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Exam 7: Performance Evaluation Using Variances From Standard Costs

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Question 71

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The direct labor time variance measures the efficiency of the direct labor force.

A) True
B) False

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verified

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Question 72

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In most businesses, cost standards are established principally by accountants.

A) True
B) False

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Question 73

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If at the end of the fiscal year, the variances from standard are significant, the variances should be transferred to the

Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in a

A favorable cost variance occurs when actual cost is less than budgeted cost at actual volumes.

Match the following formulas or descriptions with the term a-e it defines. -Standard variable overhead for actual units produced

The variance from standard for factory overhead cost resulting from operating at a level above or below 100% of normal capacity is termed volume variance.

Standards are more widely used for nonmanufacturing activities than for manufacturing activities.

Calculate the total direct labor variance.

An example of a nonfinancial measure is the number of customer complaints.

The following data relate to direct labor costs for the current period: Standard costs 7,500 hours at $11.70 Actual costs 6,000 hours at $12.00 What is the direct labor time variance?

Changes in technology, machinery, or production methods may make past cost data irrelevant when setting standards.

Titus Company produced 8,900 units of a product that required 3.25 standard hours per unit.The standard fixed overhead cost per unit is $1.20 per hour at 29,000 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance.

The labor rate variance is

Match the following formulas or descriptions with the term a-e it defines. -Actual quantity - Standard quantity × Standard price

If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 600 hours at $17, the rate variance was $1,200 unfavorable.

Favorable fixed factory overhead volume variances are never harmful, since achieving them encourages managers to run the factory above normal capacity.

Ruby Company produces a chair that requires 5 yards of material per unit.The standard price of one yard of material is $7.50.During the month, 8,500 chairs were manufactured, using 43,600 yards at a cost of $7.55 per yard. Determine the a price variance, b quantity variance, and c cost variance.

Sally's Chocolate Company makes gourmet cupcakes which are sold by the dozen.Compute the standard cost for one dozen cupcakes, based on the following standards: Standard materials quantity: 4.25 cups of ingredients at $0.56 per cup Standard labor: 1.10 hours at $8.30 per hour Factory overhead: $3.80 per direct labor hour

Robin Company purchased and used 520 pounds of direct materials to produce a product with a 510 pound standard direct materials requirement.The standard materials price is $2.10 per pound.The actual materials price was $2.00 per pound. Prepare the journal entries to record 1 the purchase of the materials and 2 the material entering production.