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Chapter 10--Profit and Cost Center Performance Evaluation
Student:
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1. Which of the following might cause a materials variance? A.
Failing to take purchase discounts. B. Using a better grade of raw
material. C. Changes in the market supply for the raw materials. D.
All of the above.
2. Which of the following is not a major group responsible for
variances in organizations? A. Marketing B. Consulting C.
Administration D. Production
3. Why might a material variance arise? A. More efficient use of
materials than the standard. B. The purchase of inferior raw
materials. C. Both a and b above. D. None of the above.
4. Why do direct labor variances occur? A. Managers do not
correctly anticipate changes in wage rates. B. Poor materials are
used in production. C. Supervisors encounter scheduling problems.
D. All of the above.
5. Which is not a reason direct labor variances may occur? A.
Managers do not correctly anticipate changes in wage rates. B. Poor
materials are used in production. C. Prices rise with direct
materials. D. All of the above.
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6. Fixed production costs variances are calculated as A. the
difference between actual and budgeted fixed costs. B. (actual
hours standard inputs) budgeted fixed costs. C. (actual hours
standard outputs) budgeted fixed costs. D. (actual hours standard
outputs) actual fixed costs.
7. Why do fixed manufacturing cost variances occur? A. Managers
do not correctly anticipate changes in wage rates. B. Poor
materials are used in production. C. Supervisors encounter
scheduling problems. D. Actual fixed costs differ from budgeted
fixed costs.
8. Which of the following terms describes the difference between
the budgeted (or standard) price and the actual price paid for each
unit of input? A. Price variance. B. Efficiency variance. C. Usage
variance. D. Quantity variance.
9. Which variance measures the efficiency with which the firm
uses inputs to produce outputs? A. Throughput. B. Efficiency. C.
Economy. D. Effectiveness.
10. To analyze variances, the variable cost variance model is
applied to the calculation of which of the following? A. Direct
materials variances. B. Direct labor variances. C. Variable
manufacturing overhead price and efficiency variances. D. All of
the above.
11. Which of the following does the cost variance model use to
analyze differences between actual and budgeted profits? A.
Flexible production budget. B. Fixed production budget. C. Prior
periods production budget. D. Generally accepted accounting
principles.
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12. To help managers in their efforts to control overhead costs,
managers and accountants analyze overhead variances using the
variable cost variance model by separating variable overhead
variances into A. price and quality components. B. economy and
efficiency components. C. price and efficiency components. D.
economy and effectiveness components.
13. What is the term that describes the rate companies
frequently use to apply fixed overhead costs to units produced? A.
Actual overhead rate. B. Predetermined overhead rate. C.
Post-determined overhead rate. D. Variable overhead rate.
14. The production volume variance is the difference between
which of the following two costs? A. Budgeted and applied fixed
costs. B. Actual costs and the budgeted costs. C. Budgeted and
actual fixed costs. D. Variable costs and the budgeted costs.
15. The production price (spending) variance is the difference
between which of the following two costs? A. Budgeted and applied
costs. B. Actual and budgeted costs. C. Applied and actual costs.
D. Variable and budgeted costs.
16. Which statement is true concerning the fixed overhead
production efficiency variance? A. The production efficiency
variance exists as fixed costs are assumed to vary inversely with
volume. B. The production efficiency variance exists as fixed costs
are assumed to vary along with volume. C. The production efficiency
variance exists as fixed costs are assumed to vary exponentially
with volume. D. The production efficiency variance does not exist
as fixed costs are assumed not to vary with volume.
17. Which variance(s) are generally calculated to analyze fixed
manufacturing overhead costs? A. Production volume variances only.
B. Price variances only. C. Production volume and price variances
only. D. Production volume, price, and efficiency variances.
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18. Tool(s) that managers can use to decide when to investigate
variances include which of the following? A. Use of both tolerance
limits and decision models. B. Use of tolerance limits only. C.
Decision models only. D. None of the above.
19. Activity-based costing is commonly used with standard
costing. Using activity-based costing, a company has A. a single
cost driver B. multiple cost drivers. C. no cost drivers. D. the
same cost drivers as standard costing.
20. Activity-based costing is commonly used with standard
costing. Using more activity drivers increases the potential for
managers to A. get much more information from activity-based
costing than from the traditional approach. B. get much more
information from the traditional approach than from activity-based
costing. C. get the same information from activity-based costing as
from the traditional approach. D. None of the above.
21. Activity-based costing raises numerous specific questions
that managers can address to improve which of the following? A.
Productivity and quality. B. Price and efficiency. C. Efficiency
only. D. Productivity only.
22. What is the result of substituting computerized equipment
for direct labor? A. Less direct material and more manufacturing
overhead. B. Less direct labor and more manufacturing overhead. C.
Less manufacturing overhead and more direct materials. D. Less
direct labor and more direct material.
23. When substituting computerized equipment for direct labor, a
firm should treat labor as which of the following? A. Fixed (or
capacity) costs. B. Mixed costs. C. Opportunity costs. D. Variable
costs.
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24. When substituting computerized equipment for direct labor,
variable overhead may be associated more with A. labor hours than
machine usage. B. machine usage than labor hours. C. machine usage
than direct materials. D. machine usage than manufacturing
overhead.
25. For managerial accounting purposes, how are fixed
manufacturing costs treated? A. As product costs. B. As period
costs. C. As opportunity costs. D. As variable costs.
26. For external reporting purposes, how are fixed manufacturing
costs treated? A. As period costs. B. Expensed as incurred. C.
Period costs included in the value of inventory. D. Product costs
included in the value of inventory.
27. For financial reporting purposes, how are fixed
manufacturing costs treated? A. As period costs. B. As product
costs. C. As direct materials costs. D. None of the above.
28. How are fixed manufacturing costs treated? A. Period costs
for managerial accounting and product costs for financial
accounting purposes. B. Product costs for managerial accounting and
financial accounting purposes. C. Period cost for managerial
accounting and financial accounting purposes. D. Product costs for
managerial accounting and period costs for financial accounting
purposes.
29. For financial reporting purposes, how are fixed
manufacturing costs treated? A. Included in the value of inventory.
B. Not included in the value of inventory. C. Treated the same as
in managerial accounting. D. Not reported.
