000 creditd. P6,000 debit


To record the use of direct materials in production, the general ledger would include what entry to the Materials Quantity Variance account?a. P3,600 debitb. P3,600 credit.c. P900 debitd. P900 credit


To record the incurrence of direct labor cost and its use in production, the general ledger would include what entry to the Labor Rate Variance account?a. P240 creditb. P240 debitc. P340 debitd. P340 credit



To record the incurrence of direct labor costs and its use in production, the general ledger would include what entry to the Labor Efficiency Variance account?a. P480 creditb. P240 debitc. P1,200 debitd. P1,200 credit

Reference: 10-6The Alpha Company produces toys for national distribution. Standards for a particular toy are:

Materials: 12 ounces per unit at 56¢ per ounce. Labor: 2 hours per unit at P2.75 per hour.

During the month of December, the company produced 1,000 units. Information for the month follows:

Materials: 14,000 ounces were purchased and used at a total cost of P7,140. Labor: 2,500 hours worked at a total cost of P8,000.


The materials price variance is:a. P700 U.b. P420 U.c. P420 F.d. P700 F.


The materials quantity variance is:a. P1,120 U.b. P1,820 F.c. P1,820 U.d. P1,120 F.


The labor rate variance is:a. P2,500 F.b. P1,125 F.c. P1,125 U.d. P2,500 U.


The labor efficiency variance is:a. P1,600 U.b. P1,375 U.c. P1,375 F.d. P1,600 F.


Reference: 10-7The following materials standards have been established for a particular product:

Standard quantity per unit of output .. 4.4 pounds Standard price ........................ P13.20 per pound


Actual materials purchased ............ 4,800 pounds Actual cost of materials purchased .... P62,880 Actual materials used in production ... 4,300 pounds Actual output ......................... 700 units


What is the materials price variance for the month?a. P480 Fb. P430 Fc. P430 Ud. P480 U


What is the materials quantity variance for the month?a. P6,550 Ub. P15,982 Uc. P16,104 Ud. P6,600 U




Actual materials purchased ............ 5,800 grams Actual cost of materials purchased .... P108,460 Actual materials used in production ... 5,200 grams Actual output ......................... 2,700 units


What is the materials price variance for the month?a. P4,060 Ub. P3,640 Fc. P3,640 Ud. P4,060 F





Standard quantity per unit of output .. 6.8 meters Standard price ........................ P17.10 per meter


Actual materials purchased ............ 9,000 meters Actual cost of materials purchased .... P156,600 Actual materials used in production ... 8,500 meters Actual output ......................... 1,200 units


What is the materials price variance for the month?a. P2,700 Fb. P2,550 Uc. P2,550 Fd. P2,700 U



Reference: 10-10The following labor standards have been established for a particular product:



Actual hours worked ...................... 9,600 hours Actual total labor cost .................. P144,480 Actual output ............................ 1,200 units



What is the labor rate variance for the month?a. P1,920 Fb. P240 Uc. P1,920 Ud. P240 F


What is the labor efficiency variance for the month?a. P7,230 Ub. P9,030 Uc. P7,230 Fd. P9,150 U

Reference: 10-11The Clark Company makes a single product and uses standard costing. Some data concerning this product for the month of May follow:

Labor rate variance:.................................. P 7,000 F Labor efficiency variance:............................ P12,000 F Variable overhead efficiency variance:................ P 4,000 F Number of units produced:............................. 10,000 Standard labor rate per direct labor hour:............ P12 Standard variable overhead rate per direct labor hour: P 4 Actual labor hours used:.............................. 14,000 Actual variable manufacturing overhead costs:......... P58,290


The variable overhead spending variance for May was:a. P2,290 F.b. P2,290 U.c. P1,710 F.d. P1,710 U.

94.DHardRefer To: 10-11

The actual direct labor rate for May in Pesos per hour was:a. P12.50.b. P12.00.c. P11.75.d. P11.50.

95.BHardRefer To: 10-11

The total standard cost for direct labor for May was:a. P168,000.b. P180,000.c. P120,000.d. P161,000.

