CH APTER 11
Standard Costs and Variance Analysis
Summary of Questions by Objectives and Bloom’s Taxonomy
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True-False Statements
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*28.
Multiple Choice Questions
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135.
Matching
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Exercises
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11-2
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
*178.
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TRUE-FALSE STATEMENTS
1.
In a standard costing system, manufactured goods are recorded at the variable cost that
should have been incurred to produce the items.
2.
Differences between standard and budgeted costs are referred to as standard cost
variances.
3.
The use of standard costs is limited to manufacturing companies.
4.
Budgeted costs are the same as standard costs.
5.
Ideal standards are developed under the assumption that no obstacles to the production
process will be encountered.
6.
For planning purposes, ideal standards are more useful than attainable standards.
7.
A variance analysis generally involves decomposing the difference between standard
and actual costs into three components—direct materials, direct labor, and
manufacturing overhead.
8.
Ideal standards are synonymous with favorable variances, while attainable standards
are synonymous with unfavorable variances.
9.
A material price variance measures whether more or less material was used in
producing inventory.
10.
Unfavorable variances are red flags that a manager has performed poorly.
11.
The material quantity variance compares the actual quantity of material purchased with
the quantity of material used.
12.
The material price variance is equal to the standard price per unit of material times the
actual quantity of material used.
13.
The labor rate variance is also known as the labor efficiency variance.
14.
The labor rate variance measures whether the rate paid to employees is more or less
than the company’s standard rate.
15.
The labor rate variance is equal to the difference between the actual number of labor
hours worked and the standard labor hours allowed, times the standard labor wage rate.
Chapter 11 Standard Costs and Variance Analysis
11-3
16.
A favorable labor efficiency variance indicates that employees worked more quickly than
expected.
17.
The total variance for manufacturing overhead is the difference between the flexible
budget for overhead and actual overhead costs.
18.
An unfavorable controllable overhead variance indicates that more cost was incurred on
overhead costs than allowed in the flexible budget.
19.
A favorable overhead volume variance is a signal that the actual quantity produced was
greater than the quantity anticipated.
20.
An unfavorable overhead volume variance always indicates that overhead is overapplied
during the period.
21.
The controllable variable overhead variance is inappropriately named, because
managers are not expected to be able to control it.
22.
If a management by exception approach is used to investigate variances, only variances
that cause costs to be more than expected are investigated.
23.
Variances that are large in absolute dollar value or as a percent of budgeted amounts
are generally considered exceptional in a management by exception approach.
24.
In some instances, process improvement can lead to unfavorable variances.
25.
If actual demand is greater than anticipated, an overall favorable variance will exist for
each of the three production costs.
26.
The materials storeroom clerk is responsible for material price variances.
27.
A purchasing manager might be tempted to buy inferior materials because it will create
favorable material quantity variance.
*28.
In a standard costing system, the cost transferred out of Work in Process inventory is
equal to the standard cost per items produced time the number of completed units.
*29.
A standard costing system simplifies accounting by carrying inventory at standard cost.
*30.
All insignificant variances are closed to Cost of Goods Sold.
*31.
A favorable material quantity variance is recorded with a credit to the Material Quantity
Variance account.
Material from the appendix to the chapter is marked with an asterisk (*)
11-4
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
Answers to True-False
1 F
8
2 F
9
3 F
10
4 F
11
5 T
12
6 F
13
7 T
14
F
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29 T
30 T
31 T
MULTIPLE CHOICE
32.
Which of the following statements is true of standard cost?
A.
It is equal to the actual cost of one unit of product.
B.
It is the amount management thinks that one unit of product should cost.
C.
It allows companies to generate more favorable than unfavorable variances.
D.
It is often calculated after production for the period is complete.
33.
What are standard cost variances?
A.
Differences between standard and actual costs
B.
Amounts that exceed budgeted amounts
C.
Useful industry-developed amounts that can be used by companies to evaluate
their performance
D.
Differences between budgeted and standard amounts
34.
The difference between standard and actual costs is
A.
considered to be an ideal standard.
B.
a variance by exception.
C.
the budgeted cost of one item of product.
D.
a standard cost variance.
35.
What is the cost that management believes should be incurred to produce a product
under anticipated conditions called?
A.
Budgeted cost
B.
Ideal cost
C.
Actual cost
D.
Standard cost
36.
In what industries are standard costs used?
A.
Manufacturing companies only
B.
Service companies only
C.
Both manufacturing and service companies
D.
None of these answer options are correct.
37.
For which one of the following will standard costs be most useful?
A.
A soft drink bottling company
B.
A caterer
C.
A cabinet manufacturer
D.
An event planner
Chapter 11 Standard Costs and Variance Analysis
11-5
38.
What is a standard cost?
A.
The difference between an attainable standard and an ideal standard
B.
The budgeted cost of the total number of budgeted units
C.
The budgeted cost of a single unit
D.
None of these answer choices are correct.
39.
Which one of the following is true concerning standard and budgeted costs?
A.
Standard cost times the expected production level equals the budgeted cost.
B.
Standard cost times the predetermined overhead rate equals the budgeted cost.
C.
Total budgeted cost divided by actual units equals the standard cost.
D.
None of these answer choices are correct.
40.
The difference between standard costs and budgeted costs is that standard cost
A.
refers to a single unit while budgeted costs refer to the cost, at standard, for the
total number of budgeted units.
B.
is calculated under ideal conditions, while budgeted costs are calculated for
attainable conditions.
C.
is calculated for raw material while budgeted costs are calculated for direct labor.
D.
is part of the management accounting system, while budgets are part of the
financial accounting system.
41.
For which one of the following are standard production costs not developed?
A.
Direct materials
B.
Commission per unit
C.
Manufacturing overhead
D.
Fixed costs
42.
Which one of the following is often used to determine a standard price for materials?
A.
Time-and-motion studies
B.
A union labor contract
C.
Price lists provided by suppliers
D.
Materials requisition forms
43.
Which of the following is a method of determining the standard quantity of direct labor?
A.
An analysis of past data regarding overhead required for various levels of
production
B.
Labor contract negotiated with the union employees
C.
Time-and-motion studies conducted by industrial engineers
D.
Suppliers’ estimates of labor quantities to be used
44.
A company developed a standard cost for overhead. Which of the following involves
standard development procedures that are similar to developing overhead standard
costs?
A.
Standard costs for materials
B.
Total number of units to be produced
C.
Predetermined overhead rates
D.
Budgeted direct labor costs
11-6
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
45.
Management of Wilson, Inc. developed standards under the assumption that a variety of
factors may lead to less than perfect performance. Which type of standard was
developed?
A.
Ideal standards
B.
Actual standards
C.
Attainable standards
D.
Questionable standards
46.
Which of the following is a reason that most managers support the use of attainable
standards rather than ideal standards?
A.
Attainable standards allow for an occasional equipment failure.
B.
Attainable standards recognize that suppliers must provide raw materials with no
defects.
C.
Attainable standards are required in order to have zero variances.
D.
Attainable standards motivate employees to achieve perfection.
47.
Which of the following may cause an unfavorable material variance?
I. More material was used than planned.
II. A company paid a higher price for materials than expected.
III. More materials were used than purchased.
A.
I and II
B.
II and III
C.
I and III
D.
I, II, and III
48.
What are the two most likely reasons an unfavorable total materials variance may exist?
A.
Inflation caused an increase in the cost to acquire materials of the same quality,
and due to this inflation, the company purchased fewer materials than used.
B.
The company used less material than it purchased, and the amount paid for the
material was more than the standard price.
C.
The price paid was more than the standard price, and the quantity budgeted was
less than quantity used.
D.
The price paid was more than the standard price, and the quantity used was less
than the quantity budgeted
49.
Lander Foods applied management by exception. Which of the following would have
occurred?
A.
The company’s managers prepared a flexible budget.
B.
Management created a poorly conceived budget.
C.
Management forecasted its sales for the budget period.
D.
Management investigated all significant variances.
Chapter 11 Standard Costs and Variance Analysis
50.
11-7
Scotto Designs has the following standards for the production of scarves:
Standard Quantity
Direct materials 1.2 yards per scarf
Direct labor
0.15 hours per scarf
Standard Price
$4.70 per yard
$11.00 per hour
The company used 985 yards of material in order to make 800 scarves in April. The
company purchased 1,100 yards at $4.60 per yard. How much is the direct materials
quantity variance?
A.
$110 favorable
B.
$118 unfavorable
C.
$8 unfavorable
D.
$705 unfavorable
51.
Scotto Designs has the following standards to make one scarf:
Standard Quantity
Direct materials 1.2 yards per scarf
Direct labor
0.15 hours per scarf
Standard Price
$4.70 per yard
$11.00 per hour
The company used 985 yards of material in order to make 800 scarves in April. The
company purchased 1,100 yards at $4.60 per yard. How much is the direct materials
price variance?
A.
$110 favorable
B.
$118 unfavorable
C.
$8 unfavorable
D.
$98.50 favorable
52.
An automobile parts company has a standard material price of $2 per pound. In October
the company produced 4,500 units using 6,000 pounds of material. The company
experienced a favorable materials quantity variance of $1,200. How much is the
standard quantity of materials per unit?
A.
1.20 pounds
B.
1 pound
C.
2.4 pounds
D.
1.47 pounds
53.
A manufacturing company has a standard quantity of direct materials of 7 pounds per
unit at a standard price of $2.20 per pound. In April the actual material price was $2.40
per pound and the company produced 5,500 units. If the company experienced a
favorable material quantity variance of $6,600 during the month, how much was the
actual quantity of material used?
A.
35,500 pounds
B.
32,542 pounds
C.
38,500 pounds
D.
41,500 pounds
11-8
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
54.
Blue Box Beach Chairs has the following standards to make beach chairs:
Direct materials
Direct labor
Standard Quantity
Standard Price
2.2 pounds of polywood per chair $3.50 per pound
0.65 hours per chair
$13.00 per hour
The static budget was based on the production of 6,200 beach chairs. The company
used 13,000 pounds of polywood in order to make 6,000 chairs in April. The company
purchased 7,000 pounds of polywood at a total cost of $24,150. How much is the direct
materials quantity variance?
A.
$700 favorable
B.
$2,240 favorable
C.
$350 favorable
D.
$1,050 favorable
55.
Blue Box Beach Chairs has the following standards to make beach chairs:
Direct materials
Direct labor
Standard Quantity
Standard Price
2.2 pounds of polywood per chair $3.50 per pound
0.65 hours per chair
$13.00 per hour
The static budget was based on the production of 6,200 beach chairs. The company
used 13,000 pounds of polywood in order to make 6,000 chairs in April. The company
purchased 7,000 pounds of polywood at a total cost of $24,150. How much is the direct
materials price variance?
A.
$700 favorable
B.
$2,240 favorable
C.
$350 favorable
D.
$1,050 favorable
56.
Last month, Investly Widgets purchased 16,400 pounds of material and used 16,600
pounds in the production of 4,200 widgets. The actual cost per pound of the material
was $7.80 and the standard price was $7.75 per pound. The company budgeted 4,500
widgets for production. How much is the material quantity variance?
A.
$820 unfavorable
B.
$730 favorable
C.
$1,550 favorable
D.
More information is needed to determine the answer.
57.
Which variances are most important to investigate?
A.
Variable costs variances, because they are controllable
B.
Those that are material in amount
C.
Those that are immaterial in amount
D.
Those that are unfavorable
58.
Which one of the following determines the material price variance?
A.
The difference between actual price per unit and standard price per unit times the
quantity of material purchased from suppliers
B.
The difference between actual price per unit and standard price per unit times
standard quantity of material used for the achieved level of production
C.
The difference between actual quantity of material purchased and the actual
quantity of material used times the standard price of material per unit
D.
The difference between actual quantity of material purchased and the actual
quantity of material used times the actual price of material per unit purchased
Chapter 11 Standard Costs and Variance Analysis
11-9
59.
