Beruflich Dokumente
Kultur Dokumente
Student: _______________________________________________________________________________________
4. One important short-term goal for a company is to earn the projected operating income for the period. Attainment of this goal is measured
by comparing the actual operating income to the:
A.
B.
C.
D.
E.
5. The total operating-income variance for a period reveals whether a company has achieved:
A.
B.
C.
D.
E.
6. Another name for the total operating-income variance for a period is:
A.
B.
C.
D.
E.
Flexible-budget variance.
Master (static) budget variance.
Sales-volume variance.
Production-volume variance.
Sales-mix variance.
7. Authoritative standards (within the context of a standard cost system) are determined primarily by:
A.
B.
C.
D.
E.
Distributors.
Employees.
Customers.
Suppliers.
Managers.
8. The arrival of new manufacturing techniques such as automation, flexible manufacturing systems, and cluster or cell manufacturing has:
A.
B.
C.
D.
E.
10. The "flexible budget" can best be described as a budget that adjusts:
A. Revenues for sales-dollar changes.
B. Revenues and expenses for changes in output.
12. A flexible-budget variance measures the impact on short-term operating profit of:
A.
B.
C.
D.
E.
14. Differences in expectation levels lead to two basic types of standards in a standard cost system:
A.
B.
C.
D.
E.
15. An organization planned to use $82 of material per unit of output, but it actually used $80 per unit. During this period, the company
planned to make 1,200 units, but actually produced only 1,000 units. The flexible budget amount for materials is:
A.
B.
C.
D.
$80,000.
$82,000.
$96,000.
$98,400.
17. An organization subject to intense competitive pressures would most likely use:
A.
B.
C.
D.
E.
18. A materials efficiency variance can be caused by all of the following except:
A.
B.
C.
D.
E.
Peak-efficiency.
Currently attainable.
Benchmarked.
Flexible-budget.
Continuous-improvement.
21. Using continuous-improvement standards likely has the effect(s) of all the following except:
A.
B.
C.
D.
E.
Reductions in inefficiencies.
Reduced product defects.
Constantly decreasing standard levels.
Improved productivity.
Increasing pressure on employees and managers.
22. A total variable cost variance (such as for direct materials) can be broken down into separate variances that evaluate:
A.
B.
C.
D.
E.
23. A standard cost system should be designed to generate and report variances:
A.
B.
C.
D.
E.
24. Which of the following benefits is not typically associated with a move to a just-in-time (JIT) manufacturing system?
A.
B.
C.
D.
E.
25. The way managers and employees who are affected by a standard cost system perceive the system will:
A.
B.
C.
D.
E.
26. For control purposes, it is usually preferable to calculate the materials price variance:
A.
B.
C.
D.
E.
At point of purchase.
At point of production.
At the end of the period.
Only if the materials quantity variance is significant in amount.
Only if it is controllable by operating managers.
27. The difference between the actual operating income of the period and master budgeted operating income for the period is the:
A.
B.
C.
D.
E.
28. The difference between the actual sales volume for a period and the flexible-budget sales volume is:
A.
B.
C.
D.
E.
29. The difference between the flexible-budget operating income and the actual operating income in a period is the:
A.
B.
C.
D.
E.
Sales-mix variance.
Sales-volume variance.
Sales price variance.
Operating income flexible-budget variance.
Total operating income variance.
30. The difference between the total actual sales revenue of a period and the total flexible-budget sales revenue for the units sold during the
period is the:
A.
B.
C.
D.
E.
31. A standard that assumes perfect implementation and maximum efficiency is called a(n):
A.
B.
C.
D.
E.
32. A standard that sets the performance criterion at a level that workers with proper training and experience can attain most of the time
without extraordinary effort is a(n):
A.
B.
C.
D.
33. The total variable cost flexible-budget variance for any given period:
A.
B.
C.
D.
Is the difference between actual total variable cost incurred and master budgeted total variable cost.
Is decomposable into sales-volume and sales-mix components.
Is decomposable into production-volume and production-mix components.
Can be broken down into flexible-budget variances for major costs such as materials, labor, variable overhead, and variable selling
expenses.
34. The flexible-budget variable cost variance includes all of the following except:
A.
B.
C.
D.
E.
35. Which one of the following is the difference in direct material costs between the actual amount incurred and the total standard cost in the
flexible budget for the units manufactured during the period?
A.
B.
C.
D.
E.
36. For a direct material, which one of the following is the difference between the actual and standard unit price of the direct material
multiplied by the actual quantity of the material purchased?
A.
B.
C.
D.
E.
37. Which one of the following, for each direct material used in production, is the difference between the actual units of material used and the
total standard units of the direct material that should have been used for the units of the product manufactured during the period,
multiplied by the standard unit price of the direct materials?
A.
B.
C.
D.
E.
38. Which one of the following is the difference between the actual and standard hourly wage rate multiplied by the actual direct labor hours
worked during a period?
A.
B.
C.
D.
E.
39. Which one of the following is the difference between the actual and standard direct labor hours for the units manufactured, multiplied by
the standard hourly wage rate per hour?
A.
B.
C.
D.
E.
40. The primary purpose of calculating standard cost variances each period is:
A.
B.
C.
D.
41. A firm uses a JIT inventory system and has an unfavorable selling price variance for the period just ended. If the proportion of the total
variable manufacturing costs to total sales in both the flexible budget and the actual operating results is 70%:
A.
B.
C.
D.
E.
42. The effect on sales, expenses, or operating income of changes in units sold is measured by the:
A.
B.
C.
D.
E.
Flexible-budget variance.
Sales-volume variance.
Sales price variance.
Operating income flexible-budget variance.
Production-volume variance.
43. The difference between actual and standard cost caused by the difference between the actual number of resource-units used and the
standard number of resource-units that should have been used for the output of the period is called the:
A.
B.
C.
D.
E.
Controllable variance.
Master budget variance.
Flexible-budget variance.
Quantity (or efficiency) variance.
Price variance.
44. Which of the following is not a plausible cause of a direct labor efficiency variance?
A.
B.
C.
D.
E.
45. The direct materials usage ratio for a given period is:
A.
B.
C.
D.
E.
49. A manufacturer planned to use $82 of materials per unit produced, but in the most recent period it actually used $80 of material per unit
produced. During this same period, the company planned to produce 1,200 units, but actually produced only 1,000 units. The flexiblebudget variance for materials is:
A.
B.
C.
D.
E.
$2,000 favorable.
Impossible to determine without additional information.
$14,000 unfavorable.
$16,400 unfavorable.
$2,400 unfavorable.
50. All of the following are limitations of short-term financial performance indicators except:
A.
B.
C.
D.
Employees and managers can take actions that improve short-term financial performance at the expense of long-term performance.
Focusing on individual cost variances can result in optimum local but not global (i.e., firm-wide) performance.
Operating personnel may not readily understand or be able to interpret financial-performance indicators.
Senior managers typically find non-financial performance indicators more useful than summary financial-performance indicators.
51. Flexible budgets and standard costs are useful for assessing:
A.
B.
C.
D.
Operating processes.
Customer-management processes.
Innovation processes.
Social/regulatory processes.
Just-in-time (JIT) processes.
54. Which of the following is not an anticipated benefit of switching to a JIT production system?
A.
B.
C.
D.
E.
The time between when a customer places an order and the time when the order is received by the customer.
The elapsed time between initial customer contact and the time a customer places an order.
The time between when a customer places an order and when that order is manufactured.
The time between when an order is started into production and when that order is completed.
57. Which of the following is not indicated as an advantage of using nonfinancial performance measures, relative to financial performance
measures, as part of an operational control system?
A.
B.
C.
D.
58. Which of the following statements about processing cycle efficiency (PCE) is not true:
A.
B.
C.
D.
E.
Is defined as the difference between flexible-budget fixed cost and the level of fixed costs reflected in the master (static) budget.
Is undefined, except when actual output equals budgeted output.
Is typically zero, because the volume assumed in the flexible budget and the master budget for fixed costs is identical.
Is the difference between budgeted fixed cost and actual fixed cost.
61.
$6.12.
$6.15.
$6.50.
$6.75.
$7.13.
62. Information concerning Johnston Co.'s direct materials costs was as follows:
$307.50 unfavorable.
$307.50 favorable.
$322.50 unfavorable.
$322.50 favorable.
$532.50 favorable.
63. Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in digital equipment, Flex 10. Information
concerning its operation in June was as follows:
$5.20.
$5.76.
$6.24.
$6.84.
$7.20.
64. Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in digital equipment, Flex 10. Information
concerning its operation in June was as follows:
$5.20.
$5.76.
$6.24.
$6.84.
$7.20.
65.
Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in digital equipment, Flex 10. Information
concerning its operation in June was as follows:
$51,840 favorable.
$56,160 favorable.
$62,208 favorable.
$64,840 favorable.
$72,000 favorable.
66. Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in digital equipment, Flex 10. Information
concerning its operation in June was as follows:
The cost of PPS in the flexible budget for the output of the period is:
A.
B.
C.
D.
E.
$259,200.
$280,800.
$311,040.
$324,000.
$360,000.
67. Lucky Company's direct labor information for the month of February is as follows:
$12.00.
$12.30.
$12.60.
$13.20.
$13.50.
68. Lucky Company's direct labor information for the month of February is as follows:
$12.00.
$12.30.
$12.60.
$13.20.
$13.50.
69. Lucky Company's direct labor information for the month of February is as follows:
The total standard direct labor cost for the period is:
A.
B.
C.
D.
E.
$738,000.
$747,000.
$756,000.
$765,000.
$774,900.
70. Lucky Company's direct labor information for the month of February is as follows:
$36,900 unfavorable.
$37,800 unfavorable.
$55,350 unfavorable.
$56,700 unfavorable.
$73,800 unfavorable.
71. Lucky Company's direct labor information for the month of February is as follows:
$18,900 unfavorable.
$42,300 unfavorable.
$46,350 unfavorable.
$44,500 unfavorable.
$54,900 unfavorable.
$13.44.
$13.65.
$13.78.
$14.00.
$14.35.
$13.44.
$13.65.
$13.78.
$14.00.
$14.35.
The total standard direct labor cost for the units manufactured in February is:
A.
B.
C.
D.
E.
$458,640.
$470,400.
$477,750.
$478,240.
$490,000.
75.
$13,440 favorable.
$13,650 favorable.
$13,776 favorable.
$14,000 favorable.
$19,110 favorable.
$7,350 favorable.
$7,840 favorable.
$30,870 favorable.
$30,870 unfavorable.
$31,360 favorable.
77. Europa Company manufactures only one product. Presented below is direct labor information for November.
18,720.
19,200.
20,800.
22,400.
22,464.
78. Europa Company manufactures only one product. Presented below is direct labor information for November.
The total standard direct labor hours in November for the output produced are:
A.
B.
C.
D.
E.
18,720.
19,200.
20,800.
22,400.
22,464.
79. Europa Company manufactures only one product. Presented below is direct labor information for November.
$26,624.00 unfavorable.
$31,948.80 unfavorable.
$39,936.00 favorable.
$71,884.80 favorable.
$103,833.60 favorable.
80.
Europa Company manufactures only one product. Presented below is direct labor information for November.
$26,624.00 unfavorable.
$31,948.80 unfavorable.
$39,936.00 favorable.
$71,884.80 favorable.
$103,833.60 favorable.
81. Europa Company manufactures only one product. Presented below is direct labor information for November.
$26,624.00 unfavorable.
$31,948.80 unfavorable.
$39,936.00 favorable.
$71,884.80 favorable.
$103,833.60 favorable.
82. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
$11.80.
$11.96.
$12.04.
$12.20.
$12.50.
83. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
$458,068.
$459,862.
$461,132.
$462,938.
$478,400.
84. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
$1,800 unfavorable.
$1,800 favorable.
$59,400 unfavorable.
$59,400 favorable.
85. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
$1,590 favorable.
$5,650 favorable.
$7,790 unfavorable.
$24,410 unfavorable.
$59,410 unfavorable.
86. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
$1,590 favorable.
$5,650 favorable.
$7,240 unfavorable.
$59,410 unfavorable.
87. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
C. $7,040 unfavorable.
D. $9,830 unfavorable.
88. Kennedy Inc. has the following data for its operation in August:
$3.35.
$3.40.
$3.72.
$3.80.
$3.85.
89. Kennedy Inc. has the following data for its operation in August:
$180 unfavorable.
$360 unfavorable.
$540 favorable.
$540 unfavorable.
$720 unfavorable.
90. Matinna Co. maintains no inventories and has the following data pertaining to one of its direct materials in July:
All materials purchased during the month were issued to production. What was the direct materials purchase-price variance for July?
A.
B.
C.
D.
E.
$1,500 favorable.
$3,000 unfavorable.
$3,000 favorable.
$7,500 unfavorable.
$7,500 favorable.
91. Matinna Co. maintains no inventories and has the following data pertaining to one of its direct materials in July:
What was the company's direct materials flexible-budget (FB) variance for July?
A.
B.
C.
D.
E.
$1,500 favorable.
$3,000 unfavorable.
$3,000 favorable.
$7,500 unfavorable.
$7,500 favorable.
92.
Prokp Co.'s records for April disclosed the following data relating to direct labor:
$16.00.
$18.00.
$20.00.
$24.00.
$26.67.
93. Prokp Co.'s records for April disclosed the following data relating to direct labor:
Prokp's total standard direct labor hours for units produced in April were:
A.
B.
C.
D.
E.
890.
900.
1,000.
1,100.
1,110.
94. Prokp Co.'s records for April disclosed the following data relating to direct labor:
Prokp's total standard direct labor cost for the output in April was:
A.
B.
C.
D.
E.
$17,600.
$21,600.
$22,400.
$24,000.
$26,400.
95. Marv Company's direct labor costs for manufacturing its only product were as follows for October:
$3,000 unfavorable.
$20,000 favorable.
$23,000 favorable.
$30,000 unfavorable.
$50,000 unfavorable.
96. Marv Company's direct labor costs for manufacturing its only product were as follows for October:
$3,000 unfavorable.
$20,000 favorable.
$23,000 favorable.
$30,000 unfavorable.
$50,000 unfavorable.
97.
Marv Company's direct labor costs for manufacturing its only product were as follows for October:
$7,000 unfavorable.
$9,000 favorable.
$9,000 unfavorable.
$32,000 favorable.
$54,000 unfavorable.