96.CHardRefer To: 10-11

The total standard cost for variable overhead for May was:a. P56,000.b. P40,000.c. P60,000.d. P50,000.


The standard hours allowed to make one unit of finished product are:a. 1.0.b. 1.2.c. 1.5.d. 2.0.

Reference: 10-12The following standards for variable manufacturing overhead have been established for a company that makes only one product:



Actual hours ........................... 4,900 hours Actual total variable overhead cost .... P58,310 Actual output .......................... 3,000 units



What is the variable overhead spending variance for the month?a. P2,870 Ub. P2,870 Fc. P1,715 Ud. P1,715 F


What is the variable overhead efficiency variance for the month?a. P1,680 Fb. P1,190 Uc. P1,155 Ud. P1,190 F

Reference: 10-13The Upton Company employs a standard costing system in which variable overhead is assigned to production on the basis of direct labor hours. Data for the month of February include the following:

• Variable manufacturing overhead cost incurred: P48,700 • Total variable overhead variance: P300 F • Standard hours allowed for actual production: 7,000 • Actual direct labor hours worked: 6,840


The standard variable overhead rate per direct labor hour is:a. P6.91.b. P6.95.c. P7.00.d. P7.12.


101.BHardRefer To: 10-13

The variable overhead spending variance is:a. P820 F.b. P820 U.c. P740 F.d. P740 U.


The variable overhead efficiency variance is:a. P430 U.b. P740 F.c. P1,120 F.d. P950 U.

Reference: 10-14Ricric Corporation has provided the following data for one of its products:

Process time ........ 3 days Queue time .......... 4 days Inspection time ..... 0.7 days Move time ........... 0.3 days Wait time ........... 9 days


The throughput time for this operation would be:a. 8 days.b. 3 days.c. 17 days.d. 7.7 days.


The delivery cycle time for this operation would be:a. 8 days.b. 17 days.c. 9.3 days.d. 7.7 days.


The manufacturing cycle efficiency for this operation would be closest to:a. 0.375.b. 0.45.c. 0.18.d. 0.33.


Essay

106.Hard

(Appendix) Albert Manufacturing Company manufactures a single product. The standard cost of one unit of this product is:

Direct materials: 6 feet at P1.50 ........... P 9.00 Direct labor: 1 hour at P6.75 ............... 6.75 Variable overhead: 1 hour at P4.50 .......... 4.50 Total standard variable cost per unit ....... P20.25

During the month of October, 6,000 units were produced. Selected cost data relating to the month's production follow:

Material purchased: 60,000 feet at P1.43 .... P85,800 Material used in production: 38,000 feet ... - Direct labor: ?__ hours at P ?__ per hr .. P41,925 Variable overhead cost incurred ............. P30,713 Variable overhead efficiency variance ....... P 2,250

There was no beginning inventory of raw materials. The variable overhead rate is based on direct labor-hours.

Required:

a. For direct materials, compute the price and quantity variances for the month, and prepare journal entries to record activity for the month.b. For direct labor, compute the rate and efficiency variances for the month, and prepare a journal entry to record labor activity for the month.c. For variable overhead, compute the spending variance for the month, and prove the efficiency variance given above.


Answer:

a. Materials Price Variance: Actual Quantity of Inputs, at Actual Price: 60,000 feet @ P1.43 per foot ............ P85,800 Actual Quantity of Inputs, at Standard Price: 60,000 feet @ P1.50 ..................... 90,000 Materials Price Variance .................. P 4,200 F

Materials Quantity Variance: Actual Quantity of Inputs, at Standard Price: 38,000 feet @ P1.50 per foot ............ P57,000 Standard Quantity of Inputs, at Standard Price: 6,000 units @ 6 feet per unit x P1.50 per ft 54,000 Materials Quantity Variance ............... P 3,000 U

Journal entries: Raw Materials (60,000 feet @ P1.50) ....... 90,000 Materials Price Variance (60,000 feet @ P.07 F) ................ 4,200 Accounts Payable (60,000 feet @ P1.43) .. 85,800