What will result if the actual price per unit of material is greater than the standard price?
A.
A favorable material price variance
B.
An unfavorable material quantity variance
C.
An unfavorable material price variance
D.
A favorable material quantity variance
60.
If the material quantity variance is favorable, the
A.
material price variance will be unfavorable.
B.
material price variance must also be favorable.
C.
quantity purchased is less than the quantity used.
D.
actual quantity used is less than the standard quantity allowed.
61.
Electric Zero produces relay units for generators. Each relay has a standard material
cost of $67. Standards call for two relays per generator. In July, the company purchased
120 relays for $7,560. The company used 104 relays in the production of 50 generators,
with 4 relays damaged in the installation process. The standard quantity of labor is 20
hours per generator, with a standard wage rate of $23. The company incurred 1,020
labor hours at a cost of $22,950. How much is the material price variance?
A.
$480 favorable
B.
$268 unfavorable
C.
$1,340 unfavorable
D.
$592 unfavorable
62.
Electric Zero produces relay units for generators. Each relay has a standard material
cost of $67. Standards call for two relays per generator. In July, the company purchased
120 relays for $7,560. The company used 104 relays in the production of 50 generators,
with 4 relays damaged in the installation process. The standard quantity of labor is 20
hours per generator, with a standard wage rate of $23. The company incurred 1,020
labor hours at a cost of $22,950. How much is the material quantity variance?
A.
$480 favorable
B.
$268 unfavorable
C.
$1,340 unfavorable
D.
$592 unfavorable
63.
Siggy Inc. budgeted 12,000 and produced 11,000 tape dispensers during June. Resin
used to make the dispensers is purchased by the pound. Manufacturing overhead is
applied based on units produced. Manufacturing standards and actual costs follow:
Materials
Labor
Variable overhead
Fixed overhead
Standards
2 pounds @ $5.00 a pound
0.25 hours @ $15.00 per hour
$39,000
$1.50 per dispenser
Actual
20,900 pounds @ $4.90 per pound
2,700 hours @ $15.30 per hour
$36,500
$17,250
How much is the standard cost of a tape dispenser?
A.
$18.50
B.
$13.75
C.
$24.75
D.
$18.80
11-10
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
64.
Master Auto Parts has a standard labor rate of $10.50 per hour. In September, the
company produced 10,000 gears using 24,000 labor hours. The company experienced a
favorable labor rate variance of $18,000 during September. How much is Master Auto
Parts’ actual labor rate per hour?
A.
$9.75
B.
$11.25
C.
$13.50
D.
$7.50
65.
Blue Box Beach Chairs has the following standards to make beach chairs:
Direct materials
Direct labor
Standard Quantity
2.2 pounds of polywood per chair
0.65 hours per chair
Standard Price
$3.50 per pound
$13.00 per hour
The static budget was based on the production of 6,200 beach chairs. The company
used 13,000 pounds of polywood in order to make 6,000 chairs in April. The company
purchased 7,000 pounds of polywood at a total cost of $24,150. It also used 3,840 labor
hours at a cost of $12.70 per hour. How much is the direct labor efficiency variance?
A.
$1,932 unfavorable
B.
$1,152 favorable
C.
$780 favorable
D.
$2,470 favorable
66.
Blue Box Beach Chairs has the following standards to make beach chairs:
Direct materials
Direct labor
Standard Quantity
Standard Price
2.2 pounds of polywood per chair $3.50 per pound
0.65 hours per chair
$13.00 per hour
The static budget was based on the production of 6,200 beach chairs. The company
used 13,000 pounds of polywood in order to make 6,000 chairs in April. The company
purchased 7,000 pounds of polywood at a total cost of $24,150. It also used 3,840 labor
hours at a cost of $12.70 per hour. How much is the direct labor rate variance?
A.
$1,932 unfavorable
B.
$1,152 favorable
C.
$780 favorable
D.
$2,470 favorable
67.
Standard Faucets uses standard costing and recorded the following data for the month
of August:
Standard direct labor rate
Standard hours allowed for actual production
Actual direct labor rate
Labor efficiency variance
How much is the labor rate variance for August?
A.
$9,750 unfavorable
B.
$14,750 unfavorable
C.
$4,750 unfavorable
D.
$0
$10.00 per hour
20,000 hours
$10.50 per hour
$5,000 favorable
Chapter 11 Standard Costs and Variance Analysis
11-11
68.
Paradise Energy Company produces a product with a direct labor standard of 4.5 hours
per unit at a rate of $13.50 per hour. During July 2,200 units were produced using 9,825
labor hours at an actual cost of $135,094. How much is the total direct labor variance for
July?
A.
$2,456 unfavorable
B.
$1,013 favorable
C.
$1,444 unfavorable
D.
$3,469 favorable
69.
Which of the following would cause a variance to be unfavorable?
A.
The actual price is less than the standard price.
B.
The standard hours allowed are less than the actual hours worked.
C.
The overhead costs incurred are less than the flexible budget amount.
D.
All of these answer choices are correct.
70.
Why is the point of purchase the best time to compute material price variances?
A.
This is when the company is able to determine the total cost of production.
B.
This is when the cost of material will be known.
C.
This is when the company knows the amount of materials used in production.
D.
This is the only point when the company is able to determine a standard material
price.
71.
Which one of the following is a possible cause of an unfavorable labor rate variance?
A.
The company used attainable standards rather than ideal standards.
B.
The company hired new, inexperienced employees.
C.
The company produced fewer units than had been planned.
D.
The company used more experienced workers than planned.
72.
Paradise Energy Company produces a product with a direct labor standard of 4.5 hours
per unit at a rate of $13.50 per hour. During July 2,200 units were produced using 9,825
labor hours at an actual cost of $135,094. How much is the direct labor efficiency
variance for July?
A.
$2,456 unfavorable
B.
$1,013 favorable
C.
$1,444 favorable
D.
$3,469 unfavorable
73.
Electric Zero produces relay units for generators. Each relay has a standard cost of $67.
Standards call for two relays per generator. In July, the company purchased 120 relays
for $7,560. The company used 104 relays in the production of 50 generators, with four
relays damaged in the installation process. The standard quantity of labor is 20 hours
per generator, with a standard wage rate of $23. In July, the company incurred 1,020
labor hours at a cost of $22,950. How much is the labor rate variance?
A.
$460 unfavorable
B.
$50 favorable
C.
$510 favorable
D.
$460 favorable
11-12
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
74.
Electric Zero produces relay units for generators. Each relay has a standard cost of $67.
Standards call for two relays per generator. In July, the company purchased 120 relays
for $7,560. The company used 104 relays in the production of 50 generators, with four
relays damaged in the installation process. The standard quantity of labor is 20 hours
per generator, with a standard wage rate of $23. In July, the company incurred 1,020
labor hours at a cost of $22,950. How much is the labor efficiency variance?
A.
$460 unfavorable
B.
$50 favorable
C.
$510 favorable
D.
$460 favorable
75.
Steep, Inc. budgeted 6,000 cup holders for March. Each holder is sold for $12. Actual
production for March was 6,300 cup holders. Standards and actual costs follow for
March:
Standards
Materials
1.1 pounds @ $2.40 a pound
Labor
Variable overhead
Fixed overhead
0.10 hours @ $14.00 per hour
$16,800
$9,600
Actual
6,400 pounds purchased for $15,040;
6,450 pounds used
620 hours @ $14.30 per hour
$18,400
$10,300
How much is the labor rate variance?
A.
$140 favorable
B.
$186 unfavorable
C.
$46 unfavorable
D.
$280 favorable
76.
Steep, Inc. budgeted 6,000 cup holders for March. Each holder is sold for $12. Actual
production for March was 6,300 cup holders. Standards and actual costs follow for
March:
Standards
Materials
1.1 pounds @ $2.40 a pound
Labor
Variable overhead
Fixed overhead
0.10 hours @ $14.00 per hour
$16,800
$9,600
Actual
6,400 pounds purchased for $15,040;
6,450 pounds used
620 hours @ $14.30 per hour
$18,400
$10,300
How much is the labor efficiency variance?
A.
$140 favorable
B.
$186 unfavorable
C.
$46 unfavorable
D.
$280 favorable
77.
Which of the following will determine the total variance for manufacturing overhead?
A.
The difference between the overhead applied to inventory at standard and the
actual overhead costs
B.
The difference between fixed overhead and variable overhead
C.
The difference between the efficiency variance and the rate variance
D.
The difference between the controllable overhead variance and the overhead
volume variance
Chapter 11 Standard Costs and Variance Analysis
11-13
78.
If the controllable overhead variance is favorable, the overhead volume variance
A.
will be favorable.
B.
may be favorable or unfavorable.
C.
will not be significant and may be omitted from the analysis.
D.
will be zero.
79.
What is the difference between the actual amount of overhead and the amount of
overhead that would be included in a flexible budget called?
A.
Total overhead variance
B.
Actual overhead variance
C.
Controllable overhead variance
D.
Overhead volume variance
80.
What will result if the actual overhead costs incurred are greater than the amount in the
flexible budget?
A.
The controllable overhead variance will be unfavorable.
B.
The overhead volume variance will be favorable.
C.
The overhead volume variance will be unfavorable.
D.
The controllable overhead variance will be favorable.
81.
For which of the following reasons does the volume variance arise?
A.
Overhead costs incurred were greater or less than the amount budgeted.
B.
The company operated at more or less units of production activity than expected
during the period.
C.
Actual activity equaled the volume used to establish the overhead cost per unit.
D.
The company purchased more or less materials for production than the amount
used.
82.
What does an unfavorable overhead volume variance indicate?
A.
The quantity of production was less than what was anticipated.
B.
The company spent more costs on overhead than expected.
C.
Production took longer than expected.
D.
The company produced more units than it budgeted.
83.
In which of the following situations will the overhead volume variance be favorable?
A.
When more units are produced than were originally planned
B.
When actual overhead costs are less than the flexible budget
C.
When the predetermined overhead rate was set too low
D.
When there are units remaining in ending inventory
84.
Which of the following values is used in the calculations for both the controllable
overhead variance and the overhead volume variance?
A.
Overhead applied to production using the predetermined overhead rate
B.
Flexible budget level of overhead for the actual level of production
C.
Actual overhead incurred
D.
None of these answer choices are used in both calculations.
11-14
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
85.
Steep, Inc. budgeted 6,000 cup holders for March. Each holder is sold for $12. Actual
production for March was 6,300 cup holders. Manufacturing overhead is applied based
on units produced. Standards and actual costs follow for March:
Standards
Materials
1.1 pounds @ $2.40 a pound
Labor
Variable
overhead
Fixed overhead
0.10 hours @ $14.00 per hour
Actual
6,400 pounds purchased for $15,040;
6,450 pounds used
620 hours @ $14.30 per hour
$16,800
$18,400
$9,600
$10,300
How much is the overhead controllable variance?
A.
$1,460 unfavorable
B.
$480 favorable
C.
$2,300 unfavorable
D.
$980 favorable
86.
Steep, Inc. budgeted 6,000 cup holders for March. Each holder is sold for $12.
Manufacturing overhead is applied based on units produced. Actual production for
March was 6,300 cup holders. Standards and actual costs follow for March:
Standards
Materials
Labor
Variable overhead
Fixed overhead
1.1 pounds @ $2.40 a pound
0.10 hours @ $14.00 per
hour
$16,800
$9,600
Actual
6,400 pounds purchased for $15,040;
6,450 pounds used
620 hours @ $14.30 per hour
$18,400
$10,300
How much is the overhead volume variance?
A.
$1,460 unfavorable
B.
$480 favorable
C.
$2,300 unfavorable
D.
$980 favorable
87.
For what reason(s) might the overhead volume variance occur?
I.
Overhead cost control is poor.
II.
The actual activity level was less than estimated.
III.
The expected production level was greater than budgeted.
A.
I and II
B.
II and III
C.
I and III
D.
I, II, and III
88.
Into what components is the manufacturing overhead variance decomposed when it is
analyzed?
A.
Overhead volume variance and controllable overhead variance
B.
Overhead rate variance and overhead efficiency variance
C.
Fixed overhead variance and variable overhead variance
D.
Controllable overhead variance and uncontrollable overhead variance
Chapter 11 Standard Costs and Variance Analysis
89.
11-15
Cuevas Company produces magic swords. It uses units as the cost driver for overhead.
The following information was provided concerning its standard cost system for 2017:
Standard/Budgeted Data
Material
½ lb. @ $15.00 per lb.
Labor
1.2 hrs. @ $12 per hr.
Fixed overhead $62,000
Variable overhead $11 per unit
Production
2,000 units
Produced
Materials
purchased
Materials used
Labor worked
Overhead
Actual Data
2,100 units
1,050 lbs. for $14,700
1,080 lbs.
2,500 hrs. costing $29,375
$82,000
How much is the standard cost per unit?
A.
$21.90
B.
$63.90
C.
$69.00
D.
$62.42
90.
Rodchester Company uses standard costing. Overhead is applied at $12 per unit
produced. Data for the month of March follows:
Actual overhead costs
Actual units produced
Flexible budget overhead for units produced
$194,000
17,400
$210,000
How much is the overhead volume variance?
A.
$16,000 favorable
B.
$17,200 favorable
C.
$1,200 unfavorable
D.
$14,800 unfavorable
91.
RTC Supply Co. produces cleaning equipment for professional cleaners. At the start of
the year, RTC estimated variable overhead costs to be $13 per unit and total fixed
overhead costs at $300,000 based on a volume of 60,000 units. The detail for the
overhead estimates follows:
Variable Overhead
Budget @ 60,000 units
Indirect materials
$ 480,000
Utilities
120,000
Maintenance
180,000
Total variable overhead
780,000
Actual Costs
$ 469,500
93,000
224,000
786,500
Fixed Overhead
Supervisor salaries
125,000
127,000
Depreciation
150,000
145,000
Other fixed overhead
25,000
26,000
Total fixed overhead
300,000
298,000
Total overhead costs
$1,080,000
$1,084,500
Actual production for the year totaled 62,000 units. How much is the variable overhead
flexible budget variance?
A.
$4,500 unfavorable
B.
$10,000 favorable
C.
$21,500 favorable
D.
$19,500 favorable
11-16
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
92.
At the start of 2017, Capital Cemetery determined its standard labor cost to be 2.5 hours
for each cemetery plot prepared at $14.00 per hour. The budget for variable overhead
was $8 per plot and budgeted fixed overhead was $15,000 for the year. Overhead is
applied based on the number of plots prepared. The company expects to prepare 5,000
plots during 2017. During 2017, the actual cost of labor was $14.30 per hour. Capital
prepared 4,900 cemetery plots requiring 11,700 direct labor hours. Actual overhead for
the year was $52,100. How much is the controllable overhead variance?
A.
$1,800 favorable
B.
$300 unfavorable
C.
$2,100 favorable
D.
$800 favorable
93.
At the start of 2017, Capital Cemetery determined its standard labor cost to be 2.5 hours
for each cemetery plot prepared at $14.00 per hour. The budget for variable overhead
was $8 per plot and budgeted fixed overhead was $15,000 for the year. Overhead is
applied based on the number of plots prepared. The company expects to prepare 5,000
plots during 2017. During 2017, the actual cost of labor was $14.30 per hour. Capital
prepared 4,900 cemetery plots requiring 11,700 direct labor hours. Actual overhead for
the year was $52,100. How much is the overhead volume variance?
A.
$1,800 favorable
B.
$300 unfavorable
C.
$2,100 favorable
D.
$800 favorable
94.
Hanson produces pressure washers. The detail for the overhead estimates follows:
Variable Overhead
Budget @ 50,000 units
Indirect materials
$ 480,000
Utilities
120,000
Maintenance
180,000
Total variable overhead
780,000
Actual Costs
$ 469,500
93,000
224,000
786,500
Fixed Overhead
Supervisor salaries
Depreciation
Other fixed overhead
Total fixed overhead
Total overhead costs
127,000
145,000
26,000
298,000
$1,084,500
125,000
150,000
25,000
300,000
$1,080,000
Actual production for the year totaled 62,000 units. How much is the overhead volume
variance?
A.
$72,000 favorable
B.
$77,580 favorable
C.
$63,940 favorable
D.
$74,000 favorable
Chapter 11 Standard Costs and Variance Analysis
95.
11-17
Sigorny Company uses standard costing and applies overhead on the basis of units
produced. The company provided the following for July:
Predetermined overhead rate per unit produced
Budgeted fixed overhead
Variable overhead budgeted per unit
Actual units produced
$6.20
$12,600
$2.00
3,100
If the controllable overhead variance was $920 favorable in July, how much were total
actual overhead costs?
A.
$17,880
B.
$18,800
C.
$19,220
D.
$19,720
96.
Sigorny Company uses standard costing and applies overhead on the basis of units
produced. The company provided the following for July:
Predetermined overhead rate per unit produced
Budgeted fixed overhead
Variable overhead budgeted per unit
Actual units produced
$6.20
$12,600
$2.00
3,100
How much is the budgeted variable overhead in July?
A.
$18,600
B.
$6,200
C.
$19,220
D.
$6,000
97.
What does the overhead controllable variance indicate?
A.
The company produced more or less than the quantity planned.
B.
Material quantity standards were more or less than the actual quantity used.
C.
Material price standards were more or less than the actual price.
D.
Actual overhead cost was more or less than the amount indicated in the flexible
budget.
98.
Which of the following is not a criterion that a company might use to determine whether
or not a variance is exceptional?
A.
The variance is based on a significant percentage of the standard cost.
B.
The variance is unfavorable.
C.
The variance is for a large dollar amount.
D.
The variance is for a significant percentage of the flexible budget amount.
99.
Which of the following variances is most likely the responsibility of the purchasing
manager?
A.
Material quantity variance
B.
Labor efficiency variance
C.
Material price variance
D.
Overhead volume variance
11-18
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
100.
Under what condition(s) might a favorable variance be considered unfavorable?
I. When a manager overproduces to fully utilize labor in a non-bottleneck
department
II. When a manager buys a better quality materials at a cheaper price
A.
I only
B.
II only
C.
Both I and II
D.
Neither I nor II
101.
How might an emphasis on variances as performance measures lead to overproduction?
A.
Managers may produce more units than a bottleneck can handle.
B.
Managers may fully utilize the existing labor force.
C.
Managers may produce fewer units than needed.
D.
Managers may buy more raw materials than needed for production.
*102. Which statement is true concerning a standard costing system?
A.
Unfavorable variances are recorded; favorable variances are not recorded in the
accounting records.
B.
Only unfavorable variances that are large enough to be investigated under the
company’s management by exception policy are recorded in the accounting
records.
C.
The costs added to the inventory accounts are recorded at standard costs rather
than actual costs.
D.
No Work in Process Inventory account is used.
*103. Which statement is true concerning unfavorable variances in a standard costing system?
A.
They are recorded only if they are significant.
B.
They are offset by favorable variances for the same amounts.
C.
They are recorded in the cost of goods sold account when incurred.
D.
They are recorded with debits.
*104. Which statement is true concerning an insignificant material quantity variance in a
standard costing system?
A.
It is recorded in the accounting records as a credit when the material is ordered.
B.
It is closed to the manufacturing overhead account at the end of the period.
C.
It is recorded at the actual cost of materials used times the standard quantity of
materials allowed.
D.
It is closed to the cost of goods sold account at yearend.
*105. Ace Manufacturing uses a standard costing system. What amount is debited to the Work
in Process Inventory when labor is incurred in production?
A.
Actual labor hours used times the standard rate per hour
B.
Actual labor hours used times the actual rate per hour
C.
Standard labor hours used times the actual rate per hour
D.
Standard labor hours used times the standard rate per hour
*106. Which statement is true concerning the variance accounts in a standard costing system?
A.
They cause the general ledger to be out of balance.
B.
They appear on the balance sheet as adjustments to Work in Process Inventory.
C.
They are temporary accounts and are closed before financial statements are
prepared.
D.
They have debit balances prior to closing.
Chapter 11 Standard Costs and Variance Analysis
11-19
*107. Which statement is true concerning insignificant favorable variance accounts in a
standard costing system?
A.
They have a debit balance.
B.
They reduce a company’s total expenses.
C.
They are closed to Work in Process.
D.
They are recorded with a credit to the related inventory accounts.
*108. Which of the following variances is not recorded with a journal entry that involves a debit
to Work in Process in a standard costing system?
A.
Material price variance
B.
Material quantity variance
C.
Labor rate variance
D.
Labor efficiency variance
*109. When is a labor rate variance recorded in a standard costing system?
A.
At the time the labor costs are incurred
B.
At the time employees given rate increases
C.
After units of product are completed
D.
As part of the closing process
*110. Wilson Manufacturing uses a standard costing system. When Wilson sells its inventory
units, by how much is the Finished Goods Inventory account reduced?
A.
The actual cost of the units sold plus the total of the unfavorable variances
B.
The standard cost of the units sold
C.
The actual direct materials, direct labor, and standard manufacturing overhead
D.
The actual cost of the units sold
*111. As a practical matter, to which account are variance accounts with insignificant balances
usually closed?
A.
Manufacturing Overhead
B.
Work in Process Inventory
C.
Finished Goods Inventory
D.
Cost of Goods Sold
112.
Ultimate Production manufactures radon detectors. The standard for materials for each
detector is 2 pounds of acrylic at a standard cost of $4.30 per pound. During May, the
company purchased 890 pounds and used 830 pounds of acrylic and made 410 radon
detectors. The company paid $4.45 per pound for the acrylic. There were 400 detectors
budgeted for May. How much is the material price variance?
A.
$134 unfavorable
B.
$43 unfavorable
C.
$177 unfavorable
D.
$263 unfavorable
113.
Ultimate Production manufactures radon detectors. The standard for materials for each
detector is 2 pounds of acrylic at a standard cost of $4.30 per pound. During May, the
company purchased 890 pounds and used 830 pounds of acrylic and made 410 radon
detectors. The company paid $4.45 per pound for the acrylic. There were 400 detectors
budgeted for May. How much is the material quantity variance?
A.
$134 unfavorable
B.
$43 unfavorable
C.
$177 unfavorable
D.
$263 unfavorable
11-20
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
114.
Straton Company produces one product, the H2001. Each unit of H2001 requires 6.5
pounds of raw material with a standard cost of $12.00 per pound. During July, Straton
purchased 3,500 pounds of this raw material at a price of $12.25 per pound and used
3,280 pounds to produce 500 units of the H2001. How much is the material price
variance?
A.
$3,000 unfavorable
B.
$360 unfavorable
C.
$875 unfavorable
D.
$820 unfavorable
115.
Thomas Company produces one product, the E4501. The standards for E4501 include
the use of 25 yards of raw material at a standard price of $4.42 per yard. During a recent
month, the company used 65,000 yards of raw material to produce 2,580 units of E4501.
Thomas purchased this material at a cost of $4.37 per yard. How much is the material
quantity variance?
A.
$2,185 unfavorable
B.
$2,185 favorable
C.
$2,210 unfavorable
D.
$3,225 favorable
116.
Glue For All has developed the following material standard to produce one container of
Glue-It: 96 ounces of Chemical A at $0.15 per ounce. Glue For All planned to produce
2,000 containers of Glue-It during July. The company purchased 1,500 gallons (192,000
ounces) of Chemical A at a cost of $0.14 per ounce in July. The company used 1,480
gallons of materials to produce 1,950 containers of Glue-It. How much is the material
quantity variance?
A.