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30. Bens Delivery Company Bens Delivery Company reports the
following information for 2010: Actual:
Output: 2,200 parcels picked up or delivered Fuel required: 200
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Bens Delivery Company. What is the
variable overhead variance for fuel costs? A. $12.00 U B. $12.00 F
C. $6.00 U D. $6.00 F
31. Bens Delivery Company Bens Delivery Company reports the
following information for 2010: Actual:
Output: 2,200 parcels picked up or delivered Fuel required: 200
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Bens Delivery Company. What is the
variable overhead price variance for fuel costs? A. $32.00 F B. $
6.00 U C. $12.00 F D. $20.00 U
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32. Bens Delivery Company Bens Delivery Company reports the
following information for 2010: Actual:
Output: 2,200 parcels picked up or delivered Fuel required: 200
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Bens Delivery Company. What is the
variable overhead efficiency variance for fuel costs? A. $32.00 F
B. $ 6.00 U C. $12.00 F D. $20.00 U
33. Bens Delivery Company Bens Delivery Company reports the
following information for 2010: Actual:
Output: 2,200 parcels picked up or delivered Fuel required: 200
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Bens Delivery Company. What is the actual
fuel cost for March 2010? A. $374.00 B. $352.00 C. $340.00 D.
$320.00
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34. Bens Delivery Company Bens Delivery Company reports the
following information for 2010: Actual:
Output: 2,200 parcels picked up or delivered Fuel required: 200
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Bens Delivery Company. What is the
variable overhead flexible budget for March 2010? A. $374.00 B.
$352.00 C. $340.00 D. $320.00
35. Lydias Delivery Company Lydias Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Lydias Delivery Company. What is the
variable overhead variance for fuel costs? A. $12.00 U B. $12.00 F
C. $6.00 U D. $6.00 F
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36. Lydias Delivery Company Lydias Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Lydias Delivery Company. What is the
variable overhead price variance for fuel costs? A. $10.00 U B.
$16.00 F C. $26.00 F D. $ 6.00F
37. Lydias Delivery Company Lydias Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Lydias Delivery Company. What is the
variable overhead efficiency variance for fuel costs? A. $10.00 U
B. $16.00 F C. $26.00 F D. $ 6.00F
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38. Dougs Delivery Company Dougs Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $2.00 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.80 per gallon Refer to Dougs Delivery Company. What is the
variable overhead variance for fuel costs? A. $20.00 U B. $20.00 F
C. $2.00 U D. $2.00 F
39. Dougs Delivery Company Dougs Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $2.00 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.80 per gallon Refer to Dougs Delivery Company. What is the
variable overhead price variance for fuel costs? A. $20.00 U B.
$20.00 F C. $2.00 U D. $2.00 F
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40. Dougs Delivery Company Dougs Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $2.00 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.80 per gallon Refer to Dougs Delivery Company. What is the
variable overhead efficiency variance for fuel costs? A. $20.00 U
B. $20.00 F C. $18.00 U D. $18.00 F
41. Dougs Delivery Company Dougs Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $2.00 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.80 per gallon Refer to Dougs Delivery Company. What is the
actual fuel cost for March 2010? A. $240.00 B. $220.00 C. $200.00
D. $180.00
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42. Dougs Delivery Company Dougs Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $2.00 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.80 per gallon Refer to Dougs Delivery Company. What is the
variable overhead flexible budget for March 2010? A. $180.00 B.
$198.00 C. $220.00 D. $240.00
43. Most companies report which of the following variances? A.
Each type of material. B. Each category of labor. C. Major cost
components of variable overhead. D. All of the above.
44. Which of the following is an example of a major cost
component of variable overhead? A. Direct material. B. Direct
labor. C. Indirect material. D. All of the above.
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45. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the total direct materials variance. A.
$15,500 U B. $10,500 U C. $15,500 F D. $10,500 F
46. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000
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Standard: Direct Materials: Quantity of coffee beans: 200,000
pounds Cost per pound: $0.50 per pound Direct Labor: Direct labor
rate: $20.00 per hour Labor hours to be used: 0.05 hours per pound
Variable overhead: $.10 per pound Refer to Java Gourmet Coffee.
Calculate the direct materials price variance. A. $15,500 U B.
$10,500 U C. $15,500 F D. $10,500 F
47. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the actual amount paid for coffee. A.
$115,500 B. $105,000 C. $100,000 D. $ 95,500
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48. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the direct materials efficiency variance.
A. $5,000 U B. $10,500 U C. $5,000 F D. $10,500 F
49. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000
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Standard: Direct Materials: Quantity of coffee beans: 200,000
pounds Cost per pound: $0.50 per pound Direct Labor: Direct labor
rate: $20.00 per hour Labor hours to be used: 0.05 hours per pound
Variable overhead: $.10 per pound Refer to Java Gourmet Coffee.
Calculate the flexible budget for direct materials. A. $115,500 B.
$105,500 C. $100,000 D. $ 95,500
50. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the total direct labor variance. A.
$11,000 F B. $9,000 U C. $20,000 U D. $9,500 U
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51. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the direct labor price variance. A.
$11,000 F B. $9,000 U C. $20,000 U D. $9,500 U
52. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000
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Standard: Direct Materials: Quantity of coffee beans: 200,000
pounds Cost per pound: $0.50 per pound Direct Labor: Direct labor
rate: $20.00 per hour Labor hours to be used: 0.05 hours per pound
Variable overhead: $.10 per pound Refer to Java Gourmet Coffee.
Calculate the direct labor efficiency variance. A. $11,000 F B.
$9,000 U C. $20,000 U D. $9,500 U
53. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the variable manufacturing overhead
variance. A. $1,000 U B. $2,000 U C. $1,000 F D. $2,000 F
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54. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the variable manufacturing overhead
variance. A. $1,000 U B. $2,000 U C. $1,000 F D. $2,000 F
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55. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the total direct
materials variance. A. $56,000 U B. $40,500 U C. $56,000 F D.
$40,500 U
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56. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the direct materials
price variance. A. $51,000 U B. $56,000 U C. $5,000 U D. $40,500
U
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57. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the direct materials
efficiency variance. A. $51,000 U B. $56,000 U C. $5,000 U D.
$40,500 U
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58. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the total direct
labor variance. A. $48,000 F B. $20,000 F C. $68,000 F D. $28,000
F
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59. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the direct labor
price variance. A. $48,000 F B. $20,000 F C. $68,000 F D. $28,000
F
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60. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the direct labor
efficiency variance. A. $48,000 F B. $20,000 F C. $68,000 F D.
$28,000 F
61. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
direct materials efficiency variance. A. $7,150 U B. $7,500 U C.
$7,150 F D. $7,500 F
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62. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
direct materials price variance. A. $350 F B. $-0- C. $350 U D.
