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Exam 22: Performance Evaluation Using Variances From Standard Costs

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Question 1

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Ruby Company produces a chair that requires 5 yards of material per unit. The standard price of one yard of material is $7.50. During the month, 8,500 chairs were manufactured, using 43,600 yards at a cost of $7.55 per yard. Determine the a) price variance, b) quantity variance, and c) cost variance.

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a) Price variance = $7.50 - $7...

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Question 2

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Match the following descriptions with the term a-e) it describes: -actual cost < standard cost at actual volumes

A) Ideal standard
B) Nonfinancial performance measure
C) Currently attainable standard
D) Unfavorable cost variance
E) Favorable cost variance

F) All of the above
G) C) and E)

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Question 3

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If at the end of the fiscal year, the variances from standard are significant, the variances should be transferred to the

The following data relate to direct labor costs for the current period: Standard costs 6,000 hours at $12.00 Actual costs 7,500 hours at $11.40 What is the direct labor rate variance?

The following data relate to direct labor costs for August: Actual costs: 5,500 hours at $24.00 per hour. Standard costs: 5,000 hours at $23.70 per hour. What is the direct labor time variance?

If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at $17, the rate variance was $1,200 favorable.

The standard cost is how much a product should cost to manufacture.

In most businesses, cost standards are established principally by accountants.

Favorable volume variances may be harmful when

The standard factory overhead rate is $10 per direct labor hour $8 for variable factory overhead and $2 for fixed factory overhead) based on 100% of normal capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows: -What is the amount of the variable factory overhead controllable variance?

Rosser Company produces a container that requires 4 yards of material per unit. The standard price of one yard of material is $4.50. During the month, 9,500 chairs were manufactured using 37,300 yards of material. Journalize the entry to record the standard direct materials used in production.

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 unfavorable.

Which of the following would not lend itself to applying direct labor variances?

Calculate the direct materials quantity variance.

Standards are set for only direct labor and direct materials.

Prepare an income statement for the year ended December 31, through the gross profit for Baxter Company using the following information. Baxter Company sold 8,600 units at $125 per unit. Normal production is 9,000 units. Do not round fixed overhead rate calculation when determining fixed factory overhead volume variance.)

The following data relate to direct labor costs for the current period: Standard costs 9,000 hours at $5.50 Actual costs 8,500 hours at $5.75 What is the direct labor rate variance?

Since the controllable variance measures the efficiency of using variable overhead resources, if budgeted variable overhead exceeds actual results, the variance is favorable.

Standard costs are determined by multiplying expected price by expected quantity.

Though favorable fixed factory overhead volume variances are usually good news, if inventory levels are too high, additional production could be harmful.