$1,920 favorable
B.
$1,894 favorable
C.
$336 unfavorable
D.
$1,584 unfavorable
117.
Glue For All has developed the following material standard to produce one container of
Glue-It: 96 ounces of Chemical A at $0.15 per ounce. Glue For All planned to produce
2,000 containers of Glue-It during July. The company purchased 1,500 gallons (192,000
ounces) of Chemical A at a cost of $0.14 per ounce in July. The company used 1,480
gallons to produce 1,950 containers of Glue-It. How much is the material price variance?
A.
$1,920 favorable
B.
$1,894 favorable
C.
$336 unfavorable
D.
$1,584 unfavorable
Chapter 11 Standard Costs and Variance Analysis
118.
11-21
Mohammed Company employs a standard cost system. Mohammed has established the
following standards for one unit of product:
Standard Quantity
Direct materials
Direct labor
12.0 pounds
2.6 hours
Standard
Price
$ 7.00/pound
$22.00/hour
Standard
Cost
$ 84.00
57.20
During June, Mohammed planned to produce 24,000 units of product. It purchased
330,000 pounds of direct material at a total cost of $2,343,000. The total factory wages
for June were $1,440,000. Mohammed manufactured 25,000 units of product during
June using 302,000 pounds of direct material and 64,000 direct labor hours. How much
is the labor rate variance?
A.
$32,000 unfavorable
B.
$22,000 favorable
C.
$10,000 favorable
D.
$35,200 unfavorable
119.
Mohammed Company employs a standard cost system. Mohammed has established the
following standards for one unit of product:
Standard Quantity
Direct materials
Direct labor
12.0 pounds
2.6 hours
Standard
Price
$ 7.00/pound
$22.00/hour
Standard
Cost
$ 84.00
57.20
During June, Mohammed planned to produce 24,000 units of product. It purchased
330,000 pounds of direct material at a total cost of $2,343,000. The total factory wages
for June were $1,440,000. Mohammed manufactured 25,000 units of product during
June using 302,000 pounds of direct material and 64,000 direct labor hours. How much
is the labor efficiency variance?
A.
$32,000 unfavorable
B.
$22,000 favorable
C.
$10,000 favorable
D.
$35,200 unfavorable
120.
Radical Company produces versascopes. It has a standard wage rate of $9.50 per hour.
It has determined that the standard time to assemble one versascope is 2.75 hours.
During August, the company’s employees assembled 600 versascopes, and they were
paid $15,974 for 1,630 hours of work. What is Radical’s labor efficiency variance?
A.
$489 favorable
B.
$299 favorable
C.
$271 favorable
D.
$190 favorable
121.
Standard Tires’ labor standard for the production of one bicycle tire is 4.5 hours at $8.50
per hour. During October, the company’s employees produced 140,000 tires, using
610,000 hours at a total cost of $5,328,400. How much is Standard Tire’s labor
efficiency variance?
A.
$143,400 unfavorable
B.
$26,600 favorable
C.
$170,000 favorable
D.
$313,400 favorable
11-22
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
122.
Barnes Company produces men’s ties. The following budgeted amounts were provided
by management for the current year:
Category
Direct materials
Direct labor
Standard Inputs
1.1 yards per tie
0.32 hours per tie
Standard Cost
$4.00 per yard
$9.00 per hour
Barnes produced and sold 4,000 ties during 2017. Actual performance for the year is:
Direct Materials
Yards used in production
Yards purchased
Actual cost per yard
4,100
3,900
$3.75
Direct Labor
Labor hours incurred
Actual cost per hour
1,240
$9.25
How much is the labor rate variance?
A.
$310 unfavorable
B.
$360 favorable
C.
$50 favorable
D.
$1,000 unfavorable
123.
Barnes Company produces men’s ties. The following budgeted amounts were provided
by management for the current year:
Category
Direct materials
Direct labor
Standard Inputs
1.1 yards per tie
0.32 hours per tie
Standard Cost
$4.00 per yard
$9.00 per hour
Barnes produced and sold 4,000 ties during 2017. Actual performance for the year is:
Direct Materials
Yards used in production
Yards purchased
Actual cost per yard
4,100
3,900
$3.75
Direct Labor
Labor hours incurred
Actual cost per hour
1,240
$9.25
How much is the labor efficiency variance?
A.
$310 unfavorable
B.
$360 favorable
C.
$50 favorable
D.
$1,000 unfavorable
124.
Capital Leather Company produces leather footballs. The standard cost for each football
is:
Direct material
Direct labor
2 feet of leather at $4.00 per foot
1.5 hours at $12.00 per hour
During February, 1,200 footballs were produced and 2,600 feet of leather were
purchased at $4.25 per foot. Production usage was 2,300 feet. Direct labor cost incurred
was $20,930 for 1,820 hours. How much is the direct material price variance?
A.
$650 favorable
B.
$650 unfavorable
C.
$575 favorable
D.
$575 unfavorable
Chapter 11 Standard Costs and Variance Analysis
125.
11-23
Capital Leather Company produces leather footballs. The standard cost for each football
is:
Direct material
Direct labor
2 feet of leather at $4.00 per foot
1.5 hours at $12.00 per hour
During February, 1,200 footballs were produced and 2,600 feet of leather were
purchased at $4.25 per foot. Production usage was 2,300 feet. Direct labor cost incurred
was $20,930 for 1,820 hours. How much is the direct material quantity variance?
A.
$100 unfavorable
B.
$400 favorable
C.
$800 favorable
D.
$800 unfavorable
126.
Capital Leather Company produces leather footballs. The standard cost for each football
is:
Direct material
Direct labor
2 feet of leather at $4.00 per foot
1.5 hours at $12.00 per hour
During February, 1,200 footballs were produced and 2,600 feet of leather were
purchased at $4.25 per foot. Production usage was 2,300 feet. Direct labor cost incurred
was $20,930 for 1,820 hours. How much is the direct labor rate variance?
A.
$900 favorable
B.
$900 unfavorable
C.
$910 favorable
D.
$910 unfavorable
127.
Capital Leather Company produces leather footballs. The standard cost for each football
is:
Direct material
Direct labor
2 feet of leather at $4.00 per foot
1.5 hours at $12.00 per hour
During February, 1,200 footballs were produced and 2,600 feet of leather were
purchased at $4.25 per foot. Production usage was 2,300 feet. Direct labor cost incurred
was $20,930 for 1,820 hours. How much is the direct labor efficiency variance?
A.
$20 unfavorable
B.
$240 unfavorable
C.
$360 unfavorable
D.
$360 favorable
11-24
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
128.
Standard Gears produces lawn mower gears. It uses units as the cost driver for
overhead. The following information was provided concerning its standard cost system:
Actual Data
Produced
12,400 units
Materials
purchased
4,650 lbs. for a total cost
of $32,550
Budgeted and Standard Data
Budgeted units
Budgeted materials
Budgeted labor
12,500 units
0.40 lb. @ $7.10 per lb.
36 minutes @ $11.00 per
hour
Materials used
4,700 lbs.
Labor worked
7,460 hrs. costing
$79,822
Budgeted variable
overhead
$35,625
Actual overhead
Fixed: $84,800
Variable $36,100
Budgeted fixed
overhead
$85,500
How much is the standard cost of each lawn mower gear?
A.
$25.59
B.
$19.13
C.
$9.44
D.
$19.28
129.
Standard Gears produces lawn mower gears. It uses units as the cost driver for
overhead. The following information was provided concerning its standard cost system:
Actual Data
Produced
12,400 units
Materials
purchased
4,650 lbs. for a total cost
of $32,550
Budgeted and Standard Data
Budgeted units
Budgeted materials
Budgeted labor
12,500 units
0.40 lb. @ $7.10 per lb.
36 minutes @ $11.00 per
hour
Materials used
4,700 lbs.
Labor worked
7,460 hrs. costing
$79,822
Budgeted variable
overhead
$35,625
Actual overhead
Fixed: $84,800
Variable $36,100
Budgeted fixed
overhead
$85,500
How much is the direct material price variance?
A.
$465 favorable
B.
$1,846 favorable
C.
$470 favorable
D.
$2,201 favorable
Chapter 11 Standard Costs and Variance Analysis
130.
11-25
Standard Gears produces lawn mower gears. It uses units as the cost driver for
overhead. The following information was provided concerning its standard cost system:
Actual Data
Produced
Materials
purchased
Budgeted and Standard Data
12,400 units
4,650 lbs.; total cost
$32,550
Budgeted units
Materials used
4,700 lbs.
Budgeted labor
Labor worked
7,460 hrs. costing $79,822
Actual overhead
Fixed: $84,800
Variable $36,100
Budgeted materials
12,500 units
0.40 lb. @ $7.10 per lb.
36 minutes @
$11.00/hour
Budgeted variable
overhead
$35,625
Budgeted fixed overhead
$85,500
What is the direct material quantity variance?
A.
$465 favorable
B.
$1,846 favorable
C.
$470 favorable
D.
$2,201 favorable
131.
Billy Bob Subs has the following standard cost to produce a king size party sub
sandwich.
Direct materials = 4 pounds @ $3.00 per pound = $12.00 per sub
Direct labor = 1/2 hour @ $8.00 per hour = $4.00 per sub
During December, the company produced 1,000 party subs, bought 4,300 pounds and
used 4,100 pounds of meat at $3.20 per pound, and used 490 hours of labor at a total
cost of $4,018. How much is the direct labor rate variance?
A.
$98 unfavorable
B.
$18 unfavorable
C.
$80 favorable
D.
$178 unfavorable
132.
Billy Bob Subs has the following standard cost to produce a king size party sub
sandwich.
Direct materials = 4 pounds @ $3.00 per pound = $12.00 per sub
Direct labor = 1/2 hour @ $8.00 per hour = $4.00 per sub
During December, the company produced 1,000 party subs, bought 4,300 pounds and
used 4,100 pounds of meat at $3.20 per pound, and used 490 hours of labor at a total
cost of $4,018. How much is the direct labor efficiency variance?
A.
$80 favorable
B.
$18 unfavorable
C.
$98 unfavorable
D.
$178 unfavorable
11-26
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
133.
When Walston Corporation prepared its budget for 2017, it estimated fixed overhead of
$540,000 ($45,000 per month) and variable overhead at $3.00 per unit produced. The
company planned to produce 48,000 units during the year at a rate of 4,000 units each
month. During April, the company produced 3,800 units and total overhead costs were
$59,000. How much is the amount of overhead in the flexible budget for April’s level of
production?
A.
$57,000
B.
$45,000
C.
$46,000
D.
$56,400
134.
When Walston Corporation prepared its budget for 2017, it estimated fixed overhead of
$540,000 ($45,000 per month) and variable overhead at $3.00 per unit produced. The
company planned to produce 48,000 units during the year at a rate of 4,000 units each
month. During April, the company produced 3,800 units and total overhead costs were
$59,000. How much is the controllable overhead variance for April?
A.
$2,000 unfavorable
B.
$2,600 unfavorable
C.
$600 favorable
D.
$2,250 unfavorable
135.
When Walston Corporation prepared its budget for 2017, it estimated fixed overhead of
$540,000 ($45,000 per month) and variable overhead at $3.00 per unit produced. The
company planned to produce 48,000 units during the year at a rate of 4,000 units each
month. During April, the company produced 3,800 units and total overhead costs were
$59,000. How much is the overhead volume variance for April?
A.
$2,250 unfavorable
B.
$2,850 unfavorable
C.
$1,000 unfavorable
D.
$1,600 unfavorable
136.
Haley Fans manufactures and distributes circulators. The standard and actual costs for
the manufacture of circulators are as follows:
Standard Costs
Variable cost, $24 per unit
Fixed cost, $40 per unit
Actual Costs
Total variable cost, $12,300
Total fixed cost, $19,250
Budgeted factory overhead was $32,000. Overhead applied is based on the number of
circulator units produced. The company estimated that 500 circulators would be
produced, however only 480 were produced. How much is budgeted fixed overhead for
the year?
