Chapter 10 Standard Costs and the Balanced Scorecard Tr ue/False Questions 1. Ideal standards do not allow for machine breakdowns and other normal ineff iciencies. Ans: T rue AACSB: Reflective Thinking AICA BB: Cri tical Thinking AICA !": Re#orting $%: 1 $evel: &as' (. The standard #rice #er unit for direct materials should reflect the final) delivered cost of the materials) net of an' discounts taken. Ans: T rue AACSB: Reflective Thinking AICA BB: Cri tical Thinking AICA !": Re#orting $%: 1 $evel: &as' *. The standard +uantit' or standard hours all owed refers to the amount of the in#ut that should have been used to #roduce the actual out#ut of the #eriod. Ans: T rue AACSB: Reflective Thinking AICA BB: Cri tical Thinking AICA !": Re#orting $%: 1 $evel: &as' ,. In develo#ing a direct material #rice standard) the e-#ected fr eight cost on the materials should be included. Ans: T rue AACSB: Reflective Thinking AICA BB: Cri tical Thinking AICA !": Re#orting $%: 1 $evel: &as' . /aterial #rice vari ances are often i solated at t he time materi als are #urchased) rather than when the' are #laced into #roduction) to facilitate earlier recognition of variances. Ans: T rue AACSB: Reflective Thinking AICA BB: Cri tical Thinking AICA !": Re#orting $%: ( $evel: &as' 0. a ste on the #roduction line wil l result in a materials #rice variance. Ans: !alse AACSB: Anal'tic AICA BB: Critical Thinking AICA !": Re#orting $%: ( $evel: /edium 2. It is best to isolate the material +uantit ' variance when the materials are #urchased. Ans: !alse AACSB: Anal'tic AICA BB: Critical Thinking AICA !": Re#orting $%: ( $evel: 3ard Garrison/Noreen/Brewer , Managerial Accounting, Twelfth Edition 10-7
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*. The standard +uantit' or standard hours allowed refers to the amount of the in#ut thatshould have been used to #roduce the actual out#ut of the #eriod.
. /aterial #rice variances are often isolated at the time materials are #urchased) ratherthan when the' are #laced into #roduction) to facilitate earlier recognition ofvariances.
5. If im#rovement in a #erformance measure on a balanced scorecard should lead toim#rovement in another #erformance measure) but does not) then em#lo'ees mustwork harder.
10. To measure controllable #roduction inefficiencies) which of the following is the best basis for a com#an' to use in establishing the standard hours allowed for the out#ut ofone unit of #roduct<A9 Average historical #erformance for the last several 'ears.
B9 &ngineering estimates based on ideal #erformance.C9 &ngineering estimates based on attainable #erformance.=9 The hours #er unit that would be re+uired for the #resent workforce to satisf'
Chapter 10 Standard Costs and the Balanced Scorecard
14. Richter Cor#. recorded the following entr' in its general ledger:
ork in rocess 0)777/aterial ?uantit' >ariance 77
Raw /aterials 0)77
The above ournal entr' indicates that:A9 the materials +uantit' variance for the #eriod was favorable.B9 less materials were used in #roduction during the #eriod than was called for at
standard.C9 the materials +uantit' variance for the #eriod was unfavorable.=9 the actual #rice #aid for the materials used in #roduction was greater than the
15. hen the actual #rice #aid on credit for a raw material e-ceeds its standard #rice) the ournal entr' would include:A9 Credit to Raw /aterials6 Credit to /aterials rice >arianceB9 Credit to Accounts a'able6 Credit to /aterials rice >arianceC9 Credit to Raw /aterials6 =ebit to /aterials rice >ariance=9 Credit to Accounts a'able6 =ebit to /aterials rice >ariance
(7. The variance that is most useful in assessing the #erformance of the #urchasingde#artment manager is:A9 the materials +uantit' variance.B9 the materials #rice variance.C9 the labor rate variance.=9 the labor efficienc' variance.
Chapter 10 Standard Costs and the Balanced Scorecard
(1. The #roduction de#artment should generall' be res#onsible for material #ricevariances that resulted from:
A9 #urchases made in uneconomical lotsies.B9 rush orders arising from #oor scheduling.C9 #urchase of the wrong grade of materials.=9 changes in the market #rices of raw materials.
((. A debit balance in the labor efficienc' variance account indicates that:A9 standard hours e-ceed actual hours.
B9 actual hours e-ceed standard hours.C9 standard rate and standard hours e-ceed actual rate and actual hours.=9 actual rate and actual hours e-ceed standard rate and standard hours.
indicates that:A9 the total labor variance was 477) unfavorable.B9 em#lo'ees received an une-#ected rate increase during the #eriod.C9 more labor time was re+uired to com#lete the out#ut of the #eriod than was
allowed at standard.=9 res#onses a and b are both correct.
Chapter 10 Standard Costs and the Balanced Scorecard
(,. hen the actual wage rate #aid to direct labor workers e-ceeds the standard wage rate)the ournal entr' would include:
A9 =ebit to ages a'able6 Credit to $abor Rate >arianceB9 =ebit to orkInrocess6 Credit to $abor Rate >arianceC9 =ebit to ages a'able6 =ebit to $abor Rate >ariance=9 =ebit to orkInrocess6 =ebit to $abor Rate >ariance
(. =uring a recent length' strike at /orell /anufacturing Com#an') managementre#laced striking assembl' line workers with office workers. The assembl' lineworkers were being #aid 14 #er hour while the office workers are onl' #aid 17 #er
hour. hat is the most likel' effect on the labor variances in the first month of thisstrike<
$abor Rate >ariance $abor &fficienc' >arianceA9 Dnfavorable "o effectB9 "o effect DnfavorableC9 Dnfavorable !avorable=9 !avorable Dnfavorable
Chapter 10 Standard Costs and the Balanced Scorecard
(2. ersechino Cor#oration is develo#ing standards for its #roducts. %ne #roduct re+uiresan in#ut that is #urchased for 4(.77 #er kilogram from the su##lier. B' #a'ing cash)
the com#an' gets a discount of (; off this #urchase #rice. Shi##ing costs from thesu##lierEs warehouse amount to 0. #er kilogram. Receiving costs are 7.,2 #erkilogram. The standard #rice #er kilogram of this in#ut should be:A9 20.0(B9 42.*4C9 57.00=9 4(.77
urchase #rice.................................................................. 4(.77$ess cash discount 8(; F 4(9........................................ 1.0,Shi##ing costs from the su##lierGs warehouse................ 0.Receiving costs................................................................ 7.,2Standard #rice #er kilogram............................................ 42.*4
(4. /a'all Cor#oration is develo#ing standards for its #roducts. &ach unit of out#ut of the #roduct re+uires 7.5( kilogram of a #articular in#ut. The allowance for waste ands#oilage is 7.7( kilogram of this in#ut for each unit of out#ut. The allowance for
reects is 7.11 kilogram of this in#ut for each unit of out#ut. The standard +uantit' inkilograms of this in#ut #er unit of out#ut should be:A9 7.57B9 7.5(C9 7.25=9 1.7
/aterial re+uirement #er unit of out#ut) in kilograms... . 7.5(Allowance for waste and s#oilages) in kilograms........... 7.7(Allowance for reects) in kilograms................................. 7.11Standard +uantit' #er unit' of out#ut) in kilograms........ 1.7
Chapter 10 Standard Costs and the Balanced Scorecard
(5. Heffs Cor#oration is develo#ing direct labor standards. The basic direct labor wage rateis 1,.77 #er hour. &m#lo'ment ta-es are 11; of the basic wage rate. !ringe benefits
are *.(, #er direct laborhour. The standard rate #er direct laborhour should be:A9 1,.77B9 5.((C9 ,.24=9 14.24
Basic direct labor wage rate............................................. 1,.77&m#lo'ment ta-es 811; F 1,.779................................. 1.,!ringe benefits................................................................. *.(,Standard rate #er direct laborhour.................................. 14.24
*7. refrath Cor#oration is develo#ing direct labor standards. A #articular #roductre+uires 7.21 direct laborhours #er unit. The allowance for breaks and #ersonal needsis 7.7, direct laborhours #er unit. The allowance for cleanu#) machine downtime) andreects is 7.1( direct laborhours #er unit. The standard direct laborhours #er unitshould be:A9 7.21
Chapter 10 Standard Costs and the Balanced Scorecard
*1. The budget for /a' called for #roduction of 5)777 units. Actual out#ut for the monthwas 4)77 units with total direct materials cost of 1(2)77 and total direct labor cost
of 22)22. The direct labor standards call for , minutes of direct labor #er unit at acost of 1( #er direct laborhour. The direct materials standards call for one #ound ofdirect materials #er unit at a cost of 1 #er #ound. The actual direct laborhours were0)*2. >ariance anal'sis of the #erformance for the month of /a' would indicate:A9 2)77 favorable materials +uantit' variance.B9 1)(2 favorable direct labor efficienc' variance.C9 1)(2 unfavorable direct labor efficienc' variance.=9 1)(2 unfavorable direct labor rate variance.