98. Mandy Company has the following direct labor costs last month:
$43.20.
$45.60.
$48.00.
$52.20.
99. Mandy Company has the following direct labor costs last month:
$43.20.
$45.60.
$48.00.
$52.20.
$54.00.
100. Mandy Company has the following direct labor costs last month:
$15,120 unfavorable.
$20,880 unfavorable.
$23,490 unfavorable.
$42,480 favorable.
101. Mandy Company has the following direct labor costs last month:
$15,120 unfavorable.
$20,800 unfavorable.
$36,720 favorable.
$42,480 favorable.
$79,920 favorable.
102. A company's flexible budget for 15,000 units of production showed sales of $48,000; variable costs of $18,000; and fixed costs of
$12,000. The operating income in the master budget for 20,000 units is:
A.
B.
C.
D.
E.
$8,000.
$13,500.
$24,000.
$28,000.
$30,000.
103. A company's master budget for October is to manufacture and sell 30,000 units for a total of $270,000 with total variable costs of
$180,000 and total fixed costs of $24,000. The company actually manufactured and sold 32,000 units and generated $45,000 of operating
income in October. The flexible-budget operating income in October is:
A.
B.
C.
D.
E.
$27,000.
$70,400.
$72,000.
$83,520.
$86,400.
104. A company's master budget for October is to manufacture and sell 30,000 units for a total of $270,000 with total variable costs of
$180,000 and total fixed costs of $24,000. The company actually manufactured and sold 32,000 units and generated $45,000 of operating
income in October. The operating income flexible-budget (FB) variance is:
A.
B.
C.
D.
E.
$3,600 unfavorable.
$6,000 unfavorable.
$15,400 unfavorable.
$21,000 unfavorable.
$27,000 unfavorable.
105. A company's master budget for October is to manufacture and sell 30,000 units for a total of $270,000 with total variable costs of
$180,000 and total fixed costs of $24,000. The company actually manufactured and sold 32,000 units and generated $45,000 of operating
income in October. The sales volume variance, in terms of operating income, for October is:
A.
B.
C.
D.
$3,600 favorable.
$6,000 favorable.
$15,400 favorable.
$21,000 favorable.
106. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The actual amount of operating income earned in September was:
A.
B.
C.
D.
E.
$15,000.
$40,000.
$63,000.
$78,000.
$105,000.
107. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The total amount of variable costs in the flexible budget for September was:
A.
B.
C.
D.
E.
$129,000.
$192,000.
$200,000.
$208,000.
$255,000.
108. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U); and, sales volume variance, in terms of contribution
margin, $27,000U). The amount of operating income in the flexible budget (FB) for September was:
A.
B.
C.
D.
E.
$40,000.
$48,000.
$56,000.
$70,000.
$78,000.
109. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U.The budgeted fixed cost is:
A.
B.
C.
D.
E.
$30,000.
$45,000.
$71,000.
$78,000.
$93,000.
110. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The sales volume variance, in terms of operating income, is:
A.
B.
C.
D.
E.
$20,000 unfavorable.
$27,000 unfavorable.
$36,000 unfavorable.
$75,000 unfavorable.
$90,000 unfavorable.
111. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The master budget operating income for September was:
A.
B.
C.
D.
E.
$78,000.
$105,000.
$108,000.
$110,000.
$135,000.
112. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The total number of budgeted units reflected in the master budget for September was:
A.
B.
C.
D.
E.
36,000 units.
40,000 units.
45,000 units.
48,000 units.
50,000 units.
113. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The total sales revenue in the master budget for September was:
A.
B.
C.
D.
E.
$300,000.
$327,000.
$350,000.
$375,000.
$425,000.
114. Shoemaker Perkins Company uses a standard cost system and had 400 pounds of raw material X15 on hand on September 1. The
standard cost is $10 per pound. The standard calls for 2 pounds of material X15 for each unit of the product manufactured. The company
manufactured 600 units of the product in September, and had 500 pounds of Material X-15 in stock on September 30. The actual price
for Material X-15 purchased during the month was $1 per pound below the standard cost. The material usage variance in September was
$3,000 unfavorable. What is the purchase-price variance for Material X in September?
A.
B.
C.
D.
E.
$1,100 favorable.
$1,200 favorable.
$1,300 favorable.
$1,500 favorable.
$1,600 favorable.
115. Sheldon Company manufactures only one product and uses a standard cost system. During the past month, the manufacturing operations
had the following variances: Direct labor rate variance = $30,000 Favorable. Direct labor efficiency variance = $50,000 Unfavorable.
Sheldon allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly rate is $50. During the month, the
company used 25 percent more direct labor hours than the standard allowed. What was the direct labor flexible-budget (FB) variance for
the month?
A.
B.
C.
D.
E.
$20,000 unfavorable.
$25,000 unfavorable.
$37,500 favorable.
$62,500 unfavorable.
$80,000 unfavorable.
116. Sheldon Company manufactures only one product and uses a standard cost system. During the past month, the manufacturing operations
had the following variances: Direct labor rate variance = $30,000 Favorable; direct labor efficiency variance = $50,000 Unfavorable.
Sheldon allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly rate is $50. During the month, the
company used 25 percent more direct labor hours than the standard allowed. What were the total standard hours allowed for the units
manufactured during the month?
A.
B.
C.
D.
E.
1,000.
2,500.
4,000.
5,000.
6,000.
117. Sheldon Company manufactures only one product and uses a standard cost system. During the past month, the manufacturing operations
had the following variances: Direct labor rate variance $30,000 Favorable; direct labor efficiency variance $50,000 Unfavorable.
Sheldon allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly rate is $50. During the month, the
company used 25 percent more direct labor hours than the standard allowed. What were the total actual direct hours worked?
A.
B.
C.
D.
E.
1,000.
3,000.
4,000.
5,000.
6,000.
118. Sheldon Company manufactures only one product and uses a standard cost system. During the past month, the manufacturing operations
had the following variances: Direct labor rate variance = $30,000 Favorable; direct labor efficiency variance = $50,000 Unfavorable.
Sheldon allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly rate is $50. During the month, the
company used 25 percent more direct labor hours than the standard allowed. What was the actual hourly rate for direct labor?
A.
B.
C.
D.
E.
$30.
$36.
$44.
$50.
$56.
119. Sheldon Company manufactures only one product and uses a standard cost system. During the past month, the manufacturing operations
had the following variances: Direct labor rate variance $30,000 Favorable. Direct labor efficiency variance 50,000 Unfavorable Sheldon
allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly rate is $50. During the month, the company
used 25 percent more direct labor hours than the standard allowed. How many units of the product were produced during the past
month?
A.
B.
C.
D.
E.
800.
1,000.
1,200.
1,500.
2,000.
120. Ventura uses a just-in-time (JIT) manufacturing system for all of its materials, components, and products. The master budget of the
company for June called for use of 11,000 square feet of materials, while the flexible budget for the actual output of the month had
10,000 square feet of materials at a standard cost of $9.60 per square foot. Company records show that the actual price paid for the
materials used in June was $9.50 per square foot, and that the direct materials purchase-price variance for the month was $1,040.
The actual total quantity of materials purchased during the month was:
A.
B.
C.
D.
E.
121. Ventura uses a just-in-time (JIT) manufacturing system for all of its materials, components, and products. The master budget of the
company for June called for use of 11,000 square feet of materials, while the flexible budget for the actual output of the month had
10,000 square feet of materials at a standard cost of $9.60 per square foot. Company records show that the actual price paid for the
materials used in June was $9.50 per square foot, and that the direct materials purchase-price variance for the month was $1,040.
The materials usage (quantity) variance for June was:
A.
B.
C.
D.
E.
$3,800 unfavorable.
$3,840 unfavorable.
$5,700 unfavorable.
$5,760 unfavorable.
$8,560 favorable.
122. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
123. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
124. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$72,000.
$74,400.
$75,000.
$90,000.
$111,000.
125. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$12,000.
$15,000.
$16,500.
$18,000.
$33,000.
126. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$61,500.
$76,500.
$79,500.
$88,500.
$91,500.
127. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$4,500.
$6,000.
$7,500.
$9,000.
$10,000.
128.
Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$500 favorable.
$1,500 unfavorable.
$1,500 favorable.
$2,500 unfavorable.
$3,000 favorable.
129. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$500 favorable.
$1,500 unfavorable.
$1,500 favorable.
$2,500 unfavorable.
$3,000 favorable.
130. Precilla Company uses a standard costing system that allows 2 pounds of direct materials for one finished unit. During July, the company
purchased 40,000 pounds of direct materials for $210,000 and manufactured 12,000 finished units. The standard direct materials cost
allowed for the units manufactured is $120,000. The performance report shows that Pricilla has an unfavorable direct materials usage
variance of $5,000. Also, the company records any price variance for materials at time of purchase.
Precilla's standard price per pound of direct materials is:
A.
B.
C.
D.
E.
$4.00.
$5.00.
$6.00.
$10.00.
$12.00.
131. Precilla Company uses a standard costing system that allows 2 pounds of direct materials for one finished unit. During July, the company
purchased 40,000 pounds of direct materials for $210,000 and manufactured 12,000 finished units. The standard direct materials cost
allowed for the units manufactured is $120,000. The performance report shows that Pricilla has an unfavorable direct materials usage
variance of $5,000. Also, the company records any price variance for materials at time of purchase.
The number of pounds of direct materials used to produce July's output was:
A.
B.
C.
D.
E.
12,000 pounds.
20,000 pounds.
24,000 pounds.
25,000 pounds.
40,000 pounds.
132. Precilla Company uses a standard costing system that allows 2 pounds of direct materials for one finished unit. During July, the company
purchased 40,000 pounds of direct materials for $210,000 and manufactured 12,000 finished units. The standard direct materials cost
allowed for the units manufactured is $120,000. The performance report shows that Pricilla has an unfavorable direct materials usage
variance of $5,000. Also, the company records any price variance for materials at time of purchase.
The direct materials purchase-price variance in July is:
A.
B.
C.
D.
E.
$10,000 unfavorable.
$50,000 unfavorable.
$80,000 unfavorable.
$86,000 unfavorable.
$90,000 unfavorable.
133. Ally Mfg. uses a standard cost system and its July production of 1,800 units involved actual direct labor costs of $242,000 for 5,500
hours worked. The budget for July called for production of 2,000 units with 6,000 direct labor hours at $40.00 per hour.
Ally's direct labor rate variance for July is:
A.
B.
C.
D.
E.
$2,000 unfavorable.
$4,000 unfavorable.
$20,000 favorable.
$22,000 unfavorable.
$26,000 unfavorable.
134. Ally Mfg. uses a standard cost system and its July production of 1,800 units involved actual direct labor costs of $242,000 for 5,500
hours worked. The budget for July called for production of 2,000 units with 6,000 direct labor hours at $40.00 per hour.
Ally's direct labor efficiency variance for July is:
A.
B.
C.
D.
E.
$2,000 unfavorable.
$4,000 unfavorable.
$20,000 favorable.
$22,000 unfavorable.
$26,000 unfavorable.
135. Roncy Manufacturing uses enhanced powder plastics (EPP) to manufacture high-pressure boards, Dura-Plastic. Information concerning
its operation in June was as follows:
$6.22.
$6.30.
$6.65.
$6.84.
Greater than $7.00.
136. Roncy Manufacturing uses enhanced powder plastics (EPP) to manufacture high-pressure boards, Dura-Plastic. Information concerning
its operation in June was as follows:
$13,300 unfavorable.
$26,600 unfavorable.
$29,925 unfavorable.
$34,020 unfavorable.
137. Roncy Manufacturing uses enhanced powder plastics (EPP) to manufacture high-pressure boards, Dura-Plastic. Information concerning
its operation in June was as follows:
$63,700 unfavorable.
$65,520 unfavorable.
$69,160 unfavorable.
$95,760 unfavorable.
138. Luanna Inc. manufactures game consoles. Some of the company's data was misplaced. Use the following information to replace the lost
data.
C. $105,600.
D. $108,000.
139. Luanna Inc. manufactures game consoles. Some of the company's data was misplaced. Use the following information to replace the lost
data.
$100,300.
$102,000.
$103,440.
$105,600.
140. Luanna Inc. manufactures game consoles. Some of the company's data was misplaced. Use the following information to replace the lost
data.
$38,790.
$59,490.
$65,050.
$83,140.
141. Luanna Inc. manufactures game consoles. Some of the company's data was misplaced. Use the following information to replace the lost
data.
$26,920.
$33,720.
$35,620.
$42,450.
142. Joe Malay received the following report on the Division's operation for the month of August: Direct labor rate variance = $25,000
unfavorable. Direct labor efficiency variance = $70,000 (?) The standard calls for 3 direct labor hours per unit of output at $28 per labor
hour. The standard direct labor hours for the units manufactured is 20 percent more than the total direct labor hours actually worked in
August. What were the total standard hours allowed for the units manufactured in August?
A.
B.
C.
D.
E.
10,000.
12,000.
12,500.
15,000.
15,625.
143. Joe Malay received the following report on the Division's operation for the month of August:
Direct labor rate variance = $25,000 unfavorable. Direct labor efficiency variance = $70,000 (?) The standard calls for 3 direct labor
hours per unit of output at $28 per labor hour. The standard direct labor hours for the units manufactured is 20 percent more than the
total direct labor hours actually worked in August. What was the average direct labor hourly rate the Division paid in August?
A.
B.
C.
D.
E.
$24.00.
$26.00.
$28.00.
$30.00.
$31.25.
144. Joe Malay received the following report on the Division's operation for the month of August:
Direct labor rate variance = $25,000 unfavorable. Direct labor efficiency variance = $70,000 (?) The standard calls for 3 direct labor
hours per unit of output at $28 per labor hour. The standard direct labor hours for the units manufactured is 20 percent more than the
total direct labor hours actually worked in August. How many units of the product were produced in August?
A.
B.
C.
D.
E.
4,000.
4,250.
4,500.
4,750.
5,000.
145. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: Materials: (4 kilograms x $10.00 per
kilogram) $40.00/unit. Labor: (4 hours x $18.00 per hour) $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
The actual direct materials purchase price per kilogram in July was:
A.
B.
C.
D.
E.
$8.80.
$9.90.
$10.00.
$10.10.
$11.80.
146. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: Materials: 4 kilograms/unit x $10.00 per
kilogram = $40.00/unit; labor: 4 hours/unit x $18.00 per hour = $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
The actual total cost of direct materials used in production during July was:
A.
B.
C.
D.
E.
$282,150.
$287,850.
$297,000.
$300,000.
$303,000.
147. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: materials: 4 kilograms/unit x $10.00 per
kilogram = $40.00/unit; labor: 4 hours/unit x $18.00 per hour = $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
D. $15,000 unfavorable.
148. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: Materials: 4 kilograms/unit x $10.00 per
kilogram = $40.00/unit; labor: 4 hours/unit x $18.00 per hour = $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
$6,600 favorable.
$16,600 favorable.
$21,000 unfavorable.
$57,600 unfavorable.
$58,200 unfavorable.
149. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: Materials: 4 kilograms/unit x $10.00 per
kilogram = $40.00/unit; labor: (4 hours x $18.00 per hour) $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
$6,600 favorable.
$7,200 unfavorable.
$8,000 unfavorable.
$14,400 favorable.
$79,200 favorable.
150. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: Materials: 4 kilograms/unit x $10.00 per
kilogram) $40.00/unit; labor: 4 hours/unit x $18.00 per hour = $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
$6,600 unfavorable.
$7,200 unfavorable.
$51,000 favorable.
$58,200 favorable.
$65,400 favorable.
151.
Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows:
All materials are issued at the beginning of processing. The operating data shown below were taken from the records for July:
The sales volume variance, measured in terms of direct labor cost, for July was:
A.
B.
C.
D.
E.
$6,600 favorable.
$7,200 favorable.
$51,000 unfavorable.
$57,600 unfavorable.
$72,000 unfavorable.
152. Landlubber Company has established a standard direct material cost of 1.5 gallons @ $2 per gallon for one unit of its product. During the
past month, actual production of this product was 6,500 units. The direct materials usage (efficiency) variance was $700 (favorable) and
the materials price variance (calculated at point of production) was $470 (unfavorable). The entry to charge Work in Process Inventory
for the standard material costs during the month and to record the direct material variances in the accounts would include all the
following except:
A.
B.
C.
D.
E.
153. What four variances may be included as a component of the total variable cost flexible-budget variance for a given period?
154. What is a direct materials usage ratio? For what purpose is this ratio used?
155. What is a direct labor efficiency variance, and what are some of the likely causes of this variance?
156. Rachael Hair Products shows the following budgeted and actual data for the first quarter of the current fiscal year:
Required: (a) What type of financial control system might the company use to determine whether the company met its short-term
financial objectives?
(b) For the first quarter of the year, what was the total master (static) budget variance?
(c) In general, into what two component variances can the master (static) budget variance be decomposed? What is the meaning of each
of these two variances?
(d) Comment specifically on the financial performance of this company during the 1st quarter.
(e) What are the primary limitations of traditional financial-control models?
157. Ann Jacobson's supervisor has asked her to list any concerns she might have about the proposed development of standards to measure
performance and to reward superior performance in her department. Ann's department handles customer calls, directing customer
questions and complaints to the appropriate persons within the firm. The company has never before used any performance measure nor
paid any performance-related bonuses. It hopes to install a simple but effective system to achieve its twin goals of cost control and
performance measurement. Develop the list for Ann based on the information above.
158. Within the context of the material covered in Chapter 14, define the term "sales-volume variance." List some common causes of the
sales-volume variance.
159. Discuss some major differences between static and flexible budgets.
160. Klash Company adopted a standard cost system several years ago. The company uses standard costs for all of its inventories. The
standard costs for direct materials and labor for its single product are as follows: Materials (12 kilograms/unit x $7.00 per kilogram) =
$84.00/unit; direct labor (8 hours/unit x $12.00 per hour) = $96.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for December:
Note: number of kilograms issued to production during the period = number of kilograms purchased.
Required: (A) Calculate the standard cost of the actual kilograms of material purchased.
(B) Calculate the total standard kilograms for the production of the period (that is, for "equivalent units produced with respect to direct
materials")
(C) Calculate the total standard cost of materials for the production of the period.
(D) Calculate the actual price per kilogram of material of material purchased this period.
(E) Calculate the direct labor rate variance.
161. Miller has the following information pertaining to its usage of direct labor in a recent period:
162.
Sarheen, Inc. maintains no inventories and has collected the following data on one of its products for the most recent period:
Required: Determine:
(A) The direct material usage (quantity) variance.
(B) The actual cost of the direct materials purchased and used during the period. (Hint: these two amounts are identical.)
(C) The direct material price variance.
(D) The correct summary journal entry to record direct material costs for this period's production, including associated standard cost
variances. (Note: assume that any price variances are recorded at point of production.)
163. McElroy Company has prepared the following master budget for 2010. Although McElroy has the capacity to manufacture 50,000 units,
management expected the likely demand for its product to be 40,000 units in 2010; as such, it prepared the master budget to manufacture
and sell 40,000 units. In early January 2011, the company was pleasantly surprised to find out that it manufactured and sold 45,000 units
in 2010.
Required: Prepare the flexible budget (FB) for the actual operating level achieved in 2010.
164. Balt Company maintains a standard cost system; as such, all inventories, including materials, are carried on the books at standard cost.
Last period, Balt used 5,000 pounds of Material H to produce 800 units of Product C8. The company has established a standard of 7
pounds of Material H per unit of C8, at a price of $7.50 per pound of material. During the period the inventory for Material H decreased
by 2,000 pounds. The company spent $25,000 during the period to purchase material H.
Required: (1) Calculate the direct materials purchase-price variance for the period. (2) Calculate the direct materials usage variance for
the period. (3) Provide the correct summary journal entry to record the purchase, on credit, of materials during the period.(4) Provide the
correct summary journal to record direct materials cost for materials issued to production during the period.
165. Falcon Company uses a standard cost system; as such, all inventories are carried on the books at standard cost. During the most recent
period the company manufactured 12,000 units. The standard cost sheet indicates that the standard direct labor cost per unit is $1.50. The
performance report for the period includes an unfavorable direct labor rate variance of $1,000 and a favorable direct labor efficiency
variance of $275.
Required: What was the total actual cost of direct labor incurred during the period?
166.
During the period, the company actually manufactured and sold 42,000 units.
Required:
(1) Prepare a flexible budget (FB) for the actual output level achieved during the period.
(2) What is the definition of a FB? For what managerial purpose is a FB useful? Be specific about the types of information (and
variances) that management can generate, at the end of an accounting period, given a flexible budget and its master (static) budget.
167. Patterson, Inc. wishes to evaluate, in summary fashion, its financial performance for the most recent period. The budget and the actual
operating results for this period are presented below.
Required: (A) What was the actual operating income for the period?
(B) What is the firm's master budget operating income?
(C) What was the flexible-budget operating income for the period?
(D) What is the total operating-income variance of the period?
(E) What was the sales-volume variance, in terms of operating income, for the period?
(F) What are the key elements of the traditional financial control model?
(G) What are the primary limitations of the traditional financial control model?
168. Contemporary furniture manufactures office desks. The firm budgeted to sell 5,000 desks at $200 per desk in 2010. Budgeted costs
include $80 variable cost per desk, and $200,000 fixed cost/year. In 2010 the company sold 6,000 desks at $190, and incurred $78
variable cost per desk and $220,000 fixed cost for the year.
Required: Prepare, in proper form, a variance analysis report identifying both flexible budget and sales-volume variances.
169.
170.
James has the following information pertaining to its usage of direct labor in a recent period:
Required: (A) Calculate the labor efficiency variance for the period.
(B) Calculate the labor rate variance for the period.
(C) Prepare, in proper form, the journal entry to record wage expense for the period, including any associated standard cost variances.
171. Appliance, Inc. manufactured 10,000 units. The standard cost sheet indicates that the standard direct labor cost per unit is $3.00. The
performance report for the period includes a favorable direct labor rate variance of $2,000, and a favorable direct labor efficiency
variance of $500.
Required: What was the total actual cost of direct labor incurred during the period?
172. The Chen Company uses a standard cost system. As such, all of its inventories are carried on the books at standard, not actual, cost.
During the most recent accounting period, the company had the following summary transactions:
(A) Purchased, on credit, direct materials; the standard cost of these materials was $30,000, while the actual cost was $32,000.
(B) Issued to production direct materials. The standard cost of materials that should have been used for this period's output was $35,000,
while the standard cost of materials actually used in production during the period was $33,000.
(C) Actual direct labor cost, which has been incurred but not yet paid, for the period was $75,000. The standard direct labor cost for this
period's output was $80,000. The direct labor efficiency variance for the period was $10,000(F).
(D) For the units completed during the period, the standard direct labor cost was $78,000, while the standard direct materials cost was
$34,000.
(E) For the units sold during the period, the standard materials cost was $30,000, while the standard direct labor cost was $76,000
Required: Given the above information, provide the correct journal entries for the following:
(A) Purchase of direct materials
(B) Issuance of materials to production.
(C) Direct labor cost for the period.
(D) The labor and materials cost associated with finished production this period.
(E) The labor and materials cost associated with items sold during the period.
173. Define what is meant by the term "just in time production" (JIT). As indicated in your text, management accountants can supply relevant
information to management as it considers a move to JIT. In this regard, describe some of the principal advantages of using a JIT system,
and then describe some of the incremental costs that would likely be associated with a move to such a system.
174. Chapter 14 argues that a comprehensive management accounting and control system would include nonfinancial as well as financial
performance indicators. Two such nonfinancial performance indicators were discussed in conjunction with organizations that adopt a
just-in-time (JIT) production philosophy: customer-response time (CRT) and process cycle efficiency (PCE). Explain each of these two
performance indicators.
175. Explain the calculation and interpretation of a sales price variance for any given period. How does this variance relate to the total
flexible-budget variance for the period?
176.
Subscript "a" = actual; subscript "s" = standard; Q = quantity of direct materials issued to production; P = price paid for unit of direct
materials.
Required: Use the above notation to develop a formula for each of the following standard cost variances: (A) Direct materials price
variance (calculated at point of production, not point of purchase).
(B) Direct materials usage variance.
177. Chapter 14 introduces you to the concept of operational control systems. Within the context of this discussion, certain limitations of
financial control systems were presented. Provide a summary of the primary limitations of short-term financial performance indicators,
such as the variances discussed in the main part of the chapter.
14 KEY
1. By convention, short-term financial control is accomplished by all the following except:
A.
B.
C.
D.
E.
4. One important short-term goal for a company is to earn the projected operating income for the period. Attainment of this goal is measured
by comparing the actual operating income to the:
A.
B.
C.
D.
E.
5. The total operating-income variance for a period reveals whether a company has achieved:
A.
B.
C.
D.
E.
6. Another name for the total operating-income variance for a period is:
A.
B.
C.
D.
E.
Flexible-budget variance.
Master (static) budget variance.
Sales-volume variance.
Production-volume variance.
Sales-mix variance.
Blocher - Chapter 14 #6
Difficulty: Easy
Learning Objective: 14-2
7. Authoritative standards (within the context of a standard cost system) are determined primarily by:
A.
B.
C.
D.
E.
Distributors.
Employees.
Customers.
Suppliers.
Managers.
Blocher - Chapter 14 #7
Difficulty: Easy
Learning Objective: 14-4
8. The arrival of new manufacturing techniques such as automation, flexible manufacturing systems, and cluster or cell manufacturing has:
A. Emphasized the importance of direct labor variances.
B. Not had an effect on the importance of direct labor variances.
C. De-emphasized the importance of direct labor variances.
10. The "flexible budget" can best be described as a budget that adjusts:
A.
B.
C.
D.
E.
11. Which of the following is different in a flexible budget compared to the master budget for a period?
A.
B.
C.
D.
12. A flexible-budget variance measures the impact on short-term operating profit of:
A.
B.
C.
D.
E.
14. Differences in expectation levels lead to two basic types of standards in a standard cost system:
A.
B.
C.
D.
E.
15. An organization planned to use $82 of material per unit of output, but it actually used $80 per unit. During this period, the company
planned to make 1,200 units, but actually produced only 1,000 units. The flexible budget amount for materials is:
A.
B.
C.
D.
$80,000.
$82,000.
$96,000.
$98,400.
A.
B.
C.
D.
E.
17. An organization subject to intense competitive pressures would most likely use:
A.
B.
C.
D.
E.
18. A materials efficiency variance can be caused by all of the following except:
A.
B.
C.
D.
E.
Peak-efficiency.
Currently attainable.
Benchmarked.
Flexible-budget.
Continuous-improvement.
Blocher - Chapter 14 #20
Difficulty: Easy
Learning Objective: 14-4
21. Using continuous-improvement standards likely has the effect(s) of all the following except:
A.
B.
C.
D.
E.
Reductions in inefficiencies.
Reduced product defects.
Constantly decreasing standard levels.
Improved productivity.
Increasing pressure on employees and managers.
Blocher - Chapter 14 #21
Difficulty: Medium
Learning Objective: 14-4
22. A total variable cost variance (such as for direct materials) can be broken down into separate variances that evaluate:
A.
B.
C.
D.
E.
23. A standard cost system should be designed to generate and report variances:
A.
B.
C.
D.
E.
24. Which of the following benefits is not typically associated with a move to a just-in-time (JIT) manufacturing system?
A.
B.
C.
D.
E.
25. The way managers and employees who are affected by a standard cost system perceive the system will:
A.
B.
C.
D.
E.
26. For control purposes, it is usually preferable to calculate the materials price variance:
A.
B.
C.
D.
E.
At point of purchase.
At point of production.
At the end of the period.
Only if the materials quantity variance is significant in amount.
Only if it is controllable by operating managers.
Blocher - Chapter 14 #26
Difficulty: Medium
Learning Objective: 14-6
27. The difference between the actual operating income of the period and master budgeted operating income for the period is the:
A.
B.
C.
D.
E.
28. The difference between the actual sales volume for a period and the flexible-budget sales volume is:
A.
B.
C.
D.
E.
29. The difference between the flexible-budget operating income and the actual operating income in a period is the:
A.
B.
C.
D.
E.
Sales-mix variance.
Sales-volume variance.
Sales price variance.
Operating income flexible-budget variance.
Total operating income variance.
Blocher - Chapter 14 #29
Difficulty: Easy
Learning Objective: 14-3
30. The difference between the total actual sales revenue of a period and the total flexible-budget sales revenue for the units sold during the
period is the:
A.