$7,150 U
63. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
total direct materials variance. A. $7,500 U B. $7,850 U C. $7,150
U D. $7,000 U
64. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
total direct labor variance. A. $70 F B. $200 U C. $270 U D. $130
U
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65. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
direct labor price variance. A. $70 F B. $200 U C. $270 U D. $130
U
66. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
direct labor efficiency variance. A. $70 F B. $200 U C. $270 U D.
$130 U
67. KF Company KF Company uses standard costing. The company
reported the following information for the current period:
Actual overhead incurred $25,000 of which $8,000 is fixed
Budgeted fixed overhead $8,300 Variable overhead rate per machine
hour $5.00 Standard machine hours allowed for production 3,300
Actual machine hours used 3,200 Refer to KF Company. Calculate the
total Variable Overhead variance. A. $1,000 U B. $ 500 F C. $1,000
F D. $ 500 U
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68. KF Company KF Company uses standard costing. The company
reported the following information for the current period:
Actual overhead incurred $25,000 of which $8,000 is fixed
Budgeted fixed overhead $8,300 Variable overhead rate per machine
hour $5.00 Standard machine hours allowed for production 3,300
Actual machine hours used 3,200 Refer to KF Company. Calculate the
variable overhead price variance. A. $1,000 U B. $ 500 F C. $1,000
F D. $ 500 U
69. KF Company KF Company uses standard costing. The company
reported the following information for the current period:
Actual overhead incurred $25,000 of which $8,000 is fixed
Budgeted fixed overhead $8,300 Variable overhead rate per machine
hour $5.00 Standard machine hours allowed for production 3,300
Actual machine hours used 3,200 Refer to KF Company. Calculate the
variable overhead efficiency variance. A. $1,000 U B. $ 500 F C.
$1,000 F D. $ 500 U
70. KF Company KF Company uses standard costing. The company
reported the following information for the current period:
Actual overhead incurred $25,000 of which $8,000 is fixed
Budgeted fixed overhead $8,300 Variable overhead rate per machine
hour $5.00 Standard machine hours allowed for production 3,300
Actual machine hours used 3,200
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Refer to KF Company. Calculate the total fixed overhead
efficiency variance. A. $8,000 F B. $300 F C. $500 U D. $1,000
U
71. When multiple inputs are used to produce the output, the
efficiency variance can be broken down into which of the following?
A. mix and match variances. B. mix and yield variances. C. profit
and yield variances. D. benefit and match variances.
72. The yield variance is the portion of the efficiency variance
that is not a A. match variance. B. mix variance. C. quantity
variance. D. price variance.
73. Explain how variable production cost variances are
calculated and why they occur.
74. How are fixed production cost variances calculated and why
do they occur?
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75. What is the difference between price and efficiency
variances?
76. How do you analyze variances using the variable cost
variance model?
77. How do you analyze overhead variances using the variable
cost variance model?
78. What is the relationship between actual, budgeted, and
applied fixed manufacturing costs?
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79. What tools do managers use to decide when to investigate
variances?
80. How do you apply activity-based costing to variance
analysis?
81. How does technology impact variance analyses?
82. How do you calculate the mix variance portion of the
efficiency variance?
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83. How are fixed manufacturing costs treated for managerial and
external reporting purposes?
84. Bens Delivery Company reports the following information for
2010: Actual:
Output: 6,000 parcels picked up or delivered Fuel required: 500
Gallons Cost per gallon: $2.25 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$2.00 per gallon REQUIRED: What was the actual fuel cost, flexible
budget for fuel cost, and the fuel cost variance?
85. Sallys Delivery Company reports the following information
for 2010: Actual:
Output: 10,000 parcels picked up or delivered Fuel required:
1,200 Gallons Cost per gallon: $3.05 per gallon Standard: Fuel
allowed: 0.10 gallon per parcel picked up or delivered Cost per
gallon: $3.10 per gallon
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REQUIRED: Calculate the following: 1) Variable overhead variance
for fuel 2) Variable overhead price variance for fuel 3) Variable
overhead efficiency variance for fuel 4) Actual fuel costs 5)
Flexible budget for fuel cost
86. Houser Parcel Moving Express reports the following
information for 2010: Actual:
Output: 8,000 parcels picked up or delivered Fuel required:
1,000 Gallons Cost per gallon: $3.00 per gallon Standard: Fuel
allowed: 0.08 gallon per parcel picked up or delivered Cost per
gallon: $2.95 per gallon REQUIRED: Calculate the following: 1)
Variable overhead variance for fuel 2) Variable overhead price
variance for fuel 3) Variable overhead efficiency variance for fuel
4) Actual fuel costs 5) Flexible budget for fuel cost
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87. JM Company uses standard costing. The company reported the
following information for the current period:
Actual overhead incurred $15,000 of which $5,000 is fixed
Budgeted fixed overhead $4,800 Variable overhead rate per machine
hour $5.00 Standard machine hours allowed for production 1,950
Actual machine hours used 2,200 REQUIRED: Calculate the following
variances: 1) Variable overhead price variance 2) Variable overhead
efficiency variance 3) Total variable overhead variance 4) Total
fixed overhead variance
88. Hightown Company uses a predetermined overhead rate for
applying overhead cost to products. Rates for the current year
follow: Variable Overhead Rate: $2.50 per unit Fixed Overhead Rate:
$5.00 per unit Actual overhead costs:
Variable Overhead: $275,000 Fixed Overhead: $630,000 The company
expected to produce 125,000 units during the year, but only
produced 120,000. REQUIRED: 1) Calculate the amount of budgeted
fixed overhead costs for the year. 2) Calculate the fixed overhead
price (spending) variance. 3) Calculate the fixed overhead
production volume variance. 4) Calculate the variable overhead
price variance.
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89. Estimating flexible selling expense budget and computing
variances. Georgia Peaches estimates the following selling expenses
next period:
Salaries (fixed) $ 30,000 Commissions (0.05% of sales revenue)
17,875 Travel (0.03% of sales revenue) 10,725 Advertising (fixed)
60,000 Sales Office Costs ($3,750 plus $0.05 per unit sold) 7,000
Shipping Costs ($0.10 per unit sold) 6,500 Total Selling Expenses
$132,100 Required: a. Derive the cost equation (y = a + bx) for
selling expenses. (Hint: y = a + bx + cy.) b. Assume that Georgia
actually sells 50,000 units during the period at an average price
of $6 per unit. The company had budgeted sales for the period to
be: volume, 65,000 units; price, $5.50. Calculate the sales price
and volume variance. c. The actual selling expenses incurred during
the period were $80,000 fixed and $30,000 variable. Prepare a
profit variance analysis for sales revenue and selling
expenses.
90. Estimating flexible selling expense budget and computing
variances. Golden Nugget estimates the following selling expenses
next period:
Salaries (fixed) $ 35,000 Commissions (0.04% of sales revenue)
17,875 Travel (0.02% of sales revenue) 10,725 Advertising (fixed)
65,000 Sales Office Costs ($3,950 plus $0.08 per unit sold) 7,000
Shipping Costs ($0.12 per unit sold) 6,500 Total Selling Expenses
$132,100
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Required: a. Derive the cost equation (y = a + bx) for selling
expenses. (Hint: y = a + bx + cy.) b. Assume that Golden actually
sells 60,000 units during the period at an average price of $7 per
unit. The company had budgeted sales for the period to be: volume,
75,000 units; price, $6.50. Calculate the sales price and volume
variance. c. The actual selling expenses incurred during the period
were $90,000 fixed and $40,000 variable. Prepare a profit variance
analysis for sales revenue and selling expenses.
91. Materials and labor variances. The Sweet Tooth Chocolate
Company presents the following data for October:
Standards per Batch Actual Total Materials 1 Pound at $2.50 per
Pound 49,000 Pounds Labor. 1.5 Hours at $3.00 per Hour 70,000 Hours
Batches Produced 48,000 Batches During the month, the firm
purchased 49,000 pounds of materials for $127,500. Wages earned
were $214,000. Required: 1. Compute the labor and material
variances. 2. Based on the information for the company, write a
short report explaining the cause of the variances that you
computed.
92. Materials and labor variances. The Chocolate Factory
presents the following data for September:
Standards per Batch Actual Total Materials 1 Pound at $3.50 per
Pound 59,000 Pounds Labor. 1.5 Hours at $4.00 per Hour 82,000 Hours
Batches Produced 58,000 Batches
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During the month, the firm purchased 59,000 pounds of materials
for $216,500. Wages earned were $330,000. Required: 1. Compute the
labor and material variances. 2. Based on the information for the
company, write a short report explaining the cause of the variances
that you computed.
93. Nonmanufacturing variances. Ralphs Sales uses standard costs
and variances for controlling costs. As a result of studying past
cost data, it has established standards as follows: variable costs,
$6 per sales call; nine sales calls per unit sold. Actual data for
May, June, and July follow:
Sales Calls Units Sold Actual Costs May 140,000 15,000 $ 900,000
June 160,000 20,000 1,000,000 July 130,000 10,000 800,000 Required:
Compute the variable cost price and efficiency variances for each
month.
94. Nonmanufacturing variances. Appliance Sales uses standard
costs and variances for controlling costs. As a result of studying
past cost data, it has established standards as follows: variable
costs, $7 per sales call; six sales calls per unit sold. Actual
data for May, June, and July follow:
Sales Calls Units Sold Actual Costs May 150,000 16,000 $
1,100,000 June 170,000 22,000 1,200,000 July 140,000 11,000
1,000,000
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Required: Compute the variable cost price and efficiency
variances for each month.
95. Solving for materials and labor. Clayton Company makes
fireplace screens. Under the flexible budget, when the firm uses
75,000 direct labor hours, budgeted variable overhead is $75,000,
whereas budgeted direct labor costs are $450,000. The company
applies variable overhead to production units on the basis of
direct labor hours. All data apply to the month of February. The
following are some of the variances for February (F denotes
favorable; U denotes unfavorable):
Variable Overhead Price Variance $12,000 U Variable Overhead
Efficiency Variance $20,000 U Materials Price Variance $30,000 F
Materials Efficiency Variance $20,000 U During February, the firm
incurred $400,000 of direct labor costs. According to the
standards, each fireplace screen uses one pound of materials at a
standard price of $4.00 per pound. The firm produced 100,000
fireplace screens in February. The materials price variance was
$0.30 per pound, whereas the average wage rate exceeded the
standard average rate by $0.50 per hour. Required: Compute the
following for February, assuming there are beginning inventories
but no ending inventories of materials: a. pounds of materials
purchased b. pounds of material usage over standard c. standard
hourly wage rate d. standard direct labor hours for the total
February production
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96. Solving for materials and labor. Howard Company makes screen
doors. Under the flexible budget, when the firm uses 85,000 direct
labor hours, budgeted variable overhead is $85,000, whereas
budgeted direct labor costs are $573,750. The company applies
variable overhead to production units on the basis of direct labor
hours. All data apply to the month of February. The following are
some of the variances for February (F denotes favorable; U denotes
unfavorable):
Variable Overhead Price Variance $12,000 U Variable Overhead
Efficiency Variance $30,000 U Materials Price Variance $60,000 F
Materials Efficiency Variance $30,000 U During February, the firm
incurred $600,000 of direct labor costs. According to the
standards, each screen door uses one pound of materials at a
standard price of $5.00 per pound. The firm produced 100,000 screen
doors in February. The materials price variance was $0.40 per
pound, whereas the average wage rate exceeded the standard average
rate by $0.50 per hour. Required: Compute the following for
February, assuming there are beginning inventories but no ending
inventories of materials: a. pounds of materials purchased b.
pounds of material usage over standard c. standard hourly wage rate
d. standard direct labor hours for the total February
production
97. Overhead variances. Upton, Inc., uses standard costing. The
company reported the following overhead information for the current
period:
Actual Overhead Incurred $13,600, of which $3,500 is fixed
Budgeted Fixed Overhead $3,300 Variable Overhead Rate per Machine
Hour $ 3 Standard Hours Allowed for Actual Production 3,500 Actual
Machine Hours Used 3,200 Required: Calculate the variable and fixed
overhead variances.
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98. Overhead variances. Trevor, Inc., uses standard costing. The
company reported the following overhead information for the current
period:
Actual Overhead Incurred $19,600, of which $5,500 is fixed
Budgeted Fixed Overhead $4,300 Variable Overhead Rate per Machine
Hour $ 3 Standard Hours Allowed for Actual Production 5,000 Actual
Machine Hours Used 4,100 Required: Calculate the variable and fixed
overhead variances.
99. Solving for labor hours. Bills Engineering Consulting
reports the following direct labor information for clerical
staff:
Month: April Standard Rate $15 per Hour Actual Rate Paid $17 per
Hour Standard Hours Allowed for Actual Production 1,600 Hours Labor
Efficiency Variance $860 U Required: What are the actual hours
worked, rounded to the nearest hour?
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100. Solving for labor hours. Lances Engineering Consulting
reports the following direct labor information for clerical
staff:
Month: March Standard Rate $25 per Hour Actual Rate Paid $27 per
Hour Standard Hours Allowed for Actual Production 1,500 Hours Labor
Efficiency Variance $2,000 U Required: What are the actual hours
worked, rounded to the nearest hour?
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Chapter 10--Profit and Cost Center Performance Evaluation
Key
1. Which of the following might cause a materials variance? A.
Failing to take purchase discounts. B. Using a better grade of raw
material. C. Changes in the market supply for the raw materials. D.
All of the above.
2. Which of the following is not a major group responsible for
variances in organizations? A. Marketing B. Consulting C.
Administration D. Production
3. Why might a material variance arise? A. More efficient use of
materials than the standard. B. The purchase of inferior raw
materials. C. Both a and b above. D. None of the above.
4. Why do direct labor variances occur? A. Managers do not
correctly anticipate changes in wage rates. B. Poor materials are
used in production. C. Supervisors encounter scheduling problems.
D. All of the above.
5. Which is not a reason direct labor variances may occur? A.
Managers do not correctly anticipate changes in wage rates. B. Poor
materials are used in production. C. Prices rise with direct
materials. D. All of the above.
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6. Fixed production costs variances are calculated as A. the
difference between actual and budgeted fixed costs. B. (actual
hours standard inputs) budgeted fixed costs. C. (actual hours
standard outputs) budgeted fixed costs. D. (actual hours standard
outputs) actual fixed costs.
7. Why do fixed manufacturing cost variances occur? A. Managers
do not correctly anticipate changes in wage rates. B. Poor
materials are used in production. C. Supervisors encounter
scheduling problems. D. Actual fixed costs differ from budgeted
fixed costs.
8. Which of the following terms describes the difference between
the budgeted (or standard) price and the actual price paid for each
unit of input? A. Price variance. B. Efficiency variance. C. Usage
variance. D. Quantity variance.
9. Which variance measures the efficiency with which the firm
uses inputs to produce outputs? A. Throughput. B. Efficiency. C.
Economy. D. Effectiveness.
10. To analyze variances, the variable cost variance model is
applied to the calculation of which of the following? A. Direct
materials variances. B. Direct labor variances. C. Variable
manufacturing overhead price and efficiency variances. D. All of
the above.
11. Which of the following does the cost variance model use to
analyze differences between actual and budgeted profits? A.
Flexible production budget. B. Fixed production budget. C. Prior
periods production budget. D. Generally accepted accounting
principles.
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12. To help managers in their efforts to control overhead costs,
managers and accountants analyze overhead variances using the
variable cost variance model by separating variable overhead
variances into A. price and quality components. B. economy and
efficiency components. C. price and efficiency components. D.
economy and effectiveness components.
13. What is the term that describes the rate companies
frequently use to apply fixed overhead costs to units produced? A.
Actual overhead rate. B. Predetermined overhead rate. C.
Post-determined overhead rate. D. Variable overhead rate.
14. The production volume variance is the difference between
which of the following two costs? A. Budgeted and applied fixed
costs. B. Actual costs and the budgeted costs. C. Budgeted and
actual fixed costs. D. Variable costs and the budgeted costs.
15. The production price (spending) variance is the difference
between which of the following two costs? A. Budgeted and applied
costs. B. Actual and budgeted costs. C. Applied and actual costs.
D. Variable and budgeted costs.
16. Which statement is true concerning the fixed overhead
production efficiency variance? A. The production efficiency
variance exists as fixed costs are assumed to vary inversely with
volume. B. The production efficiency variance exists as fixed costs
are assumed to vary along with volume. C. The production efficiency
variance exists as fixed costs are assumed to vary exponentially
with volume. D. The production efficiency variance does not exist
as fixed costs are assumed not to vary with volume.
17. Which variance(s) are generally calculated to analyze fixed
manufacturing overhead costs? A. Production volume variances only.
B. Price variances only. C. Production volume and price variances
only. D. Production volume, price, and efficiency variances.
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18. Tool(s) that managers can use to decide when to investigate
variances include which of the following? A. Use of both tolerance
limits and decision models. B. Use of tolerance limits only. C.
Decision models only. D. None of the above.
19. Activity-based costing is commonly used with standard
costing. Using activity-based costing, a company has A. a single
cost driver B. multiple cost drivers. C. no cost drivers. D. the
same cost drivers as standard costing.
20. Activity-based costing is commonly used with standard
costing. Using more activity drivers increases the potential for
managers to A. get much more information from activity-based
costing than from the traditional approach. B. get much more
information from the traditional approach than from activity-based
costing. C. get the same information from activity-based costing as
from the traditional approach. D. None of the above.
21. Activity-based costing raises numerous specific questions
that managers can address to improve which of the following? A.
Productivity and quality. B. Price and efficiency. C. Efficiency
only. D. Productivity only.
22. What is the result of substituting computerized equipment
for direct labor? A. Less direct material and more manufacturing
overhead. B. Less direct labor and more manufacturing overhead. C.
Less manufacturing overhead and more direct materials. D. Less
direct labor and more direct material.
23. When substituting computerized equipment for direct labor, a
firm should treat labor as which of the following? A. Fixed (or
capacity) costs. B. Mixed costs. C. Opportunity costs. D. Variable
costs.
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24. When substituting computerized equipment for direct labor,
variable overhead may be associated more with A. labor hours than
machine usage. B. machine usage than labor hours. C. machine usage
than direct materials. D. machine usage than manufacturing
overhead.
25. For managerial accounting purposes, how are fixed
manufacturing costs treated? A. As product costs. B. As period
costs. C. As opportunity costs. D. As variable costs.
26. For external reporting purposes, how are fixed manufacturing
costs treated? A. As period costs. B. Expensed as incurred. C.
Period costs included in the value of inventory. D. Product costs
included in the value of inventory.
27. For financial reporting purposes, how are fixed
manufacturing costs treated? A. As period costs. B. As product
costs. C. As direct materials costs. D. None of the above.
28. How are fixed manufacturing costs treated? A. Period costs
for managerial accounting and product costs for financial
accounting purposes. B. Product costs for managerial accounting and
financial accounting purposes. C. Period cost for managerial
accounting and financial accounting purposes. D. Product costs for
managerial accounting and period costs for financial accounting
purposes.
29. For financial reporting purposes, how are fixed
manufacturing costs treated? A. Included in the value of inventory.
B. Not included in the value of inventory. C. Treated the same as
in managerial accounting. D. Not reported.