Actual rate J =irect labor cost K =irect laborhours J 22)22 K 0)*2 J 1(.(7$abor rate variance J Actual hours F 8Actual rate L Standard rate9J 0)*2 F 81(.(7 L 1(9 J 1)(2 unfavorableStandard hours J Standard hours #er unit F Actual out#utJ 8, minutes K 07 minutes9 F 4)77 J 0)*2$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 1( F 80)*2 L 0)*29 J 7
*(. $ion Com#an'Es direct labor costs for the month of Hanuar' were as follows:
Actual total direct laborhours................... (7)777Standard total direct laborhours................ (1)777=irect labor rate varianceMunfavorable.... *)777Total direct labor cost................................. 1(0)777
hat was $ionEs direct labor efficienc' variance<A9 0)777 favorableB9 0)17 favorableC9 0)*77 favorable
Chapter 10 Standard Costs and the Balanced Scorecard
Solution:
Actual rate J =irect labor cost K Actual direct laborhoursJ 1(0)777 K (7)777 J 0.*7$abor rate variance J Actual hours F 8Actual rate L Standard rate9*)777 J (7)777 F 80.*7 L Standard rate9Standard rate J 0.1$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 0.1 F 8(7)777 L (1)7779J 0)17 favorable
**. Information on Re- Co.Es direct material costs for /a' follows:
Actual +uantit' of direct materials #urchased and used. *7)777 #oundsActual cost of direct materials........................................ 4,)777Dnfavorable direct materials +uantit' variance.............. *)777Standard +uantit' of direct materials allowed for /a'
/aterials +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9*)777 J Standard #rice F 8*7)777 L (5)7779Standard #rice J */aterials #rice variance J 8Actual +uantit' F Actual #rice9 L 8Actual +uantit' FStandard #rice9 J 4,)777 L 8*7)777 F *9 J 0)777 favorable
Chapter 10 Standard Costs and the Balanced Scorecard
*,. /att Com#an' uses a standard cost s'stem. Information for raw materials for roductRBI for the month of %ctober follows:
Standard #rice #er #ound of raw materials.................. 1.07Actual #urchase #rice #er #ound of raw materials....... 1.Actual +uantit' of raw materials #urchased................. ()777 #oundsActual +uantit' of raw materials used......................... 1)577 #oundsStandard +uantit' allowed for actual #roduction......... 1)477 #ounds
hat is the materials #urchase #rice variance<A9 57 favorableB9 57 unfavorableC9 177 favorable
Chapter 10 Standard Costs and the Balanced Scorecard
*. Buckler Com#an' manufactures desks with vin'l to#s. The standard material cost forthe vin'l used #er /odel S desk is (2.77 based on 1( s+uare feet of vin'l at a cost of
(.( #er s+uare foot. A #roduction run of 1)777 desks in /arch resulted in usage of1()077 s+uare feet of vin'l at a cost of (.77 #er s+uare foot) a total cost of ()(77.The materials +uantit' variance resulting from the above #roduction run was:A9 1)(77 unfavorableB9 1)*7 unfavorableC9 1)477 favorable=9 *)17 favorable
Standard +uantit' J Standard +uantit' #er unit F Actual out#utJ 1( F 1)777 J 1()777/aterials +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9 J(.( F 81()077 L 1()7779 J 1)*7 unfavorable
*0. /agno Cereal Cor#oration uses a standard cost s'stem to collect costs related to the #roduction of its Ncrunch' #ickleO cereal. The #ickle 8materials9 standards for each batch of cereal #roduced are 1., #ounds of #ickles at a standard cost of *.77 #er #ound. =uring the month of August) /agno #urchased 24)777 #ounds of #ounds at a
total cost of (*)77. /agno used all of these #ickles to #roduce 07)777 batches ofcereal. hat is /agnoEs materials +uantit' variance for the month of August<A9 1)77 unfavorableB9 14)777 favorableC9 15)77 unfavorable=9 ,)777 unfavorable
Standard +uantit' J Standard +uantit' #er unit F Actual out#utJ 1., F 07)777 J 4,)777/aterials +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9 J* F 824)777 L 4,)7779 J 14)777 favorable
Chapter 10 Standard Costs and the Balanced Scorecard
*2. The following materials standards have been established for a #articular #roduct:
Standard +uantit' #er unit of out#ut..... .. .. . (.0 metersStandard #rice............................................ 17. #er meter
The following data #ertain to o#erations concerning the #roduct for the last month:
Actual materials #urchased........................ 0)777 metersActual cost of materials #urchased............ 5),77Actual materials used in #roduction.......... )077 metersActual out#ut.............................................. ()(77 units
hat is the materials +uantit' variance for the month<
Chapter 10 Standard Costs and the Balanced Scorecard
*4. The following materials standards have been established for a #articular #roduct:
Standard +uantit' #er unit of out#ut..... .. .. . (.4 gramsStandard #rice............................................ 1(.7 #er gram
The following data #ertain to o#erations concerning the #roduct for the last month:
Actual materials #urchased........................ 0)(77 gramsActual cost of materials #urchased............ 41)*7Actual materials used in #roduction.......... )277 gramsActual out#ut.............................................. 1)477 units
hat is the materials #rice variance for the month<
Chapter 10 Standard Costs and the Balanced Scorecard
*5. The standards for direct materials in making a certain #roduct are (7 #ounds at 7.2 #er #ound. =uring the #ast #eriod) 0)777 units of #roduct were made and the material
+uantit' variance was *7)777 D. The number of #ounds of direct material usedduring the #eriod amounted to:A9 1)747)777B9 1)107)777C9 1)(77)777=9 24,)777
Standard +uantit' J Standard +uantit' #er unit F Actual out#utJ (7 F 0)777 J 1)1(7)777/aterials +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9*7)777 J 7.2 F 8Actual +uantit' L 1)1(7)7779Actual +uantit' J 1)107)777
,7. The standard cost card for one unit of a finished #roduct shows the following:
Chapter 10 Standard Costs and the Balanced Scorecard
Solution:
Standard unit variable cost J 8=irect material standard +uantit' F =irect materialstandard #rice9 P 8=irect labor standard hours F =irect labor standard rate9 P 8>ariableoverhead standard +uantit' F >ariable overhead standard #rice924 J 81( F =irect materials standard #rice9 P 81. F 1(9 P 81. F 49=irect materials standard #rice J ,
,1. Construction Safet' Cor#oration manufactures orange #lastic safet' suits for roadworkers. The following information relates to the cor#orationEs #urchases and use ofmaterial for the month of A#ril:
Total 'ards of material
/aterial #urchased................................................. 4)77/aterial used in #roduction................................... 4)777Standard material allowed for suits #roduced........ 4)(77
Construction Safet'Es materials #rice variance for A#ril was 1)(77 favorable. Itsmaterials +uantit' variance for A#ril was 577 favorable. hat does ConstructionSafet' use as a standard #rice #er 'ard of material for its safet' suits<A9 1.47B9 (.,7C9 *.77=9 ,.7
Chapter 10 Standard Costs and the Balanced Scorecard
,(. A small com#onent is #urchased for the use in the #roduction of a maor #roduct. Thestandard #rice of the com#onent is 7.4. =uring a recent #eriod) 0)477 units of the
small com#onent were #urchased and the materials #rice variance was ,,unfavorable. The standard number of units of the small com#onent allowed for theactual out#ut of the #eriod was ),,7 units. hat was the actual #urchase #rice #erunit<A9 7.2B9 7.22C9 7.5*=9 7.5
Chapter 10 Standard Costs and the Balanced Scorecard
,,. Raggs Cor#orationEs standard wage rate is 1(.(7 #er direct laborhour 8=$39 andaccording to the standards) each unit of out#ut re+uires *.5 =$3s. In A#ril) )(77 units
were #roduced) the actual wage rate was 1(.17 #er =$3) and the actual hours were(,)17 =$3s. The $abor Rate >ariance for A#ril would be recorded as a:A9 credit of ()7(4.B9 credit of (),1.C9 debit of ()7(4.=9 debit of (),1.
Standard hours J Standard hours #er unit F Actual out#utJ 4.4 F 0)077 J 4)747$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 1( F 804)1(7 L 4)7479J 1(7),47 unfavorable
Chapter 10 Standard Costs and the Balanced Scorecard
,0. !ast Cor#orationEs standard wage rate is 1*.17 #er direct laborhour 8=$39 andaccording to the standards) each unit of out#ut re+uires (.0 =$3s. In /arch) 4)777
units were #roduced) the actual wage rate was 1(.,7 #er =$3) and the actual hourswere 14)727 =$3s. The $abor &fficienc' >ariance for /arch would be recorded as a:A9 debit of **)4(.B9 credit of **)4(.C9 debit of *)20*.=9 credit of *)20*.
Standard hours J Standard hours #er unit F Actual out#utJ (.0 F 4)777 J (7)477$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 1*.17 F 814)727 L (7)4779J *)20* favorable
,2. =ata concerning Barber Com#an'Es direct labor costs for the month of Hanuar' follow:
Actual total direct laborhours................... *,)77Standard total direct laborhours................ *)777
Total direct labor cost................................. (,1)77=irect labor efficienc' variance................. *)(77 !avorable
hat is BarberEs direct labor rate variance<A9 12)(7 unfavorableB9 (7)277 unfavorableC9 (1)777 unfavorable=9 (1)777 favorable
Chapter 10 Standard Costs and the Balanced Scorecard
Solution:
$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9L*)(77 J Standard rate F 8*,)77 L *)7779Standard rate J 0.,7Actual rate J =irect labor cost K Actual hoursJ (,1)77 K *,)77 J 2$abor rate variance J Actual hours F 8Actual rate L Standard rate9J *,)77 F 82.77 L 0.,79J (7)277 unfavorable
,4. i#er Com#an' should work 1)777 direct laborhours to #roduce (7 units of #roduct.=uring %ctober the com#an' worked 1)(7 direct laborhours and #roduced *77 units.
The standard hours allowed for %ctober would be:A9 1)(7 hoursB9 1)777 hoursC9 1)(77 hours=9 it is im#ossible to determine from the data given.