A.
$30,720
B.
$19,200
C.
$20,000
D.
$12,000
Chapter 11 Standard Costs and Variance Analysis
137.
11-27
Haley Fans manufactures and distributes circulators. The standard and actual costs for
the manufacture of circulators are as follows:
Standard Costs
Variable cost, $24 per unit
Fixed cost, $40 per unit
Actual Costs
Total variable cost, $12,300
Total fixed cost, $19,250
Budgeted factory overhead was $32,000. Overhead applied is based on the number of
circulator units produced. The company estimated that 500 circulators would be
produced, however only 480 were produced. How much is Haley’s controllable overhead
variance?
A.
$800 unfavorable
B.
$830 favorable
C.
$450 favorable
D.
$30 unfavorable
138.
Scotch Brand Products produces packaging tape and has determined the following to be
its standard cost of producing one case of budget packaging tape:
Material (3.50 ounces at $1.30 per ounce)
Labor (0.30 hour at $12.00 per hour)
Overhead
Total
$4.55
3.60
2.20
$10.35
At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the
year. Overhead is allocated based on the number of cases of tape produced. Annual
fixed overhead is budgeted at $56,000 and the standard for variable overhead is $1.50
per case. The following information summarizes the results for 2017:





Actual production, 75,000 cases
Purchased 275,000 ounces of material at a total cost of $343,750
Used 266,250 ounces of material in production
Employees worked 22,000 hours, total labor cost $275,000
Actual overhead incurred, $175,000
What is the material price variance for 2017?
A.
$4,875 unfavorable
B.
$13,750 favorable
C.
$13,313 favorable
D.
$8,875 favorable
11-28
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
139.
Scotch Brand Products produces packaging tape and has determined the following to be
its standard cost of producing one case of budget packaging tape:
Material (3.50 ounces at $1.30 per ounce)
Labor (0.30 hour at $12.00 per hour)
Overhead
Total
$4.55
3.60
2.20
$10.35
At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the
year. Overhead is allocated based on the number of cases of tape produced. Annual
fixed overhead is budgeted at $56,000 and variable overhead costs are budgeted at
$1.50 per case. The following information summarizes the results for 2017:





Actual production, 75,000 cases
Purchased 275,000 ounces of material at a total cost of $343,750
Used 266,250 ounces of material in production
Employees worked 22,000 hours, total labor cost $275,000
Actual overhead incurred, $175,000
How much is the material quantity variance for 2017?
A.
$4,875 unfavorable
B.
$8,875 favorable
C.
$$14,750 favorable
D.
$13,750 favorable
140.
Scotch Brand Products produces packaging tape and has determined the following to be
its standard cost of producing one case of budget packaging tape:
Material (3.50 ounces at $1.30 per ounce)
Labor (0.30 hour at $12.00 per hour)
Overhead
Total
$4.55
3.60
2.20
$10.35
At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the
year. Overhead is allocated based on the number of cases of tape produced. Annual
fixed overhead is budgeted at $56,000 and variable overhead costs are budgeted at
$1.50 per case. The following information summarizes the results for 2017:





Actual production, 75,000 cases
Purchased 275,000 ounces of material at a total cost of $343,750
Used 266,250 ounces of material in production
Employees worked 22,000 hours, total labor cost $275,000
Actual overhead incurred, $175,000
How much is the labor rate variance for 2017?
A.
$6,000 favorable
B.
$5,000 unfavorable
C.
$24,000 favorable
D.
$11,000 unfavorable
Chapter 11 Standard Costs and Variance Analysis
141.
11-29
Scotch Brand Products produces packaging tape and has determined the following to be
its standard cost of producing one case of budget packaging tape:
Material (3.50 ounces at $1.30 per ounce)
Labor (0.30 hour at $12.00 per hour)
Overhead
Total
$4.55
3.60
2.20
$10.35
At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the
year. Overhead is allocated based on the number of cases of tape produced. Annual
fixed overhead is budgeted at $56,000 and variable overhead costs are budgeted at
$1.50 per case. The following information summarizes the results for 2017:





Actual production, 75,000 cases
Purchased 275,000 ounces of material at a total cost of $343,750
Used 266,250 ounces of material in production
Employees worked 22,000 hours, total labor cost $275,000
Actual overhead incurred, $175,000
How much is the labor efficiency variance for 2017?
A.
$11,000 unfavorable
B.
$5,000 unfavorable
C.
$6,000 favorable
D.
$24,000 favorable
142.
Scotch Brand Products produces packaging tape and has determined the following to be
its standard cost of producing one case of budget packaging tape:
Material (3.50 ounces at $1.30 per ounce)
Labor (0.30 hour at $12.00 per hour)
Overhead
Total
$4.55
3.60
2.20
$10.35
At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the
year. Overhead is allocated based on the number of cases of tape produced. Annual
fixed overhead is budgeted at $56,000 and the variable overhead costs are budgeted at
$1.50 per case. The following information summarizes the results for 2017:





Actual production, 75,000 cases
Purchased 275,000 ounces of material at a total cost of $343,750
Used 266,250 ounces of material in production
Employees worked 22,000 hours, total labor cost $275,000
Actual overhead incurred, $175,000
How much is the controllable overhead variance for 2017?
A.
$3,000 unfavorable
B.
$10,000 unfavorable
C.
$6,500 unfavorable
D.
$3,500 unfavorable
11-30
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
143.
Scotch Brand Products produces packaging tape and has determined the following to be
its standard cost of producing one case of budget packaging tape:
Material (3.50 ounces at $1.30 per ounce)
Labor (0.30 hour at $12.00 per hour)
Overhead
Total
$4.55
3.60
2.20
$10.35
At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the
year. Overhead is allocated based on the number of cases of tape produced. Annual
fixed overhead is budgeted at $56,000 and the variable overhead costs are budgeted at
$1.50 per case. The following information summarizes the results for 2017:





Actual production, 75,000 cases
Purchased 275,000 ounces of material at a total cost of $343,750
Used 266,250 ounces of material in production
Employees worked 22,000 hours, total labor cost $275,000
Actual overhead incurred, $175,000
How much is the overhead volume variance for 2017?
A.
$6,500 unfavorable
B.
$3,500 unfavorable
C.
$10,000 unfavorable
D.
$3,000 unfavorable
144.
Haley Fans manufactures and distributes circulators. The standard and actual costs for
the manufacture of circulators follows:
Standard Costs
Variable cost, $24 per unit
Fixed cost, $40 per unit
Actual Costs
Total variable cost, $12,300
Total fixed cost, $19,250
Budgeted factory overhead was $32,000. Overhead applied is based on the number of
circulator units produced. The company estimated that 500 circulators would be
produced, however only 480 were produced. How much is Haley’s overhead volume
variance for 2017?
A.
$800 unfavorable
B.
$830 favorable
C.
$450 favorable
D.
$50 unfavorable
Chapter 11 Standard Costs and Variance Analysis
145.
11-31
Eminem, Inc. manufactures music CDs. At the start of 2017, Eminem planned to
produce 108,000 CDs for which the standard cost for each CD is:
Plastic (0.25 pounds at $6.00 per pound)
Labor (0.10 hour at $12.00 per hour)
Overhead ($0.80 fixed and $0.60
variable)
Total
$1.50
1.20
1.40
$4.10
Overhead is allocated based on the number of units produced. Eminem isolates material
purchase variances at the point of purchase. The following information summarizes
Eminem’s results for 2017:
Actual production
Actual variable overhead
Actual fixed overhead
110,000 CDs
$65,000
$83,000
How much is the budgeted fixed overhead for 2017?
A.
$86,400
B.
$83,000
C.
$88,000
D.
$66,400
146.
Eminem, Inc. manufactures music CDs. At the start of 2017, Eminem planned to
produce 108,000 CDs for which the standard cost for each CD is:
Plastic (0.25 pounds at $6.00 per pound)
$1.50
Labor (0.10 hour at $12.00 per hour)
1.20
Overhead ($0.80 fixed and $0.60 variable)
1.40
Total
$4.10
Overhead is allocated based on the number of units produced. Eminem isolates material
purchase variances at the point of purchase. The following information summarizes
Eminem’s results for 2017:
Actual production
Actual variable overhead
Actual fixed overhead
110,000 CDs
$65,000
$83,000
How much is the controllable overhead variance for 2017?
A.
$4,400 favorable
B.
$1,600 favorable
C.
$6,000 favorable
D.
$5,000 favorable
11-32
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
147.
Eminem, Inc. manufactures music CDs. At the start of 2017, Eminem planned to
produce 108,000 CDs for which the standard cost for each CD is:
Plastic (0.25 pounds at $6.00 per pound)
Labor (0.10 hour at $12.00 per hour)
Overhead ($0.80 fixed and $0.60 variable)
Total
$1.50
1.20
1.40
$4.10
Overhead is allocated based on the number of units produced. Eminem isolates material
purchase variances at the point of purchase. The following information summarizes
Eminem’s results for 2017:
Actual production
Actual variable overhead
Actual fixed overhead
110,000 CDs
$65,000
$83,000
How much is the overhead volume variance for 2017?
A.
$4,400 favorable
B.
$1,600 favorable
C.
$1,200 unfavorable
D.
$3,200 favorable
148.
Eminem, Inc. manufactures music CDs. At the start of 2017, Eminem planned to
produce 108,000 CDs for which the standard cost for each CD is:
Plastic (0.25 pounds at $6.00 per pound)
$1.50
Labor (0.10 hour at $12.00 per hour)
1.20
Overhead ($0.80 fixed and $0.60 variable)
1.40
Total
$4.10
Overhead is allocated based on the number of units produced. Eminem isolates material
purchase variances at the point of purchase. The following information summarizes
Eminem’s results for 2017:
Actual production
Actual variable overhead
Actual fixed overhead
110,000 CDs
$65,000
$83,000
How much is under or overapplied overhead for 2017?
A.
$6,000 overapplied
B.
$4,400 overapplied
C.
$1,600 overapplied
D.
$3,200 underapplied
149.
Rumington Popcorn uses a standard cost system and applies overhead on a per unit
basis. The company estimated that 30,000 units would be produced in 2017 and uses
this quantity to establish its standard overhead cost per unit. The cost formula for
overhead costs used to develop the standard overhead cost per unit was:
Overhead = $120,000 + $6 per unit
During the year, actual overhead cost was $340,000. Actual units produced were
32,000. How much is the controllable overhead variance for 2017?
A.
$20,000 favorable
B.
$20,000 unfavorable
C.
$28,000 favorable
D.
$28,000 unfavorable
Chapter 11 Standard Costs and Variance Analysis
11-33
150.
Rumington Popcorn uses a standard cost system and applies overhead on a per unit
basis. The company estimated that 30,000 units would be produced in 2017 and uses
this quantity to establish its standard overhead cost per unit. The cost formula for
overhead costs used to develop the standard overhead cost per unit was:
Overhead = $120,000 + $6 per unit
During the year, actual overhead cost was $340,000. Actual units produced were
32,000. How much is the amount of under or over applied overhead for 2017?
A.
$20,000 overapplied
B.
$20,000 underapplied
C.
$28,000 overapplied
D.
$28,000 underapplied
151.
Rumington Popcorn uses a standard cost system and applies overhead on a per unit
basis. The company estimated that 30,000 units would be produced in 2017 and uses
this quantity to establish its standard overhead cost per unit. The cost formula for
overhead costs used to develop the standard overhead cost per unit was:
Overhead = $120,000 + $6 per unit
During the year, actual overhead cost was $340,000. Actual units produced were
32,000. How much is the overhead volume variance for 2017?
A.
$2,000 favorable
B.
$28,000 unfavorable
C.
