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Part I. Problems (for variances indicate if it is favorable using F or unfavorable using U)
Data for the next 2 questions: Thompson Company uses a standard cost system for its single product. The following data are available for current year:
| Standards per unit of product for planned production of 15000 units: | |
| Budgeted Production | 15,000 units |
| Budgeted machine hours | 30,000 hours |
| Raw materials | 3 yards at $15 per yard |
| Direct labor | 1.2 hours at $10.50 per hour |
| Variable overhead | $8 per machine hour |
| Fixed overhead | $5 per machine hour |
| Budgeted fixed overhead | $150,000 |
| Actual experience for the current year: | |
| Purchases of raw materials (60,000 yards at $14) | $840,000 |
| Raw materials used for production of 15,800 units | 50,560 yards |
| Direct labor costs (for 19,000 hours) | $194,750 |
| Actual machine hours used | 31,000 hours |
| Actual variable overhead cost | $257,920 |
| Actual fixed overhead cost | $155,000 |
| Units produced | 15,800 |
1. Compute standard cost per unit.
2. Compute the numbers for blank cells with $:
3. The following overhead data are for a department in a large company.
| Actual Results | Static Budget | |
| Activity level (in units) | 420 | 400 |
| Variable costs: | ||
| Indirect materials | $7,614 | $7,600 |
| Power | $780 | $840 |
| Fixed costs: | ||
| Administration | $7,060 | $7,100 |
| Rent | $4,220 | $4,200 |
Company wants to assess how well costs were controlled in this department. How much is total cost variance Indicate if it is favorable using F or unfavorable using U.
4. The Hanson Company employs a standard costing system. The following data are available for February:
| Actual direct labor hours worked | 6,500 |
| Standard direct labor rate | $8 per hour |
| Labor rate variance | $2,600 favorable |
Compute the actual direct labor rate for February.
Data for the next 2 questions: Dynozz Corporation currently produces cardboard boxes in an automated process. Expected production per month is 15,000 units, direct material costs are $0.50 per unit, and manufacturing overhead costs are $15,000 per month. Manufacturing overhead is all fixed costs.
5. What are the flexible budget for 10,000 units?
6. What are the flexible budget for 15,000 units?
7. Dynondo Incorporated planned to use materials of $12 per unit but actually used materials of $13 per unit, and planned to make 1,500 units but actually made 1,800 units. Compute the flexible-budget amount for materials.
Data for the next 4 questions: Animent Industries, Inc. (AII), developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container.
| Budgeted quantity | Budgeted price | |
| Direct materials | 0.10 pounds | $60 per pound |
| Direct labor | 0.05 hours | $30 per hour |
During June, AII produced and sold 20,000 containers using 1,900 pounds of direct materials at an average cost per pound of $64 and 1,000 direct manufacturing labor-hours at an average wage of $30.50 per hour.
8. Compute June’s direct material flexible-budget variance.
9. Compute the direct material price variance during June.
10. Compute the direct manufacturing labor price variance during June.
11. Compute the direct labor efficiency variance during June.
Data for the next 3 questions: Baseballic Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information relates to the company’s manufacturing overhead data:
| Budgeted output units | 11,250 units |
| Budgeted machine-hours | 22,500 hours |
| Budgeted variable manufacturing overhead costs for 22,500 hours | $213,750 |
| Actual output units produced | 11,500 units |
| Actual machine-hours used | 22,000 hours |
| Actual variable manufacturing overhead costs | $225,000 |
12. What is the flexible-budget amount for variable manufacturing overhead?
13. What is the total flexible-budget variance for variable manufacturing overhead?
14. What is the amount of the budgeted variable manufacturing overhead cost per unit?
15. What is the amount variable manufacturing overhead spending variance?
16. What is the amount variable manufacturing overhead efficiency variance?
17. Ecocomfort Corporation manufactured 1,000 coolers during October. The following variable overhead data relates to October:
| Variable overhead spending variance | $1,230 Unfavorable |
| Variable overhead efficiency variance | $175 Unfavorable |
| Budgeted machine hours allowed for actual output | 615 machine hours |
| Actual cost per machine hour | $27 |
| Budgeted cost per machine hour | $25 |
Calculate the actual machine hours used by Stark during October.
Data for the next 3 questions: Berman’s Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
| Flexible | Variances | ||
| Budget | Price | Efficiency | |
| Material A | $40,000 | $1,000F | $3,000U |
| Material B | 60,000 | 500U | 1,500F |
| Direct manufacturing labor | 80,000 | 500U | 2,500F |
18. The most likely explanation of the above variances for Material A is that ________.
A) a lower price than expected was paid for Material A
B) higher-quality raw materials were used than were planned
C) the company used a higher-priced supplier
D) Material A used during September was $2,000 less than expected
19. Compute the actual amount spent for Material B.
20. Compute the actual amount spent for direct manufacturing labor.
Data for the next 3 questions: Sport-in Corporation manufactured 10,000 golf bags during April. The following fixed overhead data pertain to March:
| Actual | Static Budget | |
| Production | 20,000 units | 20,500 units |
| Machine-hours | 5,100 hours | 6,150 hours |
| Fixed overhead cost for March | $250,000 | $258,300 |
21. Compute the amount of flexible-budget for fixed overhead cost.
22. Compute the amount of fixed factory overhead spending variance.
23. Compute the amount of production volume variance.
24. Neocomfort Corporation manufactured 3,000 chairs during June. The following variable overhead data relates to June:
| Budgeted variable overhead cost per unit | $12.00 |
| Actual variable manufacturing overhead cost | $49,900 |
| Flexible-budget amount for variable manufacturing overhead | $47,800 |
| Variable manufacturing overhead efficiency variance | $720 unfavorable |
What is the variable overhead flexible-budget variance?