Work in Process (36,000 feet @ P1.50) ..... 54,000 Materials Quantity Variance (2,000 feet U @ P1.50) ................ 3,000 Raw Materials (38,000 feet @ P1.50) ..... 57,000

b. The actual hours worked during the period can be computed through the variable overhead efficiency variance, as follows:

SR(AH - SH) = Variable Overhead Efficiency Variance P4.50(AH - (6,000 units @ 1 hr. per unit)= P2,250 U P4.50AH - P27,000 = P2,250 U P4.50AH = P29,250 AH = 6,500 hours

Labor Rate Variance: Actual Hours of Input, at the Actual Rate: 6,500 hours @ P6.45 .................... P49,056 Actual Hours of Input, at the Standard Rate: 6,500 hours @ P6.75 per hour ........... 43,875 Labor Rate Variance ...................... P 1,950 F

Labor Efficiency Variance: Actual Hours of Input, at the Standard Rate: 6,500 hours @ P6.75 per hour ........... P43,875 Standard Hours of Input, at the Standard Rate: 6,000 @ 1 hour per unit @ P6.75 per hour 40,500 Labor Efficiency Variance ................ P 3,375 U

Journal entry: Work in Process (6,00 hours @ P6.75) ..... 40,500 Labor Efficiency Variance (500 hrs. U @ P6.75) 3,696 Labor Rate Variance (6,500 hrs. @ P0.30 F) 6,480 Wages Payable (6,500 hrs. @ P6.45) ..... 41,925


c. Variable Overhead Spending Variance: Actual Hours of Input, at the Actual Rate P30,713 Actual Hours of Input, at the Standard Rate: 6,500 hours @ P4.50 per hour ........... 29,250 Variable Overhead Spending Variance ...... P 1,463 U

Variable Overhead Efficiency Variance: Actual Hours of Input, at the Standard Rate: 6,500 hours @ P4.50 per hour ........... P 29,250 Standard Hours of Input, at the Standard Rate: 6,000 hours @ P4.50 per hour ........... 27,000 Labor Efficiency Variance ................ P 2,250 U

107.Hard

(Appendix) Vernon Mills, Inc. is a large producer of men's and women's clothing. The company uses standard costs for all of its products. The standard costs and actual costs per unit of product for a recent period are given below for one of the company's product lines:

Standard Actual Cost Cost Standard: 4.0 yards at P5.40 per yard ...... P21.60 Actual: 4.4 yards at P5.05 per yard ......... P22.22Direct labor: Standard: 1.6 hours at P6.75 per hour ....... P10.80 Actual: 1.4 hours at P7.30 per hour ......... P10.22Variable overhead: Standard: 1.6 hours at P2.70 per hour ....... P 4.32 Actual: 1.4 hours at P3.25 per hour ......... P 4.55 Total cost per unit ....................... P36.72 P36.99


During this period, the company produced 4,800 units of this product. A comparison of standard and actual costs for the period on a total cost basis is given below:

Actual costs: 4,800 units at P36.99 ...... P177,552 Standard costs: 4,800 units at P36.72 .... 176,256 Difference in cost--unfavorable .......... P 1,296

There was no inventory of materials on hand at the beginning of the period. During the period, 21,120 yards of materials were purchased, all of which were used in production.

Required:

a. For direct materials, compute the price and quantity variances for the period and prepare journal entries to record all activity relating to direct materials for the period.b. For direct labor, compute the rate and efficiency variances and prepare a journal entry to record the incurrence of direct labor cost for the period.c. For variable overhead, compute the spending and efficiency variances.

Answer:

a. Materials Price Variance: Actual Quantity of Inputs, at Actual Price: 4,800 units, 4.4 yards per unit, P5.05 per yard = P106,656 Actual Quantity of Inputs, at Standard Price: 4,800 units, 4.4 yards per unit, P5.40 per yard = 114,048 Materials Price Variance ...................... P 7,392 F

Materials Quantity Variance: Actual Quantity of Inputs, at Standard Price: 4,800 units, 4.4 yards per unit, P5.40 per yard = P114,048 Standard Quantity of Inputs, at Standard Price: 4,800 units, 4.0 yards per unit, P5.40 per yard = 103,680 Materials Quantity Variance ................... P 10,368 U