$8,000 favorable
D.
$28,000 favorable
152.
Harris Manufacturing produces white sauce. It uses units as the cost driver for overhead.
The following information was provided concerning its standard cost system for 2017:
Material
Budgeted and Standard Data
1/4 lb. @ $14 per pound
Labor
1.4 hrs. @ $16 per hour
Total fixed overhead
Variable overhead
Production
$84,000
$6.50 per unit
6,000 units
Produced
Materials
purchased
Materials used
Labor worked
Total overhead
How much is the standard cost of white sauce?
A.
$50.50
B.
$25.90
C.
$45.95
D.
$46.40
Actual Data
6,200 units
1,600 lbs. for $13.70/ pound
1,520 lbs.
8,740 hrs. at $15.90/hour
$122,000
11-34
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
153.
Harris Manufacturing produces white sauce. It uses units as the cost driver for overhead.
The following information was provided concerning its standard cost system for 2017:
Budgeted and Standard Data
Material
1/4 lb. @ $14 per pound
Labor
1.4 hrs. @ $16 per hour
Total fixed overhead
Variable overhead
Production
$84,000
$6.50 per unit
6,000 units
Produced
Materials
purchased
Materials used
Labor worked
Total overhead
Actual Data
6,200 units
1,600 lbs. for $13.70/pound
1,520 lbs.
8,740 hrs. at $15.90/hour
$122,000
How much is the flexible budget for overhead for 2017?
A.
$122,000
B.
$123,000
C.
$127,100
D.
$124,300
154.
Material
Harris Manufacturing produces white sauce. It uses units as the cost driver for overhead.
The following information was provided concerning its standard cost system for 2017:
Budgeted and Standard Data
1/4 lb. @ $14 per pound
Labor
1.4 hrs. @ $16 per hour
Total fixed overhead
Variable overhead
Production
$84,000
$6.50 per unit
6,000 units
Produced
Materials
purchased
Materials used
Labor worked
Total overhead
Actual Data
6,200 units
1,600 lbs. for $13.70/pound
1,520 lbs.
8,740 hrs. at $15.90/hour
$122,000
How much is the overhead volume variance for 2017?
A.
$2,300 favorable
B.
$2,800 favorable
C.
$0
D.
$5,100 favorable
155.
Material
Harris Manufacturing produces white sauce. It uses units as the cost driver for overhead.
The following information was provided concerning its standard cost system for 2017:
Budgeted and Standard Data
1/4 lb. @ $14 per pound
Labor
1.4 hrs. @ $16 per hour
Total fixed overhead
Variable overhead
Production
$84,000
$6.50 per unit
6,000 units
Produced
Materials
purchased
Materials used
Labor worked
Total overhead
How much is the overhead controllable variance for 2017?
A.
$2,300 favorable
B.
$2,800 favorable
C.
$500 favorable
D.
$5,100 favorable
Actual Data
6,200 units
1,600 lbs. for $13.70/pound
1,520 lbs.
8,740 hrs. at $15.90/hour
$122,000
Chapter 11 Standard Costs and Variance Analysis
156.
Material
11-35
Harris Manufacturing produces white sauce. It uses units as the cost driver for overhead.
The following information was provided concerning its standard cost system for 2017:
Budgeted and Standard Data
1/4 lb. @ $14 per pound
Labor
1.4 hrs. @ $16 per hour
Total fixed overhead
Variable overhead
Production
$84,000
$6.50 per unit
6,000 units
Produced
Materials
purchased
Materials used
Labor worked
Total overhead
Actual Data
6,200 units
1,600 lbs. for $13.70/pound
1,520 lbs.
8,740 hrs. at $15.90/hour
$122,000
How much is the direct labor rate variance for 2017?
A.
$874 favorable
B.
$86 unfavorable
C.
$960 unfavorable
D.
$5,440 unfavorable
157.
Harris Manufacturing produces white sauce. It uses units as the cost driver for overhead.
The following information was provided concerning its standard cost system for 2017:
Budgeted and Standard Data
Actual Data
Material
1/4 lb. @ $14 per pound Produced
6,200 units
Materials
Labor
1.4 hrs. @ $16 per hour
1,600 lbs. for $13.70/pound
purchased
Total fixed overhead $84,000
Materials used
1,520 lbs.
8,740 hrs. costing
Variable overhead
$6.50 per unit
Labor worked
$15.90/hour
Production
6,000 units
Total overhead
$122,000
How much the direct labor efficiency variance for 2017?
A.
$874 favorable
B.
$86 unfavorable
C.
$960 unfavorable
D.
$5,440 unfavorable
158.
Harris Manufacturing produces white sauce. It uses units as the cost driver for overhead.
The following information was provided concerning its standard cost system for 2017:
Budgeted and Standard Data
Actual Data
Material
1/4 lb. @ $14 per pound Produced
6,200 units
Materials
Labor
1.4 hrs. @ $16 per hour
1,600 lbs. for $13.70/pound
purchased
Total fixed overhead $84,000
Materials used
1,520 lbs.
8,740 hrs. costing
Variable overhead
$6.50 per unit
Labor worked
$15.90/hour
Production
6,000 units
Total overhead
$122,000
How much the direct material price variance for 2017?
A.
$456 favorable
B.
$480 favorable
C.
$900 favorable
D.
$420 favorable
11-36
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
159.
Harris Manufacturing produces white sauce. It uses units as the cost driver for overhead.
The following information was provided concerning its standard cost system for 2017:
Budgeted and Standard Data
Actual Data
Material
1/4 lb. @ $14 per pound Produced
6,200 units
Materials
Labor
1.4 hrs. @ $16 per hour
1,600 lbs. for $13.70/pound
purchased
Total fixed overhead $84,000
Materials used
1,520 lbs.
8,740 hrs. costing
Variable overhead
$6.50 per unit
Labor worked
$15.90/hour
Production
6,000 units
Total overhead
$122,000
How much the direct material quantity variance for 2017?
A.
$456 favorable
B.
$480 favorable
C.
$900 favorable
D.
$420 favorable
*160. Eli uses a standard costing system. At the end of the fiscal year, only the following
variance accounts had balances:
Material Price Variance
Material Quantity Variance
Labor Efficiency Variance
$260 (debit)
$35 (credit)
$65 (credit)
Assuming these amounts are not considered significant, which one of the following will
be part of the journal entry to close these accounts?
A.
Credit to Cost of Goods Sold for $160
B.
Debit to Manufacturing Overhead Variances for $260
C.
Debit to Cost of Goods Sold for $160
D.
Credit to Manufacturing Overhead Control for $160
Material from the appendix to the chapter is marked with an asterisk (*).
Chapter 11 Standard Costs and Variance Analysis
Answers to Multiple Choice
32 B
54 A
33 A
55 C
34 D
56 D
35 D
57 B
36 C
58 A
37 A
59 C
38 C
60 D
39 A
61 A
40 A
62 B
41 B
63 A
42 C
64 A
43 C
65 C
44 C
66 B
45 C
67 A
46 A
68 C
47 A
69 B
48 C
70 B
49 D
71 D
50 B
72 B
51 A
73 C
52 D
74 A
53 A
75 B
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
A
A
B
C
A
B
A
A
B
A
B
B
A
B
C
D
C
B
A
A
B
D
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
B
C
A
A
C
D
D
D
C
B
A
A
B
D
A
B
C
C
C
A
A
B
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
D
C
A
B
B
B
C
B
B
A
B
A
A
D
B
A
C
D
B
A
D
C
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
C
B
A
A
A
B
A
D
B
C
D
D
B
A
A
C
B
D
C
11-37
11-38
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
MATCHING
161.
Match each of the following terms with the phrase that most closely describes it. Each
answer may be used only once.
_____ 1. Attainable standard
_____ 2. Budgeted cost
_____ 3. Overhead controllable variance
_____ 4. Favorable variances
_____ 5. Ideal standard
_____ 6. Labor efficiency variance
_____ 7. Labor rate variance
_____ 8. Overhead volume variance
_____ 9. Standard cost
_____ 10. Unfavorable variances
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
Difference between the actual amount of overhead and the amount of overhead
that would be included in the flexible budget for the actual level of production
The cost that should be incurred to produce a good under anticipated conditions
Standards developed under the assumption that no obstacles will be
encountered
Difference between the actual hours worked and the standard hours allowed for
the number of units produced times the standard labor wage rate
Difference between the amount of overhead in the flexible budget and the
amount of overhead applied to production using the standard overhead rate
Variances where the actual prices or quantities are less than the standard
The cost, at standard, for the total number of units scheduled to be produced
Difference between the actual wage rate and the standard wage rate times the
actual number of hours worked
Variance where the actual prices or quantities are greater than standard
Standards which allow for expected deviations
Answers to Matching
1.
J
4.
2.
G
5.
3.
A
6.
F
C
D
7.
8.
9.
H
E
B
10.
I
Chapter 11 Standard Costs and Variance Analysis
11-39
EXERCISES
162.
Beale Acid Company produces muriatic acid in ½ gallon containers. Its accounting
system uses standard costs. The standards per half gallon can of acid call for 0.70
gallons of material and 2.0 hours of labor. The material needed to produce a 0.5 gallon
can of product due to evaporation is 0.70 gallons of material. The standard cost per
gallon of material is $5.35. The standard cost per hour for labor is $12.00. Overhead is
applied at the rate of $8.95 per can. Expected production is 18,000 cans with fixed
overhead per year of $35,100, and variable overhead of $7.00 per half gallon can.
During 2017, 19,000 cans were produced; 15,000 gallons of material were
purchased at a cost of $87,750; 14,000 gallons of material were used in production. The
cost of direct labor incurred in 2017 was $465,300 based on an average actual wage
rate of $11.75 per hour. Actual overhead for 2017 was $170,000. Determine the
standard cost of each ½ gallon of muriatic acid.
Answer
Material (0.70 gallon  $5.35)
Labor (2 hours  $12.00)
Variable overhead
Fixed overhead ($35,100 ÷ 18,000)
Total unit cost
163.
$ 3.75
24.00
7.00
1.95
$36.70
Best Chocolates uses standard costing. During 2017, the company estimated the
following standard costs for one of its major products, cocoa bars.
Direct materials
Direct labor
Standard quantity
0.10 pounds
0.05 hours
Standard price
$30 per pound
$15 per hour
Best purchased 500 pounds of cocoa at a cost of $32 per pound. It produced and sold
5,000 chocolate bars using 490 pounds of cocoa and 250 direct manufacturing labor
hours at an average wage of $15.25 per hour. Calculate the material price variance and
material quantity variance, and indicate whether each variance is favorable or
unfavorable.
Answer
Material price variance = ($32.00 – $30.00) × 500 = $1,000 unfavorable
Material quantity variance = [($30 × 5,000) × 0.10] – [490 × $30.00] = $300 favorable
164.
Reconly Company’s standards for the production of one handbag include 7 hours of
direct labor at a cost of $15.00 per hour. Last month, Reconly produced 24,200
handbags. Employees were paid $2,553,600 for working a total of 168,000 hours.
Calculate Reconly’s labor rate variance and labor efficiency variance and indicate
whether each variance is favorable or unfavorable.
Answer
Actual rate = $2,553,600 ÷ 168,000 = $15.20 per hour
Labor rate variance = ($15.20 – $15.00) × 168,000 = $33,600 unfavorable
Labor efficiency variance = [168,000 – (24,200 × 7)] × $15.00 = $21,000 favorable
11-40
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
165.
Eval Industries employs a standard cost system and uses the following standards for the
production of one vase:
Direct materials: 5 pounds @ $3.60/pound
Direct labor: 1¼ hour @ $12.00/hour
Eval budgeted 21,600 vases for May. In addition, it purchased 125,000 pounds of direct
material at a total cost of $475,000. The total factory wages for May were $327,600. The
company manufactured 22,000 units of product during May using 108,000 pounds of
direct material and 28,000 direct labor hours. Estimated fixed manufacturing overhead
for May was $54,000. Actual total overhead was $70,000. The variable overhead rate is
$0.80 per unit, and the fixed overhead rate is $2.50 per unit. Determine the material
price variance and the material quantity variance for May. Indicate whether each
variance is favorable or unfavorable.