Data for the following questions: The Alberto Company uses a standard cost system in which manufacturing overhead costs are applied to units of the company’s single product (Zoom) on the basis of machine-hours. The standard cost card for the product follows:
Standard Cost Card-per unit of product:
Direct Materials, 4 lbs. at $3.70 per lb.
Direct Labor, 1.5 DLH at $8.50 per DLH
Variable Overhead, 2 MHs at $2.5 per MH
Fixed Overhead, 2 MHs at $3.20 per MH
Standard cost per unit
Planned production 23,000 units
Budgeted fixed overhead costs $147,200
The following data pertain to last year’s activities:
- The company manufactured 20,000 units of product during the year and used 44,000 MH.
- A total of 80,000 lbs. of material was purchased for $300,000.
- 76,000 lbs. of material were used to manufacture the 20,000 units.
- The company paid $239,850 for 29,250 direct labor-hours for production of 20,000 units.
- Actual fixed factory overhead costs were $150,000.
- Actual variable factory overhead costs were $145,200.
25. What is standard cost per unit of Zoom?
26. What is standard direct labor hours allowed for actual output?
Part II. Journal Entries
Using the above data for Alberto Company, provide journal entries for the following transactions.
Q1. Purchase of raw materials on account
Q2. Usage of raw materials in factory
Q3. Payment for usage of direct labor in factory
Q4. Applied variable factory overhead cost to factory
Q5. Applied fixed factory overhead cost to factory
Q6. Incurrence of actual variable factory overhead cost
Q7. Incurrence of actual fixed factory overhead cost
Q8. Transfer of manufactured units from factory to warehouse
Q9. Closing variable factory overhead account and recognizing related cost variances
Q10. Closing fixed factory overhead account and recognizing related cost variances
Data for next 2 questions: Zina Company had the following account balances at the end of year. Make the necessary adjusting entry at end of year to close cost variances assuming they are significant. Carry the percentages up to 4 decimal points.
| RM inventory | WIP Inventory | FG Inventory | CGS |
| 36,000 | 51,000 | 61,200 | 91,800 |
| DM Price Variance | DL Efficiency Variance | Var. FOH Eff. Var. | |
| 4,000 | 6,000 | 4,000 |
Q11. Provide journal entry to close DM Price Variance account at the end of period.
Q12. Provide journal entry to close the remaining cost variance accounts at the end of period.
Part III. Multiple-Choice: Select the best answer for each question.
1. The terms “standard quantity allowed” or “standard hours allowed” means:
A) the actual output in units multiplied by the standard output allowed.
B) the actual input in units multiplied by the standard output allowed.
C) the actual output in units multiplied by the standard input allowed.
D) the standard output in units multiplied by the standard input allowed.
2. An unfavorable material quantity variance indicates that:
A) actual usage of material exceeds the standard material allowed for output.
B) standard material allowed for output exceeds the actual usage of material.
C) actual material price exceeds standard price.
D) standard material price exceeds actual price.
3. The purchasing agent of the Clampett Company ordered materials of lower quality in an effort to economize on price and in response to the demands of the production manager due to a mistake in production scheduling. The materials were shipped by airfreight at a rate higher than ordinarily charged for shipment by truck, resulting in an unfavorable materials price variance. The lower quality material proved to be unsuitable on the production line and resulted in excessive waste. In this situation, who should be held responsible for the materials price and quantity variances?
Materials Price Variance Materials Quantity Variance
A) Purchasing Agent Purchasing Agent
B) Production Manager Production Manager
C) Production Manager Purchasing Agent
D) Purchasing Agent Production Manager
4.When a flexible budget is used, a decrease in the activity level would:
A) increase total fixed costs.
B) increase variable cost per unit.
C) decrease variable cost per unit.
D) decrease total costs.
5. A favorable material price variance coupled with an unfavorable material usage variance would most likely result from:
A) labor efficiency problems.
B) machine efficiency problems.
C) the purchase and use of higher than standard quality material.
D) the purchase and use of lower than standard quality material.
6. An unfavorable direct labor efficiency variance could be caused by:
A) an unfavorable material quantity variance.
B) an unfavorable variable overhead spending variance.
C) a favorable material quantity variance.
D) a favorable variable overhead spending variance.
7. Which of the following overhead variances would be useful in calling attention to a possible short-term problem in the control of overhead costs?
8. An unfavorable production-volume variance ________.
A) is not a good measure of a lost production opportunity
B) indicates that the company had reduced its per unit fixed overhead cost to improve sales
C) measures the amount of extra fixed costs planned for but not used
D) takes into account the effect of additional revenues due to maintaining higher prices
9. An unfavorable variable overhead efficiency variance indicates that ________.
A) the actual rate of variable overhead was more than budgeted rate
B) the price of variable overhead items was less than budgeted
C) the variable overhead cost-allocation base was not used efficiently
D) the variable overhead cost-allocation base was used efficiently
10. When machine-hours are used as a cost-allocation base, the item most likely to contribute to a favorable variable overhead efficiency variance is ________.
A) excessive machine breakdowns
B) skillful workforce
C) additional machinery
D) strengthened demand for the product
11. An unfavorable fixed overhead spending variance indicates that ________.
A) there was more excess capacity than planned
B) the price of fixed overhead items cost more than budgeted
C) the fixed overhead cost-allocation base was not used efficiently
D) the denominator level was more than planned