Standard hours #er unit J Budgeted direct labor hours K Budgeted #roductionJ 1)777 K (7 J ,Standard hours J Standard hours #er unit F Actual #roduction J , F *77 J 1)(77
,5. Qann' &lectronics Com#an' uses a standard cost s'stem to collect costs related to the #roduction of its water ski radios. The direct labor standard for each radio is 7.5 hours.The standard direct labor cost #er hour is 2.(7.=uring the month of August) Qann'Es water ski radio #roduction used 0)077 directlaborhours at a total direct labor cost of ,4)274. This resulted in #roduction of 0)577water ski radios for August. hat is Qann'Es labor rate variance for the month ofAugust<
Chapter 10 Standard Costs and the Balanced Scorecard
Solution:
$abor rate variance J Actual hours F 8Actual rate L Standard rate9J ,4)274 L 80)077 F 2.(79J 1)144 unfavorable
7. The following labor standards have been established for a #articular #roduct:
Standard laborhours #er unit of out#ut..... .7 hoursStandard labor rate..................................... 14.( #er hour
The following data #ertain to o#erations concerning the #roduct for the last month:
Actual hours worked...... .. .. 5)477 hoursActual total labor cost........ 120),77Actual out#ut...................... 1)577 units
hat is the labor efficienc' variance for the month<A9 *)7( DB9 ),77 DC9 *)7( !=9 ),2 D
Ans: = AACSB: Anal'tic AICA BB: Critical Thinking
AICA !": Re#orting $%: * $evel: &as'
Solution:
Standard hours J Standard hours #er unit F Actual out#utJ F 1)577 J 5)77$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 14.( F 85)477 L 5)779 J ),2 unfavorable
Actual rate J $abor cost K Actual hoursJ 172)0*7 K 5),77 J 11.,
$abor rate variance J Actual hours F 8Actual rate L Standard rate9J 5),77 F 811., L 11.079 J 1),17 favorable
(. Information on estcott Com#an'Es direct labor costs for a recent month follows:
Standard direct labor rate........................... *.2Actual direct labor rate............................... *.7Total standard direct laborhours............... 17)777=irect labor efficienc' variance................. ,)(77 Dnfavorable
hat were the actual hours worked during the month) rounded to the nearest hour<
Chapter 10 Standard Costs and the Balanced Scorecard
Solution:
$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9,)(77 J *.2 F 8Actual hours L 17)7779Actual hours J 11)1(7
*. Sullivan Cor#orationEs direct labor costs for the month of /arch were as follows:
Total standard direct laborhours............... ,()777Total actual direct laborhours................... ,7)777=irect labor rate variance........................... 4),77 !avorableStandard direct labor rate #er hour............. 0.*7
hat was SullivanEs total direct labor #a'roll for the month of /arch<A9 (,*)077B9 (,,)777C9 (07)777=9 (07),77
$abor rate variance J Actual hours F 8Actual rate L Standard rate9L4),77 J ,7)777 F 8Actual rate L 0.*79Actual rate J 0.75=irect labor #a'roll J Actual rate F Actual hoursJ 0.75 F ,7)777 J (,*)077
Chapter 10 Standard Costs and the Balanced Scorecard
,. &lliott Com#an' makes and sells a single #roduct. $ast #eriod the com#an'Es laborrate variance was 1,),77 D. =uring the #eriod) the com#an' worked *0)777 actual
direct laborhours at an actual cost of **4),77. The standard labor rate for the #roductin dollars #er hour is:A9 5.,7B9 5.77C9 4.7=9 4.17
Actual rate J =irect labor cost K =irect laborhoursJ **4),77 K *0)777 J 5.,7$abor rate variance J Actual hours F 8Actual rate L Standard rate91,),77 J *0)777 F 85.,7 L Standard rate9Standard rate J 5.77
. Tub Co. uses a standard cost s'stem. The following information #ertains to directlabor for #roduct B for the month of %ctober:
Actual rate #aid...................................................... 4.,7 #er hour
Standard rate.......................................................... 4.77 #er hour Standard hours allowed for actual #roduction....... ()777 hours$abor efficienc' variance....................................... 1)077 unfavorable
hat were the actual hours worked during %ctober<A9 1)477B9 1)417C9 ()157=9 ()(77
Chapter 10 Standard Costs and the Balanced Scorecard
0. In a #eriod) the labor efficienc' variance was ,)777 favorable. The standard directlabor wage rate is 1(.77 #er hour and *7 direct laborhours are allowed for each unit
of out#ut. iven that ,*)77 direct laborhours were worked) how man' units ofout#ut were actuall' #roduced<A9 17B9 1)*77C9 1),7=9 1)077
$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J Standard rate F Actual hours L 8Standard hours #er unit F Actual out#ut9L,)777 J 1( F ,*)77 L 8*7 F Actual out#ut9Actual out#ut J 1)077
2. ar# /anufacturing Cor#oration uses a standard cost s'stem to collect costs related tothe #roduction of its ski lift chairs. ar# uses machine hours as an overhead base. Thevariable overhead standards for each chair are 1.( machine hours at a standard cost of14 #er hour.=uring the month of Se#tember) ar# incurred *,)777 machine hours in the
#roduction of *()777 ski lift chairs. The total variable overhead cost was 0,5),77.hat is ar#Es variable overhead s#ending variance for the month of Se#tember<A9 *2),77 unfavorableB9 ,1)477 favorableC9 25)(77 favorable=9 4,)7,7 favorable
Chapter 10 Standard Costs and the Balanced Scorecard
4. The following standards for variable manufacturing overhead have been establishedfor a com#an' that makes onl' one #roduct:
Standard hours #er unit of out#ut......... 1.( hoursStandard variable overhead rate........... 17.(7 #er hour
The following data #ertain to o#erations for the last month:
Actual hours............................................... )777 hoursActual total variable overhead cost............ ()27Actual out#ut.............................................. ,)777 units
hat is the variable overhead efficienc' variance for the month<
Standard hours J Standard hours #er unit F Actual out#ut
J 1.( F ,)777 J ,)477>ariable overhead efficienc' variance J Standard rate F 8Actual hours L Standardhours9 J 17.(7 F 8)777 L ,)4779 J ()7,7 unfavorable
Chapter 10 Standard Costs and the Balanced Scorecard
5. The following standards for variable manufacturing overhead have been establishedfor a com#an' that makes onl' one #roduct:
Standard hours #er unit of out#ut......... 4.7 hoursStandard variable overhead rate........... 11. #er hour
The following data #ertain to o#erations for the last month:
Actual hours............................................... 2)777 hoursActual total variable overhead cost............ 25)177Actual out#ut.............................................. 077 units
hat is the variable overhead s#ending variance for the month<
>ariable overhead s#ending variance J 8Actual hours F Actual rate9 L 8Actual hours F
Standard rate9 J 25)177 L 82)777 F 11.9 J 1)27 favorable
07. The 3ane' Com#an' has a standard costing s'stem. >ariable manufacturing overheadis a##lied on the basis of direct laborhours. The following data are available forHanuar':
Chapter 10 Standard Costs and the Balanced Scorecard
Solution:
>ariable overhead s#ending variance J 8Actual hours F Actual rate9 L 8Actual hours FStandard rate9077 J ()77 L 8)477 F Standard rate9Standard rate J 8()77 P 0779 K )477 J ,.7>ariable overhead efficienc' variance J Standard rate F 8Actual hours L Standardhours9(),2 J ,.7 F 8)477 L Standard hours9Standard hours J )(7
01. Tanou'e Cor#oration kee#s careful track of the time re+uired to fill orders. =ataconcerning a #articular order a##ear below:
/C& J >alueadded time 8rocess time9 K Through#ut timeJ rocess time K 8rocess time P Ins#ection time P /ove time P ?ueue time9J 1.5 K 81.5 P 7.1 P (.2 P ,.49 J 7.(7
=eliver' c'cle time J ait time P Through#ut timeJ ait time P 8rocess time P Ins#ection time P /ove time P ?ueue time9J (4.7 P 81.7 P 7., P *.( P .19 J *2.2
=eliver' c'cle time J ait time P Through#ut timeJ ait time P 8rocess time P Ins#ection time P /ove time P ?ueue time9J 1*.* P 87. P 7.( P *.0 P .19 J ((.2
0. Scha## Cor#oration kee#s careful track of the time re+uired to fill orders. The timesrecorded for a #articular order a##ear below:
Chapter 10 Standard Costs and the Balanced Scorecard
02. =uring the month of August) $inosa /anufacturing Cor#oration #urchased 17)777 #ounds of materials at a total actual cost of 27)777. $inosa used 4)777 #ounds of this
material for AugustEs #roduction. $inosaEs materials #rice variance for August was,)777 favorable. Its materials +uantit' variance was 2)777 unfavorable. hat ournal entr' would $inosa make to record the usage of materials and the materials+uantit' variance for the month of August<
A9 ork in rocess ()(77/aterials ?uantit' >ariance 2)777
Raw /aterials 5)(77
B9 ork in rocess 00)(77/aterials ?uantit' >ariance 2)777
Raw /aterials 5)(77
C9 Raw /aterials 0*)777/aterials ?uantit' >ariance 2)777
Accounts a'able 27)777
=9 ork in rocess 02)777/aterials ?uantit' >ariance 2)777
Raw /aterials 2,)777
Ans: A AACSB: Anal'tic AICA BB: Critical Thinking
AICA !": Re#orting A##endi-: 17 $%: 2 $evel: 3ard
Solution:
/aterials #urchased +uantit' J urchase #rice L Standard cost 8Total9L,)777 J 27)777 L Standard costStandard cost J 2,)777Raw materials J 8/aterials used K /aterials #urchased9 F Standard costJ 84)777 K 17)7779 F 2,)777 J 5)(77ork in #rocess J Raw materials L /aterials +uantit' varianceJ 5)(77 L 2)777
Chapter 10 Standard Costs and the Balanced Scorecard
04. olio Cor#oration has #rovided the following data concerning its most im#ortant rawmaterial) com#ound A1*>:
Standard cost) #er liter........................................... *2.57Standard +uantit') liters #er unit of out#ut............. *.4Cost of material #urchased in Hul') #er liter........... *4.07/aterial #urchased in Hul') liters........................... ()(77
hen recording the #urchase of materials) Raw /aterials would be:A9 credited for 4*)*47.B9 credited for 4,)5(7.C9 debited for 4*)*47.=9 debited for 4,)5(7.
Raw materials J /aterials #urchased F Standard costJ ()(77 F *2.57 J 4*)*47
05. erstein Cor#oration has #rovided the following data concerning its most im#ortantraw material) com#ound /77?:
Standard cost) #er liter........................................... ,1.(7Standard +uantit') liters #er unit of out#ut............. (.5/aterial used in #roduction in A#ril) liters............ *(7Actual out#ut in A#ril) units................................... 177
hen recording the use of materials in #roduction) Raw /aterials would be:A9 debited for 1*)14,.B9 debited for 11)5,4.C9 credited for 1*)14,.=9 credited for 11)5,4.
Chapter 10 Standard Costs and the Balanced Scorecard
27. Com#ound >(/ is used to make Bl'e Cor#orationEs maor #roduct. The standardcost of >(/ is (.17 #er ounce and the standard +uantit' is *.1 ounces #er unit of
out#ut. In the most recent month) 1)77 ounces of the raw material were #urchased ata cost of (.(7 #er ounce. hen recording the #urchase of materials) Raw /aterialswould be:A9 credited for *2)477.B9 credited for *2)07.C9 debited for *2)477.=9 debited for *2)07.
Raw materials J /aterials #urchased F Standard cost J 1)77 F (.17 J *2)07
21. Com#ound $,2D is used to make Sewc'k Cor#orationEs maor #roduct. Thestandard cost of com#ound $,2D is (2.47 #er ounce and the standard +uantit' is 1.*ounces #er unit of out#ut. In the most recent month) 027 ounces of the com#ound wereused to make 077 units of the out#ut. hen recording the use of materials in #roduction) Raw /aterials would be:A9 debited for 14)0(0.B9 credited for 14)0(0.