B.
C.
D.
E.
31. A standard that assumes perfect implementation and maximum efficiency is called a(n):
A.
B.
C.
D.
E. Ideal standard.
Blocher - Chapter 14 #31
Difficulty: Easy
Learning Objective: 14-4
32. A standard that sets the performance criterion at a level that workers with proper training and experience can attain most of the time
without extraordinary effort is a(n):
A.
B.
C.
D.
33. The total variable cost flexible-budget variance for any given period:
A.
B.
C.
D.
Is the difference between actual total variable cost incurred and master budgeted total variable cost.
Is decomposable into sales-volume and sales-mix components.
Is decomposable into production-volume and production-mix components.
Can be broken down into flexible-budget variances for major costs such as materials, labor, variable overhead, and variable selling
expenses.
Blocher - Chapter 14 #33
Difficulty: Easy
Learning Objective: 14-3
34. The flexible-budget variable cost variance includes all of the following except:
A.
B.
C.
D.
E.
35. Which one of the following is the difference in direct material costs between the actual amount incurred and the total standard cost in the
flexible budget for the units manufactured during the period?
A.
B.
C.
D.
E.
36. For a direct material, which one of the following is the difference between the actual and standard unit price of the direct material
multiplied by the actual quantity of the material purchased?
A.
B.
C.
D.
E.
37. Which one of the following, for each direct material used in production, is the difference between the actual units of material used and the
total standard units of the direct material that should have been used for the units of the product manufactured during the period,
multiplied by the standard unit price of the direct materials?
A.
B.
C.
D.
E.
38. Which one of the following is the difference between the actual and standard hourly wage rate multiplied by the actual direct labor hours
worked during a period?
A.
B.
C.
D.
E.
39. Which one of the following is the difference between the actual and standard direct labor hours for the units manufactured, multiplied by
the standard hourly wage rate per hour?
A.
B.
C.
D.
E.
40. The primary purpose of calculating standard cost variances each period is:
A.
B.
C.
D.
41. A firm uses a JIT inventory system and has an unfavorable selling price variance for the period just ended. If the proportion of the total
variable manufacturing costs to total sales in both the flexible budget and the actual operating results is 70%:
A.
B.
C.
D.
E.
42. The effect on sales, expenses, or operating income of changes in units sold is measured by the:
A.
B.
C.
D.
E.
Flexible-budget variance.
Sales-volume variance.
Sales price variance.
Operating income flexible-budget variance.
Production-volume variance.
Blocher - Chapter 14 #42
Difficulty: Easy
Learning Objective: 14-2
43. The difference between actual and standard cost caused by the difference between the actual number of resource-units used and the
standard number of resource-units that should have been used for the output of the period is called the:
A.
B.
C.
D.
E.
Controllable variance.
Master budget variance.
Flexible-budget variance.
Quantity (or efficiency) variance.
Price variance.
Blocher - Chapter 14 #43
Difficulty: Medium
Learning Objective: 14-4
44. Which of the following is not a plausible cause of a direct labor efficiency variance?
A.
B.
C.
D.
E.
45. The direct materials usage ratio for a given period is:
A.
B.
C.
D.
E.
49. A manufacturer planned to use $82 of materials per unit produced, but in the most recent period it actually used $80 of material per unit
produced. During this same period, the company planned to produce 1,200 units, but actually produced only 1,000 units. The flexiblebudget variance for materials is:
A.
B.
C.
D.
E.
$2,000 favorable.
Impossible to determine without additional information.
$14,000 unfavorable.
$16,400 unfavorable.
$2,400 unfavorable.
50. All of the following are limitations of short-term financial performance indicators except:
A.
B.
C.
D.
Employees and managers can take actions that improve short-term financial performance at the expense of long-term performance.
Focusing on individual cost variances can result in optimum local but not global (i.e., firm-wide) performance.
Operating personnel may not readily understand or be able to interpret financial-performance indicators.
Senior managers typically find non-financial performance indicators more useful than summary financial-performance indicators.
Blocher - Chapter 14 #50
Difficulty: Medium
Learning Objective: 14-6
51. Flexible budgets and standard costs are useful for assessing:
A.
B.
C.
D.
Operating processes.
Customer-management processes.
Innovation processes.
Social/regulatory processes.
Just-in-time (JIT) processes.
54. Which of the following is not an anticipated benefit of switching to a JIT production system?
A.
B.
C.
D.
E.
The time between when a customer places an order and the time when the order is received by the customer.
The elapsed time between initial customer contact and the time a customer places an order.
The time between when a customer places an order and when that order is manufactured.
The time between when an order is started into production and when that order is completed.
Blocher - Chapter 14 #55
Difficulty: Easy
Learning Objective: 14-6
57. Which of the following is not indicated as an advantage of using nonfinancial performance measures, relative to financial performance
measures, as part of an operational control system?
A.
B.
C.
D.
58. Which of the following statements about processing cycle efficiency (PCE) is not true:
A.
B.
C.
D.
E.
Is defined as the difference between flexible-budget fixed cost and the level of fixed costs reflected in the master (static) budget.
Is undefined, except when actual output equals budgeted output.
Is typically zero, because the volume assumed in the flexible budget and the master budget for fixed costs is identical.
Is the difference between budgeted fixed cost and actual fixed cost.
Blocher - Chapter 14 #59
Difficulty: Medium
Learning Objective: 14-3
61.
$6.12.
$6.15.
$6.50.
$6.75.
$7.13.
62. Information concerning Johnston Co.'s direct materials costs was as follows:
$307.50 unfavorable.
$307.50 favorable.
$322.50 unfavorable.
$322.50 favorable.
$532.50 favorable.
1. 1000 units to manufacture/4000 pounds of direct materials = 1 unit requires 4 pounds direct materials. 2. So, 700 units actually
manufactured would have required 2,800 pounds direct materials
3. But, actual manufacturing only used 2,750 pounds. 4. 2,800 - 2,750 = 50 pounds not needed. 5. 50 x $6.45 = $322.50 favorable
Blocher - Chapter 14 #62
Difficulty: Medium
Learning Objective: 14-3
63. Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in digital equipment, Flex 10. Information
concerning its operation in June was as follows:
$5.20.
$5.76.
$6.24.
$6.84.
$7.20.
64.
Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in digital equipment, Flex 10. Information
concerning its operation in June was as follows:
$5.20.
$5.76.
$6.24.
$6.84.
$7.20.
65. Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in digital equipment, Flex 10. Information
concerning its operation in June was as follows:
$51,840 favorable.
$56,160 favorable.
$62,208 favorable.
$64,840 favorable.
$72,000 favorable.
1. Direct materials purchase-price variance = pounds of PPS purchased x (standard cost per pound - actual cost per pound). 2. Standard cost
per pound, p: (39,000p) - [4,000(45,000/5,000)]p = $21,600; p = $7.20. 3. 43,200 x ($7.20 - $5.76) = $62,208 favorable
Blocher - Chapter 14 #65
Difficulty: Medium
Learning Objective: 14-3
66. Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in digital equipment, Flex 10. Information
concerning its operation in June was as follows:
The cost of PPS in the flexible budget for the output of the period is:
A.
B.
C.
D.
E.
$259,200.
$280,800.
$311,040.
$324,000.
$360,000.
67. Lucky Company's direct labor information for the month of February is as follows:
B.
C.
D.
E.
$12.30.
$12.60.
$13.20.
$13.50.
68. Lucky Company's direct labor information for the month of February is as follows:
$12.00.
$12.30.
$12.60.
$13.20.
$13.50.
1. Difference between actual and standard hours 61,500 - 63,000 = 1,500F. 2. Efficiency variance is caused by difference in hours x standard
DL rate per hour. $18,000 var./1,500 hours = $12.00 per hour
Blocher - Chapter 14 #68
Difficulty: Easy
Learning Objective: 14-3
69. Lucky Company's direct labor information for the month of February is as follows:
The total standard direct labor cost for the period is:
A.
B.
C.
D.
E.
$738,000.
$747,000.
$756,000.
$765,000.
$774,900.
1. Standard direct labor rate = $18,000/(63,000 standard - 61,500 actual direct labor hours) = $12.00 per hour. 2. $12.00 per hour x 63,000
standard direct labor hours = $756,000
Blocher - Chapter 14 #69
Difficulty: Medium
Learning Objective: 14-3
70. Lucky Company's direct labor information for the month of February is as follows:
$36,900 unfavorable.
$37,800 unfavorable.
$55,350 unfavorable.
$56,700 unfavorable.
$73,800 unfavorable.
1. Standard direct labor rate = $18,000/63,000 standard - 61,500 actual direct labor hours = $12.00 per hour. 2. Actual direct labor rate =
$774,900/61,500 actual direct labor hours worked = $12.60 per hour
3. Labor rate variance = ($12.60 - $12.00)/hour x 61,500 hours = $36,900 unfavorable
Blocher - Chapter 14 #70
Difficulty: Medium
Learning Objective: 14-3
71. Lucky Company's direct labor information for the month of February is as follows:
A.
B.
C.
D.
E.
$18,900 unfavorable.
$42,300 unfavorable.
$46,350 unfavorable.
$44,500 unfavorable.
$54,900 unfavorable.
1. Standard direct labor rate = $18,000/63,000 standard - 61,500 actual direct labor hours = $12.00 per hour. 2. FB for direct labor, based on
output = $12.00 per hour x 63,000 standard direct labor hours = $756,000. 3. FB variance for direct labor = Actual direct labor cost - FB
direct labor cost = $774,900 (given) - $756,000 = $18,900 unfavorable
Blocher - Chapter 14 #71
Difficulty: Medium
Learning Objective: 14-2
Learning Objective: 14-4
$13.44.
$13.65.
$13.78.
$14.00.
$14.35.
$13.44.
$13.65.
$13.78.
$14.00.
$14.35.
The total standard direct labor cost for the units manufactured in February is:
A.
B.
C.
D.
E.
$458,640.
$470,400.
$477,750.
$478,240.
$490,000.
1. Standard direct labor rate/hr. = 33,600 x (14 - r) = $11,760; r = $13.65; or ($470,400 - $11,760)/33,600. 2. $13.65 x 35,000 standard direct
labor hours (given) = $477,750
Blocher - Chapter 14 #74
Difficulty: Medium
Learning Objective: 14-3
A.
B.
C.
D.
E.
$13,440 favorable.
$13,650 favorable.
$13,776 favorable.
$14,000 favorable.
$19,110 favorable.
1. Standard direct labor rate/hr. = 33,600 x (14 - r) = $11,760; r = $13.65; or ($470,400 - $11,760)/33,600. 2. (35,000 - 33,600) hours x $13.65
per hour = $19,110 favorable
Blocher - Chapter 14 #75
Difficulty: Medium
Learning Objective: 14-3
$7,350 favorable.
$7,840 favorable.
$30,870 favorable.
$30,870 unfavorable.
$31,360 favorable.
1. Standard direct labor rate/hr. = 33,600 x (14 - r) = $11,760; r = $13.65; or ($470,400 - $11,760)/33,600. 2. (35,000 - 33,600) hours x $13.65
per hour = $19,110 favorable. 3. $19,110F - $11,760U (given) = $7,350F, or, $470,400 - (35,000 x $13.65) = 7,350F
Blocher - Chapter 14 #76
Difficulty: Medium
Learning Objective: 14-3
77. Europa Company manufactures only one product. Presented below is direct labor information for November.
18,720.
19,200.
20,800.
22,400.
22,464.
$359,424/$16 per direct labor hour = 22,464 actual direct labor hours
Blocher - Chapter 14 #77
Difficulty: Easy
Learning Objective: 14-3
78. Europa Company manufactures only one product. Presented below is direct labor information for November.
The total standard direct labor hours in November for the output produced are:
A.
B.
C.
D.
E.
18,720.
19,200.
20,800.
22,400.
22,464.
79. Europa Company manufactures only one product. Presented below is direct labor information for November.
$26,624.00 unfavorable.
$31,948.80 unfavorable.
$39,936.00 favorable.
$71,884.80 favorable.
$103,833.60 favorable.
1. $359,424/$16 per direct labor hour = 22,464 actual direct labor hours 2. Rate variance = ($19.20 - $16.00)/hour x 22,464 hours =
$71,884.80 favorable
Blocher - Chapter 14 #79
Difficulty: Medium
Learning Objective: 14-3
80. Europa Company manufactures only one product. Presented below is direct labor information for November.
$26,624.00 unfavorable.
$31,948.80 unfavorable.
$39,936.00 favorable.
$71,884.80 favorable.
$103,833.60 favorable.
1. $359,424/$16 per direct labor hour = 22,464 actual direct labor hours. 2. Standard hours allowed for output produced = 6,500 units (given)
x 3.20 hours/unit (given) = 20,800. 4. Direct labor efficiency variance = (22,464 - 20,800) x $19.20 per hour = $31,948.80 unfavorable
Blocher - Chapter 14 #80
Difficulty: Medium
Learning Objective: 14-3
81. Europa Company manufactures only one product. Presented below is direct labor information for November.
$26,624.00 unfavorable.
$31,948.80 unfavorable.
$39,936.00 favorable.
$71,884.80 favorable.
$103,833.60 favorable.
1. $359,424/$16 per direct labor hour = 22,464 actual direct labor hours.2. Standard hours allowed for output produced = 6,500 units (given) x
3.20 hours/unit (given) = 20,800. 3. DL rate variance = ($19.20 - $16.00)/hour x 22,464 hours = $71,884.80 favorable. 4. Direct labor
efficiency variance = (22,464 - 20,800) x $19.20 per hour = $31,948.80 unfavorable. 5. Direct labor FB variance = Rate variance + Efficiency
Variance = $71,884.80F - $31,948.8U = $39,936F
Blocher - Chapter 14 #81
Difficulty: Medium
Learning Objective: 14-3
82. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
$11.80.
$11.96.
$12.04.
$12.20.
E. $12.50.
1. Standard cost of materials purchased = (40,000 kilograms x $12 per kilogram) = $480,000. 2. Actual price per kilogram = ($480,000 $1,600)/40,000 kilograms = $11.96/kilogram
Blocher - Chapter 14 #82
Difficulty: Medium
Learning Objective: 14-3
83. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
$458,068.
$459,862.
$461,132.
$462,938.
$478,400.