Journal entries: Raw Materials (21,120 yards @ P5.40) .......... 114,048 Materials Price Variance (21,120 yards @ P0.35 F) .................. 7,392 Accounts Payable (21,120 yards @ P5.05) ..... 106,656

Work in Process (19,200 yards @ P5.40) ........ 103,680 Materials Quantity Variance (1,920 yards @ P5.40) 10,368 Raw Materials (21,120 yards @ P5.40) ........ 114,048


b. Labor Rate Variance: Actual Hours of Input, at the Actual Rate: 4,800 units, 1.4 hours, P7.30 per hour ...... P49,056 Actual Hours of Input, at the Standard Rate: 4,800 units, 1.4 hours, P6.75 per hour ...... 45,360 Labor Rate Variance ........................... P 3,696 U

Labor Efficiency Variance: Actual Hours of Input, at the Standard Rate: 4,800 units, 1.4 hours, P6.75 per hour ...... P45,360 Standard Hours of Input, at the Standard Rate: 4,800 units, 1.6 hours, P6.75 per hour ...... 51,840 Labor Efficiency Variance ..................... P 6,480 F

Journal entry: Work in Process (7,600 hours @ P6.75) ......... 51,840 Labor Rate Variance (6,720 @ P0.55 U) ......... 3,696 Labor Efficiency Variance (960 hrs. F @ P6.75) 6,480 Wages Payable (6,720 hrs. @ P7.30) .......... 49,056

c. Variable Overhead Spending Variance: Actual Hours of Input, at the Actual Rate: 4,800 units, 1.4 hours, P3.25 per hour ...... P 21,840 Actual Hours of Input, at the Standard Rate: 4,800 units, 1.4 hours, P2.70 per hour ...... 18,144 Variable Overhead Spending Variance ........... P 3,696 U

Variable Overhead Efficiency Variance: Actual Hours of Input, at the Standard Rate: 4,800 units, 1.4 hours, P2.70 per hour ...... P 18,144 Standard Hours of Input, at the Standard Rate: 4,800 units, 1.6 hours, P2.70 per hour ...... 20,736 Labor Efficiency Variance ..................... P 2,592 F

108.Medium

Lido Company’s standard and actual costs per unit for the most recent period, during which 400 units were actually produced, are given below:

Standard Actual Materials: Standard: 2 ft. at P1.50 per ft. ........ P 3.00 Actual: 2.1 ft. at P1.60 per ft. ........ P 3.36 Direct labor: Standard: 1.5 hrs. at P6.00 per hr. ..... 9.00 Actual: 1.4 hrs. at P6.50 per hr. ....... 9.10 Variable overhead: Standard: 1.5 hrs. at P3.40 per hr. ..... 5.10 Actual: 1.4 hrs. at P3.10 per hr. ....... 4.34 Total unit cost ............................ P17.10 P16.80

Required:

From the foregoing information, compute the following variances. Show whether the variance is favorable (F) or unfavorable (U):a. Material price varianceb. Material quantity variancec. Direct labor rate varianced. Direct labor efficiency variancee. Variable overhead spending variancef. Variable overhead efficiency variance


Answer:a. Material price variance = AQ(AP-SP) = (2.1x400)x(P1.60-P1.50) = P84 U

b. Material quantity variance = SP(AQ-SQ) = P1.50(2.1x400 - 2.0x400) = P60 U

c. Direct labor rate variance = AH(AR-SR) = (1.4x400)x(P6.50-P6.00) = P280 U

d. Direct labor efficiency variance = SR(AH-SH) = P6.00(1.4x400 - 1.5x400) = P240 F

e. Variable overhead spending variance = AH(AR-SR) = (1.4x400)x(P3.10-P3.40) = P168 F

f. Variable overhead efficiency variance = SR(AH-SH) = P3.40 (1.4x400 - 1.5x400) = P136 F

109.Medium

(Appendix) The Lahn Company produces and sells a single product. Standards have been established for the product as follows:

Direct materials ... 5 lbs. @ P3.50/lb. = P17.50/unit Direct labor ....... 3 hrs. @ P5.50/hr. = P16.50/unit

Actual cost and usage figures for the past month follow:

Units produced ................. 750 Direct materials used .......... 4,000 lbs. Direct materials purchased ..... P14,400 (4,500 lbs.) Direct labor cost .............. P11,200 (2,000 hrs.)