The ournal entr' to record the incurrence of direct labor costs in /arch would includethe following for ork in rocess:A9 credit of 11)477.B9 credit of 5)55(.C9 debit of 5)55(.
Chapter 10 Standard Costs and the Balanced Scorecard
2*. Shackleford Cor#orationEs standard wage rate is 1*.27 #er direct laborhour 8=$39and according to the standards) each unit of out#ut re+uires 2.7 =$3s. In %ctober)
*)777 units were #roduced) the actual wage rate was 1,.17 #er =$3) and the actualhours were (1)207 =$3s. In the ournal entr' to record the incurrence of direct laborcosts in %ctober) the ork in rocess entr' would consist of a:A9 debit of (42)277.B9 credit of *70)410.C9 credit of (42)277.=9 debit of *70)410.
Standard hours J Standard hours #er unit F Actual out#utJ 2 F *)777 J (1)777ork in #rocess J Standard hours F Standard rateJ (1)777 F 1*.27 J (42)277
Dse the following to answer +uestions 2,2:
$ange Com#an' manufactures abstractsha#ed scul#tures made out of li+uid ade. &achscul#ture re+uires two 8(9 gallons of li+uid ade. Because of the instabilit' of the li+uid ade at
times) some scul#tures crack or shatter during the #roduction #rocess. The ade used in the broken scul#tures cannot be reused and is discarded. %n the average) one scul#ture ise-#ected to be lost for ever' nine scul#tures #roduced. In other words) eight good scul#turesare generated from ever' nine #roduction attem#ts.
2,. Dnder traditional standard costing) what amount should $ange use for the standard+uantit' of li+uid ade #er scul#ture<A9 (.777 gallonsB9 (.1( gallonsC9 (.((( gallons=9 (.(7 gallons
Chapter 10 Standard Costs and the Balanced Scorecard
Solution:
Standard +uantit' J Standard +uantit' #er unit F 8roduction attem#ts K "umber ofgood scul#tures9 J ( F 85 K 49 J (.(7 gallons
2. Dnder a total +ualit' management 8T?/9 a##roach to standard costing) what amountshould $ange use for the standard +uantit' of li+uid ade #er scul#ture<A9 (.777 gallonsB9 (.1( gallonsC9 (.((( gallons=9 (.(7 gallons
Ans: A AACSB: Anal'tic AICA BB: Critical Thinking
AICA !": Re#orting $%: 1 $evel: /edium
Solution:
Standard +uantit' #er unit J (.777 gallons
Dse the following to answer +uestions 2022:
ouri Cor#oration is develo#ing standards for its #roducts. %ne #roduct re+uires an in#ut thatis #urchased for 4.77 #er kilogram from the su##lier. B' #a'ing cash) the com#an' gets adiscount of ,; off this #urchase #rice. Shi##ing costs from the su##lierEs warehouse amount
to ,.0( #er kilogram. Receiving costs are 7. #er kilogram. &ach unit of out#ut of the #roduct re+uires 7.2, kilogram of this in#ut. The allowance for waste and s#oilage is 7.7*kilogram of this in#ut for each unit of out#ut. The allowance for reects is 7.1* kilogram ofthis in#ut for each unit of out#ut.
22. The standard +uantit' in kilograms of this in#ut #er unit of out#ut should be:A9 7.21B9 7.4C9 7.57=9 7.2,
Ans: C AACSB: Anal'tic AICA BB: Critical Thinking
AICA !": Re#orting $%: 1 $evel: &as'
Solution:
Standard +uantit':/aterial re+uirements #er unit of out#ut......................... 7.2,Allowance for waste and s#oilage................................... 7.7*Allowance for reects....................................................... 7.1*Standard +uantit' in kilograms........................................ 7.57
Dse the following to answer +uestions 2425:
arrigus Cor#oration is develo#ing direct labor standards. The basic direct labor wage rate is1,.77 #er hour. &m#lo'ment ta-es are 17; of the basic wage rate. !ringe benefits are *.* #er direct laborhour. A #articular #roduct re+uires 7.2, direct laborhours #er unit. Theallowance for breaks and #ersonal needs is 7.7 direct laborhours #er unit. The allowance for cleanu#) machine downtime) and reects is 7.1* direct laborhours #er unit.
Basic labor time #er unit.................................................. 7.2,Allowance for breaks and #ersonal needs....................... 7.7Allowance for cleanu#) machine downtime) and reects. 7.1*Standard direct laborhour #er unit.................................. 7.5(
Standard +uantit' J Standard +uantit' #er unit F Actual out#utJ (. F *)27 J 5)*2
/aterials +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9J Standard #rice F 8=irect materials #urchased in ounces L &nding inventor' inounces9 L Standard +uantit'J (7 F 81()777 L ()7779 L 5)*2J 1()77 unfavorable
4(. The direct labor efficienc' variance for %ctober is:A9 1),77 favorableB9 1)577 unfavorableC9 *)27 favorable=9 ,)*2 unfavorable
Standard hours J Standard hours #er unit F Actual out#utJ 1., F *)27 J )(7$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 1(.7 F 8)077 L )(79 J ,)*2 unfavorable
Standard hours J Standard hours #er unit F Actual out#utJ 1., F *)27 J )(7
Standard rate F Standard hours #er unit F Actual out#ut J >ariable overhead a##liedStandard rate J >ariable overhead a##lied K Standard hoursJ 14)*2 K )(7 J *.7>ariable overhead s#ending variance J 8Actual hours F Actual rate9 L 8Actual hours FStandard rate9J 14)(77 L 8)077 F *.79J 1),77 favorable
4,. The variable overhead efficienc' variance for %ctober is:A9 1),77 favorableB9 1)(( unfavorable
Standard hours J Standard hours #er unit F Actual out#utJ 1., F *)27 J )(7>ariable overhead efficienc' variance J Standard rate F 8Actual hours L Standard
The com#an' records all variances at the earliest #ossible #oint in time. >ariablemanufacturing overhead costs are a##lied to #roducts on the basis of direct labor hours.
4. The materials #rice variance for the #eriod is:A9 1)(7 !B9 1)77 !C9 1)(7 D=9 1)77 D
/aterials #rice variance J 8Actual +uantit' #urchased F Actual #rice9 L 8Actual+uantit' #urchased F Standard #rice9 J (4)77 L 80)777 F 9 J 1)77 favorable
Standard hours J Standard hours #er unit F Actual out#utJ 1. F 1)(77 J 1)477
>ariable overhead efficienc' variance J Standard rate F 8Actual hours L Standardhours9 J , F 8()177 L 1)4779 J 1)(77 unfavorable
Dse the following to answer +uestions 515:
$ongview 3os#ital #erforms blood tests in its laborator'. The following standards have beenset for each blood test #erformed:
Standard ?uantit' or 3ours Standard rice or Rate=irect materials............ (.7 #lates (.2 #er #late=irect labor.................. 7.( hours 1.77 #er hour >ariable overhead......... 7.( hours 2.77 #er hour
=uring /a') the laborator' #erformed 1)77 blood tests. %n /a' 1 there were no directmaterials 8#lates9 on hand6 after a #late is used for a blood test it is discarded. >ariableoverhead is assigned to blood tests on the basis of direct labor hours. The following eventsoccurred during /a':
• *)077 #lates were #urchased for 5),7
• *)(77 #lates were used for blood tests
• *,7 actual direct labor hours were worked at a cost of )7
Standard +uantit' J Standard +uantit' #er unit F Actual out#utJ ( F 1)77 J *)777/aterials +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9 J(.2 F 8*)(77 L *)7779 J 7 unfavorable
Standard hours J Standard hours #er unit F Actual out#utJ 7.( F 1)77 J *77$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 1 F 8*,7 L *779 J 077 unfavorable
Standard hours J Standard hours #er unit F Actual out#utJ 7.( F 1)77 J *77
>ariable overhead efficienc' variance J Standard rate F 8Actual hours L Standardhours9 J 2 F 8*,7 L *779 J (47 unfavorable
Dse the following to answer +uestions 5055:
rub Chemical Com#an' has develo#ed cost standards for the #roduction of its new cologne)Choc%. The variable cost standards below relate to each 17 gallon batch of Choc%:
Standard Cost er Batch/ilk chocolate 8( #ounds U 7.4 #er #ound9.. .... ..... 1.27=irect labor 81.( hours U 1(.77 #er hour9............... 1.77
>ariable overhead 81.( hours U ,,.77 #er hour9... .. .77
>ariable manufacturing overhead at rub is a##lied based on direct labor hours. The actualresults for last month were as follows:
"umber of batches #roduced..................... *)477=irect labor hours incurred........................ ,)17ounds of chocolate #urchased.................. 5)777ounds of chocolate used in #roduction.... 2)447Cost of chocolate #urchased...................... 2)(77=irect labor cost......................................... *)(14
/aterials #rice variance J 8Actual +uantit' #urchased F Actual #rice9 L 8Actual+uantit' #urchased F Standard #rice9 J 2)(77 L 85)777 F 7.49 J ,7 favorable
52. hat is Choc%Es materials 8milk chocolate9 +uantit' variance<A9 (*4 unfavorableB9 ,20 unfavorableC9 5( favorable=9 1)157 unfavorable
Standard +uantit' J Standard +uantit' #er unit F Actual out#utJ ( F *)477 J 2)077/aterials +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9 J7.4 F 82)447 L 2)0779 J (*4 unfavorable
Standard hours J Standard hours #er unit F Actual out#utJ 1.( F *)477 J ,)27>ariable overhead efficienc' variance J Standard rate F 8Actual hours L Standardhours9 J ,, F 8,)17 L ,)279 J 17)07 favorable
Chapter 10 Standard Costs and the Balanced Scorecard
Dse the following to answer +uestions 17717(:
8A##endi-9 idman) Inc. makes and sells onl' one #roduct and uses standard costing. Thestandard cost sheet for one unit of #roduct includes the following:
• =irect materials: grams at 7.* #er gram
• =irect labor: 1 hour at 4 #er hour
$ast #eriod the com#an' had the following results:
• )777 grams of direct materials #urchased at 7.,7 #er gram
• ,)777 grams of direct materials used in #roduction
•
577 units of #roduct were made• 47 hours of direct labor were used at 4.7 #er hour
177. The ournal entr' to record the #urchase of direct materials last #eriod would include:A9 Raw materials ()777) =ebit6 material #rice variance (7) CreditB9 Raw materials 1)27) =ebit6 material #rice variance (7) CreditC9 Raw materials ()777) =ebit6 material #rice variance (7) =ebit=9 Raw materials 1)27) =ebit6 material #rice variance (7) =ebit
