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Exam 10: Standard Costs and Variances

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Question 21

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Samples Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $140,000 and budgeted activity of 20,000 hours.During the year, the company completed the following transactions:Purchased 49,500 liters of raw material at a price of $8.00 per liter. The materials price variance was $24,750 Favorable.Used 45,820 liters of the raw material to produce 32,800 units of work in process. The materials quantity variance was $850 Favorable.Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 28,440 hours at an average cost of $17.00 per hour. The direct labor rate variance was $28,440 Favorable. The labor efficiency variance was $39,600 Unfavorable.Applied fixed overhead to the 32,800 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs for the year were $154,700. Of this total, $83,700 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $71,000 related to depreciation of manufacturing equipment. The fixed manufacturing overhead budget variance was $14,700 Unfavorable. The fixed manufacturing overhead volume variance was $43,680 Favorable.Completed and transferred 32,800 units from work in process to finished goods.Sold (for cash) 32,000 units to customers at a price of $38.20 per unit.Transferred the standard cost associated with the 32,000 units sold from finished goods to cost of goods sold.Paid $133,000 of selling and administrative expenses.Closed all standard cost variances to cost of goods sold.To answer the following questions, it would be advisable to record transactions a through i in the worksheet below. This worksheet is similar to the worksheets in your text except that it has been split into two parts to fit on the page. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. The net operating income for the year is closest to:

A) $155,660
B) $178,434
C) $68,600
D) $112,020

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

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Question 22

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The standard quantity or standard hours allowed refers to the amount of the input that should have been used to produce the actual output of the period.

A) True
B) False

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Question 23

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Doogan Corporation makes a product with the following standard costs: The company produced 5,200 units in January using 39,310 grams of direct material and 2,380 direct labor-hours. During the month, the company purchased 44,400 grams of the direct material at $1.70 per gram. The actual direct labor rate was $19.30 per hour and the actual variable overhead rate was $6.80 per hour.The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The variable overhead efficiency variance for January is:

Kita Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows: During the year, the company assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 24,820 hours at an average cost of $21.20 per hour.Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. When the direct labor cost is recorded in transaction (c) above, which of the following entries will be made?

Poorly trained workers could have an unfavorable effect on which of the following variances?

Elliott Corporation makes and sells a single product. Last period the company's labor rate variance was $14,400 Unfavorable. During the period, the company worked 36,000 actual direct labor-hours at an actual cost of $338,400. The standard labor rate for the product in dollars per hour is:

The following standards for variable manufacturing overhead have been established for a company that makes only one product: The following data pertain to operations for the last month: What is the variable overhead rate variance for the month?

Phann Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows: The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $90,000 and budgeted activity of 7,500 hours.During the year, the company completed the following transactions:a. Purchased 59,000 kilos of raw material at a price of $9.20 per kilo.b. Used 51,340 kilos of the raw material to produce 18,300 units of work in process.c. Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 8,850 hours at an average cost of $23.70 per hour.d. Applied fixed overhead to the 18,300 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs for the year were $79,400. Of this total, $22,400 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $57,000 related to depreciation of manufacturing equipment.e. Completed and transferred 18,300 units from work in process to finished goods.Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. When applying fixed manufacturing overhead to production in transaction (d) above, the Work in Process inventory account will increase (decrease) by:

Dibert Incorporated has provided the following data concerning one of the products in its standard cost system. The company has reported the following actual results for the product for February: The labor rate variance for the month is closest to:

The Fime Corporation uses a standard costing system. The following data have been assembled for December: The standard hours allowed for December's production is:

Bondi Corporation makes automotive engines. For the most recent month, budgeted production was 3,500 engines. The standard power cost is $1.50 per machine-hour. The company's standards indicate that each engine requires 11.3 machine-hours. Actual production was 3,800 engines. Actual machine-hours were 41,340 machine-hours. Actual power cost totaled $66,642.Required:Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable. Indicate whether each of the variances is favorable (F) or unfavorable (U).

Information on Westcott Corporation's direct labor costs for a recent month follows: What were the actual hours worked during the month, rounded to the nearest hour?

Robnett Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows: During the year, the company completed the following transactions:a. Purchased 106,900 liters of raw material at a price of $6.80 per liter.b. Used 93,760 liters of the raw material to produce 24,700 units of work in process.Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. When recording the raw materials purchases in transaction (a) above, the Cash account will increase (decrease) by:

A product's standard cost card specifies that a unit of the product requires 4 direct labor-hours. During September, 3,350 units were made, which was 150 units less than budgeted. The total budgeted direct labor cost for September was $117,600. The direct labor cost incurred during September was $111,850 and 13,450 direct labor-hours were worked.The labor rate variance for the month was:

Suver Corporation has a standard costing system. The following data are available for June: The actual price per pound of direct materials purchased in June was:

Kartman Corporation makes a product with the following standard costs: In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931.The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The labor rate variance for June is:

The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: The direct materials purchases variance is computed when the materials are purchased.What is the materials quantity variance for the month?

Irving Corporation makes a product with the following standards for direct labor and variable overhead: In November the company's budgeted production was 5,900 units, but the actual production was 5,700 units. The company used 1,640 direct labor-hours to produce this output. The actual variable overhead cost was $8,528. The company applies variable overhead on the basis of direct labor-hours.The variable overhead rate variance for November is:

The labor rate variance measures the difference between the actual hourly rate and the standard hourly rate, multiplied by the standard hours allowed for the actual output.

Hofbauer Incorporated has provided the following data concerning one of the products in its standard cost system. The company has reported the following actual results for the product for September: The labor efficiency variance for the month is closest to: