True False

12/16/21, 1:35 PM Assignment Print View

1.
Standard costs should generally be based on the actual costs of prior periods.
 True
 False

2.
(Appendix 10C) What is the sum of the sales mix variance and the sales quantity variance?
 The flexible budget variance.
 The sales volume variance.
 The master budget variance.
 The market share variance.

3.

If a company follows a practice of isolating variances at the earliest point in time, what would be the appropriate time to isolate
and recognize a direct material price variance?
 When material is issued.
 When material is purchased.
 When material is used in production.
 When production is completed.
https://ezto.mheducation.com/hm.tpx 1/97

4.
Borden Enterprises uses standard costing. For the month of April, the company reported the following data:

Standard direct labour rate $10 per hour
Standard hours allowed for actual production 8,000
Actual direct labour rate $9.50 per hour
Labour efficiency variance $4,800 favourable
What was the labour rate variance for April?
 $2,850 favourable.
 $2,850 unfavourable.
 $3,760 favourable.
(8,000 * 10 - 4,800)/10 * (10 - 9.50) = $3,760 favourable.

5.

HAF produces a single product. The standard production requirement for each unit requires 2 kilograms of a single material at a
standard cost of $6 per kilogram. During the last year, HAF purchased 10,000 kilograms of materials at total cost of $52,000.
Also last year, HAF manufactured 3,000 units of product using a total of 7,000 kg. What was the HAF's materials purchase price
variance for the year?
 Nil
 $8,000 favourable
 $8,000 unfavourable
Materials price variance: $52,000 − ($6 × 10,000) = $8,000 favourable.

6.
Waste or excessive usage of overhead items will show up as part of the variable overhead efficiency variance.
 True
 False

7.
(Appendix 10B) Nova Corporation produces a single product and uses a standard cost system to help control costs. Overhead is
applied to production on the basis of machine hours. According to the company's flexible budget, the following overhead costs
should be incurred at an activity level of 20,000 machine hours (the denominator activity level chosen for the current year):

Variable Overhead Costs $50,000
Fixed Overhead Costs $110,000
Total Overhead Costs $160,000
During the current year, the following operating results were recorded:

Actual Machine Hours Worked 18,000
Standard Machine Hours Allowed 19,000
Actual Variable Overhead Cost Incurred $48,000
Actual Fixed Overhead Cost Incurred $100,000
At the end of the year, the company's Manufacturing Overhead account showed total debits for actual overhead costs of
$145,100 and total credits for overhead actually applied of $136,000. The difference ($9,100) represents underapplied overhead,
the cause of which management would like to know.
Required:
a) Compute the predetermined overhead rate that would have been used during the year, showing separately the variable and
fixed components of the rate.
b) Show how the $136,000 of "Applied Costs" was computed.
c) Analyze the $9,100 underapplied overhead figure in terms of the variable overhead spending and efficiency variances and the
fixed overhead budget and volume variances.
d) (Appendix 10B) Prepare a journal entry to record the variable overhead costs incurred and applied, including the results of the
variance analysis.
e) (Appendix 10B) Prepare a journal entry to record the fixed overhead costs incurred and applied, including the results of the
variance analysis.
a) The predetermined overhead rate, with variable and fixed elements identified:

$50,000 /20,000 $2.50
$110,000 / 20,000 $5.50
$8.00
b) Applied overhead for the period:

Standard hours allowed x Total overhead rate = 19,000 hours × $8.00
= $128,000
c) Variable overhead variances:

Spending variance:
Actual variable overhead cost $48,000
Actual hours x Standard rate:
18,000 hours x $2.50 $45,000
Spending variance $3,000 unfavourable

Efficiency variance:
Actual hours x Standard rate:
18,000 hours x $2.50 = $45,000
Standard hours allowed x Standard rate:
19,000 hours x $2.50 $47,500
Efficiency variance $2,500 favourable
Fixed overhead variances:
Budget variance:
Actual fixed overhead cost $100,000
Flexible budget fixed overhead cost $110,000
Budget variance $10,000 favourable
Volume variance:
Flexible budget fixed overhead cost $110,000
Fixed overhead applied to work in process:
19,000 x $5.50 = $104,500
Volume variance $5,500 unfavourable
Proof of variances:

Variable overhead spending variance $3,000 unfavourable
Variable overhead efficiency variance $2,500 favourable
Fixed overhead budget variance $10,000 favourable
Fixed overhead volume variance $5,500 unfavourable
Underapplied overhead $16,000 unfavourable
d) Journal entries for variable overhead:

Sundry Accounts $48,000

Work-in-Process $47,500

$
Spending Variance $3,000
Efficiency Variance $2,500
Variable Overhead costs $500
e) Journal entries for fixed overhead:

Volume Variance $5,500
Budget Variance $10,000

8.
Khemicool Ltd. manufactures a chemical using in the process two components: K1 and component K2. The standard materials
usage and cost of one unit of the ready chemical are:

K1 6kg @ $2 $ 12
K2 14kg @ $3 $ 42
$ 54

In a particular period, 80 units of the chemical were produced from 500 kg of K1 and 730 kg of K2.
What was the company's materials yield variance?
 $90 favourable
 $999 unfavourable
 $990 favourable
Yield variance is the usage variance in total for all materials together.

Each unit of the chemical requires 6 kg of K1 costing $ 12
14 kg of K2 costing $ 42
20 kg costing in total $ 54

Average standard cost per kg: $54 / 20 = $2.70

Actual: 80 units of K1 required 1,230 kg of material in total
Standard: 80 units should require (× 20) 1,600 kg of material in total
Yield variance 370 kg (F)

Expressed in kgs: 370 kg (F) × $2.70 = $990 (F)

9.

The standard quantity allowed for materials means the amount that should have been used to produce the actual output of the
period.
 True
 False

10.
DBC's actual and budgeted fixed overhead amounts for the last year were $330,000 and $300,000. Standard hours allowed for
the output achieved was 55,000 hours. 60,000 hours had been budgeted for the year. DBC's fixed overhead budget variance
was:
 $60,000 favourable
 $30,000 unfavourable
Fixed overhead budget variance: $330,000 − $300,000 = $30,000 unfavourable.

11.
Ideal standards can best be described as standards that allow for no machine breakdowns or other work interruptions.
 True
 False

12.
HAF produces a single product. The standard production requirement for each unit requires 0.50 variable overhead hours at a
standard rate of $4 per hour. During the last year, HAF assembly line workers worked a total of 5,000 hours at a cost of $30,000
to HAF. Also last year, HAF manufactured 3,600 units of product. What was the company’s variable overhead spending variance
for the year?
 Nil
Variable overhead spending variance: $30,000 − (5,000 × $4) = $10,000 unfavourable.

13.
Sucher Company uses a standard cost system in which manufacturing overhead costs are applied to units of product on the
basis of machine hours. The company's condensed flexible budget for manufacturing overhead is given below:

Per Machine Hour Machine Hours
20,000 25,000 30,000
Variable overhead $3 $60,000 $75,000 $90,000
costs
Fixed overhead 300,000 300,000 300,000
costs
Total overhead $360,000 $375,000 $390,000
costs
The denominator level of activity is 30,000 machine hours. Standards call for 2.5 machine hours per unit of output. Actual activity
and manufacturing overhead costs for the year are given below:

Units produced 12,800 units
Machine hours used 31,600 machine hours
Overhead costs incurred:
Variable costs $96,000
Fixed costs $297,000
Required:
a) What are the standard hours allowed for the output?

b) What was the variable overhead spending variance?
c) What was the variable overhead efficiency variance?
d) What was the fixed overhead budget variance?
e) What was the fixed overhead volume variance?
f) (Appendix 10B) Prepare a journal entry to record the variable overhead costs incurred and applied, including the results of the
variance analysis.
g) (Appendix 10B) Prepare a journal entry to record the fixed overhead costs incurred and applied, including the results of the
variance analysis.
a) 12,800 units × 2.5 machine hours per unit = 32,000 machine hours
b) Computation of variable overhead spending variance:
Spending variance = (AH × AR) - (AH × SR)

= ($96,000) - (31,600 MHs × $3)
= $1,200 unfavourable
c) Computation of variable overhead efficiency variance:
Efficiency variance = (AH × SR) - (SH × SR)

= (31,600 MHs × $3) - (32,000 MHs × $3)
= $1,200 favourable
d) Computation of the fixed overhead budget variance:
Budget variance = Actual fixed overhead - Flexible budget fixed overhead

= $297,000 - $300,000
= $3,000 favourable
e) Computation of the fixed overhead volume variance:
Volume variance = Fixed portion of predetermined overhead rate ×

(Denominator hours - Standard hours allowed)
= $10 * (30,000 MH - 32,000 MH)
= $20,000 favourable
*$300,000/30,000 MH = $10
f) Journal entries for variable overhead:

Work-in-process (32,000x$3) $96,000
Efficiency Variance $1,200
g) Journal entries for fixed overhead:

Work-in-process (32,000 x $10) $320,000

14.
DBC produces a single product. The standard production requirement for each unit requires 0.50 direct labour hours at a
standard rate of $8 per hour. During the last year, DBC assembly line workers worked a total of 1,400 hours at a cost of $60,000
to DBC. Also last year, DBC manufactured 3,000 units of product. What was the company's direct labour efficiency variance for
the year?
 Nil
Direct labour efficiency variance: (1,400 − (3,000 × 0.50)) × $8 = $800 favourable.

15.
DBC's actual and budgeted fixed overhead amounts for the last year were $360,000 and $300,000. Actual hours worked were
60,000 hours. 80,000 hours had been budgeted for the year. DBC's predetermined fixed overhead rate was:
 $2.50 per hour
 $6 per hour
 $3.75 per hour
 $10 per hour
Predetermined fixed overhead rate: $300,000 / 80,000 hours = $3.75 per hour.

16.
Direct labour hour is often assumed as the sole cost driver in analyzing the total variable overhead cost variance into spending
and efficiency variances.
Required:
a) Will direct labour cost ever be a better cost driver of variable overhead costs than direct labour hour? Explain
b) How is the standard variable overhead rate different from the standard labour rate in variance analysis? Explain.
a) Direct labour cost can be a better cost driver than direct labour hour. For example, in a manufacturing situation where there
are significant variations in wage rates within or across departments, direct labour cost can better capture these variations as
they are reflected in variable overhead costs. Some variable overhead costs such as employee benefits and entitlements are
usually dependent not only on number of hours but also wage rates.
b) Variable overhead costs include not only indirect labour costs but also other costs such as indirect material and variable
portions of utilities. As such the standard variable overhead rate measures things other than indirect labour. The resulting
spending and efficiency variances may therefore have no relationship to either the cost or quantity of indirect labour if their
amounts are insignificant relative to other components of variable overhead costs. On the other hand, the standard direct labour
rate, by definition, relates only to direct labour and any resulting variances have unique interpretations regarding direct labour
quantity and rate.

17.
the output achieved was 55,000 hours. 64,000 hours had been budgeted for the year. DBC's fixed overhead budget variance
was:

18.

Web Company uses a standard cost system that applies manufacturing overhead to units of product on the basis of machine
hours. During February, the company used a denominator activity of 80,000 machine hours in computing its predetermined
overhead rate. However, only 75,000 standard machine hours were allowed for the month's actual production. If the fixed
overhead volume variance for February was $6,400 unfavourable, what was the total budgeted fixed overhead cost for the
month?
 $96,000
 $98,600
 $100,000
 $102,400
[6,400/(80,000 - 75,000)] * 80,000 = $102,400.

19.
A standard cost for a unit of product contains estimated product and period costs per unit.
 True
 False
A standard cost card is a per-unit breakdown of a product’s manufacturing costs, containing product costs only.

20.
The predetermined overhead rate (variable and fixed) is $7.50 per machine hour, and the denominator activity level is 135,000
machine hours. If the variable portion of the predetermined overhead rate is $3.00 per machine hour, what is the budgeted fixed
factory overhead for the year?
 $30,000
 $607,500
 $405,000
 $1,012,500
135,000 *(7.50 - 3) = $607,500.

21.
Which of the following statements is NOT correct?
 If the denominator level of activity and the standard hours allowed for the output of the period are the same, then
there is no volume variance.
 If the denominator level of activity is greater than the standard hours allowed for the output of the period, then the
volume variance is unfavourable.
 If the denominator level of activity is greater than the standard hours allowed for the output of the period, then the
volume variance is favourable.
 The volume variance is the most appropriate measure of the utilization of plant facilities.

22.
What is the term used to describe the variance occurring in multi-product companies from the change in volume of sales,
independent of any change in mix?
 Market share variance
 Industry volume variance
 Sales mix variance
 Sales quantity variance

23.
A favourable materials price variance coupled with an unfavourable materials quantity variance would MOST likely result from
which of the following?
 Problems with processing machines.
 Purchase of low-quality materials.
 Problems with labour efficiency.
 Changes in the product mix.

24.
Paneless Company makes storm-resistant windows. The company's sales manager estimated the sales volume to be 160,000
windows. Due to the increased hurricane activity this year, the total demand for this type of window increased from 800,000
windows to 1,000,000 windows. At the same time the company's market share fell from 20 percent to 15 percent. The company's
standard contribution margin is $15.00 per window. What is the company's industry volume variance?

25.
The material quantity variance is computed based on the quantity of all materials purchased during the period.
 True
 False

26.
the output achieved was 55,000 hours. 60,000 hours had been budgeted for the year. DBC's fixed overhead volume variance
was:
Fixed overhead volume variance: $300,000 − ($5 × 55,000) = $25,000 unfavourable.

27.
Which of the following variances would be useful in calling attention to possible problems in the control of spending on overhead
items?

Option Variable overhead spending Fixed overhead budget variance
variance
A No No
B No Yes
C Yes No
D Yes Yes
 Option A
 Option B
 Option C
 Option D

28.
(Appendix 10B) Which of the following entries would correctly record the charging of direct labour costs to Work in Process given
an unfavourable labour efficiency variance and a favourable labour rate variance?
 A debit to Work in Process, and credits to Labour Efficiency Variance, Labour Rate Variance, and Wages Payable.
 A debit to Work in Process and an equal credit to Wages Payable.
 Debits to Work in Process and Labour Efficiency Variance, and credits to Labour Rate Variance and Wages Payable.
 Debits to Work in Process and Labour Rate Variance, and credits to Labour Efficiency Variance and Wages Payable.

29.
Wattis Manufacturing has established the following master flexible budget:

Production in Units
110,000 160,000 210,000
Variable expenses:
Raw materials $242,000 352,000 462,000
Direct labour 264,000 284,000 504,000
Manufacturing overhead 198,000 288,000 378,000
Selling and administrative 110,000 160,000 210,000
Total variable expenses $814,000 $1,084,000 $1,554,000
Fixed expenses:
Manufacturing overhead $337,500 $337,500 $337,500
Total fixed expenses $637,500 $637,500 $637,500
Total expenses $1,451,500 $1,721,500 $2,191,500
Manufacturing overhead is applied on the basis of machine hours. At standard, each unit of product requires one machine hour
to complete.
Required:
a) The denominator activity level is 160,000 units. What are the predetermined variable and fixed manufacturing overhead rates?
b) Actual data for the year were as follows:

Actual variable manufacturing overhead cost $211,680
Actual fixed manufacturing overhead cost $341,700
Actual machine hours incurred 126,000
Units produced 120,200
Compute the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances for the
year.
a) Predetermined variable overhead rate = $288,000 /160,000 machine hours

= $1.80 per machine hour
Predetermined fixed overhead rate = $337,500/160,000 machine hours
b) Variable overhead variances:
Spending variance = AH (AR - SR)

= 126,000 ($1.68 - $1.80)
= $15,120 favourable
AR = $211,680/126,000 actual machine hours

= $1.68
Efficiency variance = SR (AH - SH)

= $1.80 (126,000 - 120,200)
SR = 120,200 units × 1 hour per unit = 120,200 hours.
Budget variance = Actual fixed overhead - Budgeted fixed overhead

= $341,700 - $337,500
Volume variance = Fixed rate (Denominator hours - Standard hours)

= $2.12 (160,000 - 120,200)
Standard hours = 120,200 units × 1 hour per unit = 120,200 hours

30.
Also last year, HAF manufactured 3,000 units of product using a total of 7,000 kg. What was the HAF's materials purchase price
 Nil
Materials price variance: $58,000 − ($7 × 10,000) = $12,000 favourable.

31.
DBC produces a single product. The standard production requirement for each unit requires 0.50 direct labour hours at a
standard rate of $12 per hour. During the last year, DBC assembly line workers worked a total of 5,000 hours at a cost of
$60,000 to DBC. Also last year, DBC manufactured 3,000 units of product. What was the company's direct labour rate variance
for the year?
 Nil
Direct labour rate variance: $60,000 − (5,000 × $12) = nil.

32.
(Appendix 10C) A favourable sales volume variance for a substitute product in a multiple-product firm does NOT necessarily
imply a favourable sales mix variance for that substitute product.
 True
 False

33.
Standard costs are best described as a budgeted price per unit.
 True
 False
Standard costs are best described as a budgeted price per unit.

34.
(Appendix 10B) The Lahn Company produces and sells a single product. Standards have been established for the product as
follows:

Direct Materials 5 kgs. @ $3.50/lb. = $17.50/unit
Direct Labour 3 hrs. @ $5.50/hr. = $16.50/unit
Actual cost and usage figures for the past month follow:

Units Produced 750
Direct Materials Used 4,000 kilograms
Direct Materials Purchased $14,400 (4,500 kgs.)
Direct Labour Cost $11,200 (2,000 hrs.)
Required:
Prepare journal entries to record:
a) The purchase of raw materials.

b) The usage of raw materials in production.
c) The incurrence of direct labour cost.
Raw materials inventory 15,750*

Materials price variance 1,350**
Accounts payable 14,400
* $3.50 per kg. × 4,500 kgs. = $15,750

** AQ(AP - SP) = 4,500(($14,400/4,500 kgs.) - $3.50) = $1,350 favourable

Work in process 13,125*
Materials quantity variance 875**
Raw materials inventory 14,400***
* $3.50 per kg. × 5 kgs per unit × 750 units = $13,125

** SP(AQ - SQ) = $3.50(4,000 - (5 × 750)) = $875 unfavourable
*** $3.50 × 4,000 = $14,000

Work in process 12,375*
Labour rate variance 200**
Labour efficiency variance 1,375***
Accrued wages payable 11,200
* $5.50 per hr. × 3 hrs per unit × 750 units = $12,375

** AH(AR - SR) = 2,000(($11,200/2,000) - $5.50) = $200 unfavourable
*** SR(AH - SH) = $5.50(2,000 - (3 × 750)) = $1,375 favourable

35.
HAF's actual and budgeted fixed overhead amounts for the last year were $140,000 and $100,000. Actual hours worked were
30,000 hours. 10,000 hours had been budgeted for the year. HAF's predetermined fixed overhead rate was:
 $5 per unit
 $6 per hour
 $5 per hour
 $10 per hour
Predetermined fixed overhead rate: $100,000 / 10,000 hours = $10 per hour.

36.
The following materials standards have been established for a particular product:

Standard quantity per unit of output 4.0 metres
Standard price $8.00 per metre
The following data pertain to operations concerning the product for the last month:

Actual materials purchased 7,920 metres
Actual cost of materials purchased $68,515
Actual materials used in production 6,800 metres
Actual output 1,780 units
Required:
a) What was the materials price variance for the month?

b) What was the materials quantity variance for the month?
Materials price variance = (AQ × AP) - (AQ × SP)

= $68,515 - (7,920 × $8.00)
SQ = Standard quantity per unit × Actual output

= 4.0 × 1,780
= 7,120
Materials quantity variance = SP(AQ - SQ)

= $8.00 (6,800 - 7,120)
= $2,560 favourable

37.
Jaune Company uses a standard cost system that applies manufacturing overhead to units of product on the basis of direct
labour hours (DLHs). The following data pertain to last month's operations:

Budgeted Fixed Overhead Costs $5,000
Actual Fixed Overhead Costs $5,500
Standard Hours Allowed for Output 2,400 DLHs
Predetermined Overhead Rate ($2 variable + $3 $5 per DLH
fixed)
What was the fixed overhead budget variance?
 $500 favourable.
 $500 unfavourable.
5,000 - 5,500 = $500 unfavourable.

38.
Practical standards can best be described as standards that allow for some machine breakdowns or other work interruptions.
 True
 False
Practical standards can best be described as standards that allow for some machine breakdowns or other work interruptions.

39.
The Porter Company has a standard cost system. In July, the company purchased and used 22,500 kilograms of direct material
at an actual cost of $53,000, the materials quantity variance was $1,875 unfavourable, and the standard quantity of materials
allowed for July production was 21,750 kilograms. What was the materials price variance for July?
Std. Price = 1,875/ (22,500 - 21,750) = $2.50/kg.

Variance = 22,500 * 2.50 - 53,000 = $3,250 favourable.

40.
HAF produces a single product. The standard production requirement for each unit requires 0.50 direct labour hours at a
standard rate of $11 per hour. During the last year, HAF assembly line workers worked a total of 3,000 hours at a cost of $40,000
to HAF. Also last year, HAF manufactured 3,000 units of product. What was the company's direct labour rate variance for the
year?
 Nil
Direct labour rate variance: $40,000 − (3,000 × $11) = $7,000 unfavourable.

41.
When more materials are used than allowed for actual production this will result in an unfavourable materials quantity variance.
 True
 False
When more materials are used than allowed for actual production this will result in an unfavourable materials quantity variance.

42.
The variable overhead efficiency variance reflects how efficiently variable overhead resources were used.
 True
 False

43.
DBC produces a single product. The standard production requirement for each unit requires 0.50 variable overhead hours at a
to DBC. Also last year, DBC manufactured 3,000 units of product. What was the company's variable overhead efficiency variance
for the year?
 Nil
Variable overhead efficiency variance: = (2,000 − (3,000 × 0.50)) × $7 = $3,500 unfavourable.

44.

The Dahlia Company uses a standard costing system. The following data are available for September:

Actual direct labour hours worked 6,300
Standard direct labour rate $10 per hour
Labour rate variance $1,220 favourable
What was the actual direct labour rate for September? (Round your final answer to 2 decimal places.)
 $9.81
 $8.90
 $9.01
 $9.20
(6,300 * $10 - $1,220) /6,300 = $9.81.

45.
(Appendix 10C) Iraj Company retails two grades of Persian carpets: Grade X and Grade Y. The carpets are sold by rolls. The
following is a summary of the company's activities for last year:

Grade X Grade Y Total
Sales in rolls:
Budget 1,910 490 2,400
Actual 2,000 310 2,310
Contribution margin per
roll:
Budget $855 $2,000
Actual $730 $2,900
Market volume in rolls:
Forecast 10,000
Actual 13,500
Required:
Required:
a) Assume the two grades of carpet are close substitutes. Calculate the sales volume variance for each grade of carpet and
analyze each into a sales mix variance and a sales quantity variance.
b) Analyze the sum of the sales quantity variance into its two components: market volume variance and market share variance.
c) Comment on the appropriateness of the assumption of close substitution between the two grades of carpet. Comment also on
the effect, if any, on the analysis in part a) above if this assumption is considered inappropriate.
For the following, F = favourable and U = unfavourable.
a) Sales volume variances:
Grade X: (2,000 - 1,910) × $855

= $76,950 F
Grade Y:
= (310 - 490) * 2,000
= $360,000 U
Analysis of the sales volume variance into a sales mix variance and a sales quantity variance is as follows:
Sales mix variances:
Grade X: [(0.87 * - 0.80*) × 2,200] × $800
= $123,200 F
Grade Y: [(0.13 * - 0.20*) × 2,200] × 2,000
= $308,000 U
Sales quantity variances:
Grade X: [(2,200 - 2,000) × 0.80*] × $800

= +160 × $800
= $128,000 F
Grade Y: [(2,200 - 2,000) × 0.20*] × $2,000

= +40 × $2,000
= $80,000 F
* 0.90 and 0.10 are the actual mix proportions and 0.80 and 0.20 are the budgeted mix proportions of Grade X and Grade Y,
respectively.
Note that the sum of the sales mix variance and sales quantity variance for each grade of carpet equals the sales volume
variance for the grade. That is:
Grade X: $176,000 F + $128,000 F = $304,000 F

Grade Y: $440,000 U + $80,000 U = $360,000 U
b) Analysis of the total sales quantity variance into a market volume and a market share variance:
Total = $128,000 F + $80,000 F = $208,000 F
Market volume variance = [(13,750 - 10,000) × 20%] × $1,040

= 750 × $1,040*
= $780,000 F
Market volume variance = [(16% - 20%) × 13,750] × $1,040

= -550 × $1,040*
= $572,000 U
Total = $780,000 F + $572,000 U

= $208,000 F
* $1,040 is the weighted-average budgeted contribution margin per roll:
(0.80 × $800) + (0.20 × $2,000) = $640 + $400

= $1,040
c) The assumption of close substitution between the two grades of carpet may be difficult to justify. For example, Grade Y
appears to belong to a class of its own with a very high contribution margin. This grade may be serving and competing in a
different market.
If the assumption of close substitution is considered inappropriate, then each grade of carpet is assumed to compete in a
separate and different market or industry. The sales volume variance for each grade can still be calculated, but any further
analysis into market volume and market share variances will be for each grade of carpet, instead of lumping both together as
done in part b) above.

46.
(Appendix 10C) If two products are poor substitutes, the calculation of a separate market volume variance and a separate market
share variance for each product is NOT useful.
 True
 False

47.
(Appendix 10B) Albert Manufacturing Company manufactures a single product. The standard cost of one unit of this product is:

Direct Materials: 6 metres at $1.50 $9.00
Direct Labour: 1 hour at $6.75 $6.75
Variable Overhead: 1 hour at $4.50 $4.50
Total Standard Variable Cost per Unit $20.25
During the month of October, 6,000 units were produced. Selected cost data relating to the month's production follow:

Materials Purchased: 60,000 metres at $1.43 $85,800
Material Used in Production: 38,000 metres
Direct Labour: _?_ hours at $_?_ per hr $41,925
Variable Overhead Cost Incurred $30,713
Variable Overhead Efficiency Variance $2,250 unfavourable
There was no beginning inventory of raw materials. The variable overhead rate is based on direct labour-hours.
Required:
a) (Appendix 10B) For direct materials, compute the price and quantity variances for the month, and prepare journal entries to
record activity for the month.
b) (Appendix 10B) For direct labour, compute the rate and efficiency variances for the month, and prepare a journal entry to
record labour activity for the month.
c) For variable overhead, compute the spending variance for the month, and prove the efficiency variance given above.
a) Materials Price Variance:

Actual Quantity of Inputs, at Actual Price:
60,000 metres @ $1.43 per metre $85,800
Actual Quantity of Inputs, at Standard Price:
60,000 metres @ $1.50 per metre $90,000
Materials Price Variance $4,200 favourable
Materials Quantity Variance:
38,000 metres @ $1.150 per metre $57,000
Standard Quantity of Inputs, at Standard Price:
6,000 units @ 6 metres per unit x $1.50 per $54,000
metre
Materials Quantity Variance $3,000 unfavourable
Journal entries:

Raw Materials (60,000 metres @ $1.50) 90,000
Materials Price Variance (60,000 metres @ $.07 4,200
favourable)
Accounts Payable (60,000 metres @ $1.43) 85,800
Work in Process (36,000 54,000
metres @ $1.50)
Materials Quantity 3,000
Variance (2,000 metres
unfavourable @ $1.50)
Raw Materials (38,000 57,000
metre @ $1.50)
b) The actual hours worked during the period can be computed through the variable overhead efficiency variance, as follows:
SR(AH - SH) = Variable Overhead Efficiency Variance

$4.50(AH - (6,000 units @ 1 hr. per unit) = $2,250 unfavourable
$4.50AH - $27,000 = $2,250 unfavourable
$4.50AH = $29,250
AH = 6,500 hours

Labour Rate Variance:
Actual Hours of Input, at the Actual Rate:
6,500 hours @ $6.45 per hour $49,056
Actual Hours of Input, at the Standard Rate:
6,500 hours @ $6.75 per hour $43,875
Labour Rate Variance $1,950 favourable
Labour Efficiency Variance:
6,500 hours @ $6.75 per hour $43,875
Standard Hours of Input, at the Standard Rate:
6,000 @ 1 hour per unit @ $6.75 per hour $40,500
Labour Efficiency Variance $3,375 unfavourable
Journal entry:
Work in Process (6,000 hrs. @ $6.75) 40,500
Labour Efficiency Variance (500 hrs. 3,375
Labour Rate Variance (6,500 hrs. @ $0.30 F) 1,950
Wages Payable (6,500 hrs. @ $6.45) 41,925
c) Variable Overhead Spending Variance:

Actual Hours of Input, at the Actual Rate: $30,713
6,500 hours @ $4.50 per hour $29,250
Variable Overhead Spending Variance $1,463 unfavourable
Variable Overhead Efficiency Variance:
6,500 hours @ $4.50 per hour $29,250
6,000 hours @ $4.50 per hour $27,000
Variable Overhead Efficiency Variance $2,250 unfavourable

48.
ABC Inc. had a materials mix variance of $500 unfavourable and a materials yield variance of $1,200 favourable. What was the
company's materials usage (quantity) variance?
Materials Quantity Variance: $1,200 favourable + $500 unfavourable = $700 favourable.

49.

The fixed overhead budget variance is NOT controllable by managers because fixed costs are NOT controllable.
 True
 False

50.
The standard quantity per unit for direct materials includes the amount of material required per unit of product and an allowance
for unavoidable waste, spoilage and other normal inefficiencies.
 True
 False

51.

HAF's actual and budgeted fixed overhead amounts for the last year were $320,000 and $350,000. Standard hours allowed for
the output achieved was 55,000 hours. 60,000 hours had been budgeted for the year. HAF's fixed overhead budget variance
was:
Fixed overhead budget variance: $320,000 − $350,000 = $30,000 favourable.

52.
standard rate of $6 per hour. During the last year, DBC assembly line workers worked a total of 5,000 hours. Variable overhead
spending was $33,000 to DBC and is allocated based on direct labour hours. Also last year, DBC manufactured 3,000 units of
product. What was the company's variable overhead spending variance for the year?
 Nil
Variable overhead spending variance: $33,000 − (5,000 × $6) = $3,000 unfavourable.

53.
(Appendix 10B) What does a credit balance in a direct labour efficiency variance account indicate?
 The average wage rate paid to direct labour employees was less than the standard rate.
 The standard hours allowed for the units produced were greater than actual direct labour hours used.
 The actual total direct labour costs incurred were less than standard direct labour costs allowed for the units
produced.
 The number of units produced was less than the number of units budgeted for the period.

54.

The following standards for variable manufacturing overhead have been established for a company that makes only one product:

Standard hours per unit of output 4.0 hours
Standard variable overhead rate $12.00 per hour
The following data pertain to operations for the last month:

Actual hours 2,630 hours
Actual total variable overhead cost $31,330
Actual output 500 units
What was the variable overhead spending variance for the month?
 $130 unfavourable.
 $230 favourable.
2,630 * $12 - $31,330 = $230 FAVOURABLE.

55.


Standard quantity per unit of output 8.3 grams
Standard price $19.15 per gram

Actual materials purchased 7,500 grams
Actual materials used in production 7,100 grams
What was the materials price variance for the month?
7,500 * 19.15 - 141,375 = $2,250 favourable.

56.

(Appendix 10C) If two products are good substitutes, the sales quantity variance for each product can be analyzed further into a
market volume variance and a market share variance.
 True
 False

57.
 $2.50 per hour
 $6 per hour
 $3.75 per hour
 $10 per hour

58.
Union Company uses a standard cost accounting system. The following overhead costs and production data are available for
August:

Standard Fixed Overhead Rate $1.40 per hour
Standard Variable Overhead Rate $3.20 per hour
Denominator Activity 40,000 hours
Actual Hours 39,500 hours
Standard Hours Allowed for Output 36,000 hours
Overapplied Overhead $2,000
What was the total amount of overhead applied to work in process in August?
 $165,600.
 $177,000.
 $187,500.
 $199,500.
36,000 * ($1.40 + $3.20) = $165,600.

59.
DBC produces a single product. The standard production requirement for each unit requires 2 kilograms of a single material at a
standard cost of $4 per kilogram. During the last year, DBC purchased 10,000 kilograms of materials at total cost of $54,000.
Also last year, DBC manufactured 3,000 units of product using a total of 7,500 kg. What was the DBC's materials quantity
 Nil
Materials quantity variance: $4 × (7,500 − 6,000) = $6,000 unfavourable.

60.
A favourable total sales variance could have been the result of:
 A price cut leading to a proportionality higher increase in sales volume
 Lower output leading to favourable total cost variances
 A fall in sales volume and a price reduction
 A price cut leading to a proportionality lower increase in sales volume

61.

Also last year, DBC manufactured 3,000 units of product using a total of 7,000 kg. What was the DBC's materials purchase price
 Nil
Materials price variance: $52,000 − ($5 × 10,000) = $2,000 unfavourable.

62.

Lab Corp. uses a standard cost system. Direct labour information for Product CER for the month of October follows:

Standard direct labour rate $6.00 per hour
Actual direct labour rate paid $6.10 per hour
Standard hours allowed for actual production 1,500 hours
Labour efficiency variance-unfavourable $600
What were the actual hours worked?
 1,400 hours.
 1,402 hours.
 1,598 hours.
 1,600 hours.
(1,500 * 6 + 600)/6 = 1,600 hours.

63.
The Fletcher Company uses standard costing. The following data are available for October:

Actual quantity of direct materials used 23,500 kilograms
Standard price of direct materials $2 per kilogram
Materials quantity variance $1,000 favourable
What was the standard quantity of material allowed for October production?
 23,000 kilograms.
 24,000 kilograms.
(23,500 * 2 + 1,000)/2 = 24,000 kilograms.

64.
Which of the following variances would be useful in calling attention to possible problems in the control of spending on overhead
items?

Option Variable overhead spending Fixed overhead volume variance
variance
A No No
B No Yes
C Yes No
D Yes Yes
 Option A
 Option B
 Option C
 Option D

65.

ABC Inc. had a materials mix variance of $500 favourable and a materials yield variance of $1,200 unfavourable. What was the
 $700 unfavourable
 $700 favourable
Materials Quantity Variance: $1,200 unfavourable + $500 favourable = $700 unfavourable.

66.
Khemicool Ltd. manufactures a chemical using in the process two components: K1 and component K2. The standard materials
usage and cost of one unit of the ready chemical are:

K1 5kg @ $2 $ 10
K2 20kg @ $3 $ 60
$ 70

In a particular period, 80 units of the chemical were produced from 600 kg of K1 and 900 kg of K2.
What was the company's materials mix variance?
 $90 favourable
To calculate the mix variance, it is first necessary to decide how the total quantity of materials used (600 kg + 900 kg) should
have been divides between K1 and K2 (that is to calculate the standard mix of the actual quantity of materials used).

Total quantity used Standard Mix:
1/3 K1 − 300
2/3 K2 − 1,200
(600 + 900) = 1,500 kg Total 1,500 kg

The differences between what should have been used in the mix and what was actually used is the mix variance (in kg) which
should be converted into money values at standard cost:

Actual mix kg Standard mix kg Mix variance kg Mix variance $
K1 600 300 300 (U) × $2 $600 (U)
K2 900 1,200 300 (F) × $3 $900 (F)
1,500 1,500 0 $300 (F)

67.
the output achieved was 50,000 hours. 40,000 hours had been budgeted for the year. HAF's fixed overhead volume variance
was:
Fixed overhead volume variance: $280,000 − ($7 × 50,000) = $70,000 favourable.

68.

Which of the following is normally associated with an adverse sales variance?
 A slight downward change in demand following a major price increase.
 Higher sales volume.
 Higher selling prices.
 A slight upwards change in demand following a major price reduction.

69.
Hart Company's labour standards call for 500 direct labour hours to produce 250 units of product. During October, the company
worked 625 direct labour hours and produced 300 units. What were the standard hours allowed for October?
 250 hours.
 500 hours.
 600 hours.
 625 hours.
300 * (500/250) = 600 hours.

70.

ABC Inc. had a materials mix variance of $600 favourable and a materials yield variance of $1,200 unfavourable. What was the
 $600 favourable
Materials Quantity Variance: $1,200 unfavourable + $600 favourable = $600 unfavourable.

71.
(Appendix 10B) Drake Company purchased materials on account. The entry to record the purchase of materials having a
standard cost of $1.50 per kilogram from a supplier at $1.60 per kilogram would include which of the following?
 A credit to Raw Materials Inventory.
 A debit to Work in Process.
 A credit to Materials Price Variance.
 A debit to Materials Price Variance.

72.

Dodge Company produces a single product. The company has set the following standards for materials and labour:

Direct Materials Direct Labour
Standard quantity or hours per ? kilograms 3 hours
unit
Standard price or rate ? per kilogram $15 per hour
Standard cost per unit ? $45
During the past month, the company purchased 7,000 kilograms of direct materials at a cost of $26,250. All of this material was
used in the production of 1,300 units of product. Direct labour cost totalled $55,125 for the month. The following variances have
been computed:

Materials price variance $1,750 favourable
Total materials variance $250 unfavourable
Required:
a) For direct materials, compute the standard price per kilogram, the standard quantity allowed for materials in total for the
month's production, and the standard quantity per unit of product.
b) For direct labour, compute the actual direct labour cost per hour for the month and the labour rate variance.
a) The actual cost of material per kilogram for the month was:
$26,500/7,000 kilograms = $3.75 per kilogram
AQ (AP - SP) = Materials price variance

7,000 kilograms ($3.75 - SP) = $1,750 favourable
$26,250 - 7,000 SP = $1,750 favourable
7,000 SP = $28,000
SP = $4.00
SP (AQ - SQ) = Materials quantity variance

$4.00(7,000 kgs. - SQ) = $2,000 unfavourable
$28,000 - $4.00 SQ = $2,000 unfavourable
$4.00 SQ = $26,000
SQ = 6,500 kgs.
6,500 kgs./1,300 units = 5 kgs. per unit.
b) SR (AH - SH) = Labour efficiency variance

$15 (AH - ((1,300 units × 3 hours)) = $6,000 favourable
$15 AH - $58,500 = $6,000 favourable
$15 AH = $52,500
AH = 3,500 hours
Therefore, $55,125 total actual labour cost/3,500 hours = $15.75 per hour.
AH (AR - SR) = Labour rate variance

3,500 hours ($15.75 - $15.00) = $2,625 unfavourable

73.

(Appendix 10B) Vernon Mills, Inc. is a large producer of men's and women's clothing. The company uses standard costs for all of
its products. The standard costs and actual costs per unit of product for a recent period are given below for one of the
company's product lines:

Standard Cost Actual Cost
Standard: 4.0 metres at $5.40 $21.60
per metre
Actual: 4.4 metres at $5.05 per $22.22
metre
Direct Labour:
Standard: 1.6 hours at $6.75 per $10.80
hour
Actual: 1.4 hours at $7.30 per $10.22
hour
Variable Overhead:
Standard: 1.6 hours at $2.70 per $4.32
hour
Actual: 1.4 hours at $3.25 per ______ _$4.55
hour
Total Cost per Unit $36.72 $36.99
During this period, the company produced 4,800 units of this product. A comparison of standard and actual costs for the period
on a total cost basis is given below:

Actual Costs: 4,800 units at $36.99 $177,552
Standard Costs: 4,800 units at $36.72 $176,256
Difference in Cost-Unfavourable $1,296
There was no inventory of materials on hand at the beginning of the period. During the period, 21,120 metres of materials were
purchased, all of which were used in production.
Required:
a) (Appendix 10B) For direct materials, compute the price and quantity variances for the period and prepare journal entries to
record all activity relating to direct materials for the period.
b) (Appendix 10B) For direct labour, compute the rate and efficiency variances and prepare a journal entry to record the
incurrence of direct labour cost for the period.
c) For variable overhead, compute the spending and efficiency variances.
a) Materials Price Variance:

Actual Quantity of Inputs, at Actual Price:
4,800 units, 4.4 metres per unit, $5.05 per metre $106,656
Materials Price Variance $7,392 favourable
Materials Quantity Variance:
Standard Quantity of Inputs, at Standard price:
Materials Quantity Variance $10,368 unfavourable
Journal entries:
Materials Price Variance (21,120 metres @ $0.35 7,392
F)
Accounts payable (21,120 metres @ $5.05) 106,656
Work in Process (19,200 metres @ $5.40) 103,680
Materials Quantity Variance (1,920 metres 10,368
(b) Labour Rate Variance:

4,800 units, 1.4 hours, $7.30 per hour $49,056
Labour Rate Variance $3,696 unfavourable
Labour Efficiency Variance:
4,800 units, 1.4 hours, $6.75 per hour = $45,360
4,800 units, 1.6 hours, $6.75 per hour = $51,840
Labour Efficiency Variance $6,480 favourable
Journal entry:
Work in Process (7,680 hrs. 51,840
@ $6.75)
Labour Rate Variance 3,696
(6,720 hrs. @ $0.55
unfavourable)
Labour Efficiency Variance $6,480
(960 hrs. favourable @
$6.75)
Wages Payable (6,720 hrs. 49,056
@ $7.30)
(c) Variable Overhead Spending Variance:

Variable Overhead Spending Variance $3,696 unfavourable
Variable Overhead Efficiency Variance:

Variable Overhead Efficiency Variance $2,592 favourable

74.

Capacity analysis is most affected by the presence of variable costs, NOT fixed costs.
 True
 False

75.



Required:
a) What was the variable overhead spending variance for the month?
b) What was the variable overhead efficiency variance for the month?
Variable overhead spending variance = (AH × AR) - (AH × SR)

= $92,300 - (6,100 × $15.38)
SH = Standard hours per unit × Actual output

= 6.9 × 800
= 5,520
Variable overhead efficiency variance = SR (AH - SH)

= $15.38 (6,100 - 5,520)

76.

When volume variance is unfavourable it signifies an underutilization of available facilities.
 True
 False

77.
was:

78.
Tyro Company has a standard cost system that applies manufacturing overhead to units of product on the basis of direct labour
hours (DLHs). The following information is available:

Actual Total Overhead Costs $16,000
Budgeted Fixed Overhead Costs $7,200
Actual Hours Worked 3,900 DLHs
Standard Hours Allowed for the Output 3,800 DLHs
Variable Overhead Rate $2.20 per DLH
Based on these data, what was the variable overhead spending variance?
3,900 * $2.20 - ($16,000 - $7,300) = $120 unfavourable.

79.
What does an unfavourable labour efficiency variance indicate?
 The actual labour rate was higher than the standard labour rate.
 The labour rate variance must also be unfavourable.
 Actual labour hours worked exceeded standard labour hours for the production level achieved.
 Overtime labour was used during the period.

80.
Standards can be either theoretical ("impossible dream") or practical (attainable all the time or only part of the time). Theoretically
either can be used as the framework for the budgeting process.
Required:
a) What is the major distinction, if any, between a standard amount and a budgeted amount?
b) Which standard, theoretical or practical, provides the better benchmark for evaluating subsequent performance in a budgeting
system? Explain.
a) One major distinction between a standard amount and a budgeted amount is the unit of measurement. A standard is a unit
concept. It is often quoted on per unit basis, for example, standard quantity of input for a unit of output, standard cost per unit of
input or standard cost per unit of output. A budgeted amount is a total concept. For example, when businesses talk of budgeted
labour costs, they often mean the total budgeted labour costs, not budgeted labour cost per unit of product.
b) Practical standards should normally provide better benchmarks for evaluating subsequent performance because they are
attainable through reasonable (although highly efficient) efforts by the average worker. Such standards generally will elicit
positive motivation from workers. Theoretical standards, on the other hand, tend to discourage even the most diligent workers
and as such may have no motivational value.

81.

Quantity standards specify how much should be paid for each unit of the output.
 True
 False
Quantity standards specify how much of an input should be used to make a unit of product or provide a unit of service.

82.
the output achieved was 65,000 hours. 60,000 hours had been budgeted for the year. DBC's fixed overhead volume variance
was:
 Nil.
Fixed overhead volume variance: $240,000 − ($4 × 65,000) = $20,000 favourable.

83.

Purchase of poor quality materials will generally result in a favourable materials price variance and an unfavourable labour rate
variance.
 True
 False

84.

Also last year, HAF manufactured 3,000 units of product using a total of 7,500 kg. What was the HAF's materials quantity
 Nil

85.

Ideal standards can best be described as a benchmarking tool.
 True
 False

86.

The fixed portion of the predetermined overhead rate is used for product costing purposes and has no significance in terms of
cost control.
 True
 False

87.
to DBC. Also last year, DBC manufactured 3,000 units of product. What was the company's variable overhead efficiency variance
for the year?
 Nil
 $600 favourable
Variable overhead efficiency variance: = (1,800 − (3,000 × 0.50)) × $2 = $600 unfavourable.

88.
One cause of an unfavourable overhead volume variance would be increase in cost for fixed overhead items.
 True
 False

89.
Tower Company planned to produce 3,000 units of its single product, Titactium, during November. The standards for one unit of
Titactium specify six kilograms of materials at $0.30 per kilogram. Actual production in November was 3,100 units of Titactium.
There was a favourable materials price variance of $380 and an unfavourable materials quantity variance of $120. Based on
these variances, what could one assume?
 That more materials were purchased than were used.
 That more materials were used than were purchased.
 That the actual cost per kilogram for materials was less than the standard cost per kilogram.
 That the actual usage of materials was less than the standard allowed.

90.
In a standard costing system, under- or overapplied fixed overhead is equal to the sum of the fixed overhead budget variance
and the fixed overhead volume variance.
 True
 False

91.

A reason for keeping a constant denominator activity level is to maintain stability in the amount of overhead cost that is applied
to each unit of product manufactured over the period.
 True
 False

92.
If the standard hours allowed for the actual output of the period is greater than the denominator level of activity (in hours), then
the overhead budget variance will be unfavourable.
 True
 False

93.
HAF produces a single product. The standard production requirement for each unit requires 0.50 direct labour hours at a
standard rate of $20 per hour. During the last year, HAF assembly line workers worked a total of 2,000 hours at a cost of
$60,000 to HAF. Also last year, HAF manufactured 3,000 units of product. What was the company's direct labour efficiency
 Nil
Direct labour efficiency variance: (2,000 − (3,000 × 0.50)) × $20 = $10,000 unfavourable.

94.
When completed production is transferred to Finished Goods Inventory, work-in-process is credited.
 True
 False
When completed production is transferred to Finished Goods Inventory, work-in-process is credited.

95.

An unfavorable materials quantity variance may occur due to all of the following EXCEPT:
 Negotiating an especially good price on material purchases
 Inferior quality materials used in production
 Untrained workers
 Faulty machines
Negotiating prices on materials would be the cause of a price variance not a quantity variance.

96.

Which of the following is NOT true for variable manufacturing overhead costs in a standard costing system?
 No volume variance is ever reported.
 The flexible variable overhead allowance for the standard hours allowed for the output is the same as the applied total
variable overhead.
 The slope of the budgeted variable overhead line is the same as the slope of the applied variable overhead line.
 Any underapplied or overapplied overhead is equal to the variable overhead spending variance.

97.
(Appendix 10C) Which of the following is (are) NOT used in calculating sales mix variances for two products that are close
substitutes?
 The budgeted sales mix percentages.
 The actual sales mix percentages.
 The actual total units of the two products sold.
 The market volume in units.

98.

At Overland Company, maintenance cost is exclusively a variable cost that varies directly with machine hours. The performance
report for July showed that total actual maintenance costs were $9,800 and that the associated spending variance was $200
unfavourable. If 8,000 machine hours were actually worked during July, what was the budgeted maintenance cost per machine
hour?
 $1.200
 $1.225
 $1.250
 $1.275
(9,800 - 200)/8,000 = $1.200.

99.

What does a favourable labour rate variance indicate?
 Actual hours exceed standard hours.
 Standard hours exceed actual hours.
 The actual rate exceeds the standard rate.
 The standard rate exceeds the actual rate.

100.
(Appendix 10A) A mix variance for direct materials can be derived as the difference between the quantity variance and the yield
variance.
 True
 False

101.
At Jacobson Company, indirect labour is a variable cost that varies with direct labour hours. Last month's performance report
showed that total actual indirect labour cost was $5,780 for the month and that the associated spending variance was $245
favourable. If 24,100 direct labour hours were actually worked last month, what must be the flexible budget cost formula for
indirect labour (per direct labour hour)?
 $0.20
 $0.25
 $0.30
 $0.35
(5,780 + 245)/24,100 = $0.25.

102.
was:

103.
Which of the following is directly associated with a higher denominator level of activity?
 Higher unit product cost.
 Lower unit product cost.
 Frequent occurrence of a volume variance.
 More profitable operations.

104.

(Appendix 10A) Direct labour efficiency variance can be analyzed further into mix and yield variances if more than one class of
direct labour that are good substitutes is used in operations.
 True
 False

105.

 $2.50 per hour
 $6 per hour
 $5 per hour
 $10 per hour

106.

A potential cause for an unfavorable materials price variance is:
 Negotiating an especially good price on material purchases
 Paying early to receive a discounted price from the supplier
 A rush order of materials
 Purchase of lower quality materials

107.

(Appendix 10C) The sales quantity variance is calculated by holding constant which of the following?
 The budgeted sales mix percentages.
 The actual sales mix percentages.
 The budgeted contribution margin per unit.
 Both the budgeted sales mix percentages and the budgeted contribution margin per unit.

108.

Also last year, DBC manufactured 3,000 units of product using a total of 8,000 kg. What was the DBC's materials quantity
 Nil

109.

(Appendix 10B) The following is the standard cost card for X Company's only product:

Direct materials, 5 metres at $4.00 $20.00
Direct labour, 1.5 hours at $10.00 $15.00
Variable overhead, 1.5 hours at $4.00 $6.00
Fixed overhead, 1.5 hours at $6.00 $9.00
Standard cost per unit $50.00
The company manufactured and sold 18,000 units of product during the year. A total of 70,000 metres of material was purchased
during the year at cost of $4.20 per metre. All of this material was used to manufacture the 14,500 units. The company records
showed no beginning or ending inventories for the year.
The company worked 30,000 direct labour hours during the year at a cost of $9.75 per hour. Overhead cost is applied to
products on the basis of direct labour hours. The denominator activity level (direct labour hours) was 20,000 hours. Budgeted
fixed overhead costs as shown on the flexible budget were $157,500, while actual fixed overhead costs were $150,000. Actual
variable overhead costs were $118,000.
Required:
a) Compute the direct materials price and quantity variances for the year.
b) Compute the direct labour rate and efficiency variances for the year.
c) Compute the variable overhead spending and efficiency variances for the year.
d) Compute the fixed overhead budget and volume variances for the year.
e) (Appendix 10B) Prepare a journal entry to record the variable overhead costs incurred and applied, including the results of the
variance analysis.
f) (Appendix 10B) Prepare a journal entry to record the fixed overhead costs incurred and applied, including the results of the
variance analysis.
a) Direct materials price and quantity variances:

AQ (AP - SP) = Direct materials price variance
70,000 metres ($4.20 - $4.00) = $14,000 unfavourable
SP (AQ - SQ) = Direct materials quantity variance

$4.00 (70,000 metres - 72,500 metres *) = $10,000 favourable
*14,500 units × 5 metres per unit = 72,500 metres
b) Direct labour rate and efficiency variances:

AH (AR - SR) = Direct labour rate variance
30,000 hours ($9.75 - $10.00) = $7,500 favourable
SR (AH - SH) - Direct labour efficiency variance

$10.00 (30,000 - 21,750 *) = $82,500 unfavourable
*14,500 units × 1.5 hours per unit = 21,750 hours
c) Variable overhead spending and efficiency variances:

Actual Variable Overhead Cost $118,000
Actual Hours * Standard Rate: 30,000 hours * $120,000
$4.00 =
Spending Variance $2,000 favourable
Actual Hours * Standard Rate: $120,000
Standard Hours * Standard Rate:21,750 hours * $87,000
$4.00 =
Efficiency Variance $33,000 unfavourable
d) Fixed overhead budget and volume variances:

Actual fixed Overhead Cost $150,000
Flexible Budget Fixed Overhead Cost $157,500
Budget Variance $7,500 favourable
Fixed Cost Applied to Work in Process:
14,500 * 1.5 hours * $6.00 = $130,500
Volume Variance $27,000 unfavourable
e) Journal entries for variable overhead:

Efficiency Variance 33,000
f) Journal entries for fixed overhead:


110.
To measure controllable production inefficiencies, which of the following is the best basis for a company to use in establishing
the standard hours allowed for the output of one unit of product?
 Average historical performance for the last several years.
 Engineering estimates based on ideal performance.
 Engineering estimates based on attainable performance.
 The hours per unit that would be required for the present workforce to satisfy expected demand over the long run.

111.

Under which product costing system for a manufacturing company would there be no fixed manufacturing overhead volume
variance?
 Standard absorption costing.
 Standard variable costing.
 Job order costing.
 Process costing.

112.

DBC's actual and budgeted fixed overhead amounts for the last year were $120,000 and $100,000. Actual hours worked were
30,000 hours. 50,000 hours had been budgeted for the year. DBC's predetermined fixed overhead rate was:
 $2 per hour
 $6 per hour
 $5 per hour
 $10 per hour

113.

Also last year, DBC manufactured 3,000 units of product using a total of 7,000 kg. What was the DBC's materials purchase price
 Nil
Materials price variance: $58,000 − ($5 × 10,000) = $8,000 unfavourable.

114.
Warner Manufacturing has established the following master flexible budget for the current year:

Production in Units
80,000 100,000 120,000
Variable expenses:
Raw materials $152,000 190,000 228,000
Direct labour 160,000 200,000 240,000
Manufacturing overhead 120,000 150,000 180,000
Total variable expenses $432,000 $540,000 $648,000
Fixed expenses:
Manufacturing overhead $300,000 $300,000 $300,000
Total fixed expenses $491,000 $491,000 $491,000
Total expenses $923,000 $1,031,000 $1,139,000
Manufacturing overhead is applied on the basis of machine hours. At standard, each unit of product requires one machine hour
to complete.
Required:
a) The denominator activity level is 100,000 units. What are the predetermined variable and fixed manufacturing overhead rates?
b) Actual data for the year were as follows:

Actual variable manufacturing overhead cost $159,500
Actual fixed manufacturing overhead cost $306,000
Actual machine hours incurred 110,000
Units produced 100,000
Compute the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances for the
year.
a) Predetermined variable overhead rate = $150,000/100,000 machine hours

Predetermined fixed overhead rate = $300,000/100,000 machine hours
b) Variable overhead variances:
Spending variance = AH (AR - SR)

= 110,000 ($1.45 - $1.50)
= $5,500 favourable
AR = $159,500/110,000 actual hours

= $1.45 per hour
Efficiency variance = SR (AH - SH)

= $1.50 (110,000 - 100,000)
SR = 100,000 units × 1 hour per unit = 100,000 hours
Budget variance = Actual fixed overhead - Budgeted fixed overhead

= $306,000 - $300,000
Volume variance = Fixed rate (Denominator hours - Standard hours)

= $3.00 (100,000 - 100,000)
= $0
Standard hours = 100,000 units × 1 hour per unit = 100,000 hours

115.

Because managers want stable unit cost figures, the accountant creates an artificial stability so far as fixed costs are concerned
by applying fixed costs to products as if the fixed costs were really variable.
 True
 False

116.
was:

117.

Under a standard cost system, who is usually held responsible for the materials price variances?
 The production manager.
 The sales manager.
 The purchasing manager.
 The engineering manager.
Bryan Company employs a standard cost system in which direct materials inventory is carried at standard cost. Bryan has
established the following standards for the prime costs of one unit of product:

Standard Quantity Standard Price Standard Cost
Direct Materials 6 kilograms $3.50/kilogram $21.00
Direct Labour 1.3 hours $11.00/hour _$14.30
_$35.30
During March, Bryan purchased 165,000 kilograms of direct materials at a total cost of $585,750. The total factory wages for
March were $400,000, 90 percent of which were for direct labour. Bryan manufactured 25,000 units of product during March,
using 151,000 kilograms of direct materials and 32,000 direct labour hours.

118.

What was the price variance for the direct materials acquired by the company during March?
 $8,250 unfavourable.
165,000 * 3.50 - 585,750 = $8,250 unfavourable.

119.

What was the direct materials quantity variance for March?
(25,000 * 6 - 165,000) * 3.50 = $52,500 unfavourable.

120.

What was the direct labour rate variance for March?
32,000 * 11 - 400,000 * .90 = $8,000 unfavourable.

121.

What was the direct labour efficiency variance for March?
(25,000 * 1.3 - 32,000) * 11 = $5,500 favourable.
The Litton Company has established standards as follows:

Direct Material 2 kgs. @ $3 /kg. = $6 per unit
Direct Labour 1 hr. @ $4 /hr. = $4 per unit
Variable Manufacturing Overhead 1 hrs. @ $2 /hr. = $2 per unit
Actual production figures for the past year are given below. The company records the materials price variance when materials are
purchased.

Units Produced 610
Direct Material Used 2,700 kgs.
Direct Material Purchased (3,000 kgs.) $5,700
Direct Labour Cost (1,100 hrs.) $4,620
Variable Manufacturing Overhead Cost Incurred $2,860
The company applies variable manufacturing overhead to products on the basis of direct labour hours.

122.

What was the materials price variance?
3,000 * $3 - $5,700 = $3,300 favourable.

123.

What was the materials quantity variance?
(610 * 2 - 2,700) * $3 = $4,440 UNFAVOURABLE.

124.
What was the labour rate variance?
1,100 * $4 - $4,620 = $220 UNFAVOURABLE.

125.
What was the labour efficiency variance?
(610 * 1 - 1,100) * $4 = $1,960 UNFAVOURABLE.

126.

What was the variable overhead spending variance?
1,100 * $2 - $2,860 = $660 UNFAVOURABLE.

127.
What was the variable overhead efficiency variance?
(610 * 1 - 1,100) * $2 = $980 unfavourable.
The Albright Company uses standard costing and has established the following standards for its single product:

Direct Materials 2 litres at $3 per litre
Direct Labour 0.5 hours at $8 per hour
Variable Manufacturing Overhead 0.5 hours at $2 per hour
During November, the company made 4,000 units and incurred the following costs:

Direct Materials Purchased 8,100 litres at $3.10 per litre
Direct Materials Used 7,600 litres
Direct Labour Used 2,200 hours at $8.25 per hour
Actual Variable Manufacturing Overhead $4,175
The company applies variable manufacturing overhead to products on the basis of direct labour hours.

128.
What was the materials price variance for November?
8,100 * (3 - 3.10) = $810 unfavourable.

129.

What was the materials quantity variance for November?
(4,000 * 2 - 7,600) * 3 = $1,200 FAVOURABLE.

130.

What was the labour rate variance for November?
2,200 * (8 - 8.25) = $550 unfavourable.

131.

What was the labour efficiency variance for November?
(4,000 * .5 - 2,200) * 8 = $1,600 unfavourable.

132.

What was the total variable overhead variance for November?
4,000 * .5 * 2 - 4,175 = $175 unfavourable.
Lawn Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of
Fastgro as follows:

Standard Quantity Standard Cost per Bag
Direct Materials 30 kilograms $10.00
Direct Labour 0.2 hours $1.00
Variable Manufacturing Overhead 0.2 hours $0.50
The company had no beginning inventories of any kind on January 1st. Variable manufacturing overhead is applied to production
on the basis of direct labour hours. The results of the company's operations during January are as follows:

Production of Fastgro: 5,000 bags
Direct Materials Purchased 90,000 kilograms at a cost of $35,000
Direct Labour Used 368 hours at a cost of $5,000
Variable Manufacturing Overhead Incurred $1,200
Inventory of Direct Materials on January 31 2,700 kilograms

133.

What was the materials price variance for January?
90,000 * ($10/30) - $35,000 = $5,000 unfavourable.

134.

What was the materials quantity variance for January?
(5,000 * 30 - (90,000 - 2,700)) * ($10/30) = $20,900 FAVOURABLE.

135.

What was the labour rate variance for January?
DL Rate = $1.00/0.2 = $5/hr.

Variance = 368 * $5 – 5,000 = $3,160 unfavourable.

136.

What was the labour efficiency variance for January? Do not round intermediate calculations.
(5,000 * 0.2 - 368) *$5 = $3,160 FAVOURABLE.

137.

What was the total variance for variable overhead for January?
 $40 favourable.
 $85 favourable.
5,000 * $0.50 - $1,200 = $1,300 FAVOURABLE.
(Appendix 10B) The Dexon Company makes and sells a single product, called a Mip, and employs a standard costing system. The
following standards have been established for one unit of Mip:

Standard Quantity or Hours Standard Cost per Mip
Direct Materials 6 board metre $9.00
There were no inventories of any kind on August 1. During August, the following events occurred:
Purchased 15,000 board metres at the total cost of $24,000.

Used 12,000 board metres to produce 2,100 Mips.
Used 1,700 hours of direct labour time at a total cost of $20,060.

138.

(Appendix 10B) To record the purchase of direct materials, the general ledger would include what entry to the Materials Price
Variance account?
 $1,500 credit.
 $1,500 debit.
 $6,000 credit.
 $6,000 debit.
Std. Price/m = 9/6 = $1.50.

15,000 * 1.50 - 24,000 = $1,500 debit.

139.
(Appendix 10B) To record the use of direct materials in production, the general ledger would include what entry to the Materials
Quantity Variance account?
 $900 debit.
 $900 credit.
 $3,600 debit.
 $3,600 credit.
(2,100 * 6 - 12,000) * 1.50 = $900 credit.

140.

(Appendix 10B) To record the incurrence of direct labour cost and its use in production, the general ledger would include what
entry to the Labour Rate Variance account?
 $240 credit.
 $240 debit.
 $340 debit.
 $340 credit.
Std. Rate = 9.60/.8 = $12/hr.; 1,700 * 12 - 20,060 = $340 credit.

141.
(Appendix 10B) To record the incurrence of direct labour costs and its use in production, the general ledger would include what
entry to the Labour Efficiency Variance account?
 $240 debit.
 $480 credit.
 $1,200 debit.
 $1,200 credit.
(2,100 * .8 - 1,700) * 12 = $240 debit.
The Alpha Company produces toys for national distribution. Standards for a particular toy are:
Materials: 12 grams per unit at $0.56 per gram.

Labour: 2.50 hours per unit at $2.75 per hour.
During the month of December, the company produced 1,500 units. Information for the month follows:
Materials: 14,000 grams were purchased and used at a total cost of $7,000.
Labour: 2,500 hours worked at a total cost of $7,300.

142.

What was the materials price variance?
14,000 * 0.56 - $7,000 = $840 favourable.

143.

What was the materials quantity variance?
(1,500 * 12 - 14,000) * $0.56 = $2,240 FAVOURABLE.

144.

What was the labour rate variance?
2,500 * $2.50 - $7,300 = $1,050 UNFAVOURABLE.

145.

What was the labour efficiency variance?
 $3,437.50 unfavourable.
 $3,437.50 favourable.
(1,500 * 2.50 - 2,500) * $2.75 = $3,437.50 FAVOURABLE.

Standard quantity per unit of output 4.4 kilograms
Standard price $13.20 per kilogram

Actual materials purchased 4,800 kilograms
Actual materials used in production 4,300 kilograms

146.

4,800 * 13.20 - 62,880 = $480 favourable.


147.

What was the materials quantity variance for the month?
(700 * 4.4 - 4,300) * 13.20 = $16,104 unfavourable.

Standard quantity per unit of output 1.9 grams
Standard price $18.00 per gram

Actual materials purchased 5,800 grams
Actual materials used in production 5,200 grams

148.

5,800 * 18 - 108,460 = $4,060 unfavourable.

149.

(2,700 * 1.9 - 5,200) * 18 = $1,260 unfavourable.


Standard quantity per unit of output 6.40 metres
Standard price $16.20 per metre

Actual materials purchased 9,220 metres
Actual materials used in production 8,200 metres

150.
9,220 * $16.20 - $152,000 = $2,636 UNFAVOURABLE.

151.

(1,300 * 6.4 - 8,200) * $16.20 = $1,944 FAVOURABLE.
The following labour standards have been established for a particular product:

Standard labour hours per unit of output 7.5 hours
Standard labour rate $15.25 per hour

Actual hours worked 9,600 hours
Actual total labour cost $144,480

152.
What was the labour rate variance for the month?
9,600 * 15.25 - 144,480 = $1,920 favourable.

153.

What was the labour efficiency variance for the month?
(1,200 * 7.5 - 9,600) * 15.25 = $9,150 unfavourable.
The Clark Company makes a single product and uses standard costing. Some data concerning this product for the month of May
follow:

Number of units produced 10,000
Standard labour rate per direct labour hour $12
Standard variable overhead rate per direct labour $4
hour
Actual labour hours used 14,000
Actual variable manufacturing overhead costs $58,290

154.

What was the variable overhead spending variance for May?
14,000 * 4 - 58,290 = $2,290 unfavourable.

155.

What was the actual direct labour rate for May in dollars per hour?
 $11.50
 $11.75
 $12.00
 $12.50
(14,000 * 12 - 7,000)/14,000 = $11.50.

156.

What was the total standard cost for direct labour for May?
 $120,000
 $161,000
 $168,000
 $180,000
14,000 * 12 + 12,000 = $180,000.


157.

What was the total standard cost for variable overhead for May?
 $40,000
 $50,000
 $56,000
 $60,000
14,000 * 4 + 4,000 = $60,000.

158.

What are the standard hours allowed to make one unit of finished product?
 1.0 hours.
 1.2 hours.
 1.5 hours.
 2.0 hours.
60,000/4/10,000 = 1.5 hours.



159.

9,800 * $12.00 - $117,000 = $600 FAVOURABLE.

160.

What was the variable overhead efficiency variance for the month?
(3,220 * 3.0 - 9,800) * $12.00 = $1,680 UNFAVOURABLE.
The Upton Company employs a standard costing system in which variable overhead is assigned to production on the basis of
direct labour hours. Data for the month of February include the following:

Variable manufacturing overhead cost incurred $48,700
Total variable overhead variance $300 favourable
Standard hours allowed for actual production 7,000
Actual direct labour hours worked 6,840

161.
What is the standard variable overhead rate per direct labour hour?
 $6.91
 $6.95
 $7.00
 $7.12
(48,700 + 300)/7,000hrs. = $7.00.

162.

What was the variable overhead spending variance?
6,840 * 7- 48,700 = $820 unfavourable.

163.

What was the variable overhead efficiency variance?
(7,000 - 6,840) * 7 = $1,120 favourable.
(Appendix 10A) Saskatoon Company uses two raw materials, A and B, in the manufacture of its only product: Pillbo. The materials
are very close substitutes. The standard proportions for the manufacture of a unit of Pillbo are 3 units of A and 5 units of B. The
unit standard prices of A and B are $10 and $8, respectively. During the month of August, the company used 415 units of A and
800 units of B to produce 230 units of Zizbo.

164.

What were the direct materials quantity variances for raw materials A and B, respectively?
 $100 favourable and $480 unfavourable.
 $200 unfavourable and $240 unfavourable.
 $2,750 favourable and $2,800 favourable.
 $2,480 unfavourable and $2,100 favourable.
Material A: (230 * 3 - 415) * $10 = $2,750 favourable.