1. Standard cost of materials purchased = (40,000 kilograms x $12 per kilogram) = $480,000. 2. Actual price per kilogram = ($480,000 $1,600)/40,000 kilograms = $11.96/kilogram. 3. No. of kilograms used = (40,000 - 1,550) kilograms = 38,450 kilograms. 4. Total cost of
materials used = 38,450 kilograms x $11.96/kg. = $459,862
Blocher - Chapter 14 #83
Difficulty: Medium
Learning Objective: 14-3
84. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
$1,800 unfavorable.
$1,800 favorable.
$59,400 unfavorable.
$59,400 favorable.
1. Actual units of production with respect to materials = 6,700 units + 960 units = 7,660 units. 2. 7,660 units x 5 kilograms/unit = 38,300
standard kg. allowed for production. 3. Actual kg used = 38,450 - standard quantity, 38,300 kg = 150kg. 4. 150kg x $12/kilogram = $1,800U
Blocher - Chapter 14 #84
Difficulty: Medium
Learning Objective: 14-3
85. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
A.
B.
C.
D.
E.
$1,590 favorable.
$5,650 favorable.
$7,790 unfavorable.
$24,410 unfavorable.
$59,410 unfavorable.
1. Standard direct labor rate = $20 per hour (given). 2. Actual direct labor rate = ($528,410/26,500 hours) = $19.94 per hour. 3. DL rate
variance = [($20.00 - $19.94) x 26,500 hours (given)] = $1,590 favorable
Blocher - Chapter 14 #85
Difficulty: Easy
Learning Objective: 14-3
86. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
$1,590 favorable.
$5,650 favorable.
$7,240 unfavorable.
$59,410 unfavorable.
1.Total equivalent units produced = 6,700 + (960 x 0.8) = 7,468 units. 2. 7,468 units x 5 standard hours/unit = 26,138 hours allowed. 3.
(26,500 - 26,138 hours) x $20/hour = $7,240 unfavorable
Blocher - Chapter 14 #86
Difficulty: Medium
Learning Objective: 14-3
87. Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single
product are as follows: Materials (5 kilograms x $12.00 per kilogram) = $60.00/unit. Direct labor (3.5 hours x $20.00 per hour) =
$70.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for
December:
$1,590 favorable.
$5,650 unfavorable.
$7,040 unfavorable.
$9,830 unfavorable.
1. Direct labor flexible-budget (FB) variance = Efficiency variance + Labor rate variance. 2. Efficiency variance = [26,500 hrs. - ((6,700 +
(960 x 0.8)) x 3.5)] x $20/hour = [26,500 - 26,138] hrs. x $20/hr. = $7,240 unfavorable. 3. Standard direct labor rate = $20 per hour (given). 4.
Actual direct labor rate = ($528,410/26,500 hours) = $19.94 per hour. 5. DL rate variance = [($20.00 - $19.94) x 26,500 hours (given)] =
$1,590 favorable. 4. $7,240U + $1,590F = $5,650U; alternatively, this variance is calculated as the difference between the actual labor costs
of the period and the flexible-budget labor costs.
Blocher - Chapter 14 #87
Difficulty: Hard
Learning Objective: 14-3
88.
Kennedy Inc. has the following data for its operation in August:
$3.35.
$3.40.
$3.72.
$3.80.
$3.85.
[(1,600 sets x $3.60/set) - $400 favorable purchase price variance]/1,600 sets purchased = $3.35
Blocher - Chapter 14 #88
Difficulty: Easy
Learning Objective: 14-3
89. Kennedy Inc. has the following data for its operation in August:
$180 unfavorable.
$360 unfavorable.
$540 favorable.
$540 unfavorable.
$720 unfavorable.
1. Actual direct materials used = 1,600 sets purchased - 100 sets increase in inventory = 1,500 sets. 2. Standard direct materials used = 700
units x 2 sets per unit = 1,400 sets. 3. Direct materials usage variance = (1,500 - 1,400) sets x $3.60/set = $360 unfavorable
Blocher - Chapter 14 #89
Difficulty: Medium
Learning Objective: 14-3
90. Matinna Co. maintains no inventories and has the following data pertaining to one of its direct materials in July:
All materials purchased during the month were issued to production. What was the direct materials purchase-price variance for July?
A.
B.
C.
D.
E.
$1,500 favorable.
$3,000 unfavorable.
$3,000 favorable.
$7,500 unfavorable.
$7,500 favorable.
1. Standard cost of units produced = 30,000 units material x $2/unit = $60,000. 2. $60,000 - $4,500F variance = $55,500 standard cost of
materials purchased. 3. Purchase-price variance = Actual cost - standard cost = $63,000 (given) - $55,500 = $7,500U
Blocher - Chapter 14 #90
Difficulty: Medium
Learning Objective: 14-3
91. Matinna Co. maintains no inventories and has the following data pertaining to one of its direct materials in July:
What was the company's direct materials flexible-budget (FB) variance for July?
A.
B.
C.
D.
E.
$1,500 favorable.
$3,000 unfavorable.
$3,000 favorable.
$7,500 unfavorable.
$7,500 favorable.
1. Actual direct materials cost = $63,000 (given). 2. Standard direct materials cost = 30,000 x $2.00 per unit = $60,000. 3. Flexible budget
variance = $63,000 - $60,000 = $3,000 unfavorable
Blocher - Chapter 14 #91
Difficulty: Easy
Learning Objective: 14-3
92. Prokp Co.'s records for April disclosed the following data relating to direct labor:
$16.00.
$18.00.
$20.00.
$24.00.
$26.67.
1. Standard direct labor cost for actual hours worked = $20,000 (given) + $4,000F rate variance = $24,000. 2. Standard direct labor rate per
hour in April = $24,000/1000 hours = $24.00/DLH
Blocher - Chapter 14 #92
Difficulty: Easy
Learning Objective: 14-3
93. Prokp Co.'s records for April disclosed the following data relating to direct labor:
Prokp's total standard direct labor hours for units produced in April were:
A.
B.
C.
D.
E.
890.
900.
1,000.
1,100.
1,110.
1. Standard direct labor cost for actual hours worked = $20,000 (given) + $4,000F rate variance = $24,000. 2. Standard direct labor cost for
allowed labor hours, based on output = $24,000 - $2,400 unfavorable efficiency variance = $21,600. 3. Standard direct labor rate per hour in
April = $24,000/1000 hours = $24.00/DLH. 4. Total standard direct labor hours = $21,600/$24 = 900
Blocher - Chapter 14 #93
Difficulty: Medium
Learning Objective: 14-3
94. Prokp Co.'s records for April disclosed the following data relating to direct labor:
Prokp's total standard direct labor cost for the output in April was:
A.
B.
C.
D.
E.
$17,600.
$21,600.
$22,400.
$24,000.
$26,400.
1. Standard direct labor cost for actual hours worked = $20,000 (given) + $4,000F rate variance = $24,000. 2. Standard direct labor cost for
allowed labor hours, based on output = $24,000 - $2,400 unfavorable efficiency variance = $21,600.
Blocher - Chapter 14 #94
Difficulty: Medium
Learning Objective: 14-3
95.
Marv Company's direct labor costs for manufacturing its only product were as follows for October:
$3,000 unfavorable.
$20,000 favorable.
$23,000 favorable.
$30,000 unfavorable.
$50,000 unfavorable.
$20/hour x ([5,000 units x 2 hours/unit] - [$207,000/$18]) = $20/hour x (10,000 - 11,500) hours = $30,000 unfavorable
Blocher - Chapter 14 #95
Difficulty: Easy
Learning Objective: 14-4
96. Marv Company's direct labor costs for manufacturing its only product were as follows for October:
$3,000 unfavorable.
$20,000 favorable.
$23,000 favorable.
$30,000 unfavorable.
$50,000 unfavorable.
1. Actual labor hours worked = $207,000/$18 = 11,500 hours. 2. Rate variance = 11,500 hours x ($20 - $18)/hour = $23,000 favorable
Blocher - Chapter 14 #96
Difficulty: Easy
Learning Objective: 14-3
97. Marv Company's direct labor costs for manufacturing its only product were as follows for October:
$7,000 unfavorable.
$9,000 favorable.
$9,000 unfavorable.
$32,000 favorable.
$54,000 unfavorable.
1. Labor efficiency variance = $20/hour x ([5,000 units x 2 hours/unit] - [$207,000/$18]) = $20/hour x (10,000 - 11,500) hours = $30,000
unfavorable. 2. Actual labor hours worked = $207,000/$18 = 11,500 hours. 3. Rate variance = 11,500 hours x ($20 - $18)/hour = $23,000
favorable
4. Total labor variance = Labor rate variance + labor efficiency variance = $23,000 favorable + $30,000 unfavorable = $7,000 unfavorable. 5.
Alternatively, total direct labor variance = actual labor cost - FB direct labor cost = $207,000 - (5,000 units x 2 hours/unit x $20/hour) =
$207,000 - $200,000 = $7,000 unfavorable
Blocher - Chapter 14 #97
Difficulty: Medium
Learning Objective: 14-3
98. Mandy Company has the following direct labor costs last month:
$43.20.
$45.60.
$48.00.
$52.20.
1. Direct labor efficiency variance = Ps(Qa - Qs) = $5,760. 2. Ps(3,480 - 3,600) = $5,760. 3. Ps = $5,760/120 hours = $48.00/hour
Blocher - Chapter 14 #98
Difficulty: Easy
Learning Objective: 14-3
99. Mandy Company has the following direct labor costs last month:
$43.20.
$45.60.
$48.00.
$52.20.
$54.00.
100. Mandy Company has the following direct labor costs last month:
$15,120 unfavorable.
$20,880 unfavorable.
$23,490 unfavorable.
$42,480 favorable.
1. Labor rate variance = Qa(Pa - Ps). 2. Labor rate variance = 3,480 hours ($54.00 - $48.00)/hour = $20,880 unfavorable
Blocher - Chapter 14 #100
Difficulty: Easy
Learning Objective: 14-3
101. Mandy Company has the following direct labor costs last month:
$15,120 unfavorable.
$20,800 unfavorable.
$36,720 favorable.
$42,480 favorable.
$79,920 favorable.
1. Direct labor efficiency variance, favorable = Ps(Qa - Qs) = $5,760. 2. Ps(3,480- 3,600) = $5,760. 3. Therefore, standard wage rate per hour,
Ps = $5,760/120 hours = $48.00/hour. 4. Actual wage rate per hour, Pa = $187,920/3,480 hours = $54.00/hour. 5. Labor rate variance = Qa(Pa
- Ps) = 3,480 hours ($54.00 - $48.00)/hour = $20,880 unfavorable. 6. Direct labor FB variance = Total direct labor variance = Rate variance +
Efficiency variance = $20,880U + $5,760F = $15,120U. 7. Alternatively, direct labor FB variance = actual direct labor cost - FB for direct
labor = $187,920 - (3,600 hours x $48.00/hour) = $187,920 - $172,800 = $15,120U
Blocher - Chapter 14 #101
Difficulty: Medium
Learning Objective: 14-3
102. A company's flexible budget for 15,000 units of production showed sales of $48,000; variable costs of $18,000; and fixed costs of
$12,000. The operating income in the master budget for 20,000 units is:
A.
B.
C.
D.
E.
$8,000.
$13,500.
$24,000.
$28,000.
$30,000.
1. Budgeted contribution margin per unit = ($48,000 - $18,000)/15,000 units = $2.00/unit. 2. Budgeted operating income @ 20,000 units =
($2.00/unit x 20,000 units) - $12,000 = $40,000 - $12,000 = $28,000
Blocher - Chapter 14 #102
Difficulty: Easy
Learning Objective: 14-3
103. A company's master budget for October is to manufacture and sell 30,000 units for a total of $270,000 with total variable costs of
$180,000 and total fixed costs of $24,000. The company actually manufactured and sold 32,000 units and generated $45,000 of operating
income in October. The flexible-budget operating income in October is:
A.
B.
C.
D.
E.
$27,000.
$70,400.
$72,000.
$83,520.
$86,400.
1. Budgeted contribution margin per unit = ($270,000 - $180,000)/30,000 units = $3.00/unit. 2. FB operating income, October = (32,000 units
x $3.00/unit) - $24,000 = $72,000
Blocher - Chapter 14 #103
Difficulty: Easy
Learning Objective: 14-3
104. A company's master budget for October is to manufacture and sell 30,000 units for a total of $270,000 with total variable costs of
$180,000 and total fixed costs of $24,000. The company actually manufactured and sold 32,000 units and generated $45,000 of operating
income in October. The operating income flexible-budget (FB) variance is:
A.
B.
C.
D.
E.
$3,600 unfavorable.
$6,000 unfavorable.
$15,400 unfavorable.
$21,000 unfavorable.
$27,000 unfavorable.
1. Total FB variance = Actual operating income - FB operating income. 2. Budgeted contribution margin per unit = ($270,000 $180,000)/30,000 units = $3.00/unit. 3. FB operating income, October = (32,000 units x $3.00/unit) - $24,000 = $72,000. 4. Actual operating
income (given) = $45,000. 5. Therefore, total operating income FB variance = $45,000 - $72,000 = $27,000U
Blocher - Chapter 14 #104
Difficulty: Medium
Learning Objective: 14-3
105. A company's master budget for October is to manufacture and sell 30,000 units for a total of $270,000 with total variable costs of
$180,000 and total fixed costs of $24,000. The company actually manufactured and sold 32,000 units and generated $45,000 of operating
income in October. The sales volume variance, in terms of operating income, for October is:
A.
B.
C.
D.
$3,600 favorable.
$6,000 favorable.
$15,400 favorable.
$21,000 favorable.
1. Master budget sales volume = 30,000 units (given). 2. Actual sales volume = 32,000 units (given). 3. Budgeted contribution margin per unit
= ($270,000 - $180,000)/30,000 units = $3.00/unit
4. Sales volume variance, expressed in terms of operating income = 2,000 units F x $3.00/unit = $6,000F
Blocher - Chapter 14 #105
Difficulty: Easy
Learning Objective: 14-3
106. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The actual amount of operating income earned in September was:
A.
B.
C.
D.
E.
$15,000.
$40,000.
$63,000.
$78,000.
$105,000.
Actual operating income = actual sales revenue - actual costs (total) = $240,000 - $225,000 = $15,000
Blocher - Chapter 14 #106
Difficulty: Easy
Learning Objective: 14-2
107. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The total amount of variable costs in the flexible budget for September was:
A.