Raw materials J /aterials #urchased F Standard cost J )777 F 7.* J 1)27/aterials #rice variance J 8Actual +uantit' #urchased F Actual #rice9 L 8Actual+uantit' #urchased F Standard #rice9 J 8)777 F 7.,79 L 8)777 F 7.*9 J (7unfavorable
Standard +uantit' J Standard +uantit' #er unit F Actual out#ut J F 577 J ,)77
ork in #rocess J Standard +uantit' F Standard #rice F Actual out#utJ F 7.* F 577 J 1)2/aterial +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9J 7.* F 8,)777 L ,)779 J 12 favorable
17(. The ournal entr' to record the incurrence of direct labor cost last #eriod wouldinclude:A9 ork in #rocess 2)(77) =ebit6 labor efficienc' variance ,77) CreditB9 ork in #rocess 2)(77) =ebit6 labor efficienc' variance ,77) =ebitC9 ork in #rocess 0)477) =ebit6 labor rate variance ,() =ebit=9 ork in #rocess 0)477) =ebit6 labor rate variance ,() Credit
Standard hours J Standard hours #er unit F Actual out#ut J 1 F 577 J 577ork in #rocess J Standard +uantit' F Standard #rice F Actual out#utJ 1 F 4 F 577 J 2)(77$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 4 F 847 L 5779 J ,77 favorable
Chapter 10 Standard Costs and the Balanced Scorecard
Dse the following to answer +uestions 17*170:
8A##endi-9 The Hohnson Com#an' makes a single #roduct called a ef. The com#an' uses astandard cost s'stem and has established the following standards for one ef:
There was no direct materials inventor' on Hune 1. >ariable manufacturing overhead isassigned on the basis of direct labor hours. The following events occurred in Hune:
• urchased )777 gallons of direct materials at a cost of 1*)777
• Dsed ,)277 gallons of direct materials to #roduce 1)(77 efs
• Dsed 027 hours of direct labor at a cost of 0)*0
• Incurred ()17 in variable manufacturing overhead cost
17*. The ournal entr' to record the material +uantit' variance for Hune would include:A9 /aterial +uantit' variance 77) debitB9 /aterial +uantit' variance (7) creditC9 /aterial +uantit' variance (7) debit=9 /aterial +uantit' variance 14) credit
Standard #rice #er gallon J Standard #rice #er ef K Standard +uantit' #er ef J 17 K , J (.7Standard +uantit' J Standard +uantit' #er unit F Actual out#utJ , F 1)(77 J ,)477/aterial +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9
Standard rate #er hour J Standard #rice #er ef K Standard hours #er ef J K 7. J 17
Standard hours J Standard hours #er unit F Actual out#utJ 7. F 1)(77 J 077$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 17 F 8027 L 0779 J 277 unfavorable
17. The amount debited to ork in rocess to record the use of direct materials in #roduction in Hune is:A9 1*)777B9 11)27C9 1()777=9 1*)(7
Standard +uantit' J Standard +uantit' #er unit F Actual out#utJ 1( F 1)777 J 1()777/aterial +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9J 7.07 F 81,)777 L 1()7779 J 1)(77 unfavorable
Standard hours J Standard hours #er unit F Actual out#utJ ( F 1)777 J ()777$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 4 F 8()77 L ()7779 J ,)777 unfavorable
Chapter 10 Standard Costs and the Balanced Scorecard
Dse the following to answer +uestions 11,112:
8A##endi-9 Scha#er Cor#oration has #rovided the following data concerning its mostim#ortant raw material) com#ound =*7X:
Standard cost) #er liter.................................................... ,4.47Standard +uantit') liters #er unit of out#ut...................... 0.7Cost of material #urchased in =ecember) #er liter.......... ,5.27/aterial #urchased in =ecember) liters.......................... *)177/aterial used in #roduction in =ecember) liters............. ()*47Actual out#ut in =ecember) units.................................... ,77
The raw material was #urchased on account.
11,. The debits to the Raw /aterials account for =ecember would total:A9 112)1(7B9 1,)727C9 110)1,,=9 11)(47
Standard +uantit' J Standard +uantit' #er unit F Actual out#utJ 0 F ,77 J (),77/aterials +uantit' variance J Standard #rice F 8/aterial used in #roduction in=ecember) liters L Standard +uantit'9 J ,4.47 F 8()*47 L (),779 J 520 favorable
Chapter 10 Standard Costs and the Balanced Scorecard
Dse the following to answer +uestions 1141(1:
8A##endi-9 Com#ound ?4*C is a raw material used to make /ctier Cor#orationEs maor #roduct. The standard cost of com#ound ?4*C is (*.27 #er ounce and the standard +uantit'is 2.( ounces #er unit of out#ut. =ata concerning the com#ound for Hanuar' a##ear below:
Cost of material #urchased in Hanuar') #er ounce........... (*.17/aterial #urchased in Hanuar') ounces........................... 1),77/aterial used in #roduction in Hanuar') ounces.............. 0(7Actual out#ut in Hanuar') units........................................ 177
The raw material was #urchased on account.
114. The debits to the Raw /aterials account for Hanuar' would total:A9 **)147B9 12)70,C9 1,)05,=9 *()*,7
Standard +uantit' J Standard +uantit' #er unit F Actual out#utJ 2.( F 177 J 2(7/aterials +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9 J(*.27 F 80(7 L 2(79 J ()*27 favorable
Chapter 10 Standard Costs and the Balanced Scorecard
Dse the following to answer +uestions 1((1(*:
The following materials standards have been established for a #articular #roduct:
Standard +uantit' #er unit of out#ut.......... *.( metersStandard #rice............................................ 1*.,7 #er meter
The following data #ertain to o#erations concerning the #roduct for the last month:
Actual materials #urchased........................ ,)077 metersActual cost of materials #urchased............ 5)477Actual materials used in #roduction.......... ,),77 metersActual out#ut.............................................. 1)*77 units
1((. hat is the materials #rice variance for the month<A9 1)4,7 DB9 1)207 DC9 1)207 !=9 1)4,7 !
/aterials #rice variance J 8Actual materials #urchased F Actual #rice9 L 8urchaseActual materials #urchased F Standard #rice9 J 5)477 L 8,)077 F 1*.,79 J 1)4,7favorable
Standard +uantit' J Standard +uantit' #er unit F Actual out#utJ *.( F 1)*77 J ,)107
/aterials +uantit' variance J Standard #rice F 8Actual +uantit' L Standard +uantit'9 J1*.,7 F 8,),77 L ,)1079 J *)(10 unfavorable
Dse the following to answer +uestions 1(,1(:
The Bowden Com#an' makes a single #roduct. %nl' one kind of direct material is used tomake this #roduct. The com#an' uses a standard cost s'stem. The com#an'Es cost records forHune show the following data:
"umber of units #roduced..... .... ... . 17)777/aterial #rice variance.................. 4),77 !avorable
/aterial +uantit' variance............. 4)777 DnfavorableActual direct material used............ (1)777 #ounds=irect materials standard #rice. .. .. . 4 #er #ound
/aterials +uantit' variance J Standard #rice F Actual +uantit' L 8Standard +uantit' #er unit F Actual out#ut9
4)777 J 4 F (1)777 L 8Standard +uantit' #er unit F 17)7779Standard +uantit' #er unit J (Standard cost #er unit J Standard #rice #er #ound F Standard +uantit' #er unitJ 4 F ( J 10
1(. If the amount of direct material bought in Hune e+uals the amount of direct materialused in Hune) then the actual cost of direct material #er #ound is:A9 4.1(B9 4.77C9 2.07=9 2.,(
Standard hours J Standard hours #er unit F Actual out#utJ F ,)(77 J (1)777
$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 1*.,7 F 8(7)1(7 L (1)7779 J 11)25( favorable
Dse the following to answer +uestions 1(51*1:
8A##endi-9 Santiesteban Cor#orationEs standard wage rate is 1*.77 #er direct laborhour8=$39 and according to the standards) each unit of out#ut re+uires 2.5 =$3s. In /arch) 4)077units were #roduced) the actual wage rate was 1(.*7 #er =$3) and the actual hours were0)077 =$3s.
1(5. In the ournal entr' to record the incurrence of direct labor costs in /arch) the ork in
rocess entr' would consist of a:A9 credit of 470)447.B9 debit of 470)447.C9 debit of 44*)((7.=9 credit of 44*)((7.
Standard hours J Standard hours #er unit F Actual out#utJ 2.5 F 4)077 J 02)5,7$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 1* F 80)077 L 02)5,79 J *7),(7 favorable
Standard hours J Standard hours #er unit F Actual out#utJ ,.( F 477 J *)*07$abor efficienc' variance J Standard rate F 8Actual hours L Standard hours9J 1*.07 F 8()577 L *)*079 J 0)(0 favorable
Chapter 10 Standard Costs and the Balanced Scorecard
Dse the following to answer +uestions 1*,1*:
The following standards for variable manufacturing overhead have been established for acom#an' that makes onl' one #roduct:
Standard hours #er unit of out#ut............... .( hoursStandard variable overhead rate................. 1,.17 #er hour
The following data #ertain to o#erations for the last month:
Actual hours............................................... 0),77 hoursActual total variable overhead cost............ 44)*(7Actual out#ut.............................................. 1)(77 units
1*,. hat is the variable overhead s#ending variance for the month<A9 **0 !B9 **0 DC9 1)5(7 !=9 1)5(7 D
Standard hours J Standard hours #er unit F Actual out#utJ .( F 1)(77 J 0)(,7
>ariable overhead efficienc' variance J Standard rate F 8Actual hours L Standard+uantit'9 J 1,.17 F 80),77 L 0)(,79 J ()(0 unfavorable
Dse the following to answer +uestions 1*01*2:
olk Cor#oration is a highl' automated manufacturing com#an'. The vice #resident offinance has decided that traditional standards are ina##ro#riate for #erformance measures inan automated environment. $abor is insignificant in terms of the total cost of #roduction andtends to be fi-ed. /aterial +ualit' is considered more im#ortant than minimiing materialcost. And customer satisfaction is the number one #riorit'. As a result) deliver' #erformancemeasures have been chosen to evaluate manufacturing #erformance. The following data are
considered to be t'#ical of the time to com#lete orders.