Required:

Prepare journal entries to record:a. The purchase of raw materials.b. The usage of raw materials in production.c. The incurrence of direct labor cost.

Answer:a. Raw materials inventory ................. 15,750* Materials price variance .............. 1,350** Accounts payable ...................... 14,400

* P3.50 per lb. x 4,500 lbs. = P15,750 ** AQ(AP - SP) = 4,500((P14,400/4,500 lbs) - P3.50) = P1,350 F

b. Work in process ......................... 13,125* Materials quantity variance ............. 875** Raw materials inventory ............... 14,000***

* P3.50 per lb. x 5 lbs per unit x 750 units = P13,125 ** SP(AQ - SQ) = P3.50(4,000 - (5 x 750)) = P875 U *** P3.50 x 4,000 = P14,000

c. Work in process ......................... 12,375* Labor rate variance ..................... 200** Labor efficiency variance ............. 1,375*** Accrued wages payable ................. 11,200

* P5.50 per hr. x 3 hrs per unit x 750 units = P12,375 ** AH(AR - SR) = 2,000((P11,200/2,000) - P5.50) = P200 U *** SR(AH - SH) = P5.50(2,000 - (3 x 750)) = P1,375 F

110.Easy




Actual materials purchased ............ 5,500 grams Actual cost of materials purchased .... P76,450 Actual materials used in production ... 5,100 grams Actual output ......................... 540 units

Required:

a. What is the materials price variance for the month?b. What is the materials quantity variance for the month?


Answer:Solution:Materials price variance = (AQ x AP) - (AQ x SP) = P76,450 – (5,500 x P14.70) = P4,400 F

SQ = Standard quantity per unit x Actual output = 9.2 x 540 = 4,968

Materials quantity variance = SP(AQ - SQ) = P14.70 (5,100 – 4,968) = P1,940 U

111.Easy


Standard quantity per unit of output .. 9.4 pounds Standard price ........................ P16.90 per pound


Actual materials purchased ............ 7,300 pounds Actual cost of materials purchased .... P116,435 Actual materials used in production ... 7,100 pounds Actual output ......................... 740 units

Required:


Answer:Materials price variance = (AQ x AP) - (AQ x SP) = P116,435 – (7,300 x P16.90) = P6,935 F

SQ = Standard quantity per unit x Actual output = 9.4 x 740 = 6,956

Materials quantity variance = SP(AQ - SQ) = P16.90(7,100 – 6,956) = P2,434 U

112.Easy


Standard quantity per unit of output .. 3.6 feet Standard price ........................ P10.20 per feet


Actual materials purchased ............ 7,100 feet Actual cost of materials purchased .... P68,515 Actual materials used in production ... 6,600 feet Actual output ......................... 1,780 units


Required:


Answer:Materials price variance = (AQ x AP) - (AQ x SP) = P68,515 – (7,100 x P10.20) = P3,905 F

SQ = Standard quantity per unit x Actual output = 3.6 x 1,780 = 6,408

Materials quantity variance = SP(AQ - SQ) = P10.20(6,600 – 6,408) = P1,958 U

113.Hard

Dodge Company produces a single product. The company has set the following standards for materials and labor:

Direct Materials Direct LaborStandard quantity or hours per unit ? pounds 3 hoursStandard price or rate ............ ? per pound P15 per hourStandard cost per unit ............ ? P45

During the past month, the company purchased 7,000 pounds of direct materials at a cost of P26,250. All of this material was used in the production of 1,300 units of product. Direct labor cost totaled P55,125 for the month. The following variances have been computed:

Materials price variance ....... P1,750 F Total materials variance ....... P250 U Labor efficiency variance ...... P6,000 F Required:

a. For direct materials, compute the standard price per pound, the standard quantity allowed for materials in total for the month's production, and the standard quantity per unit of product.b. For direct labor, compute the actual direct labor cost per hour for the month and the labor rate variance.