B.
C.
D.
E.
$129,000.
$192,000.
$200,000.
$208,000.
$255,000.
1. Total variable cost flexible-budget (FB) variance = Actual total variable costs - FB variable costs. 2. Actual variable costs = ($225,000 $25,000) = $200,000. 3. Therefore, FB variable costs = $200,000 - $8,000U variance = $192,000
Blocher - Chapter 14 #107
Difficulty: Easy
Learning Objective: 14-3
108. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U); and, sales volume variance, in terms of contribution
margin, $27,000U). The amount of operating income in the flexible budget (FB) for September was:
A.
B.
C.
D.
E.
$40,000.
$48,000.
$56,000.
$70,000.
$78,000.
1. Total flexible-budget (FB) variance = actual operating income - FB operating income. 2. Actual operating income = actual sales revenue actual costs (total) = $240,000 - $225,000 = $15,000. 3. Total flexible-budget (FB) variance = $63,000U (given). 4. Therefore, FB operating
income = $15,000 + $63,000 = $78,000
Blocher - Chapter 14 #108
Difficulty: Easy
Learning Objective: 14-3
109. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U.The budgeted fixed cost is:
A.
B.
C.
D.
E.
$30,000.
$45,000.
$71,000.
$78,000.
$93,000.
1. Flexible-budget sales = $300,000 (given). 2. Total variable cost flexible-budget (FB) variance = Actual total variable costs - FB variable
costs. 3. Actual variable costs = ($225,000 - $25,000) = $200,000. 4. Therefore, FB variable costs = $200,000 - $8,000U variance = $192,000.
5. Therefore, flexible-budget contribution margin = $300,000 - $192,000 = $108,000. 6. Total flexible-budget (FB) variance = actual
operating income - FB operating income. 7. Actual operating income = actual sales revenue - actual costs (total) = $240,000 - $225,000 =
$15,000. 8. Total flexible-budget (FB) variance = $63,000 (U) (given). 9. Therefore, FB operating income = $15,000 + $63,000 = $78,000.
10. Therefore, budgeted fixed costs = FB contribution margin - FB operating profit = $108,000 - $78,000 = $30,000
Blocher - Chapter 14 #109
Difficulty: Hard
Learning Objective: 14-3
110. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The sales volume variance, in terms of operating income, is:
A.
B.
C.
D.
E.
$20,000 unfavorable.
$27,000 unfavorable.
$36,000 unfavorable.
$75,000 unfavorable.
$90,000 unfavorable.
As long as actual operating activity (here, 40,000 units) is within the relevant range, then the sales volume variance in terms of operating
income = sales volume variance in terms of contribution margin. The sales volume variance in terms of contribution margin is $27,000U
(given). Therefore, the sales volume variance in terms of operating income is also $27,000U.
Blocher - Chapter 14 #110
Difficulty: Medium
Learning Objective: 14-3
111. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The master budget operating income for September was:
A.
B.
C.
D.
E.
$78,000.
$105,000.
$108,000.
$110,000.
$135,000.
1. Master budget operating income = actual operating income - total operating-income variance
2. Actual operating income = actual sales revenue - actual costs (total) = $240,000 - $225,000 = $15,000
3. Total flexible-budget variance (given) = $63,000U 4. As long as actual operating activity (here, 40,000 units) is within the relevant range,
then the sales volume variance in terms of operating income = sales volume variance in terms of contribution margin. The sales volume
variance in terms of contribution margin is $27,000U (given). Therefore, the sales volume variance in terms of operating income is also
$27,000U. 5. Total operating-income variance = total flexible-budget variance + sales-volume variance = $63,000U + $27,000U = $90,000U.
6. Therefore, master budget operating income = $15,000 + $90,000 = $105,000
Blocher - Chapter 14 #111
Difficulty: Hard
Learning Objective: 14-3
112. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The total number of budgeted units reflected in the master budget for September was:
A.
B.
C.
D.
E.
36,000 units.
40,000 units.
45,000 units.
48,000 units.
50,000 units.
113. In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is
fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost
flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution
margin, $27,000U. The total sales revenue in the master budget for September was:
A.
B.
C.
D.
E.
$300,000.
$327,000.
$350,000.
$375,000.
$425,000.
1. Budgeted sp/unit = FB sales (given)/actual sales volume = $300,000/40,000 units = $7.50/unit. 2. Budgeted contribution margin/unit =
$108,000/40,000 units (given) = $2.70/unit. 3. Sales volume variance = Budgeted contribution margin/unit x (MB - Actual) units sold. 4.
$27,000U (given) = $2.70/unit x (X - 40,000) units. 5. $27,000/$2.70 = 10,000 units, so X = 50,000 units. 5. MB sales revenue = MB sales
volume x budgeted selling price/unit = 50,000 units x $7.50/unit = $375,000
Blocher - Chapter 14 #113
Difficulty: Hard
Learning Objective: 14-2
114. Shoemaker Perkins Company uses a standard cost system and had 400 pounds of raw material X15 on hand on September 1. The
standard cost is $10 per pound. The standard calls for 2 pounds of material X15 for each unit of the product manufactured. The company
manufactured 600 units of the product in September, and had 500 pounds of Material X-15 in stock on September 30. The actual price
for Material X-15 purchased during the month was $1 per pound below the standard cost. The material usage variance in September was
$3,000 unfavorable. What is the purchase-price variance for Material X in September?
A.
B.
C.
D.
E.
$1,100 favorable.
$1,200 favorable.
$1,300 favorable.
$1,500 favorable.
$1,600 favorable.
1. Efficiency variance = Ps x (Qa - Qs), where Qa = pounds of material issued to production; $3,000U = $10/lb. x (Qa - 1,200) lbs.; therefore,
Qa = 1,500 lbs. (used in production). 2. Pounds of material purchased = pounds used in production + increase in ending materials inventory =
1,500 lbs. + 100 lbs. = 1,600 lbs. 3. Purchase-price variance = Qa x (Pa - Ps), where Qa = actual pounds of material purchased = 1,600 lbs. x
($9.00 - $10.00)/lb. = $1,600F
Blocher - Chapter 14 #114
Difficulty: Medium
Learning Objective: 14-3
115. Sheldon Company manufactures only one product and uses a standard cost system. During the past month, the manufacturing operations
had the following variances: Direct labor rate variance = $30,000 Favorable. Direct labor efficiency variance = $50,000 Unfavorable.
Sheldon allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly rate is $50. During the month, the
company used 25 percent more direct labor hours than the standard allowed. What was the direct labor flexible-budget (FB) variance for
the month?
A.
B.
C.
D.
E.
$20,000 unfavorable.
$25,000 unfavorable.
$37,500 favorable.
$62,500 unfavorable.
$80,000 unfavorable.
Direct labor flexible-budget (FB) variance = total direct labor standard cost variance = labor rate variance + labor efficiency variance =
$30,000F + $50,000U = $20,000U.
Blocher - Chapter 14 #115
Difficulty: Easy
Learning Objective: 14-3
116. Sheldon Company manufactures only one product and uses a standard cost system. During the past month, the manufacturing operations
had the following variances: Direct labor rate variance = $30,000 Favorable; direct labor efficiency variance = $50,000 Unfavorable.
Sheldon allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly rate is $50. During the month, the
company used 25 percent more direct labor hours than the standard allowed. What were the total standard hours allowed for the units
manufactured during the month?
A.
B.
C.
D.
1,000.
2,500.
4,000.
5,000.
E. 6,000.
1. Excess hours worked, based on units produced = $50,000U variance/$50 per hour (the standard wage rate) = 1,000 hours. 2. This excess
represents 25% of standard hours allowed; therefore, standard hours allowed = 1,000 hours/0.25 = 4,000 hours.
Blocher - Chapter 14 #116
Difficulty: Medium
Learning Objective: 14-4
117. Sheldon Company manufactures only one product and uses a standard cost system. During the past month, the manufacturing operations
had the following variances: Direct labor rate variance $30,000 Favorable; direct labor efficiency variance $50,000 Unfavorable.
Sheldon allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly rate is $50. During the month, the
company used 25 percent more direct labor hours than the standard allowed. What were the total actual direct hours worked?
A.
B.
C.
D.
E.
1,000.
3,000.
4,000.
5,000.
6,000.
1. Excess hours worked, based on units produced = $50,000U variance/$50 per hour (the standard wage rate) = 1,000 hours. 2. This excess
represents 25% of standard hours allowed; therefore, standard hours allowed = 1,000 hours/0.25 = 4,000 hours. 3. Therefore, actual hours =
4,000 standard hours + excess 1,000 hours = 5,000 hours
Blocher - Chapter 14 #117
Difficulty: Medium
Learning Objective: 14-3
118. Sheldon Company manufactures only one product and uses a standard cost system. During the past month, the manufacturing operations
had the following variances: Direct labor rate variance = $30,000 Favorable; direct labor efficiency variance = $50,000 Unfavorable.
Sheldon allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly rate is $50. During the month, the
company used 25 percent more direct labor hours than the standard allowed. What was the actual hourly rate for direct labor?
A.
B.
C.
D.
E.
$30.
$36.
$44.
$50.
$56.
1. Rate variance = $30,000F (given) 2. $30,000F/5,000 actual hours = $6/hour F variance. 3. Standard rate $50/hour - $6/hour F variance =
$44.00/hour actual rate.
Blocher - Chapter 14 #118
Difficulty: Medium
Learning Objective: 14-3
119. Sheldon Company manufactures only one product and uses a standard cost system. During the past month, the manufacturing operations
had the following variances: Direct labor rate variance $30,000 Favorable. Direct labor efficiency variance 50,000 Unfavorable Sheldon
allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly rate is $50. During the month, the company
used 25 percent more direct labor hours than the standard allowed. How many units of the product were produced during the past
month?
A.
B.
C.
D.
E.
800.
1,000.
1,200.
1,500.
2,000.
1. Excess hours worked, based on units produced = $50,000U variance/$50 per hour (the standard wage rate) = 1,000 hours. This excess
represents 25% of standard hours allowed; therefore, standard hours allowed = 1,000 hours/0.25 = 4,000 hours. 2. Standard number of labor
hours per unit produced = 5 (given). 3. Therefore, actual units produced = 4,000 hours/5 hours per unit = 800 units
Blocher - Chapter 14 #119
Difficulty: Medium
Learning Objective: 14-4
120. Ventura uses a just-in-time (JIT) manufacturing system for all of its materials, components, and products. The master budget of the
company for June called for use of 11,000 square feet of materials, while the flexible budget for the actual output of the month had
10,000 square feet of materials at a standard cost of $9.60 per square foot. Company records show that the actual price paid for the
materials used in June was $9.50 per square foot, and that the direct materials purchase-price variance for the month was $1,040.
The actual total quantity of materials purchased during the month was:
A.
B.
C.
D.
E.
1. Purchase-price variance = Qa x (Pa - Ps). 2. $1,040 = Qa x ($9.50 - $9.60)/square foot. 3. Qa = $1,040/$0.10 per unit = 10,400 square feet
Blocher - Chapter 14 #120
Difficulty: Easy
Learning Objective: 14-4
121. Ventura uses a just-in-time (JIT) manufacturing system for all of its materials, components, and products. The master budget of the
company for June called for use of 11,000 square feet of materials, while the flexible budget for the actual output of the month had
10,000 square feet of materials at a standard cost of $9.60 per square foot. Company records show that the actual price paid for the
materials used in June was $9.50 per square foot, and that the direct materials purchase-price variance for the month was $1,040.
The materials usage (quantity) variance for June was:
A.
B.
C.
D.
E.
$3,800 unfavorable.
$3,840 unfavorable.
$5,700 unfavorable.
$5,760 unfavorable.
$8,560 favorable.
Materials usage variance = Ps x (Qa - Qs) = $9.60/square feet x (10,400 - 10,000) square feet = $3,840 U
Blocher - Chapter 14 #121
Difficulty: Easy
Learning Objective: 14-4
122. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
123. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
124. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$72,000.
$74,400.
$75,000.
$90,000.
$111,000.
1. Flexible-budget (FB) sales volume = actual sales volume (given) = 1,500 units
2. Sales-volume variance, in units = FB sales volume - Master budget sales volume = 1,500 units - 1,200 units = 300 units. 3. Budgeted
selling price per unit = $18,000/300 units = $60/unit. 4. Therefore, flexible-budget sales dollars = 1,500 units x $60/unit = $90,000
Blocher - Chapter 14 #124
Difficulty: Medium
Learning Objective: 14-3
125. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$12,000.
$15,000.
$16,500.
$18,000.
$33,000.
1. Budgeted variable cost/unit = $60,000/1,200 units = $50/unit. 2. FB variable cost (total) = $50/unit x 1,500 units = $75,000. 3. Flexiblebudget (FB) sales volume = actual sales volume (given) = 1,500 units. 4. Sales-volume variance, in units = FB sales volume - Master budget
sales volume = 1,500 units - 1,200 units = 300 units. 5. Budgeted selling price per unit = $18,000/300 units = $60/unit. 6. Flexible-budget
sales dollars = 1,500 units x $60/unit = $90,000. 7. Therefore, FB contribution margin = $90,000 - $75,000 = $15,000
Blocher - Chapter 14 #125
Difficulty: Medium
Learning Objective: 14-3
126. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$61,500.
$76,500.
$79,500.
$88,500.
$91,500.
1. Actual contribution margin = FB contribution margin - FB contribution margin. 2. Budgeted variable cost/unit = $60,000/1,200 units =
$50/unit. 3. FB variable cost (total) = $50/unit x 1,500 units = $75,000. 4. Flexible-budget (FB) sales volume = actual sales volume (given) =
1,500 units. 5. Sales-volume variance, in units = FB sales volume - Master budget sales volume = 1,500 units - 1,200 units = 300 units. 6.
Budgeted selling price per unit = $18,000/300 units. = $60/unit. 7. Flexible-budget sales dollars = 1,500 units x $60/unit = $90,000. 8.
Therefore, FB contribution margin = $90,000 - $75,000 = $15,000. 9. Actual contribution margin = FB contribution margin - FB contribution
margin = $15,000 - $1,500 = $13,500. 10. Actual total variable cost = Actual sales (given) - Actual contribution margin (above) = $93,000 $13,500 = $79,500
Blocher - Chapter 14 #126
Difficulty: Medium
Learning Objective: 14-3
127. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$4,500.