• ait time to the start of #roduction: 17.7 da's
• Ins#ection time: 1. da's
• rocess time: *.7 da's
• ?ueue time during the #roduction #rocess: .7 da's
=eliver' c'cle time J ait time P Through#ut timeJ ait time P 8rocess time P Ins#ection time P /ove time P ?ueue time9J 17 P 8* P 1. P (. P 9 J ((
Dse the following to answer +uestions 1*41*5:
The management of International Cookwares believes that deliver' #erformance measuresmust be im#roved if the com#an' is to maintain its com#etitive edge. The following data areconsidered to be t'#ical of the time to com#lete orders.
• rocess time: ,.7 da's
• ait time to the start of #roduction: 1.7 da's
• /ove time: *.7 da's
• Ins#ection time: (.7 da's
• ?ueue time during the #roduction #rocess: 4.7 da's
Through#ut time J rocess time P Ins#ection time P /ove time P ?ueue timeJ , P ( P * P 4 J 12=eliver' c'cle time J ait time P Through#ut time J 1 P 12 J *(
Dse the following to answer +uestions 1,71,(:
ingcade Cor#oration kee#s careful track of the time re+uired to fill orders. =ata concerninga #articular order a##ear below:
Through#ut time J rocess time P Ins#ection time P /ove time P ?ueue timeJ 1.1 P 7.1 P (.7 P 5.1 J 1(.*/C& J rocess time K Through#ut time J 1.1 K 1(.* J 7.75
1,(. The deliver' c'cle time was:A9 *7.0 hoursB9 ( hoursC9 (5., hours=9 11.1 hours
Through#ut time J rocess time P Ins#ection time P /ove time P ?ueue timeJ 1.1 P 7.1 P (.7 P 5.1 J 1(.*=eliver' c'cle time J ait time P Through#ut time J 14.* P 1(.* J *7.0
Bulkbo' !itness &+ui#ment) Inc. was recentl' created to #roduce and sell its NBice#tionO armmachine. Bulkbo' decided to use a standard cost s'stem to record costs related to the
#roduction of this #roduct. The material standard for each machine #roduced is 1.1 #ounds ofa s#ecial aluminum tubing at a standard cost of 1( #er #ound.
=uring the first month of o#erations) Bulkbo' #urchased ()777 #ounds of this aluminumtubing at 11 #er #ound. Bulkbo' used (()777 #ounds to #roduce (7)(7 Bice#tion machines.
1,0. hat is the balance in Bulkbo'Es materials inventor' account at the end of the firstmonth of o#erations<A9 11)777B9 *()277C9 **)777
Chapter 10 Standard Costs and the Balanced Scorecard
Essay Questions
1,4. Ra#oni Cor#oration is develo#ing standards for its #roducts. %ne #roduct re+uires anin#ut that is #urchased for 47.77 #er kilogram from the su##lier. B' #a'ing cash) thecom#an' gets a discount of *; off this #urchase #rice. Shi##ing costs from thesu##lierEs warehouse amount to 0.00 #er kilogram. Receiving costs are 7., #erkilogram. &ach unit of out#ut re+uires 7.40 kilogram of this in#ut. The allowance forwaste and s#oilage is 7.7 kilogram of this in#ut for each unit of out#ut. Theallowance for reects is 7.75 kilogram of this in#ut for each unit of out#ut.
Re+uired:
a. =etermine the standard #rice #er kilogram of this in#ut. Show 'our workY
b. =etermine the standard kilograms of this in#ut #er unit of out#ut. Show 'ourworkY
Ans:
a. Standard #riceurchase #rice................................................................. 47.77$ess cash discount........................................................... 8(.,79Shi##ing costs from the su##lierGs warehouse................ 0.00Receiving costs................................................................ 7.,
Standard #rice #er kilogram............................................ 4,.21
b. Standard +uantit'/aterial re+uirement #er unit of out#ut) in kilograms.... 7.40Allowance for waste and s#oilage) in kilograms............. 7.7Allowance for reects) in kilograms................................ 7.75
Standard +uantit' #er unit of out#ut) in kilograms.......... 1.77
Chapter 10 Standard Costs and the Balanced Scorecard
1,5. ortsche Cor#oration is develo#ing standards for its #roducts. %ne #roduct re+uires anin#ut that is #urchased for 4,.77 #er kilogram from the su##lier. B' #a'ing cash) the
com#an' gets a discount of 5; off this #urchase #rice. Shi##ing costs from thesu##lierEs warehouse amount to 2., #er kilogram. Receiving costs are 7.7 #erkilogram.
Re+uired:
=etermine the standard #rice #er kilogram of this in#ut. Show 'our workY
17. Behunin Cor#oration is develo#ing standards for a #roduct. &ach unit of out#ut of the #roduct re+uires 7.,7 kilogram of a #articular in#ut. The allowance for waste ands#oilage is 7.72 kilogram of this in#ut for each unit of out#ut. The allowance for
reects is 7.11 kilogram of this in#ut for each unit of out#ut.
Re+uired:
=etermine the standard kilograms of this in#ut #er unit of out#ut. Show 'our workY
Ans:
/aterial re+uirement #er unit of out#ut) in kilograms.... 7.,7Allowance for waste and s#oilage) in kilograms............ 7.72Allowance for reects) in kilograms................................ 7.11
Standard +uantit' #er unit of out#ut) in kilograms......... 7.4
Chapter 10 Standard Costs and the Balanced Scorecard
11. Hiles Cor#oration is develo#ing direct labor standards. The basic direct labor wage rateis 1(.,7 #er hour. &m#lo'ment ta-es are 11; of the basic wage rate. !ringe benefits
are *.1 #er hour. A #articular #roduct re+uires 7.4* direct laborhours #er unit. Theallowance for breaks and #ersonal needs is 7.7* direct laborhours #er unit. Theallowance for cleanu#) machine downtime) and reects is 7.17 direct laborhours #erunit.
Re+uired:
a. =etermine the standard rate #er direct laborhour. Show 'our workY b. =etermine the standard direct laborhours #er unit of #roduct. Show 'our workYc. =etermine the standard labor cost #er unit of #roduct to the nearest cent. Show
'our workY
Ans:
a. Standard rate #er direct laborhour:Basic wage rate #er hour.................................................... 1(.,7&m#lo'ment ta-es.............................................................. 1.*0!ringe benefits.................................................................... *.1
Standard rate #er direct laborhour..................................... 12.(2
b. Standard directlabor hours #er unit of out#ut:Basic labor time #er unit.................................................... 7.4* =$3s
Allowance for breaks and #ersonal needs.......................... 7.7* =$3sAllowance for cleanu#) machine downtime) and reects.... 7.17 =$3s
Standard directlabor hours #er unit................................... 7.50 =$3s
c. Standard labor cost #er unit:Standard rate #er direct laborhour 8a9............................... 12.(2Standard directlabor hours #er unit 8b9............................. 7.50
Standard labor cost #er unit 8a9 F 8b9................................. 10.4
Chapter 10 Standard Costs and the Balanced Scorecard
1(. Cantlow Cor#oration is develo#ing direct labor standards. The basic direct labor wagerate is 1*.7 #er hour. &m#lo'ment ta-es are 17; of the basic wage rate. !ringe
benefits are *.50 #er hour.
Re+uired:
=etermine the standard rate #er direct laborhour. Show 'our workY
1*. Bersch Cor#oration is develo#ing direct labor standards. A #articular #roduct re+uires7.04 direct laborhours #er unit. The allowance for breaks and #ersonal needs is 7.7,direct laborhours #er unit. The allowance for cleanu#) machine downtime) and reectsis 7.1* direct laborhours #er unit.
Re+uired:
=etermine the standard direct laborhours #er unit of #roduct. Show 'our workY
Ans:
Basic labor time #er unit..................................................... 7.04 =$3sAllowance for breaks and #ersonal needs.......................... 7.7, =$3sAllowance for cleanu#) machine downtime) and reects.... 7.1* =$3s
Standard directlabor hours #er unit................................... 7.4 =$3s
Chapter 10 Standard Costs and the Balanced Scorecard
1,. $ido Com#an'Es standard and actual costs #er unit for the most recent #eriod) duringwhich 77 units were actuall' #roduced) are given below:
Standard Actual/aterials:
Standard: ( feet at 1.7 #er foot.................. *.77Actual: 1.5 feet at 1.07 #er foot.................. *.7,
=irect labor:Standard: 1. hours at 0.77 #er hour........... 5.77Actual: 1.2 hours at 0.*7 #er hour.............. 17.21
>ariable manufacturing overhead:Standard: 1. hours at *.,7 #er hour........... .17Actual: 1.2 hours at *.77 #er hour.............. .17
Total unit cost................................................... 12.17 14.4
All of the material #urchased during the #eriod was used in #roduction during the #eriod.
Re+uired:
!rom the foregoing information) com#ute the following variances. Indicate whetherthe variance is favorable 8!9 or unfavorable 8D9:a. /aterial #rice variance. b. /aterial +uantit' variance.
Chapter 10 Standard Costs and the Balanced Scorecard
1. Bronfenbrenner Co. uses a standard cost s'stem for its single #roduct in whichvariable overhead is a##lied on the basis of direct labor hours. The following
information is given:
Standard costs #er unit:Raw materials 81. grams at 10 #er gram9............................. (,.77=irect labor 87.2 hours at 4 #er hour9.................................. 0.77>ariable overhead 87.2 hours at * #er hour9......................... (.(
Actual e-#erience for current 'ear:Dnits #roduced......................................................................... ((),77 unitsurchases of raw materials 8(1)777 grams at 12 #er gram9... *2)777Raw materials used.................................................................. **),77 grams
Com#ute the following variances for raw materials) direct labor) and variableoverhead) assuming that the #rice variance for materials is recognied at #oint of #urchase:a. =irect materials #rice variance. b. =irect materials +uantit' variance.c. =irect labor rate variance.
