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Exam 10: How Do Managers Evaluate Performance Using Cost Variance Analysis

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Question 31

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Standard cost typically refers to costs per unit for direct materials,direct labor,and variable overhead.

A) True
B) False

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Question 32

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Colfax Company incurred production labor costs of $5,400 in February (payable in March) for work requiring 1,100 standard hours at a standard rate of $15 per hour;1,200 actual direct labor hours were worked.Based on this information,which one of the following would be included in the journal entry to record the labor costs?

A) $16,500 credit to Work-in-process Inventory.
B) $1,500 credit to Labor Efficiency Variance.
C) $16,200 credit to Wages Payable.
D) $1,500 credit to Labor Rate Variance.
E) None of the answer choices is correct.

F) B) and D)
G) B) and E)

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Question 33

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Jake's Cheese Company produces gourmet cheese for resale at local grocery stores.The master budget indicates that the company expects to use 3.0 pounds of direct materials for each unit produced at a cost of $8.00 per pound (one unit = one batch of cheese).Each unit produced will require 0.50 direct labor hours at a cost of $10.00 per hour.Variable manufacturing overhead is applied based on direct labor hours at a rate of $5.00 per hour.Last year's sales were expected to total 50,000 units.Jake just received last year's actual results showing sales of 45,000 units. (1)Calculate the standard cost per unit for direct materials,direct labor,and variable manufacturing overhead. (2)Prepare a flexible budget based on actual sales for direct materials,direct labor,and variable manufacturing overhead.

Exhibit 10-3 Glenbrook Inc.has the following standard costs the one product the company produces. Direct Materials (2 pounds at $18.00 per pound) = $36.00 per unit Direct Labor (0.6 hours at $48.00 per hour) = $28.80 per unit During March,Glenbrook produced 2,000 units,bought and used 4,200 pounds of direct materials at $19.20 per pound,and used 1,100 hours of labor at a total cost of $56,100. -Refer to Exhibit 10-3.Based on this information,what is the direct labor rate variance?

Regardless of whether a company uses the traditional costing approach or an activity-based costing approach,the process of performing variance analysis is similar.

Which of the following remains the same when comparing a flexible budget to a master budget?

A higher mix of skilled indirect labor workers typically results in an unfavorable variable overhead spending variance.

Companies using standard costing systems wait for actual product cost data before recording transactions related to production.

When ideal standards are used,which of the following is most likely true?

Which of the following is true about "management by exception"?

Exhibit 10-2 Benny's Bakery produces bagels for resale at local grocery stores.The master budget indicates that the company expects to use 2.5 pounds of direct materials for each unit produced at a cost of $10.00 per pound (one unit = one batch of bagels) .Each unit produced will require 0.30 direct labor hours at a cost of $24.00 per hour.Variable manufacturing overhead is applied based on direct labor hours at a rate of $4.80 per hour.Last year's sales were expected to total 40,000 units.Benny just received last year's actual results showing sales of 35,000 units. -Refer to Exhibit 10-2.What amount would the flexible budget show for direct labor?

Which of the following would most likely be the reason for an unfavorable labor efficiency variance?

If a company has a favorable materials quantity variance of $3,300,the journal entry to record the use of direct materials in production along with this related quantity variance would include:

Management by exception is a term used to describe managers who look at all variances,regardless of the amount.

If an analysis shows an unfavorable labor rate variance of $18,000 and a favorable labor efficiency variance of $10,000,the entry to record the cost of direct labor and related variances would include:

Most managers prefer attainable standards rather than ideal standards for the following reasons except:

The labor rate variance is defined as the difference between actual costs for direct labor and budgeted costs based on the standards.

Exhibit 10-4 Zingler Inc.applies variable manufacturing overhead at a standard rate of $9 per direct labor hour.The standard quantity of direct labor is 4 hours per unit.Variable overhead costs totaled $90,000 for the month of December.A total of 15,000 direct labor hours were worked during December to produce 4,000 units. -Refer to Exhibit 10-4.Based on this information,what is the variable overhead efficiency variance?

Standard cost information never comes from historical data.

Prado Company applies fixed manufacturing overhead costs to products based on direct labor hours.Information for the month of April appears below.Prado's expected to produce and sell 500 units for the month. Calculate the fixed overhead spending variance and production volume variance.Clearly label each variance as favorable or unfavorable.