$6,000.
$7,500.
$9,000.
$10,000.
1. Actual contribution margin = FB contribution margin - FB contribution margin. 2. Budgeted variable cost/unit = $60,000/1,200 units =
$50/unit. 3. FB variable cost (total) = $50/unit x 1,500 units = $75,000. 4. Flexible-budget (FB) sales volume = actual sales volume (given) =
1,500 units. 5. Sales-volume variance, in units = FB sales volume - Master budget sales volume = 1,500 units - 1,200 units = 300 units. 6.
Budgeted selling price per unit = $18,000/300 units. = $60/unit. 7. Flexible-budget sales dollars = 1,500 units x $60/unit = $90,000. 8.
Therefore, FB contribution margin = $90,000 - $75,000 = $15,000. 9. Actual contribution margin = FB contribution margin - FB contribution
margin = $15,000 - $1,500 = $13,500. 10. Actual fixed costs = Actual contribution margin - actual fixed costs (given) = $13,500 - $7,500 =
$6,000
Blocher - Chapter 14 #127
Difficulty: Medium
Learning Objective: 14-3
128. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$500 favorable.
$1,500 unfavorable.
$1,500 favorable.
$2,500 unfavorable.
$3,000 favorable.
1. Master budget operating income = master budget contribution margin - master budget fixed costs = (1,200 units x [$15,000/1,500 units]) $5,000 = (1,200 units x $10/unit) - $5,000 = $7,000. 2. Total operating-income variance = actual operating income - master budget operating
income = $7,500 (given) - $7,000 = $500F
Blocher - Chapter 14 #128
Difficulty: Medium
Learning Objective: 14-3
129. Pokeman Bunch Inc., manufactures PokeMonster figures and has the following data from its operation for the year just completed.
$500 favorable.
$1,500 unfavorable.
$1,500 favorable.
$2,500 unfavorable.
$3,000 favorable.
1. Sales volume variance, in operating income = FB operating income - Master budget operating income = $10,000 - $7,000 = $3,000F. 2.
Alternatively, sales-volume variance = (actual sales volume - master budget sales volume) x budgeted contribution margin per unit = (1,500
units - 1,200 units) x ($60 - $50)/unit = $3,000F
Blocher - Chapter 14 #129
Difficulty: Medium
Learning Objective: 14-3
130. Precilla Company uses a standard costing system that allows 2 pounds of direct materials for one finished unit. During July, the company
purchased 40,000 pounds of direct materials for $210,000 and manufactured 12,000 finished units. The standard direct materials cost
allowed for the units manufactured is $120,000. The performance report shows that Pricilla has an unfavorable direct materials usage
variance of $5,000. Also, the company records any price variance for materials at time of purchase.
Precilla's standard price per pound of direct materials is:
A.
B.
C.
D.
E.
$4.00.
$5.00.
$6.00.
$10.00.
$12.00.
1. Standard direct materials cost per unit produced = $10.00. 2. Standard number of pounds of material per unit produced = 2. 3. Therefore,
standard price per pound of material = $10.00/2 = $5.00
Blocher - Chapter 14 #130
Difficulty: Easy
Learning Objective: 14-3
131. Precilla Company uses a standard costing system that allows 2 pounds of direct materials for one finished unit. During July, the company
purchased 40,000 pounds of direct materials for $210,000 and manufactured 12,000 finished units. The standard direct materials cost
allowed for the units manufactured is $120,000. The performance report shows that Pricilla has an unfavorable direct materials usage
variance of $5,000. Also, the company records any price variance for materials at time of purchase.
The number of pounds of direct materials used to produce July's output was:
A.
B.
C.
D.
E.
12,000 pounds.
20,000 pounds.
24,000 pounds.
25,000 pounds.
40,000 pounds.
1. Materials usage variance = Ps x (Qa - Qs). 2. $5,000 U = $5/lb. x (Qa - 24,000) lbs. 3. Qa = 24,000 + 1,000 = 25,000 lbs.
Blocher - Chapter 14 #131
Difficulty: Medium
Learning Objective: 14-3
132. Precilla Company uses a standard costing system that allows 2 pounds of direct materials for one finished unit. During July, the company
purchased 40,000 pounds of direct materials for $210,000 and manufactured 12,000 finished units. The standard direct materials cost
allowed for the units manufactured is $120,000. The performance report shows that Pricilla has an unfavorable direct materials usage
variance of $5,000. Also, the company records any price variance for materials at time of purchase.
The direct materials purchase-price variance in July is:
A.
B.
C.
D.
E.
$10,000 unfavorable.
$50,000 unfavorable.
$80,000 unfavorable.
$86,000 unfavorable.
$90,000 unfavorable.
1. Actual price = $210,000/40,000lbs. = $5.25/lb. 2. Standard price = $120,000/12,000 units = $10/unit. 3. $10/unit/2lbs per unit = $5
standard price/lb. 4. 40,000 lbs. x ($5.25 - $5.00)/lb. = $10,000U
Blocher - Chapter 14 #132
Difficulty: Easy
Learning Objective: 14-3
133. Ally Mfg. uses a standard cost system and its July production of 1,800 units involved actual direct labor costs of $242,000 for 5,500
hours worked. The budget for July called for production of 2,000 units with 6,000 direct labor hours at $40.00 per hour.
Ally's direct labor rate variance for July is:
A.
B.
C.
D.
E.
$2,000 unfavorable.
$4,000 unfavorable.
$20,000 favorable.
$22,000 unfavorable.
$26,000 unfavorable.
Direct labor rate variance = Qa x (Pa - Ps) = 5,500 hours (given) x ([$242,000/5,500 hours] - $40.00)/hour = 5,500 hours x ($44.00 $40.00)/hour = $22,000U
Blocher - Chapter 14 #133
Difficulty: Easy
Learning Objective: 14-3
134. Ally Mfg. uses a standard cost system and its July production of 1,800 units involved actual direct labor costs of $242,000 for 5,500
hours worked. The budget for July called for production of 2,000 units with 6,000 direct labor hours at $40.00 per hour.
Ally's direct labor efficiency variance for July is:
A.
B.
C.
D.
E.
$2,000 unfavorable.
$4,000 unfavorable.
$20,000 favorable.
$22,000 unfavorable.
$26,000 unfavorable.
Labor efficiency variance = Ps x (Qa - Qs) = $40.00/hr. (given) x (5,500 hrs. - [1,800 units x (6,000 hrs./2,000units]) = $40.00/hr. x (5,500 5,400) hours = $4,000U
Blocher - Chapter 14 #134
Difficulty: Easy
Learning Objective: 14-3
135. Roncy Manufacturing uses enhanced powder plastics (EPP) to manufacture high-pressure boards, Dura-Plastic. Information concerning
its operation in June was as follows:
$6.22.
$6.30.
$6.65.
$6.84.
Greater than $7.00.
Standard cost per oz. of material = Standard cost for materials issued to production (given)/actual oz. of materials issued to production =
$478,800/72,000 oz. = $6.65
Blocher - Chapter 14 #135
Difficulty: Easy
Learning Objective: 14-3
136.
Roncy Manufacturing uses enhanced powder plastics (EPP) to manufacture high-pressure boards, Dura-Plastic. Information concerning
its operation in June was as follows:
$13,300 unfavorable.
$26,600 unfavorable.
$29,925 unfavorable.
$34,020 unfavorable.
1. Materials usage variance = Ps x (Qa - Qs) = $6.65/oz. x (72,000 - Qs) oz. 2. Qs = standard quantity of material/unit of output x # of units of
output this period = 7.5 oz. per unit x 9,000 units = 67,500 oz. 3. Therefore, usage variance = $6.65/oz. x (72,000 - 67,500) oz. = $29,925U
Blocher - Chapter 14 #136
Difficulty: Medium
Learning Objective: 14-4
137. Roncy Manufacturing uses enhanced powder plastics (EPP) to manufacture high-pressure boards, Dura-Plastic. Information concerning
its operation in June was as follows:
$63,700 unfavorable.
$65,520 unfavorable.
$69,160 unfavorable.
$95,760 unfavorable.
138. Luanna Inc. manufactures game consoles. Some of the company's data was misplaced. Use the following information to replace the lost
data.
$102,080.
$103,440.
$105,600.
$108,000.
Flexible-budget (FB) sales revenue = actual sales revenue + unfavorable FB selling price variance = $103,840 + $1,760 = $105,600
Blocher - Chapter 14 #138
Difficulty: Easy
Learning Objective: 14-3
139.
Luanna Inc. manufactures game consoles. Some of the company's data was misplaced. Use the following information to replace the lost
data.
$100,300.
$102,000.
$103,440.
$105,600.
1. Budgeted selling price per unit = $105,600/1,760 units = $60.00/unit. 2. Master budget sales revenue = 1,700 units x $60.00/unit =
$102,000
Blocher - Chapter 14 #139
Difficulty: Medium
Learning Objective: 14-3
140. Luanna Inc. manufactures game consoles. Some of the company's data was misplaced. Use the following information to replace the lost
data.
$38,790.
$59,490.
$65,050.
$83,140.
1. Sales revenue - total variable costs - total fixed costs = operating profit. 2. Total variable costs = sales revenue - total fixed costs - operating
profit = $103,840 - $20,700 - $44,350 = $38,790
Blocher - Chapter 14 #140
Difficulty: Easy
Learning Objective: 14-3
141. Luanna Inc. manufactures game consoles. Some of the company's data was misplaced. Use the following information to replace the lost
data.
$26,920.
$33,720.
$35,620.
$42,450.
1. Master budget sales - master budget variable costs - master budget fixed costs = master budget operating income = $102,000 - $47,600 - X
= $25,000; therefore, budgeted fixed costs = $29,400. 2. Fixed costs in the flexible budget (FB) = Fixed costs in the master budget (MB) =
$29,400. 3. Budgeted variable cost/unit = MB variable costs/MB sales volume = $47,600/1,700 units = $28.00. 4. Variable costs in the FB =
actual sales volume x budgeted variable cost per unit = 1,760 units x $28.00/unit = $49,280. 5. FB operating income = FB sales - FB variable
costs - FB fixed costs = $105,600 - $49,280 - $29,400 = $26,920
Blocher - Chapter 14 #141
Difficulty: Hard
Learning Objective: 14-3
142. Joe Malay received the following report on the Division's operation for the month of August: Direct labor rate variance = $25,000
unfavorable. Direct labor efficiency variance = $70,000 (?) The standard calls for 3 direct labor hours per unit of output at $28 per labor
hour. The standard direct labor hours for the units manufactured is 20 percent more than the total direct labor hours actually worked in
August. What were the total standard hours allowed for the units manufactured in August?
A.
B.
C.
D.
E.
10,000.
12,000.
12,500.
15,000.
15,625.
1. Labor efficiency variance in hours = $70,000/$28.00/hr. = 2,500 hours. 2. 2,500 hours = 20% of actual hours. 3. Actual hours = 2,500/0.2 =
12,500 hours. 4. Therefore, standard hours allowed for units manufactured = 12,500 x 1.20 = 15,000 hours
Blocher - Chapter 14 #142
Difficulty: Medium
Learning Objective: 14-3
143. Joe Malay received the following report on the Division's operation for the month of August:
Direct labor rate variance = $25,000 unfavorable. Direct labor efficiency variance = $70,000 (?) The standard calls for 3 direct labor
hours per unit of output at $28 per labor hour. The standard direct labor hours for the units manufactured is 20 percent more than the
total direct labor hours actually worked in August. What was the average direct labor hourly rate the Division paid in August?
A.
B.
C.
D.
E.
$24.00.
$26.00.
$28.00.
$30.00.
$31.25.
1. Labor efficiency variance in hours = $70,000/$28.00/hr. = 2,500 hours. 2. 2,500 hours = 20% of actual hours. 3. Actual hours = 2,500/0.2 =
12,500 hours. 4. $25,000U/12,500 hours = $2/hour U. 5. Therefore, Pa = $28.00 + $2.00 = $30.00
Blocher - Chapter 14 #143
Difficulty: Medium
Learning Objective: 14-4
144. Joe Malay received the following report on the Division's operation for the month of August:
Direct labor rate variance = $25,000 unfavorable. Direct labor efficiency variance = $70,000 (?) The standard calls for 3 direct labor
hours per unit of output at $28 per labor hour. The standard direct labor hours for the units manufactured is 20 percent more than the
total direct labor hours actually worked in August. How many units of the product were produced in August?
A.
B.
C.
D.
E.
4,000.
4,250.
4,500.
4,750.
5,000.
1. Labor efficiency variance in hours = $70,000/$28.00/hr. = 2,500 hours. 2. 2,500 hours = 20% of actual hours. 3. Actual hours = 2,500/.2 =
12,500 hours. 4. Therefore, Qs = 12,500 x 1.20 = 15,000 hours. 5. Standard number of labor hours per unit produced = 3 (given). 6. Therefore,
number of units produced in August = 15,000 hours/3 hours per unit = 5,000
Blocher - Chapter 14 #144
Difficulty: Medium
Learning Objective: 14-3
145. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: Materials: (4 kilograms x $10.00 per
kilogram) $40.00/unit. Labor: (4 hours x $18.00 per hour) $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
The actual direct materials purchase price per kilogram in July was:
A.
B.
C.
D.
E.
$8.80.
$9.90.
$10.00.
$10.10.
$11.80.
1. Materials purchase-price variance = Qa x (Pa - Ps). 2. $3,000U = 30,000 kg. x (Pa - $10/kg.)
3. $303,000 = 30,000 x Pa. 4. Pa = $303,000/30,000kg. = $10.10/kg.
Blocher - Chapter 14 #145
Difficulty: Medium
Learning Objective: 14-3
146. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: Materials: 4 kilograms/unit x $10.00 per
kilogram = $40.00/unit; labor: 4 hours/unit x $18.00 per hour = $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
The actual total cost of direct materials used in production during July was:
A.
B.
C.
D.
E.
$282,150.
$287,850.
$297,000.
$300,000.
$303,000.
1. Materials purchase-price variance = Qa x (Pa - Ps). 2. $3,000U = 30,000 kg. x (Pa - $10/kg.). 3. $303,000 = 30,000 x Pa. 4. Pa =
$303,000/30,000kg. = $10.10/kg. 5. Actual cost of materials issued to production = # kg. of material issued to production x actual cost per kg.