Answer
Actual price = $475,000 ÷ 125,000 = $3.80 per pound
Material price variance = ($3.80 – $3.60) × 125,000 = $25,000 unfavorable
Material quantity variance = (108,000 – (5 × 22,000) × $3.60 = $7,200 favorable
166.
Watson Chemical Company produces a chemical used in dry cleaning. Its accounting
system uses standard costs. The standards per half gallon can of chemical call for 0.70
gallons of material and 2.0 hours of labor. The material needed to produce a 0.5 gallon
can of product due to evaporation is 0.70 gallons of material. The standard cost per
gallon of material is $5.35. The standard cost per hour for labor is $12.00. Overhead is
applied at the rate of $8.95 per can. Expected production is 18,000 cans with fixed
overhead per year of $35,100, and variable overhead of $7.00 per unit (a half gallon
can).
During 2017, 19,000 cans were produced; 15,000 gallons of material were
purchased at a cost of $87,750; 14,000 gallons of material were used in production. The
cost of direct labor incurred in 2017 was $465,300 based on an average actual wage
rate of $11.75 per hour. Actual overhead for 2017 was $170,000. Calculate the material
variances.
Answer
Actual price = $87,750 ÷ 15,000 gallons = $5.85 per gallon
Standard quantity = 19,000  .70 gallons = 13,300 gallons
Material price variance = ($5.85 − $5.35)  15,000 = $7,500 unfavorable
Material quantity variance = (14,000 – 13,300)  $5.35 = $3,745 unfavorable
Chapter 11 Standard Costs and Variance Analysis
167.
11-41
Palm Time Inc. budgeted 6,000 step stools for June under its standard costing system.
Each stool is sold for $22. Actual production for June was 6,300 stools. The company
uses units of product as the cost driver for overhead. Standards and actual costs follow
for June:
Budgeted and Standard
Direct materials
1.1 linear feet @ $2.40 a foot
Direct labor
Variable overhead
Fixed overhead
0.10 hours @ $14.00 per hour
$16,800 total
$15.00 per DLH
Actual
6,400 feet purchased for
$15,040; 6,450 feet used
620 hours @$14.30 per hour
$18,400
$9,200
Calculate the material price variance, material quantity variance, labor rate variance and
labor efficiency variance. Indicate if each of the variances is favorable or unfavorable.
Answer
Material price per linear foot = $15,040 ÷ 6,400 = $2.35 per linear foot
Material price variance = ($2.35 – $2.40) × 6,400 = $320 favorable
Material quantity variance = [6,450 – (6,300 × 1.1)] × $2.40 = $1,152 favorable
Labor rate variance = ($14.30 – $14.00) × 620 = $186 unfavorable
Labor efficiency variance = [620 – (6,300 × 0.10 hrs.)] × $14.00 = $140 favorable
168.
Palm Time, Inc. budgeted 6,000 step stools for June under its standard costing system.
Each stool is sold for $22. Actual production for June was 6,300 stools. The company
uses units of product as the cost driver for overhead. Standards and actual costs follow
for June:
Budgeted and Standard
Direct materials
1.1 linear feet @ $2.40 a foot
Direct labor
Variable overhead
Fixed overhead
0.10 hours @ $14.00 per hour
$16,800 total
$15.00 per stool
Actual
6,400 feet purchased for
$15,040; 6,450 feet used
620 hours @$14.30 per hour
$18,400
$9,200
Show the calculation of the standard cost of one step stool.
Answer
Direct materials (1.1 × $2.40)
Direct labor (0.10 hr. ×
$14)
Variable overhead ($16,800 ÷
6,000)
Fixed overhead
Standard cost
$ 2.64
1.40
2.80
15.00
$21.84
11-42
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
169.
Germ Free produces hand sanitizer. It uses units as the cost driver for overhead and
employs a standard costing system. The following information was provided by the
company’s controller:
Actual Data
14,400 units
4,600 lbs. for a total
of $32,660
Produced
Materials
purchased
Materials used
Labor worked
Actual overhead
a.
b.
Answer
a.
b.
170.
4,560 lbs.
7,520 hrs. costing
$91,368
Fixed $51,800;
Variable $38,100
Standard and Budgeted Data
Budgeted units
14,200 units
Budgeted
0.35 lb. @ $7.00 per lb.
materials
0.5 hours @ $12.10 per
Budgeted labor
hour
Budgeted variable
$39,050
overhead
Budgeted fixed
$51,120
overhead
Calculate the material price and quantity variances and indicate if each is
favorable or unfavorable.
Calculate the labor rate and efficiency variances and indicate if each is favorable
or unfavorable.
Material price = 4,600 × ($7.10 – $7.00) = $460 unfavorable
Material quantity = $7.00 × (4,560 – (14,400 × 0.35)) = $3,360 favorable
Labor rate variance = 7,520 × ($12.15 – $12.10) = $376 unfavorable
Labor efficiency variance = $12.10 × (7,520 – (14,400 × 0.50 hr.) = $3,872
unfavorable
Germ Free produces hand sanitizer. It uses units as the cost driver for overhead and
employs a standard costing system. The following information was provided by the
company’s controller:
Produced
Materials
purchased
Actual Data
14,400 units
4,600 lbs. for a total
of $32,660
Materials used
4,560 lbs.
Labor worked
7,520 hrs. costing
$91,368
Actual overhead
$89,900
Standard and Budgeted Data
Budgeted units
14,200 units
Budgeted
0.35 lb. @ $7.00 per lb.
materials
0.5 hours @ $12.10 per
Budgeted labor
hour
Budgeted variable
$39,050
overhead
Budgeted fixed
$51,120
overhead
Calculate the controllable overhead variance and the overhead volume variances and
indicate if each is favorable or unfavorable.
Chapter 11 Standard Costs and Variance Analysis
11-43
Answer
Applied variable overhead = ($39,050 ÷ 14,200) × 14,400 = $39,600
Applied fixed overhead = ($51,120 ÷ 14,200) × 14,400 = $51,840
Total overhead applied = $39,600 + $51,840 = $91,440
Controllable overhead variance = $89,900 – [($2.75 ×14,400) + $51,120] = $820
favorable
Overhead volume variance = [($2.75 ×14,400) + $51,120] – $91,440 = $720 favorable
171.
At the start of the year, ChillerIce estimated that the company would produce 480
portable ice makers during the year (40 per month). Annual fixed overhead costs were
estimated to be $600,000 ($50,000 per month), and estimated variable overhead costs
were estimated to be $500 per unit. Standard cost per unit was set at $3,450:
Standard material cost
Standard labor cost
Standard overhead rate per unit
Total
$1,200
500
1,750
$3,450
During the year, the company experienced stiff competition and ended up producing and
selling only 400 ice makers. Budgeted annual total production costs were $1,656,000,
and actual production costs were $1,616,400. The standard cost variances were as
follows:
Material price variance
Material quantity variance
Labor rate variance
Labor efficiency variance
Controllable overhead variance
Overhead volume variance
Total
$ 2,200 unfavorable
11,500 unfavorable
(2,300) favorable
4,800 unfavorable
2,000 unfavorable
100,000 unfavorable
$118,200 unfavorable
Suppose you are the CFO of ChillerIce and you have decided to investigate variances
which exceed a threshold of 1/2 percent of the total budgeted production cost. Which
variance(s) will you investigate? Explain the basis for your answer.
Answer
Percent of Budgeted
Variance
Amount
Production Cost
Material price variance
$ 2,200
0.13%
Material quantity variance
11,500
0.69
Labor rate variance
2,300
0.14
Labor efficiency variance
4,800
0.29
Controllable overhead variance
2,000
0.12
Overhead volume variance
100,000
6.04
The overhead volume variance does not need to be investigated. There is an obvious
explanation—the company produced only 400 units instead of the planned 480 units.
The only other variance that exceeds 1/2 percent is the material quantity variance, which
should be investigated.
11-44
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
172.
The standard labor cost in the production of a pair of Crocs is 0.40 hours at $15 per
hour. During the month of June, 13,000 pairs were produced. Actual labor costs were
$76,735 for 5,150 hours. Compute the labor rate and labor efficiency variances for the
month of June.
Answer
Actual wage rate = $76,735 ÷ 5,150 hours = $14.90 per hour
Standard hours = 13,000 × 0.40 hours per pair = 5,200 hours
Labor rate variance = ($14.90 – $15.00) × 5,150 = $515 favorable
Labor efficiency variance = (5,150 – 5,200) × $15.00 = $750 favorable
173.
Caffeine Depot is a chain of coffee shops. The standard amount of ground coffee per
cup is 0.80 ounces. During the month of September, the company sold 350,000 cups of
coffee and used 18,600 pounds of coffee. Also during September, the company
purchased 19,000 pounds of coffee at a cost of $290,700. The standard price per pound
is $15. The company views variances greater than 0.8% of the flexible budget amount to
be considered significant.
a.
b.
Answer
a.
b.
174.
Compute the material variances.
Do either or both of the variances warrant investigation? Explain why or why not.
Actual price = $290,700 ÷ 19,000 pounds = $15.30 per pound
Material price variance = ($15.30 – $15.00) ×19,000 = $5,700 unfavorable
Standard quantity = 350,000  0.80 ounce ÷ 16 ounces = 17,500 pounds
Material quantity variance = (18,600 – 17,500) × $15 = $16,500 unfavorable
The amount paid per pound was 2% higher than the standard price ($15.00
compared to $15.30). It may be that the standard price reflects an estimate of the
annual average price and seasonal fluctuations are expected. Coffee used was
approximately 6.3% more than standard. This should be investigated for possible
causes (e.g., pilferage, waste, or use of more coffee per cup than the company’s
recipe requires).
Shining Car Wash is a mobile car washing services that provides car washes wherever a
customer desires. On average it takes 1.8 hours for travel and washing each vehicle.
During November, employees spent 1,064 labor hours to wash 560 cars at a total labor
cost of $13,300. During December, 960 labor hours were used to wash 480 cars at a
total labor cost of $11,520. The wage rate standard is $12.40 per hour.
a.
Calculate the labor rate and efficiency variances for each month and indicate if
each is favorable or unfavorable.
b.
What trends can you spot regarding the variances over November and
December? What might be a cause for the labor rate variance? What might be a
cause for the labor efficiency variance?
Chapter 11 Standard Costs and Variance Analysis
Answer
a.
b.
175.
11-45
November:
Labor rate variance = ($12.50 – $12.40) × 1,064 = $106 unfavorable
Labor efficiency variance = [1,064 – (560 × 1.8)] × $12.40 = $694
unfavorable
December:
Labor rate variance = ($12.00 – $12.40) × 960 = $384 favorable
Labor efficiency variance = [960 – (480 × 1.8)] × $12.40 = $1,190
unfavorable
The actual labor rate declined from $12.50 to $12.00 which may be caused by
hiring new, unskilled employees. This is supported by the fact that in December,
there was a significant unfavorable labor efficiency variance implying the
employees worked more slowly than in November.
Watson Chemical Company produces a chemical used in dry cleaning. Its accounting
system uses standard costs. The standards per half gallon can of chemical call for 0.70
gallons of material and 2.0 hours of labor. (0.70 gallons of material are needed to
produce a 0.5 gallon can of product due to evaporation.) The standard cost per gallon of
material is $5.35. The standard cost per hour for labor is $12.00. Overhead is applied at
the rate of $8.95 per can. Expected production is 18,000 cans with fixed overhead per
year of $35,100, and variable overhead of $7.00 per unit (a half gallon can).