Material B: (230 * 5 – 800) * $8 = $2,800 favourable.

165.
(Appendix 10A) For raw material A, what were the mix and yield variances, respectively?
 $207 favourable and $2,636 unfavourable.
 $200 unfavourable and $300 favourable.
 $406 unfavourable and $2,344 unfavourable.
Mix = (415 - (3/8 * (415 + 800)) * $10 = $406 unfavourable.

Yield = (3/8 * 1,215 – 230 * 3) * $10 = $2,344 unfavourable.

166.

(Appendix 10A) For raw material B, what were the mix and yield variances, respectively?
 $5,275 favourable and $3,125 favourable.
 $240 favourable and $200 favourable.
 $325 favourable and $3,125 unfavourable.
Mix = (800 – (5/8 * (415 + 800)) * $8 = $325 favourable.

Yield = (5/8 * 1,215 – 230 * 5) * $8 = 3,125 unfavourable.
The Murray Company makes and sells a single product. The company recorded the following activity and cost data for May:

Number of Units Completed 45,000 units
Standard Direct Labour Hours Allowed per Unit 1.5 DLHS
of Product
Budgeted Direct Labour Hours (denominator 72,000 DLHS
activity)
Actual Fixed Overhead Costs Incurred $66,000
The fixed portion of the predetermined overhead rate is $0.95 per direct labour hour.

167.
What was the amount of fixed overhead contained in the company's overhead flexible budget for May?
 $64,125
 $67,500
 $68,400
 $70,275
45,000 * 1.5 * .95 + 4,275 = $68,400.

168.
What was the amount of fixed manufacturing overhead cost applied to work in process during May?
 $42,750
 $61,725
 $62,700
 $64,125
45,000 * 1.5 * .95 = $64,125.

169.
What was the fixed overhead budget variance for May?
68,400 - 66,000 = $2,400 favourable.
A manufacturing company has a standard costing system based on machine hours (MHs) as the measure of activity. Data from the
company's flexible budget for manufacturing overhead are given below:

Denominator Level of Activity 6,000 MHs
Overhead Costs at the Denominator Activity
Level:
Variable Overhead Cost $35,000
Fixed Overhead Cost $75,000
The following data pertain to operations for the most recent period:

Actual Hours 6,300 MHs
Standard Hours Allowed for the Actual Output 6,000 MHs
Actual Total Variable Overhead Cost $36,540
Actual Total Fixed Overhead Cost $75,000

170.
What was the total predetermined overhead rate, rounded to the nearest cent?
 $17.91
 $18.00
 $18.50
 $18.33
($35,000 + $75,000)/ 6,000 = $18.33.

171.

How much overhead was applied to products during the period, rounded to the nearest dollar? (Do not round intermediate
calculations.)
 $109,980
 $112,850
 $113,415
 $116,550
6,000 * $18.33 = $109,980.

172.
What was the variable overhead spending variance for the period, rounded to the nearest dollar?
(6,300 * ($35,000/6,000)) - $36,540 = $210 FAVOURABLE.

173.

What was the variable overhead efficiency variance for the period, rounded to the nearest dollar?
 $0.
(6,000 - 6,300) * $35,000/6,000 = $1,750 unfavourable.

174.

What was the fixed overhead budget variance for the period, rounded to the nearest dollar?
 $0.
$75,000 - $75,000 = 0.

175.

What was the fixed overhead volume variance for the period, rounded to the nearest dollar?
 $0.
6,000 * $75,000/ 6,000 - $75,000 = 0.
The Dillon Company makes and sells a single product and uses a flexible budget for overhead to plan and control overhead
costs. Overhead costs are applied on the basis of direct labour hours. The standard cost card shows that 5 direct labour hours are
required per unit. The Dillon Company had the following budgeted and actual data for March:

Actual Budgeted
Units Produced 33,900 30,800
Direct Labour Hours 161,800 154,000
Variable Overhead Costs $140,500 $123,200
Fixed Overhead Costs $80,000 $77,000

176.

What was the variable overhead spending variance for March?
161,800 * 123,200/154,000 - 140,500 = $11,060 unfavourable.

177.
What was the variable overhead efficiency variance for March?
(33,900 * 5 - 161,800) * 123,200/154,000 = $6,160 favourable.

178.

What was the fixed overhead budget variance for March?
77,000 - 80,000 = $3,000 unfavourable.

179.

What was the fixed overhead volume variance for March?
33,900 * 5 * 77,000/154,000 - 77,000 = 7,750 favourable.
The Ferris Company applies manufacturing overhead costs to products on the basis of direct labour hours. The standard cost card
shows that 3 direct labour hours are required per unit of product. For August, the company budgeted to work 90,000 direct
labour hours and to incur the following total manufacturing overhead costs:

Total Variable Overhead Costs $100,000
Total Fixed Overhead Costs $118,000
During August, the company completed 25,000 units of product, worked 86,000 direct labour hours, and incurred the following
total manufacturing overhead costs:

Total Variable Overhead Costs $99,000
Total Fixed Overhead Costs $115,300
The denominator activity used for the predetermined overhead rate was 90,000 direct labour hours.

180.

For August, what was the variable overhead spending variance?
86,000 * $100,000/$90,000 - $99,000 = $3,444 UNFAVOURABLE.

181.

For August, what was the variable overhead efficiency variance?
(25,000 * 3 - 86,000) * $100,000/ $90,000 = $12,222 UNFAVOURABLE.

182.
For August, what was the fixed overhead budget variance?
$118,000 - $115,300 = $2,700 favourable.

183.

For August, what was the fixed overhead volume variance?
25,000 * 3 *$118,000/$90,000 - $118,000 = $19,667 UNFAVOURABLE.
King Company estimated that it would operate its manufacturing facilities at 800,000 direct labour hours for the year, which
served as the denominator activity in the predetermined overhead rate. The total budgeted manufacturing overhead for the year
was $2,000,000, of which $1,600,000 was variable and $400,000 was fixed. The standard variable overhead rate was $2 per
direct labour hour. The standard direct labour time was 3 direct labour hours per unit. The actual results for the year are presented
below:

Actual Finished Units 250,000
Actual Direct Labour Hours 764,000
Actual Variable Overhead $1,610,000
Actual Fixed Overhead $392,000

184.
What was the variable overhead spending variance for the year?
764,000 * 2 - 1,610,000 = $82,000 unfavourable.

185.

What was the variable overhead efficiency variance for the year?
(250,000 * 3 - 764,000) * 2 = $28,000 unfavourable.

186.

What was the fixed overhead budget variance for the year?
400,000 - 392,000 = $8,000 favourable.

187.

What was the fixed overhead volume variance for the year?
[250,000 * 3 * (400,000/800,000)] - 400,000 = $25,000 unfavourable.
A manufacturing company that has only one product has established the following standards for its variable manufacturing
overhead. The company uses machine hours as its measure of activity.

Standard Hours per Unit of Output 9.0 machine hours
Standard Variable Overhead Rate $15.00 per machine hour

Actual Hours 1,800 machine hours
Actual Output 300 units

188.
1,800 * $15.00 - $25,000 = $2,000 FAVOURABLE.

189.

(300 * 9.0 - 1,800) *$15.00 = $13,500 FAVOURABLE.

A manufacturing company that has only one product has established the following standards for its variable manufacturing
overhead. The company uses direct labour hours (DLHs) as its measure of activity.

Standard Hours per Unit of Output 7.2 DLHs
Standard Variable Overhead Rate $14.20 per DLH

Actual Direct Labour Hours 5,100 DLHs
Actual Output 600 units

190.
5,100 * 14.20 - 72,165 = $255 favourable.

191.

(600 * 7.2 - 5,100) * 14.20 = $11,076 unfavourable.
Raff Co. has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour
hours (DLHs). The following standards are based on 100,000 direct labour hours:

Variable Overhead 2 DLHs @ $3 per DLH = $6 per unit
Fixed Overhead 2 DLHs @ $4 per DLH = $8 per unit
The following information pertains operations during March:

Units Actually Produced 38,000
Actual Direct Labour Hours Worked 80,000
Actual Manufacturing Overhead Incurred:
Variable Overhead $250,000
Fixed Overhead $384,000

192.
For March, what was the variable overhead spending variance?
80,000 * 3 - 250,000 = $10,000 unfavourable.

193.

For March, what was the fixed overhead volume variance?
(38,000 * 2 * 4) - (100,000 * 4) = $96,000 unfavourable.
A furniture manufacturer has a standard costing system based on machine hours (MHs) as the measure of activity. Data from the
company's flexible budget for manufacturing overhead are given below:

Level:


194.
 $21.16
 $21.26
 $21.80
 $24.24
($32,000 + $48,000)/3,300 = $24.24.

195.

How much overhead was applied to products during the period, rounded to the nearest dollar?
 $67,408
 $74,618
 $72,270
 $74,460
3,078 * $24.24 = $74,618.

196.
$48,000 - $35,000 = $13,000 FAVOURABLE.

197.

3,078 * 48,000/ 3,300 - 48,000 = 3,229 UNFAVOURABLE.
A manufacturer of playground equipment has a standard costing system based on machine hours (MHs) as the measure of
activity. Data from the company's flexible budget for manufacturing overhead are given below:



198.
What was the predetermined fixed overhead rate, rounded to the nearest cent?
 $13.61
 $12.24
 $13.55
 $13.87
$42,200/3,100 = $13.61.

199.

How much fixed overhead was applied to products during the period, rounded to the nearest dollar? (Round your intermediate
calculations to 2 decimal places.)
 $40,650
 $41,60
 $50,357
 $46,070
3,700 * $13.61 = $50,357.

200.
$42,200 - $41,000 = $1,200 FAVOURABLE.

201.
$50,357 - $42,200 = $8,157 favourable.
The Gambino Company makes and sells a single product and uses standard costing. During January, the company actually used
9,100 direct labour hours (DLHs) and produced 3,000 units of product. The standard cost card for one unit of product includes the
following:
Variable Factory Overhead: 3.0 DLHs @ $4.12 per DLH.

Fixed Factory Overhead: 3.0 DLHs. @ $3.38 per DLH.
For January, the company incurred $22,000 of actual fixed overhead costs and recorded an $900 favourable volume variance.

202.
What was the budgeted fixed factory overhead cost for January?
 $30,625
 $31,500
 $29,520
 $33,250
3,000 * 3 * $3.38 - $900 = $29,520.

203.
What was the denominator level of activity in direct labour hours (DLHs) used by Claus in setting the predetermined overhead
rate for January?
 8,734 DLHs.
 9,250 DLHs.
 9,106 DLHs.
 10,500 DLHs.
$29,520 /$3.38 = 8,734 DLHs.
A manufacturer of industrial equipment has a standard costing system based on machine hours (MHs) as the measure of activity.
Data from the company's flexible budget for manufacturing overhead are given below:

Level:


204.
 $23.59
 $23.91
 $23.98
 $24.30
(33,345 + 61,425)/3,900 = $24.30.

205.
 $93,24
 $94,483
 $94,770
 $96,034
3,952 * 24.30 = $96,033.60.
A manufacturer of industrial equipment has a standard costing system based on direct labour hours (DLHs) as the measure of

Denominator Level of Activity 8,000 DLHs
Level:

Actual Hours 7,600 DLHs
Standard Hours Allowed for the Actual Output 7,735 DLHs

206.
 $19.30
 $19.65
 $19.80
 $19.85
($58,000 + $100,800)/ 8,000 = $19.85.