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30. Bens Delivery Company Bens Delivery Company reports the
following information for 2010: Actual:
Output: 2,200 parcels picked up or delivered Fuel required: 200
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Bens Delivery Company. What is the
variable overhead variance for fuel costs? A. $12.00 U B. $12.00 F
C. $6.00 U D. $6.00 F
31. Bens Delivery Company Bens Delivery Company reports the
following information for 2010: Actual:
Output: 2,200 parcels picked up or delivered Fuel required: 200
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Bens Delivery Company. What is the
variable overhead price variance for fuel costs? A. $32.00 F B. $
6.00 U C. $12.00 F D. $20.00 U
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32. Bens Delivery Company Bens Delivery Company reports the
following information for 2010: Actual:
Output: 2,200 parcels picked up or delivered Fuel required: 200
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Bens Delivery Company. What is the
variable overhead efficiency variance for fuel costs? A. $32.00 F
B. $ 6.00 U C. $12.00 F D. $20.00 U
33. Bens Delivery Company Bens Delivery Company reports the
following information for 2010: Actual:
Output: 2,200 parcels picked up or delivered Fuel required: 200
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Bens Delivery Company. What is the actual
fuel cost for March 2010? A. $374.00 B. $352.00 C. $340.00 D.
$320.00
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34. Bens Delivery Company Bens Delivery Company reports the
following information for 2010: Actual:
Output: 2,200 parcels picked up or delivered Fuel required: 200
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Bens Delivery Company. What is the
variable overhead flexible budget for March 2010? A. $374.00 B.
$352.00 C. $340.00 D. $320.00
35. Lydias Delivery Company Lydias Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Lydias Delivery Company. What is the
variable overhead variance for fuel costs? A. $12.00 U B. $12.00 F
C. $6.00 U D. $6.00 F
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36. Lydias Delivery Company Lydias Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Lydias Delivery Company. What is the
variable overhead price variance for fuel costs? A. $10.00 U B.
$16.00 F C. $26.00 F D. $ 6.00F
37. Lydias Delivery Company Lydias Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $1.70 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.60 per gallon Refer to Lydias Delivery Company. What is the
variable overhead efficiency variance for fuel costs? A. $10.00 U
B. $16.00 F C. $26.00 F D. $ 6.00F
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38. Dougs Delivery Company Dougs Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $2.00 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.80 per gallon Refer to Dougs Delivery Company. What is the
variable overhead variance for fuel costs? A. $20.00 U B. $20.00 F
C. $2.00 U D. $2.00 F
39. Dougs Delivery Company Dougs Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $2.00 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.80 per gallon Refer to Dougs Delivery Company. What is the
variable overhead price variance for fuel costs? A. $20.00 U B.
$20.00 F C. $2.00 U D. $2.00 F
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40. Dougs Delivery Company Dougs Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $2.00 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.80 per gallon Refer to Dougs Delivery Company. What is the
variable overhead efficiency variance for fuel costs? A. $20.00 U
B. $20.00 F C. $18.00 U D. $18.00 F
41. Dougs Delivery Company Dougs Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $2.00 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.80 per gallon Refer to Dougs Delivery Company. What is the
actual fuel cost for March 2010? A. $240.00 B. $220.00 C. $200.00
D. $180.00
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42. Dougs Delivery Company Dougs Delivery Company reports the
following information for 2010: Actual:
Output: 1,100 parcels picked up or delivered Fuel required: 100
Gallons Cost per gallon: $2.00 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$1.80 per gallon Refer to Dougs Delivery Company. What is the
variable overhead flexible budget for March 2010? A. $180.00 B.
$198.00 C. $220.00 D. $240.00
43. Most companies report which of the following variances? A.
Each type of material. B. Each category of labor. C. Major cost
components of variable overhead. D. All of the above.
44. Which of the following is an example of a major cost
component of variable overhead? A. Direct material. B. Direct
labor. C. Indirect material. D. All of the above.
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45. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the total direct materials variance. A.
$15,500 U B. $10,500 U C. $15,500 F D. $10,500 F
46. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000
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Standard: Direct Materials: Quantity of coffee beans: 200,000
pounds Cost per pound: $0.50 per pound Direct Labor: Direct labor
rate: $20.00 per hour Labor hours to be used: 0.05 hours per pound
Variable overhead: $.10 per pound Refer to Java Gourmet Coffee.
Calculate the direct materials price variance. A. $15,500 U B.
$10,500 U C. $15,500 F D. $10,500 F
47. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the actual amount paid for coffee. A.
$115,500 B. $105,000 C. $100,000 D. $ 95,500
-
48. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the direct materials efficiency variance.
A. $5,000 U B. $10,500 U C. $5,000 F D. $10,500 F
49. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000
-
Standard: Direct Materials: Quantity of coffee beans: 200,000
pounds Cost per pound: $0.50 per pound Direct Labor: Direct labor
rate: $20.00 per hour Labor hours to be used: 0.05 hours per pound
Variable overhead: $.10 per pound Refer to Java Gourmet Coffee.
Calculate the flexible budget for direct materials. A. $115,500 B.
$105,500 C. $100,000 D. $ 95,500
50. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the total direct labor variance. A.
$11,000 F B. $9,000 U C. $20,000 U D. $9,500 U
-
51. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the direct labor price variance. A.
$11,000 F B. $9,000 U C. $20,000 U D. $9,500 U
52. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000
-
Standard: Direct Materials: Quantity of coffee beans: 200,000
pounds Cost per pound: $0.50 per pound Direct Labor: Direct labor
rate: $20.00 per hour Labor hours to be used: 0.05 hours per pound
Variable overhead: $.10 per pound Refer to Java Gourmet Coffee.
Calculate the direct labor efficiency variance. A. $11,000 F B.
$9,000 U C. $20,000 U D. $9,500 U
53. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the variable manufacturing overhead
variance. A. $1,000 U B. $2,000 U C. $1,000 F D. $2,000 F
-
54. Java Gourmet Coffee Java Gourmet Coffee reports the
following data for April 2010 where 200,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage), Actual:
Direct Materials: Quantity of coffee beans: 210,000 pounds Cost
per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00
per hour Labor hours used: 11,000 hours Variable Overhead: Actual
costs: $21,000 Standard: Direct Materials: Quantity of coffee
beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor:
Direct labor rate: $20.00 per hour Labor hours to be used: 0.05
hours per pound Variable overhead: $.10 per pound Refer to Java
Gourmet Coffee. Calculate the variable manufacturing overhead
variance. A. $1,000 U B. $2,000 U C. $1,000 F D. $2,000 F
-
55. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the total direct
materials variance. A. $56,000 U B. $40,500 U C. $56,000 F D.
$40,500 U
-
56. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the direct materials
price variance. A. $51,000 U B. $56,000 U C. $5,000 U D. $40,500
U
-
57. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the direct materials
efficiency variance. A. $51,000 U B. $56,000 U C. $5,000 U D.