Answer:

a. The actual cost of material per pound for the month was: P26,500 7,000 pounds = P3.75 per pound. AQ (AP - SP) = Materials Price Variance 7,000 pounds (P3.75 - SP) = P1,750 F P26,250 - 7,000 SP = P1,750 F 7,000 SP = P28,000 SP = P4.00

SP (AQ - SQ) = Materials Quantity Variance P4.00(7,000 lbs. - SQ) = P2,000 U P28,000 - P4.00 SQ = P2,000 U P4.00 SQ = P26,000 SQ = 6,500 lbs.

6,500 lbs. 1,300 units = 5 lbs. per unit.


b. SR (AH - SH) = Labor Efficiency Variance P15 (AH - ((1,300 units x 3 hours)) = P6,000 F P15 AH - P58,500 = P6,000 F P15 AH = P52,500 AH = 3,500 hours Therefore, P55,125 total actual labor cost 3,500 hours = P15.75 per hour.

AH (AR - SR) = Labor Rate Variance 3,500 hours (P15.75 - P15.00) = P2,625 U.

114.Hard

The supervisor of the cost department has just conferred with you concerning the variance analysis of direct labor for the month just ended. As she talked, you wrote feverishly, but you weren't able to record all the information she gave you before she dashed off muttering something about "another brush fire to put out." Your efforts are shown below:

4,800 hours x P7.20 ____ hours x P____ ____ hours x P____

_________________ __________________ __________________ | | | | | | | | | | | Efficiency variance | | | P2,250 U | | | | _____________________________________________________________ Total variance, P810 U _____________________________________________________________

Required:

a. To redeem yourself, complete the form above, adding numbers and labels. (The usual notations, AH, SH, AR, SR, etc., may be used where appropriate.)b. If you know that 18 minutes of labor is standard per unit of production, how many units were produced?

Answer:a. AH X AR AH X SR SH X SR 4,800 hours X P7.20 4,800 hours X P7.50 4,500 hours X P7.50 P34,560 P36,000 P33,750

Rate variance, Efficiency variance, P1,440 F P2,250 U

Total variance, P810 U

Computations -- in this order:

Rate variance = Total variance - Efficiency variance = P810U - P2,250U = P810 - P2,250 = -P1,440 = P1,440F

AH X AR = 4,800 x P7.20 = P34,560 AH X SR = AH X AR - Rate variance = P34,560 - P1,440F = P34,560 - (-P1,440) = P36,000


SR = (AH X SR) ÷ AH = P36,000 ÷ 4,800 = P7.50

SH X SR = AH X SR - Efficiency variance = P36,000 - P2,250U = P36,000 - P2,250 = P33,750

SH = (SH X SR) ÷ SR = P33,750 ÷ P7.50 = 4,500

b. Standard hours allowed for units produced .......... 4,500 Divide by fraction of hour allowed per unit ........ 18/60 Actual units ....................................... 15,000

115.Easy

The following labor standards have been established for a particular product:



Actual hours worked ...................... 6,900 hours Actual total labor cost .................. P80,385 Actual output ............................ 2,300 units

Required:

a. What is the labor rate variance for the month?b. What is the labor efficiency variance for the month?

Answer:Labor rate variance = (AH x AR) - (AH x SR) = P80,385 – (6,900 x P11.50) = P1,035 U

SH = Standard hours per unit x Actual output = 2.8 x 2,300 = 6,440

Labor efficiency variance = SR(AH - SH) = P11.50(6,900 – 6,440) = P5,290 U

116.Easy






Required:

a. What is the variable overhead spending variance for the month?b. What is the variable overhead efficiency variance for the month?

Answer:Variable overhead spending variance = (AH x AR) - (AH x SR) = P97,600 – (6,100 x P15.80) = P1,220 U

SH = Standard hours per unit x Actual output = 6.9 x 800 = 5,520

Variable overhead efficiency variance = SR(AH - SH) = P15.80(6,100 – 5,520) = P9,164 U


Test Bank - Chapter10 Standard Costing

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