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Exam 23: Evaluating Variances From Standard Costs

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Question 31

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Prepare an income statement (through operating income) that includes variances for presentation to management, using the following data from the records of Greenway Manufacturing Company for November of the current year:

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Question 32

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The fact that workers are unable to meet a properly determined direct labor standard is sufficient cause to change the standard.

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Question 33

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An unfavorable fixed factory overhead volume variance may be due to a failure of supervisors to maintain an even flow of work.

The difference between the standard cost of a product and its actual cost is called a cost variance.

Ashlee Company records standard costs and variances in its accounts. Journalize the entry to record the purchase of 4,500 widgets at $7.45 per unit, assuming widgets have a standard cost of $7.15 per unit.

The Finishing Department of Pinnacle Manufacturing Co. prepared the following factory overhead cost budget for October of the current year, during which it expected to operate at a 100% capacity of 10,000 machine hours. During October, the plant was operated for 9,000 machine hours and the factory overhead costs incurred were as follows: indirect factory wages, $16,400; power and light, $10,000; indirect materials, $3,000; supervisory salaries, $12,000; depreciation of plant and equipment, $8,800; and insurance and property taxes, $3,200.Prepare a factory overhead cost variance report for October. (The budgeted amounts for actual amount produced should be based on 9,000 machine hours.)

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

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

Hsu Company produces a part with a standard of 5 yards of material per unit. The standard price of one yard of material is $8.50. During the month, 8,800 parts were manufactured, using 45,700 yards of material at a cost of $8.30.​ Determine the direct materials (a) price variance, (b) quantity variance, and (c) total cost variance.

Standards are designed to evaluate price and quantity variances separately.

Titus Company purchased and used 650 pounds of tomatoes (direct materials) to produce a taco sauce with a 635 pound standard direct materials requirement. The standard materials price is $22.40 per pound. The actual price of the tomatoes was $22.20 per pound.Journalize the entries to record (a) the purchase of the tomatoes and (b) the tomatoes used in production. Titus records standard costs and variances in its accounts.

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

The following data relate to direct labor costs for the current period: Standard costs 36,000 hours at $22.00 Actual costs 35,000 hours at $23.00 The direct labor time variance is

​ *Actual hours are equal to standard hours for units produced.​ -An unfavorable staff time variance may be the result of

Japan Company produces lamps that require 2.25 standard hours per unit at a standard hourly rate of $15.00 per hour. Production of 7,700 units required 19,250 hours at an hourly rate of $14.90 per hour.​ What is the direct labor (a) rate variance, (b) time variance, and (c) total cost variance?

Robin Company records standard costs and variances in its accounts. Robin Company purchased and used 500 pounds of direct materials to produce a product with a 520-pound standard direct materials requirement. The standard materials price is $1.90 per pound. The actual materials price was $2.00 per pound.​ Journalize the entries to record (a) the purchase of the materials and (b) the materials used in production.

Ruby Company produces a chair for which the standard specifies 5 yards of material per unit. The standard price of one yard of material is $7.50. During the month, 8,400 chairs were manufactured, using 43,700 yards at a cost of $7.30 per yard.​ Determine the (a) direct materials price variance, (b) direct materials quantity variance, and (c) total direct materials cost variance.

Which of the following is not a reason standard costs are separated into two components?

Subtracting actual revenues from planned revenues provides the revenue price variance.

Ruby Company produces a chair for which the standard specifies 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) direct materials price variance, (b) direct materials quantity variance, and (c) total direct materials cost variance.