$40,500 U
-
58. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the total direct
labor variance. A. $48,000 F B. $20,000 F C. $68,000 F D. $28,000
F
-
59. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the direct labor
price variance. A. $48,000 F B. $20,000 F C. $68,000 F D. $28,000
F
-
60. Freds Fine Roasted Coffee Freds Fine Roasted Coffee reports
the following data for April 2010 where 500,000 pounds of roasted
gourmet coffee beans were actually produced (note: standard costs
do not allow for any wastage),
Actual: Direct Materials: Quantity of coffee beans: 510,000
pounds Cost per pound: $0.60 per pound Direct Labor: Direct labor
rate: $18.00 per hour Labor hours used: 24,000 hours Variable
Overhead: Actual costs: $49,000 Standard: Direct Materials:
Quantity of coffee beans: 500,000 pounds Cost per pound: $0.50 per
pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours
to be used: 0.05 hours per pound Variable overhead: $.10 per pound
Refer to Freds Fine Roasted Coffee. Calculate the direct labor
efficiency variance. A. $48,000 F B. $20,000 F C. $68,000 F D.
$28,000 F
61. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
direct materials efficiency variance. A. $7,150 U B. $7,500 U C.
$7,150 F D. $7,500 F
-
62. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
direct materials price variance. A. $350 F B. $-0- C. $350 U D.
$7,150 U
63. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
total direct materials variance. A. $7,500 U B. $7,850 U C. $7,150
U D. $7,000 U
64. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
total direct labor variance. A. $70 F B. $200 U C. $270 U D. $130
U
-
65. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
direct labor price variance. A. $70 F B. $200 U C. $270 U D. $130
U
66. ABC Company ABC Company reports the following information
for the most recent period when 2,750 units were produced.
Cost Standard Actual Materials 2 lbs. @ $5.00 per pound 7,000
pounds purchased for $34,650 Labor 0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour Refer to ABC Company. Calculate the
direct labor efficiency variance. A. $70 F B. $200 U C. $270 U D.
$130 U
67. KF Company KF Company uses standard costing. The company
reported the following information for the current period:
Actual overhead incurred $25,000 of which $8,000 is fixed
Budgeted fixed overhead $8,300 Variable overhead rate per machine
hour $5.00 Standard machine hours allowed for production 3,300
Actual machine hours used 3,200 Refer to KF Company. Calculate the
total Variable Overhead variance. A. $1,000 U B. $ 500 F C. $1,000
F D. $ 500 U
-
68. KF Company KF Company uses standard costing. The company
reported the following information for the current period:
Actual overhead incurred $25,000 of which $8,000 is fixed
Budgeted fixed overhead $8,300 Variable overhead rate per machine
hour $5.00 Standard machine hours allowed for production 3,300
Actual machine hours used 3,200 Refer to KF Company. Calculate the
variable overhead price variance. A. $1,000 U B. $ 500 F C. $1,000
F D. $ 500 U
69. KF Company KF Company uses standard costing. The company
reported the following information for the current period:
Actual overhead incurred $25,000 of which $8,000 is fixed
Budgeted fixed overhead $8,300 Variable overhead rate per machine
hour $5.00 Standard machine hours allowed for production 3,300
Actual machine hours used 3,200 Refer to KF Company. Calculate the
variable overhead efficiency variance. A. $1,000 U B. $ 500 F C.
$1,000 F D. $ 500 U
70. KF Company KF Company uses standard costing. The company
reported the following information for the current period:
Actual overhead incurred $25,000 of which $8,000 is fixed
Budgeted fixed overhead $8,300 Variable overhead rate per machine
hour $5.00 Standard machine hours allowed for production 3,300
Actual machine hours used 3,200
-
Refer to KF Company. Calculate the total fixed overhead
efficiency variance. A. $8,000 F B. $300 F C. $500 U D. $1,000
U
71. When multiple inputs are used to produce the output, the
efficiency variance can be broken down into which of the following?
A. mix and match variances. B. mix and yield variances. C. profit
and yield variances. D. benefit and match variances.
72. The yield variance is the portion of the efficiency variance
that is not a A. match variance. B. mix variance. C. quantity
variance. D. price variance.
73. Explain how variable production cost variances are
calculated and why they occur.
Material variances may be the result of failing to take purchase
discounts, using a better (or worse) grade of raw material, or
changes in the market supply or demand for the raw material that
affected prices. Materials variances may arise due to more (or
less) efficient use of materials than the standard or the purchase
of inferior raw materials. Direct labor variances can occur because
managers do not correctly anticipate changes in wage rates. These
variances may also be caused by the workers themselves, poor
materials, faulty equipment, poor supervision, and scheduling
problems.
74. How are fixed production cost variances calculated and why
do they occur?
The only fixed cost variance computed for managerial purposes is
the difference between actual and budgeted fixed costs. This
variance occurs because actual fixed costs differ from budgeted
fixed costs.
75. What is the difference between price and efficiency
variances?
The price variance is the difference between the budgeted (or
standard) price and the actual price paid for each unit of input.
The efficiency variance measures the efficiency with which the firm
uses inputs to produce outputs.
-
76. How do you analyze variances using the variable cost
variance model?
The variable cost variance model is applied to the calculation
of direct materials, direct labor, and variable manufacturing
overhead price and efficiency variances. The model uses the
flexible production budget to analyze differences between actual
and budgeted profits.
77. How do you analyze overhead variances using the variable
cost variance model?
Separating variable overhead variances into price and efficiency
components helps managers in their effort to control overhead
costs. The manager can use the same method to compute price and
efficiency variances for variable overhead as for other variable
manufacturing costs using an appropriate input activity
measure.
78. What is the relationship between actual, budgeted, and
applied fixed manufacturing costs?
Companies frequently use a predetermined overhead rate to apply
fixed overhead to units produced. The production volume variance is
the difference between the budgeted and applied fixed costs. The
price variance is the difference between the actual costs and the
budgeted costs. There is no efficiency variance calculated because
fixed costs are assumed not to vary with volume.
79. What tools do managers use to decide when to investigate
variances?
Managers can deal with the decision of whether to investigate a
variance like other decisions -- on a cost benefit basis.
Therefore, managers should investigate variances if they expect the
benefits from investigation to exceed the costs of investigation.
One method of identification where the benefit might be greater
than the cost is the use of tolerance limits; the other is a
decision model.
80. How do you apply activity-based costing to variance
analysis?
Activity-based costing is commonly used with standard costing.
Using activity-based costing, a company has multiple cost drivers.