Total labor variance............................................. 0,7 Dnfavorable
Re+uired:
a. =etermine the number of #ounds of direct materials #urchased and used during the #eriod.
b. =etermine the materials +uantit' variance.c. =etermine the standard direct labor rate #er direct labor hour.d. =etermine the standard hours allowed for the #roduction of the #eriod.
Chapter 10 Standard Costs and the Balanced Scorecard
14. Qee Cor#oration has develo#ed the following cost standards for the #roduction of itsleather back#acks:
Standard Cost er Back#ack
$eather 87.5 'ards U (( #er 'ard9............................. 15.47=irect labor 81.* hours U 5.77 #er hour9................... 11.27>ariable overhead 81.* hours U 1.77 #er hour9....... 15.7
>ariable overhead at Qee is a##lied on the basis of direct labor hours. The actualresults for last month were as follows:
"umber of back#acks #roduced................. 1)777
=irect labor hours incurred........................ 14)477@ards of leather #urchased......................... 1,)77@ards of leather used in #roduction........... 1,)177Cost of leather #urchased........................... *70)02=irect labor cost......................................... 15)477>ariable overhead cost............................... (4)207
Re+uired:
Com#ute the following variances for Qee. Show and label 'our com#utations.a. /aterials #rice variance.
Chapter 10 Standard Costs and the Balanced Scorecard
15. The following standards have been established for a raw material used in the #roduction of #roduct =,*:
Standard +uantit' of the material #er unit of out#ut........ ,.7 #oundsStandard #rice of the material.......................................... 1,.17 #er #ound
The following data #ertain to a recent monthGs o#erations:
Actual material #urchased.................... 2)77 #oundsActual cost of material #urchased........ 174)27Actual material used in #roduction...... 2)(77 #oundsActual out#ut........................................ 1)447 units of #roduct =,*
Re+uired:
a. hat is the materials #rice variance for the month< b. hat is the materials +uantit' variance for the month<c. re#are ournal entries to record the #urchase and use of the raw material during
the month. 8All raw materials are #urchased on account.9
Ans:
a. /aterials #rice variance J 8A? F A9 L 8A? F S9J 174)27 L 82)77 F 1,.179 J *)777 D
b. /aterials +uantit' variance J S8A? L S?[9J 1,.1782)(77 L 2)(79 J ,)1( !
[S? J Standard +uantit' #er unit F Actual out#ut J ,.7 F 1)447 J 2)(7
c. Hournal entries to record the #urchase and use of the raw material:
Record the #urchase of the raw material:Raw /aterials 17)27/aterials rice >ariance *)777
Accounts a'able 174)27
Record the use of the raw material:ork In rocess 170)7*(
Chapter 10 Standard Costs and the Balanced Scorecard
107. The standards for #roduct T45 call for 2.( meters of a raw material that costs 11.27 #er meter. $ast month) 4)277 meters of the raw material were #urchased for 54)2,.
The actual out#ut of the month was 1)(77 units of #roduct T45. A total of 4)177 metersof the raw material were used to #roduce this out#ut.
Re+uired:
a. hat is the materials #rice variance for the month< b. hat is the materials +uantit' variance for the month<c. re#are ournal entries to record the #urchase and use of the raw material during
the month. 8All raw materials are #urchased on account.9
Ans:
a. /aterials #rice variance J 8A? F A9 L 8A? F S9J 54)2, L 84)277 F 11.279 J *)7, !
b. /aterials +uantit' variance J S8A? L S?[9J 11.2784)177 L 4)0,79 J 0)*14 !
[S? J Standard +uantit' #er unit F Actual out#ut J 2.( F 1)(77 J 4)0,7
c. Hournal entries to record the #urchase and use of the raw material:
Record the #urchase of the raw material:Raw /aterials 171)257/aterials rice >ariance *)7,Accounts a'able 54)2,
Record the use of the raw material:ork In rocess 171)744
Chapter 10 Standard Costs and the Balanced Scorecard
101. &gner Cor#oration has #rovided the following data concerning its most im#ortant rawmaterial) com#ound D**:
Standard cost) #er liter................................................. (0.47Standard +uantit') liters #er unit of out#ut................... 4.7Cost of material #urchased in %ctober) #er liter.......... (2.27/aterial #urchased in %ctober) liters........................... ()777/aterial used in #roduction in %ctober) liters............. 1)0,7Actual out#ut in %ctober) units.................................... (77
The raw material was #urchased on account.
Re+uired:
a. Record the #urchase of the raw material in a ournal entr'. b. Record the use of the raw material in #roduction in a ournal entr'.
Ans:
a. &ntr' to record #urchase of materials:Raw /aterials 8()777 liters at (0.47 #er liter9 *)077/aterials rice >ariance 8()777 liters at 7.57 #er liter D9 1)477
Accounts a'able 8()777 liters at (2.27 #er liter9 ),77
b. &ntr' to record use of materials:Standard +uantit' allowed for the actual out#ut 8(77 units at 4.7 liters #er unit9 J1)077 liters
ork In rocess 81)077 liters at (0.47 #er liter9 ,()447/aterials ?uantit' >ariance 8,7 liters at (0.47 #er liter
D9 1)72(Raw /aterials 81)0,7 liters at (0.47 #er liter9 ,*)5(
Chapter 10 Standard Costs and the Balanced Scorecard
10(. Com#ound ?2T is used b' Cestone Cor#oration to make one of its #roducts. Thestandard cost of com#ound ?2T is ,0.77 #er ounce and the standard +uantit' is (.
#er unit of out#ut. =ata concerning the com#ound in the most recent month a##ear below:
Cost of material #urchased in Hul') #er ounce................. ,.*7/aterial #urchased in Hul') ounces.................................. 1)77/aterial used in #roduction in Hul') ounces.................... 1)*(7Actual out#ut in Hul') units.............................................. 077
The raw material was #urchased on account.
Re+uired:
a. Record the #urchase of the raw material in a ournal entr'. b. Record the use of the raw material in #roduction in a ournal entr'.
Ans:
a. &ntr' to record #urchase of materials:Raw /aterials 81)77 ounces at ,0.77 #er ounce9 05)777
/aterials rice >ariance 81)77 ounces at 7.27 #erounce !9 1)77
Accounts a'able 81)77 ounces at ,.*7 #er ounce9 02)57
b. &ntr' to record use of materials:Standard +uantit' allowed for the actual out#ut 8077 units at (. ounces #er unit9 J1)77
ork In rocess 81)77 ounces at ,0.77 #er ounce9 05)777/aterials ?uantit' >ariance 8147 ounces at ,0.77
Chapter 10 Standard Costs and the Balanced Scorecard
10*. Sile Com#an' uses a standard cost s'stem to collect costs related to the #roductionof its N"oStickO lawn chairs. The direct material for the chairs is teflon. Sile uses a
standard direct material cost of ,7.77 #er chair 87.4 #ounds of teflon at 7.77 #er #ound9. =uring A#ril) Sile #urchased ()177 #ounds of teflon for 170)2. Sileused 1)27 #ounds of this teflon in A#ril to #roduce 1)477 lawn chairs.
Re+uired:
Calculate SileEs materials #rice and materials +uantit' variances for A#ril. Then #re#are the ournal entries to record these variances.
Ans:
/aterials #rice variance J 170)2 L 8()177 F 7.779 J 1)2 D/aterials +uantit' variance J 81)27 F 79 L 81)477 F 7.4 F 79 J 1)77 D
Raw /aterials 17)777/aterial #rice variance 1)2
Accounts #a'able 170)2
ork in #rocess 2()777/aterial +uantit' variance 1)77
Chapter 10 Standard Costs and the Balanced Scorecard
10,. The following materials standards have been established for a #articular #roduct:
Standard +uantit' #er unit of out#ut.......... 2.7 gramsStandard #rice............................................ 1(.07 #er gram
The following data #ertain to o#erations concerning the #roduct for the last month:
Actual materials #urchased........................ 5)77 gramsActual cost of materials #urchased............ 1(2)*77Actual materials used in #roduction.......... 5)777 gramsActual out#ut.............................................. 1)*,7 units
Re+uired:
a. hat is the materials #rice variance for the month< b. hat is the materials +uantit' variance for the month<
Ans:
/aterials #rice variance J 8A? F A9 L 8A? F S9J 1(2)*77 \ 85)77 F 1(.079 J 2)077 D
S? J Standard +uantit' #er unit F Actual out#ut J 2.7 F 1)*,7 J 5)*47
Chapter 10 Standard Costs and the Balanced Scorecard
10. The following standards have been established for a raw material used to make #roduct %4,:
Standard +uantit' of the material #er unit of out#ut....... 2.1 metersStandard #rice of the material......................................... 14.*7 #er meter
The following data #ertain to a recent monthGs o#erations:
Actual material #urchased.......................... *),77 metersActual cost of material #urchased.............. 0,)757Actual material used in #roduction............ *)177 metersActual out#ut.............................................. 77 units of #roduct %4,
Re+uired:
a. hat is the materials #rice variance for the month< b. hat is the materials +uantit' variance for the month<
Ans:
a. /aterials #rice variance J 8A? F A9 L 8A? F S9J 0,)757 L 8*),77 F 14.*79 J 1)427 D
b. /aterials +uantit' variance J S8A? L S?[9
J 14.*78*)177 L *)79 J 4)(* !
[S? J Standard +uantit' #er unit F Actual out#ut J 2.1 F 77 J *)7
Chapter 10 Standard Costs and the Balanced Scorecard
100. The standards for #roduct >(4 call for 2. #ounds of a raw material that costs 14.17 #er #ound. $ast month) 1),77 #ounds of the raw material were #urchased for (,)557.
The actual out#ut of the month was 107 units of #roduct >(4. A total of 1)*77 #oundsof the raw material were used to #roduce this out#ut.
Re+uired:
a. hat is the materials #rice variance for the month< b. hat is the materials +uantit' variance for the month<
Ans:
a. /aterials #rice variance J 8A? F A9 L 8A? F S9
J (,)557 L 81),77 F 14.179 J *7 !
b. /aterials +uantit' variance J S8A? L S?[9J 14.1781)*77 L 1)(779 J 1)417 D
[S? J Standard +uantit' #er unit F Actual out#ut J 2. F 107 J 1)(77
Chapter 10 Standard Costs and the Balanced Scorecard
102. The following direct labor standards have been established for #roduct /47A:
Standard direct laborhours............ 1.* hours #er unit of /47AStandard direct labor wage rate...... 1,.17 #er hour
The following data #ertain to the most recent monthGs o#erations during which ()777units of #roduct /47A were made:
Actual direct laborhours worked.... ()277Actual direct labor wages #aid........ *0),7
Re+uired:
a. hat was the labor rate variance for the month< b. hat was the labor efficienc' variance for the month<c. re#are a ournal entr' to record direct labor costs during the month) including the
direct labor variances.