During 2017, 19,000 cans were produced; 15,000 gallons of material were
purchased at a cost of $87,750; 14,000 gallons of material were used in production. The
cost of direct labor incurred in 2017 was $465,300 based on an average actual wage
rate of $11.75 per hour. Actual overhead for 2017 was $170,000. Calculate the labor
variances.
Answer
Actual hours = $465,300 ÷ $11.75 per hour = 39,600 hours
Standard hours = 19,000 cans  2 hours per can = 38,000 hours
Labor rate variance = ($11.75 – $12.00) × 39,600 = $9,900 favorable
Labor efficiency variance = (39,600 – 38,000) × $12 = $19,200 unfavorable
176.
Orlando East Hospital is interested in analyzing overhead related to laundry services.
The hospital administrator estimated that monthly fixed costs would be $68,000 and
variable costs would be $2.50 per patient day. During the month of September, the
hospital had 15,800 patient days. Total overhead laundry costs were $108,400.
Calculate the controllable overhead variance. Analyze laundry costs for the month of
September.
Answers
Controllable Overhead Variance = $108,400 – [$68,000 + ($2.50  15,800)] = $900
unfavorable
The hospital spent $900 more on overhead costs than allowed in the budget, which is
about 0.84% of the budgeted amount. This amount should not be investigated as it is
insignificant.
11-46
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
177.
Watson Chemical Company produces a chemical used in dry cleaning. Its accounting
system uses standard costs. The standards per half gallon can of chemical call for 0.70
gallons of material and 2.0 hours of labor. (0.70 gallons of material are needed to
produce a 0.5 gallon can of product due to evaporation.) The standard cost per gallon of
material is $5.35. The standard cost per hour for labor is $12.00. Overhead is applied at
the rate of $8.95 per can. Expected production is 18,000 cans with fixed overhead per
year of $35,100, and variable overhead of $7.00 per unit (a half gallon can).
During 2017, 19,000 cans were produced; 15,000 gallons of material were
purchased at a cost of $87,750; 14,000 gallons of material were used in production. The
cost of direct labor incurred in 2017 was $465,300 based on an average actual wage
rate of $11.75 per hour. Actual overhead for 2017 was $170,000. Calculate the overhead
variances and indicate if each is favorable or unfavorable.
Answer
Overhead controllable variance = $170,000 – $168,100 = $1,900 unfavorable
Overhead volume variance = $168,100 – $170,050 = $1,950 favorable
Chapter 11 Standard Costs and Variance Analysis
11-47
CHALLENGE EXERCISES
178.
Winston Woolies provided the following summary of variances for the year ended
December 31, 2017:
Material price variance
$4,200
Favorable
Material quantity variance
(3,300) Unfavorable
Labor rate variance
400
Favorable
Labor efficiency variance
(2,220) Unfavorable
Controllable overhead variance
(1,400) Unfavorable
Overhead volume variance
900
Favorable
Total
($1,420) Unfavorable
At Winston Woolies, the ending balance in Finished Goods inventory is $80,000; the
ending balance in Work in Process inventory is $20,000, and the balance in Cost of
Goods Sold is $700,000. Winston Woolies considers the total variance to be material
and as such, should apportion it among Finished Goods inventory, Work in Process
inventory, and Cost of Goods Sold. Prepare a journal entry to close the variance
accounts at Winston Woolies.
Answer
Finished Goods
Work in Process
Cost of Goods Sold
Total
$ 80,000
20,000
700,000
$800,000
Apportionment of Variances
Finished Goods
Work in Process
Cost of Goods Sold
Total
$ 142.00
35.50
1,242.50
$1,420.00
Finished Goods
Work in Process
Cost of Goods Sold
Material Price Variance
Labor Rate Variance
Overhead Volume Variance
Material Quantity Variance
Labor Efficiency Variance
Controllable Overhead Variance
10.0%
2.5%
87.5%
100.0%
10.0% × $1,420 = $142.00
2.5% × $1,420 = $35.50
87.5% × $1,420 = $1,242.50
100%
142.00
35.50
1,242.50
4,200.00
400.00
900.00
3,300.00
2,220.00
1,400.00
11-48
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
179.
Gifts Galore, Inc. reported the following amounts for 2017:
Actual labor cost
Budgeted labor cost
$265,100
$268,500
Labor rate variance
Labor efficiency variance
$3,210 U
$3,250 F
The company employs management by exception and has a 1.2% materiality threshold
based on the budgeted allowance. Should the labor variances be investigated? Support
your answer with calculations, and briefly justify why or why not.
Answer
1.2% × $268,500 = $3,222
The labor efficiency variance should be investigated because the variance exceeds the
materiality threshold of $3,222 by $28. The labor rate variance should not be
investigated because the variance is less than the materiality threshold of $3,222 by
$12.
180.
Martinez Bakery has prepared the following flexible budget analysis for October:
Cost
Materials
Labor
Flexible Budget
$11,000
45,000
Price Variance
$430 U
470 F
Quantity Variance
$780 F
150 U
Martinez Bakery purchased the same amount of units of materials as it used in
production. The number of pounds of materials used totaled 1,858. Each unit of product
requires a ½ pound of material. The standard cost per unit was $5.50 per pound.
a.
How much is the actual cost of materials used?
b.
How much did the company spend per pound of material?
c.
How many pounds of material were allowed in the flexible budget?
d.
How many units of product did the company produce?
Answer
a.
b.
c.
d.
181.
$11,000 – $780 + $430 = $10,650
$10,650 ÷ 1,858 pounds = $5.73 per pound
$11,000 ÷ $5.50 = 2,000 pounds allowed
$2,000 ÷ 0.50 pounds = 4,000 units
Martinez Bakery has prepared the following flexible budget analysis for October:
Cost
Materials
Labor
Flexible Budget
$11,000
45,000
Price Variance
$430 U
300 F
Quantity Variance
$780 F
150 U
The actual labor rate per hour was $13.00. The standard labor time is 6 minutes per unit.
a.
How much is the actual cost of labor incurred?
b.
How much is the actual number of hours used?
c.
How much is the standard labor rate allowed in the flexible budget?
d.
How many units of product did the company produce?
Answer
a.
b.
c.
d.
$45,000 + $150 – $300 = $44,850
$44,850 ÷ $13 = 3,450 hours
($44,850 + $300) ÷ 3,450 = $13.09
$45,000 ÷ $13.09 = 3,438 units
Chapter 11 Standard Costs and Variance Analysis
182.
11-49
Select the one variance that would most likely result from each of the cases presented
by printing the letter of your choice in the answer space provided. If no variance would
likely result directly from any case listed, print ‘None’ in the answer space.
Variances
A. favorable materials price variance
G. favorable labor efficiency variance
B. unfavorable materials price variance
H. unfavorable labor efficiency variance
C. favorable materials quantity variance
I. favorable overhead controllable variance
D. unfavorable materials quantity
J. unfavorable overhead controllable
variance
variance
E. favorable labor rate variance
K. favorable overhead volume variance
F. unfavorable labor rate variance
L. unfavorable overhead volume variance
Case
1. The company purchased more materials than it used during the
period.
2. Employees used more indirect materials than expected.
3. Employees worked more slowly than expected.
4. The purchasing manager skillfully negotiated a better price for higher
quality materials.
5. The company produced fewer units than budgeted.
Answer
1.
2.
3.
4.
5.
None
J
H
A
L
Answer
11-50
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
183.
Andros Company produces ladders. It uses direct labor hours as the cost driver for
overhead. The following information was provided concerning its standard cost system
for 2017:
Budgeted and Standard Data
Direct material
0.8 lbs. @ $6.40 per lb.
Direct labor
0.9 hrs. @ $15 per hr.
Fixed overhead
$8.20 per labor hour
Variable overhead $11,700
Production
2,000 ladders
Actual Data
Produced
2,130 ladders
Materials purchased 1,700 lbs. for $11,135
Direct materials
1,740 lbs.
used
2,010 hrs. costing $16,093
Direct labor worked
Variable overhead
$11,620
Fixed overhead
$16,620
Calculate all the overhead variances and indicate if each is favorable or unfavorable.
Answer
Variable overhead rate = $11,700 ÷ (0.90 × 2,000) = $6.50 per direct labor hour
Total budgeted fixed overhead = (0.90 × 2,000) × $8.20 = $14,760
Total applied overhead = ($8.20 + $6.50) × 2,130 × 0.9 = $28,180
Overhead controllable variance = ($11,620 + $16,620) − [$14,760 + ($6.50 × 2,130 ×
0.9)] = $1,019.50 unfavorable
Overhead volume variance = – [$14,760 + ($6.50 × 2,130 × 0.9)] – $28,180 = $959
favorable
Chapter 11 Standard Costs and Variance Analysis
11-51
SHORT-ANSWER ESSAYS
184.
How are the standards for direct materials, direct labor, and manufacturing overhead
determined?
Answer
The standard quantity for materials is set by engineering plans, recipes, or formulas. The
standard price is often determined from price lists from suppliers.
The standard quantity for labor can be determined by time-and-motion studies or
analyzing past data. The labor rate is set by management or by union contract.
Standard costs for overhead are determined by estimating the amount of overhead that
will be incurred and the anticipated overhead base.
185.
What is the difference between ideal standards and attainable standards?
Answer
Ideal standards are developed under the assumption that no obstacles to the production
process will be encountered. They are the standards that would occur in a perfect
environment. Attainable standards allow for an occasional equipment failure,
inexperienced workers, and other conditions that are not ideal.
186.
A purchasing agent has found a new supplier for one of the company’s raw materials.
This supplier charges more for the raw material, but the material is of higher quality and
less will be wasted in the manufacturing process. If raw materials are purchased from
this supplier, what is likely to happen to the material price variance and the material
quantity variance?
Answer
It is likely that the material price variance will be unfavorable because the supplier is
charging more for each unit of the raw material. It is likely that the material quantity
variance will be favorable because less raw material will be required since less will be
wasted.
187.
What signal is provided by the overhead volume variance?
Answer
The overhead volume variance signals that the quantity of production was greater or
less than what was anticipated when the standard overhead rate was determined.
188.
Frank Enterprises management claims, “We investigate all variances!” Is this a good
management policy? Why or why not?
Answer
Frank’s policy is probably not a good one. It is wasting resources by investigating
variances that are not significant. It would be better to use a management by exception
policy, where only those variances that are exceptional in terms of amount or percentage
are investigated. However, both favorable and unfavorable variances should be
investigated.
11-52
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
189.
Give an example of a favorable variance that might be indicative of a poor management
decision.
Answer
A company may buy raw materials at a price that is lower than standard, creating a
favorable price variance. However, if the material has more defects than normal, or if it
causes problems with equipment, or is otherwise difficult to work with, it may cause
unfavorable variances for material quantity or for labor.
190.
Explain how a focus on variances for performance analysis might lead to overproduction
in a non-bottleneck production department.
Answer
The department should slow production to the level of the bottlenecked department.
However, if direct labor cannot be immediately eliminated, slowing production will result
in unfavorable direct labor variances. Thus, managers might be tempted to produce
faster than the bottleneck can to avoid the unfavorable labor efficiency variance.
*191. JT Engines uses a standard costing system. When are each of the variances recorded
and how are the variance accounts closed at the end of the period?
Answer
The material price variance is recorded when the purchase of the raw materials is
recorded. The material quantity variance is recorded when the raw materials are issued
into production. The labor rate variance and labor efficiency variance are recorded when
the labor costs are added to Work in Process. The overhead volume variance and the
controllable overhead variance are identified and recorded when the entry to close out
Manufacturing Overhead is recorded. Unless the variances are significant, and the
balances in Work in Process and Finished Goods are large in comparison with Cost of
Goods Sold, the variance accounts are closed directly to Cost of Goods Sold. Favorable
variances are closed with debits and unfavorable variances are closed with credits.
Material from the appendix to the chapter is marked with an asterisk (*).