The same approach is used for variance analysis as for traditional
costing. Using more activity drivers increases the potential for
managers to get much more information from activity-based costing
than from the traditional approach. Activity-based costing raises
numerous specific questions that managers can address to improve
quality and productivity.
81. How does technology impact variance analyses?
Most changes toward high technology involve substituting
computerized equipment for direct labor. The result is less direct
labor and more manufacturing overhead. This implies that the firm
should treat labor as a fixed, or capacity, cost and that variable
overhead may be associated more with machine usage than labor
hours.
-
82. How do you calculate the mix variance portion of the
efficiency variance?
When multiple inputs are used to produce the output, the
efficiency variance can be broken down into mix and yield
variances. The mix variance shows the impact on profits of using
something other than the budgeted mix of inputs. The yield variance
is the portion of the efficiency variance that is not a mix
variance.
83. How are fixed manufacturing costs treated for managerial and
external reporting purposes?
For managerial accounting purposes, fixed manufacturing costs
are treated as period costs. However for external reporting
purposes, fixed manufacturing costs are treated as product costs
and included in the value of inventory.
84. Bens Delivery Company reports the following information for
2010: Actual:
Output: 6,000 parcels picked up or delivered Fuel required: 500
Gallons Cost per gallon: $2.25 per gallon Standard: Fuel allowed:
0.10 gallon per parcel picked up or delivered Cost per gallon:
$2.00 per gallon REQUIRED: What was the actual fuel cost, flexible
budget for fuel cost, and the fuel cost variance?
SUPPORTING CALCULATIONS: Actual: $2.25 per gallon 500 gallons =
$1,125 Flexible budget: $2.00 per gallon (.10 6,000) = $1,200 Fuel
cost variance = Actual cost - Flexible budget = $1,125 - $1,200 =
$75.00 F
85. Sallys Delivery Company reports the following information
for 2010: Actual:
Output: 10,000 parcels picked up or delivered Fuel required:
1,200 Gallons Cost per gallon: $3.05 per gallon
-
Standard: Fuel allowed: 0.10 gallon per parcel picked up or
delivered Cost per gallon: $3.10 per gallon REQUIRED: Calculate the
following: 1) Variable overhead variance for fuel 2) Variable
overhead price variance for fuel 3) Variable overhead efficiency
variance for fuel 4) Actual fuel costs 5) Flexible budget for fuel
cost
SUPPORTING CALCULATIONS:
AP AQ SP AQ SP SQ $3.05 1,200 $3.10 1,200 $3.10 (0.10 10,000) =
$3,660 = $3,720 = $3,100 |______$60 F _______|________ $620 U_____|
1) Total Variable overhead variance = $ 560 U 2) Variable overhead
price variance = $ 60 F 3) Variable overhead efficiency variance =
$ 620 U 4) Actual: $3.05 per gallon 1,200 gallons = $3,660 5)
Flexible budget: $3.10 per gallon (.10 10,000) = $3,100
86. Houser Parcel Moving Express reports the following
information for 2010: Actual:
Output: 8,000 parcels picked up or delivered Fuel required:
1,000 Gallons Cost per gallon: $3.00 per gallon Standard: Fuel
allowed: 0.08 gallon per parcel picked up or delivered Cost per
gallon: $2.95 per gallon REQUIRED: Calculate the following: 1)
Variable overhead variance for fuel 2) Variable overhead price
variance for fuel 3) Variable overhead efficiency variance for fuel
4) Actual fuel costs 5) Flexible budget for fuel cost
-
SUPPORTING CALCULATIONS:
AP AQ SP AQ SP SQ $3.00 1,000 $2.95 1,000 $2.95 (0.08 8,000) =
$3,000 = $2,950 = $1,888 |______$50 U _______|________ $1,062
U_____| 1) Total Variable overhead variance = $ 1,112 U 2) Variable
overhead price variance = $ 50 U 3) Variable overhead efficiency
variance = $ 1,062 U 4) Actual: $3.00 per gallon 1,000 gallons =
$3,000 5) Flexible budget: $2.95 per gallon (.08 8,000) =
$1,888
87. JM Company uses standard costing. The company reported the
following information for the current period:
Actual overhead incurred $15,000 of which $5,000 is fixed
Budgeted fixed overhead $4,800 Variable overhead rate per machine
hour $5.00 Standard machine hours allowed for production 1,950
Actual machine hours used 2,200 REQUIRED: Calculate the following
variances: 1) Variable overhead price variance 2) Variable overhead
efficiency variance 3) Total variable overhead variance 4) Total
fixed overhead variance
SUPPORTING CALCULATIONS:
Variable Overhead Price Variable Overhead Efficiency
AP AQ SP AQ SP SQ Given $5.00
2,200 $5.00 1,950
= $10,000 = $11,000 = $9,750 |______$1,000 F _______|________
$1,250 U_____| 1) Variable overhead price variance = $ 1,000 F 2)
Variable overhead efficiency variance = $ 1,250 U 3) Total Variable
overhead variance = $ 250 U 4) Actual Fixed overhead $5,000 -
budgeted fixed overhead $4,800 = $200 U
-
88. Hightown Company uses a predetermined overhead rate for
applying overhead cost to products. Rates for the current year
follow: Variable Overhead Rate: $2.50 per unit Fixed Overhead Rate:
$5.00 per unit Actual overhead costs:
Variable Overhead: $275,000 Fixed Overhead: $630,000 The company
expected to produce 125,000 units during the year, but only
produced 120,000. REQUIRED: 1) Calculate the amount of budgeted
fixed overhead costs for the year. 2) Calculate the fixed overhead
price (spending) variance. 3) Calculate the fixed overhead
production volume variance. 4) Calculate the variable overhead
price variance.
SUPPORTING CALCULATIONS:
1) $5.00 125,000 = $625,000 2) $630,000 - $625,000 = $5,000 U 3)
$625,000 - ($5 120,000) = $25,000 U 4) $275,000 - ($2.50 120,000) =
$25,000 F
89. Estimating flexible selling expense budget and computing
variances. Georgia Peaches estimates the following selling expenses
next period:
Salaries (fixed) $ 30,000 Commissions (0.05% of sales revenue)
17,875 Travel (0.03% of sales revenue) 10,725 Advertising (fixed)
60,000 Sales Office Costs ($3,750 plus $0.05 per unit sold) 7,000
Shipping Costs ($0.10 per unit sold) 6,500 Total Selling Expenses
$132,100
-
Required: a. Derive the cost equation (y = a + bx) for selling
expenses. (Hint: y = a + bx + cy.) b. Assume that Georgia actually
sells 50,000 units during the period at an average price of $6 per
u