Ans:
a. $abor rate variance J 8A3 F AR9 L 8A3 F SR9J *0),7 L 8()277 F 1,.179 J 1)0(7 !
b. $abor efficienc' variance J SR8A3 L S3[9
J 1,.17 8()277 L ()0779 J 1),17 D
[S3 J Standard hours #er unit F Actual out#ut J 1.* F ()777 J ()077
c. Hournal entries to record the direct labor costs:
ork In rocess *0)007$abor &fficienc' >ariance 1),17
Chapter 10 Standard Costs and the Balanced Scorecard
104. The standards for #roduct 341C s#ecif' 0. direct laborhours #er unit at 1(.57 #erdirect laborhour. $ast month 1)(,7 units of #roduct 341C were #roduced using 4)(77
direct laborhours at a total direct labor wage cost of 177)7,7.
Re+uired:
a. hat was the labor rate variance for the month< b. hat was the labor efficienc' variance for the month<c. re#are a ournal entr' to record direct labor costs during the month) including the
direct labor variances.
Ans:
a. $abor rate variance J 8A3 F AR9 L 8A3 F SR9J 177)7,7 L 84)(77 F 1(.579 J )2,7 !
b. $abor efficienc' variance J SR8A3 L S3[9J 1(.57 84)(77 L 4)7079 J 1)470 D
[S3 J Standard hours #er unit F Actual out#ut J 0. F 1)(,7 J 4)707
c. Hournal entries to record the direct labor costs:
Chapter 10 Standard Costs and the Balanced Scorecard
127. The direct labor standards at ointde-ter Cor#oration are 1(.,7 #er direct laborhour8=$39 and (.* =$3s #er unit of out#ut. In August) 2)177 units were #roduced) the
actual wage rate was 1*.77 #er =$3) and the actual hours were 1)07 =$3s.
Re+uired:
re#are the ournal entr' to record the incurrence of direct labor costs.
Ans:
Standard +uantit' allowed for the actual out#ut 82)177 units at (.* =$3s #er unit9 J10)**7=$3s
ork In rocess 810)**7 =$3s at 1(.,7 #er ounce9 (7(),5(
$abor Rate >ariance 81)07 =$3s at 7.07 #er =$3D9 5)**0
Chapter 10 Standard Costs and the Balanced Scorecard
12*. The standards for #roduct 24> s#ecif' ,.1 direct laborhours #er unit at 1(.17 #erdirect laborhour. $ast month 1)077 units of #roduct 24> were #roduced using 0)077
direct laborhours at a total direct labor wage cost of 22)((7.
Re+uired:
a. hat was the labor rate variance for the month< b. hat was the labor efficienc' variance for the month<
Ans:
a. $abor rate variance J 8A3 F AR9 L 8A3 F SR9J 22)((7 L 80)077 F 1(.179 J ()0,7 !
b. $abor efficienc' variance J SR8A3 L S3[9J 1(.17 80)077 L 0)079 J ,4, D
[S3 J Standard hours #er unit F Actual out#ut J ,.1 F 1)077 J 0)07
Chapter 10 Standard Costs and the Balanced Scorecard
12,. The following standards for variable manufacturing overhead have been establishedfor a com#an' that makes onl' one #roduct:
Standard hours #er unit of out#ut............... 0.( hoursStandard variable overhead rate................. 1*.( #er hour
The following data #ertain to o#erations for the last month:
Actual hours............................................... 4)(77 hoursActual total variable overhead cost............ 175),27Actual out#ut.............................................. 1)*77 units
Re+uired:
a. hat is the variable overhead s#ending variance for the month< b. hat is the variable overhead efficienc' variance for the month<
Ans:
>ariable overhead s#ending variance J 8A3 F AR9 L 8A3 F SR9J 175),27 \ 84)(77 F 1*.(9 J 4(7 D
S3 J Standard hours #er unit F Actual out#ut J 0.( F 1)*77 J 4)707
>ariable overhead efficienc' variance J SR8A3 L S39J 1*.(84)(77 \ 4)7079 J 1)4 D
Chapter 10 Standard Costs and the Balanced Scorecard
12. !re'tag Cor#orationEs variable manufacturing overhead is a##lied on the basis ofdirect laborhours. The com#an' has established the following variable manufacturing
overhead standards for #roduct "70C:
• Standard direct laborhours: . hours #er unit of "70C
• Standard variable manufacturing overhead rate: ,.17 #er hour
The following data #ertain to the most recent monthEs o#erations during which 1)077units of #roduct "70C were made:
Actual direct laborhours worked: 4)277Actual variable manufacturing overhead incurred: *0),7
Re+uired:
a. hat was the variable overhead s#ending variance for the month< b. hat was the variable overhead efficienc' variance for the month<
Ans:
>ariable overhead s#ending variance J 8A3 F AR9 L 8A3 F SR9J *0),7 L 84)277 F ,.179 J 427 D
>ariable overhead efficienc' variance J SR8A3 L S3[9
J ,.1784)277 L 4)4779 J ,17 !
[S3 J Standard hours #er unit F Actual out#ut J . F 1)077 J 4)477
Chapter 10 Standard Costs and the Balanced Scorecard
120. 3ighfill Cor#orationEs variable manufacturing overhead is a##lied on the basis ofdirect laborhours. The standard cost card for #roduct =47= s#ecifies 4., direct laborhours #er unit of =47=. The standard variable manufacturing overhead rate is .07
#er direct laborhour. =uring the most recent month) 477 units of #roduct =47= weremade and 0)477 direct laborhours were worked.The actual variable manufacturing overhead incurred was ,1)1,7.
Re+uired:
a. hat was the variable overhead s#ending variance for the month< b. hat was the variable overhead efficienc' variance for the month<
Ans:
a. >ariable overhead s#ending variance J 8A3 F AR9 L 8A3 F SR9J ,1)1,7 L 80)477 F .079 J *)707 D
b. >ariable overhead efficienc' variance J SR8A3 L S3[9J .0780)477 L 0)2(79 J ,,4 D
[S3 J Standard hours #er unit F Actual out#ut J 4., F 477 J 0)2(7
122. h' are man' com#anies su##lementing) or even re#lacing) standard cost s'stemswith o#erating #erformance measures<
Ans:
There are a number of reasons wh' com#anies are su##lementing) or even re#lacing)their standard cost s'stems with o#erating #erformance measures. These reasonsinclude:$abor is less significant in man' com#anies and tends to be fi-ed. Thus) the traditional
labor variances are of little value.hen labor is essentiall' fi-ed) a focus on labor efficienc' variances ma' #rom#t
#roduction of needless inventories.reoccu#ation with standard costs ma' result in low +ualit' and #oor deliver' #erformance.
/an' managers would argue that continual im#rovement is necessar') not ustmeeting standards.
Chapter 10 Standard Costs and the Balanced Scorecard
124. Schlarbaum Cor#orationEs management kee#s track of the time it takes to #rocessorders. =uring the most recent month) the following average times were recorded #er
a. Com#ute the through#ut time. b. Com#ute the manufacturing c'cle efficienc' 8/C&9.c. hat #ercentage of the #roduction time is s#ent in nonvalueadded activities<d. Com#ute the deliver' c'cle time.
Ans:a. Through#ut time
J rocess time P Ins#ection time P /ove time P ?ueue timeJ 1.* da's P 7.( da's P 7.4 da's P 0.5 da's J 5.( da's
b. /C& J >alueadded time 8rocess time9 K Through#ut time
J 1.* da's K 5.( da's J 7.1,
c. ercentage of time s#ent on nonvalueadded activitiesJ 177; \ /C&; J 177; \ 1,; J 40;
=eliver' c'cle time J ait time P Through#ut timeJ *.2 da's P 5.( da's J 1(.5 da's
Chapter 10 Standard Costs and the Balanced Scorecard
125. =uring the most recent month at Schwab Cor#oration) +ueue time was 2.4 da's)ins#ection time was 7.* da') #rocess time was 1.* da's) wait time was 5.2 da's) and
move time was 7.2 da'.
Re+uired:
a. Com#ute the through#ut time. b. Com#ute the manufacturing c'cle efficienc' 8/C&9.c. hat #ercentage of the #roduction time is s#ent in nonvalueadded activities<d. Com#ute the deliver' c'cle time.
Ans:a. Through#ut time
J rocess time P Ins#ection time P /ove time P ?ueue timeJ 1.* da's P 7.* da's P 7.2 da's P 2.4 da's J 17.1 da's
b. /C& J >alueadded time 8rocess time9 K Through#ut timeJ 1.* da's K 17.1 da's J 7.1*
c. ercentage of time s#ent on nonvalueadded activitiesJ 177; \ /C&; J 177; \ 1*; J 42;
d. =eliver' c'cle time J ait time P Through#ut timeJ 5.2 da's P 17.1 da's J 15.4 da's
Chapter 10 Standard Costs and the Balanced Scorecard
147. Schur Cor#orationEs management re#orts that its average deliver' c'cle time is (0.2da's) its average through#ut time is 17.7 da's) its manufacturing c'cle efficienc'
8/C&9 is 7.(() its average move time is 7.0 da') and its average +ueue time is 0.2da's.
Re+uired:
a. hat is the wait time< b. hat is the #rocess time<c. hat is the ins#ection time<
Ans:
a. =eliver' c'cle time J ait time P Through#ut time(0.2 da's J ait time P 17.7 da'sait time J (0.2 da's L 17.7 da's J 10.2 da's
b. /C& J rocess time K Through#ut time7.(( J rocess time K 17.7 da'srocess time J 7.(( F 17.7 da's J (.( da's
c. Through#ut timeJ rocess time P Ins#ection time P /ove time P ?ueue time17.7 da's J (.( da's P Ins#ection time P 7.0 da's P 0.2 da's
Ins#ection time J 17.7 da's L (.( da's L 7.0 da's L 0.2 da'sJ 7. da's