207.
 $153,540
 $153,270
 $154,410
 $157,200
7,735 * $19.85 = $153,540.
Dori Castings is a job order shop that uses a standard cost system to account for its production costs. Manufacturing overhead
costs are applied to production on the basis of direct labour hours.

208.
Dori's choice of a production volume as a denominator for calculating its predetermined overhead rate will have NO effect on
which of the following?
 The fixed portion of this rate, which is used for applying costs to production.
 The variable portion of this rate, which is used for applying costs to production.
 The fixed overhead budget variance.
 The fixed overhead volume variance.

209.
A volume variance will exist for Dori in a month under which of the following conditions?
 When the production volume differs from sales volume.
 When the actual direct labour hours differ from standard hours allowed.
 When there is a budget variance in fixed overhead costs.
 When the fixed overhead applied to units of product on the basis of standard hours allowed differs from the budgeted
fixed overhead.

210.

What amount of fixed overhead would Dori apply to finished production?
 The actual direct labour hours multiplied by the standard fixed overhead rate per direct labour hour.
 The standard hours allowed for the actual units of finished output multiplied by the standard fixed overhead rate per
direct labour hour.
 The standard units of output for the actual direct labour hours worked multiplied by the standard fixed overhead rate
per unit of output.
 The actual fixed overhead cost per direct labour hour multiplied by the standard hours allowed for standard output.
Jessep Corporation has a standard cost system in which manufacturing overhead is applied to units of product on the basis of
direct labour hours. The company has provided the following data concerning its fixed manufacturing overhead costs in March:

Denominator Hours 15,000 hours
Actual Hours Worked 13,000 hours
Standard Hours Allowed for the Output 12,000 hours

211.
What was the fixed overhead budget variance?
$41,000 - $48,000 = $7,000 unfavourable.

212.
What was the fixed overhead volume variance?
12,000 * ($41,000/15,000) - $41,000 = $8,200 unfavourable.
An outdoor barbecue grill manufacturer has a standard costing system based on direct labour hours (DLHs) as the measure of



213.
26,895 - 28,295 = $1,400 unfavourable.

214.
3,420 * (26,895/3,300) - 26,895 = $978 favourable.

An outdoor barbecue grill manufacturer has a standard costing system based on machine hours (MHs) as the measure of activity.
Data from the company's flexible budget for manufacturing overhead are given below:



215.

$50,140 - $50,000 = $140 favourable.

216.

4,743 * (50,140 /5,000) - 50,140 = 2,577 unfavourable.
The Tate Company uses a standard costing system in which manufacturing overhead is applied to units of product on the basis of
direct labour hours (DLHs). The company recorded the following costs and activity for September:

Cost:
Actual Fixed Overhead Costs Incurred $62,420
Fixed Portion of the Predetermined Overhead $1.00 per DLH
Rate
Activity:
Number of Units Completed 22,000
Standard Direct Labour Hours Allowed per Unit 2.5 DLHs
of Product
Denominator Activity 64,000 DLHs

217.
What was the amount of fixed manufacturing overhead cost applied to work in process during September?
 $55,000
 $57,000
 $59,850
 $61,400
22,000 * 2.5 * $1.00 = $55,000.

218.
What was the amount of fixed overhead cost contained in the company's flexible budget for manufacturing overhead for
September?
 $57,000
 $57,900
 $60,000
 $61,400
$55,000 + $2,900 = $57,900.
(Appendix 10C) Kyekyeku Company retails two models of a product: Model X and Model Y. It considers both products to be close
substitutes. The following data relate to the company's operations for last year:

Model X Model Y Total
Sales in Units:
Budget 1,004 1,006 2,010
Actual 1,007 1,023 2,030
Contribution Margins per
Unit:
Budget $35 $45
Actual $30 $35
Market Volume in Units:
Budget 50,000
Actual 53,000

219.
(Appendix 10C) What were the sales volume variances for Model X and Model Y, respectively, for last year?
 $200 favourable and $3,496 favourable.
 $105 favourable and $765 favourable.
Model X Variance = ($1,007 - $1,004) * 35 = $105 favourable.

Model Y Variance = ($1,023- $1,006) *45 = $765 favourable.

220.
(Appendix 10C) What were the sales mix variances for Model X and Model Y, respectively, for last year?
 $280 unfavourable and $360 favourable.
 $1,260 favourable and $1,680 unfavourable.
 $1,260 unfavourable and $1,680 favourable.
Model X Variance = ($1,007 - $2,030 * 0.5) * 35 = $280 unfavourable.

Model Y Variance = ($1,023 - $2,030 * 0.5) * 45 = $360 favourable.

221.

(Appendix 10C) What were the sales quantity variances for Model X and Model Y, respectively, for last year?
 $385 favourable and $405 favourable.
Model X Variance = ($2,030 * 0.5 - $1,004) * 35 = $385 favourable.

Model Y Variance = ($2,030 * 0.5 - $1,006) * 45 = $405 favourable.

222.
(Appendix 10C) What was the market share variance for last year?
 4,024.00 unfavourable.
 $21,875.00 favourable.
Avg. CM = ($1,004 * 35 + $1,006 * 45) / 2,010 = $40.00.

Variance = ($2,030 – 53,000 * $2,010 / 50,000) *$40 = $4,024 unfavourable.

223.
(Appendix 10C) What was the market volume variance for last year?
(53,000- 50,000) * $2,010/ 50,000 * $40 = $4,824 favourable.
(Appendix 10B) The Baby Clothing Company makes and sells a single product, called a New bodysuit and employs a standard
costing system. The following standards have been established for one unit of New bodysuit:

Standard Quantity or Hours Standard Cost per New
bodysuit
Direct Materials 5 board metre $8.00
There were no inventories of any kind on August 1. During August, the following events occurred:
Purchased 14,000 board metres at the total cost of $22,000.

Used 10,300 board metres to produce 2,100 New bodysuits.
Used 1,400 hours of direct labour time at a total cost of $18,060.

224.

(Appendix 10B) To record the purchase of direct materials, the general ledger would include what entry to the Materials Price
Variance account?
 $1,500 credit.
 $400 debit.
 $500 credit.
 $600 debit.
Std. Price/m = 8/5 = $1.60.

14,000 * 1.60 - 22,000 = $400 debit.

225.
(Appendix 10B) To record the use of direct materials in production, the general ledger would include what entry to the Materials
Quantity Variance account?
 $900 debit.
 $320 credit.
 $360 debit.
 $360 credit.
(2,100 * 5 - 10,300) * 1.60 = $320 credit.

226.
(Appendix 10B) To record the incurrence of direct labour cost and its use in production, the general ledger would include what
entry to the Labour Rate Variance account?
 $240 credit.
 $240 debit.
 $340 debit.
 $340 credit.
Std. Rate = 8.40/.7 = $12/hr.; 1,700 * 12 - 20,060 = $340 credit.

227.

(Appendix 10B) To record the incurrence of direct labour costs and its use in production, the general ledger would include what
entry to the Labour Efficiency Variance account?
 $840 debit.
 $480 credit.
 $1,200 debit.
 $1,200 credit.
(2,100 * .7- 1,400) * 12 = $840 debit.
The Baby Clothing Company makes a single product and uses standard costing. Some data concerning this product for the month
of May follow:

Number of units produced 10,000
Standard labour rate per direct labour hour $12
Standard variable overhead rate per direct labour $5
hour
Actual labour hours used 15,000
Actual variable manufacturing overhead costs $78,290

228.
What was the variable overhead spending variance for May?
15,000 * 5- 78,290 = $3,290 unfavourable.

229.
What was the actual direct labour rate for May in dollars per hour?
 $11.50
 $11.75
 $12.00
 $12.50
(15,000 * 12 - 7,500)/15,000 = $11.50.

230.
What was the total standard cost for direct labour for May?
 $120,000
 $161,000
 $168,000
 $192,000
15,000 * 12 + 12,000 = $192,000.

231.
What was the total standard cost for variable overhead for May?
 $40,000
 $50,000
 $56,000
 $80,000
15,000 * 5 + 4,000 = $80,000.

232.
What are the standard hours allowed to make one unit of finished product?
 1.0 hours.
 1.2 hours.
 1.6 hours.
 2.0 hours.
80,000/5/10,000 = 1.56 hours.
A manufacturer of industrial equipment has a standard costing system based on direct labour hours (DLHs) as the measure of

Level:


233.

 $19.30
 $19.65
 $19.07
 $20.15
($90,700 + $100,000) / 10,000 = $19.07.

234.

 $166,948
 $153,270
 $154,410
 $143,025
7,500 * $19.07 = $143,025.

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12/16/21, 1:35 PM Assignment Print View

 The flexible budget variance.

 The sales volume variance.

 The master budget variance.

 The market share variance.

 When material is issued.

 When material is purchased.

 When material is used in production.

 When production is completed.

What was the labour rate variance for April?

(8,000 * 10 - 4,800)/10 * (10 - 9.50) = $3,760 favourable.

Materials price variance: $52,000 − ($6 × 10,000) = $8,000 favourable.

b) Applied overhead for the period:

c) Variable overhead variances:

d) Journal entries for variable overhead:

e) Journal entries for fixed overhead:

Fixed overhead budget variance: $330,000 − $300,000 = $30,000 unfavourable.

Variable overhead spending variance: $30,000 − (5,000 × $4) = $10,000 unfavourable.

a) What are the standard hours allowed for the output?

b) Computation of variable overhead spending variance:

Spending variance = (AH × AR) - (AH × SR)

c) Computation of variable overhead efficiency variance:

Efficiency variance = (AH × SR) - (SH × SR)

d) Computation of the fixed overhead budget variance:

Budget variance = Actual fixed overhead - Flexible budget fixed overhead

e) Computation of the fixed overhead volume variance:

Volume variance = Fixed portion of predetermined overhead rate ×

f) Journal entries for variable overhead:

g) Journal entries for fixed overhead:

Direct labour efficiency variance: (1,400 − (3,000 × 0.50)) × $8 = $800 favourable.

 $2.50 per hour

 $3.75 per hour

 $10 per hour

Fixed overhead budget variance: $380,000 − $320,000 = $60,000 unfavourable.

[6,400/(80,000 - 75,000)] * 80,000 = $102,400.

135,000 *(7.50 - 3) = $607,500.

Which of the following statements is NOT correct?

 Market share variance

 Industry volume variance

 Sales mix variance

 Sales quantity variance

 Problems with processing machines.

 Purchase of low-quality materials.

 Problems with labour efficiency.

 Changes in the product mix.

Fixed overhead volume variance: $300,000 − ($5 × 55,000) = $25,000 unfavourable.

 A debit to Work in Process and an equal credit to Wages Payable.

Wattis Manufacturing has established the following master flexible budget:

a) Predetermined variable overhead rate = $288,000 /160,000 machine hours

b) Variable overhead variances:

Spending variance = AH (AR - SR)

AR = $211,680/126,000 actual machine hours

Efficiency variance = SR (AH - SH)

SR = 120,200 units × 1 hour per unit = 120,200 hours.

Fixed overhead variances:

Budget variance = Actual fixed overhead - Budgeted fixed overhead

Volume variance = Fixed rate (Denominator hours - Standard hours)

Standard hours = 120,200 units × 1 hour per unit = 120,200 hours