= (30,000 units purchased - 1,500 kg. increase in ending inventory of materials) x $10.10/kg. = 28,500 kg. x $1.10/kg. = $287,850
Blocher - Chapter 14 #146
Difficulty: Medium
Learning Objective: 14-4
147. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: materials: 4 kilograms/unit x $10.00 per
kilogram = $40.00/unit; labor: 4 hours/unit x $18.00 per hour = $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
$3,000 favorable.
$43,000 favorable.
$12,000 unfavorable.
$15,000 unfavorable.
1. Direct materials usage variance = Ps x (Qs - Qa). 2. Qs = [7,200 units + 1,000 units] x 4 kg. per unit = 32,800 kg. 3. Qa = Purchases increase in ending inventory of materials = 30,000 - 1,500 = 28,500 kg. 4. Therefore, Ps = $10/kg. x (32,800 - 28,500) kg. = $43,000F
Blocher - Chapter 14 #147
Difficulty: Medium
Learning Objective: 14-3
148. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: Materials: 4 kilograms/unit x $10.00 per
kilogram = $40.00/unit; labor: 4 hours/unit x $18.00 per hour = $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
$6,600 favorable.
$16,600 favorable.
$21,000 unfavorable.
$57,600 unfavorable.
$58,200 unfavorable.
Direct labor rate variance = Qa x (Pa - Ps) = 28,000 hours x ([$525,000/28,500 hours] - $18/hr.) = 28,000 hours x ($18.75 - $18.00)/hour =
$21,000U
Blocher - Chapter 14 #148
Difficulty: Easy
Learning Objective: 14-3
149.
Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: Materials: 4 kilograms/unit x $10.00 per
kilogram = $40.00/unit; labor: (4 hours x $18.00 per hour) $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
$6,600 favorable.
$7,200 unfavorable.
$8,000 unfavorable.
$14,400 favorable.
$79,200 favorable.
1. Labor efficiency variance = Ps x (Qs - Qa). 2. Qs = [7,200 + (0.90 x 1,000)] x 4 hours per unit = 8,100 units x 4 hours/unit = 32,400 hours.
3. Labor efficiency variance = $18/hour x (32,400 - 28,000) hours = $79,200F
Blocher - Chapter 14 #149
Difficulty: Medium
Learning Objective: 14-4
150. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows: Materials: 4 kilograms/unit x $10.00 per
kilogram) $40.00/unit; labor: 4 hours/unit x $18.00 per hour = $72.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for July:
$6,600 unfavorable.
$7,200 unfavorable.
$51,000 favorable.
$58,200 favorable.
$65,400 favorable.
1. Direct labor flexible-budget variance = total direct labor variance = direct labor rate variance + direct labor efficiency variance = $21,000U
+ $79,200F = $58,200 F. 2. Alternatively, direct labor FB variance = actual direct labor cost - FB for direct labor = $525,000 - (32,400 hours
x $18/hour) = $525,000 - $583,200 = $58,200 F. 3. Labor efficiency variance = Ps x (Qs - Qa). 4. Qs = [7,200 + (0.90 x 1,000)] x 4 hours per
unit = 8,100 units x 4 hours/unit = 32,400 hours (see 2 above)
Blocher - Chapter 14 #150
Difficulty: Medium
Learning Objective: 14-3
151. Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The perunit standard costs for direct materials and direct labor for its single product are as follows:
All materials are issued at the beginning of processing. The operating data shown below were taken from the records for July:
The sales volume variance, measured in terms of direct labor cost, for July was:
A. $6,600 favorable.
B.
C.
D.
E.
$7,200 favorable.
$51,000 unfavorable.
$57,600 unfavorable.
$72,000 unfavorable.
The sales volume variance for any income statement item = flexible-budget (FB) direct labor cost - master budget (MB) direct labor cost =
standard direct labor cost per unit x (actual output - master budget output) = $72.00/unit (given) x ([7,200 + (1,000 x 0.90)] - 8,000) units =
$72.00/unit x (8,100 - 8,000) units = $7,200F
Blocher - Chapter 14 #151
Difficulty: Medium
Learning Objective: 14-3
152. Landlubber Company has established a standard direct material cost of 1.5 gallons @ $2 per gallon for one unit of its product. During the
past month, actual production of this product was 6,500 units. The direct materials usage (efficiency) variance was $700 (favorable) and
the materials price variance (calculated at point of production) was $470 (unfavorable). The entry to charge Work in Process Inventory
for the standard material costs during the month and to record the direct material variances in the accounts would include all the
following except:
A.
B.
C.
D.
E.
1. Standard direct materials cost for output of the period = 6,500 units x 1.5 gal./unit x $2/gal. = $19,500. 2. The credit to the direct materials
inventory account is at standard cost of the actual gallons used in production. Therefore, the $19,270 actual cost is the credit to accounts
payable and not a debit to inventory.
Blocher - Chapter 14 #152
Difficulty: Medium
Learning Objective: 14-5
153. What four variances may be included as a component of the total variable cost flexible-budget variance for a given period?
Please see Feedback for answers.
Feedback: The total variable cost flexible-budget (FB) variance includes the following component variances: (1) Direct materials variances,
(2) Direct labor variances, (3) Variable overhead variances, and (4) Variable selling and administrative expenses variances.
Blocher - Chapter 14 #153
Difficulty: Easy
Learning Objective: 14-3
154. What is a direct materials usage ratio? For what purpose is this ratio used?
Please see Feedback for answers.
Feedback: The materials usage ratio for a period is defined as the ratio of the quantity of materials used over the quantity of materials
purchased. This ratio is used to judge the performance of the purchasing department, particularly in situations where the goal is to minimize
inventory holdings. Also, one can view the materials usage ratio as a complement of the direct materials purchase-price variance. Together,
these two performance metrics give a fuller (and therefore more accurate) picture of the operating performance of the purchasing department
because it signals the need to balance savings in purchase price against increased costs associated with larger inventory holdings.
Blocher - Chapter 14 #154
Difficulty: Easy
Learning Objective: 14-3
155. What is a direct labor efficiency variance, and what are some of the likely causes of this variance?
Please see Feedback for answers.
Feedback: The direct labor efficiency variance is the difference in total standard cost for the direct labor hours used in production and the total
standard direct labor hours for the units manufactured during the period. Typical causes of this variance include the following: (a) Employees
not following standard operating procedures (b) Poor scheduling procedures (c) Inadequate supervision (d) Machinery and equipment not kept
in proper working condition (e) Use of nonstandard materials (f) Batch sizes different than standard (g) Employee's skill levels differ from
those envisioned in the standard (h) Inadequate training of employees or supervisors (i) The labor standard is out of date/antiquated
Blocher - Chapter 14 #155
Difficulty: Medium
Learning Objective: 14-3
156. Rachael Hair Products shows the following budgeted and actual data for the first quarter of the current fiscal year:
Required: (a) What type of financial control system might the company use to determine whether the company met its short-term
financial objectives?
(b) For the first quarter of the year, what was the total master (static) budget variance?
(c) In general, into what two component variances can the master (static) budget variance be decomposed? What is the meaning of each
of these two variances?
(d) Comment specifically on the financial performance of this company during the 1st quarter.
(e) What are the primary limitations of traditional financial-control models?
157. Ann Jacobson's supervisor has asked her to list any concerns she might have about the proposed development of standards to measure
performance and to reward superior performance in her department. Ann's department handles customer calls, directing customer
questions and complaints to the appropriate persons within the firm. The company has never before used any performance measure nor
paid any performance-related bonuses. It hopes to install a simple but effective system to achieve its twin goals of cost control and
performance measurement. Develop the list for Ann based on the information above.
Please see Feedback for answers.
Feedback: (Note: The format of students answer could vary significantly, but core ideas in brackets should be present.) (1) (Information
needs) Will we be told about the system in advance? Who will tell us? When will they tell us? (2) (Participation) Do we get to help make up
the standards? Will we get help doing that? Is the company serious about getting our input? (3) (Standards) What should be the minimum
level of performance? How do we measure our work? Can quality be measured, as well as quantity? (4) (Rewards and Punishment) How
much can we earn with good performance? What happens if we don't meet the minimum standard?
Blocher - Chapter 14 #157
Difficulty: Easy
Learning Objective: 14-3
158. Within the context of the material covered in Chapter 14, define the term "sales-volume variance." List some common causes of the
sales-volume variance.
Please see Feedback for answers.
Feedback: The sales volume variance reflects the effect on operating income of actual sales volume differing from planned sales volume (as
reflected in the master budget). For any income statement item, the sales volume variance can be defined as the difference between the
amount reflected in the flexible budget (FB) and the corresponding amount in the master budget. As such, this variance holds constant: selling
price per unit, variable cost per unit, and total fixed costs. Some common causes of the sales-volume variance are: 1. Ineffective marketing
and promotion campaigns. 2. Inappropriate selling price (either too high or too low). 3. Inaccurate sales forecast (i.e., inappropriate budgeted
sales figure). 4. Loss of market share to competitors. 5. Change in the market for the product in question. That is, total demand for the product
increased or decreased more than anticipated. 6. Failure by the firm to achieve planned improvements in quality and/or timeliness of delivery
(CRT, etc.).
Blocher - Chapter 14 #158
Difficulty: Medium
Learning Objective: 14-3
159. Discuss some major differences between static and flexible budgets.
160. Klash Company adopted a standard cost system several years ago. The company uses standard costs for all of its inventories. The
standard costs for direct materials and labor for its single product are as follows: Materials (12 kilograms/unit x $7.00 per kilogram) =
$84.00/unit; direct labor (8 hours/unit x $12.00 per hour) = $96.00/unit. All materials are issued at the beginning of processing. The
operating data shown below were taken from the records for December:
Note: number of kilograms issued to production during the period = number of kilograms purchased.
Required: (A) Calculate the standard cost of the actual kilograms of material purchased.
(B) Calculate the total standard kilograms for the production of the period (that is, for "equivalent units produced with respect to direct
materials")
(C) Calculate the total standard cost of materials for the production of the period.
(D) Calculate the actual price per kilogram of material of material purchased this period.
(E) Calculate the direct labor rate variance.
Please see Feedback for answers.
Feedback: Notethis problem requires knowledge of process costing, in particular, the notion of "equivalent units of production."
161.
Miller has the following information pertaining to its usage of direct labor in a recent period:
Feedback:
162. Sarheen, Inc. maintains no inventories and has collected the following data on one of its products for the most recent period:
Required: Determine:
(A) The direct material usage (quantity) variance.
(B) The actual cost of the direct materials purchased and used during the period. (Hint: these two amounts are identical.)
(C) The direct material price variance.
(D) The correct summary journal entry to record direct material costs for this period's production, including associated standard cost
variances. (Note: assume that any price variances are recorded at point of production.)
Please see Feedback for answers.
Feedback:
163. McElroy Company has prepared the following master budget for 2010. Although McElroy has the capacity to manufacture 50,000 units,
management expected the likely demand for its product to be 40,000 units in 2010; as such, it prepared the master budget to manufacture
and sell 40,000 units. In early January 2011, the company was pleasantly surprised to find out that it manufactured and sold 45,000 units
in 2010.
Required: Prepare the flexible budget (FB) for the actual operating level achieved in 2010.
Please see Feedback for answers.
Feedback:
164. Balt Company maintains a standard cost system; as such, all inventories, including materials, are carried on the books at standard cost.
Last period, Balt used 5,000 pounds of Material H to produce 800 units of Product C8. The company has established a standard of 7
pounds of Material H per unit of C8, at a price of $7.50 per pound of material. During the period the inventory for Material H decreased
by 2,000 pounds. The company spent $25,000 during the period to purchase material H.
Required: (1) Calculate the direct materials purchase-price variance for the period. (2) Calculate the direct materials usage variance for
the period. (3) Provide the correct summary journal entry to record the purchase, on credit, of materials during the period.(4) Provide the
correct summary journal to record direct materials cost for materials issued to production during the period.
Please see Feedback for answers.
Feedback: (1) Direct materials purchase-price variance:
165. Falcon Company uses a standard cost system; as such, all inventories are carried on the books at standard cost. During the most recent
period the company manufactured 12,000 units. The standard cost sheet indicates that the standard direct labor cost per unit is $1.50. The
performance report for the period includes an unfavorable direct labor rate variance of $1,000 and a favorable direct labor efficiency
variance of $275.
Required: What was the total actual cost of direct labor incurred during the period?
Please see Feedback for answers.
Feedback:
166. Balmer Corporation's master budget for the year is presented below:
During the period, the company actually manufactured and sold 42,000 units.
Required:
(1) Prepare a flexible budget (FB) for the actual output level achieved during the period.
(2) What is the definition of a FB? For what managerial purpose is a FB useful? Be specific about the types of information (and
variances) that management can generate, at the end of an accounting period, given a flexible budget and its master (static) budget.
Please see Feedback for answers.
Feedback: (1) Flexible budget (FB) based on actual output level achieved (42,000 units):
(2) A flexible budget (FB) contains budgeted costs and revenues for the actual output level achieved. That is, the original master budget for
the period is "flexed" to the actual sales volume achieved during the period. For control purposes, flexible budgets can be used at the end of a
period to break down and therefore explain the total master (static) budget variance for the period. This total variance is also referred to as the
total operating-income variance. The existence of a FB allows us to decompose the total operating-income variance into a total flexiblebudget variance and a sales-volume variance. The former variance is a function of a total variable cost FB variance, a selling price variance,
and a total fixed cost (spending) variance. Variable cost FB budget variances, such as those for labor and materials, can further be broken
down into price (P) and efficiency (Q) components. In short, the FB variance relates to selling price effects and spending effects for variable
and for fixed cost elements, while the sales volume variance estimates the impact on profit of letting sales volume vary from the original
budget while holding other factors constant. None of the insight provided by these component variances would be possible in the absence of
the FB results.
Blocher - Chapter 14 #166
Difficulty: Medium
Learning Objective: 14-3
167. Patterson, Inc. wishes to evaluate, in summary fashion, its financial performance for the most recent period. The budget and the actual
operating results for this period are presented below.
Required: (A) What was the actual operating income for the period?
(B) What is the firm's master budget operating income?
(C) What was the flexible-budget operating income for the period?
(D) What is the total operating-income variance of the period?
(E) What was the sales-volume variance, in terms of operating income, for the period?
(F) What are the key elements of the traditional financial control model?
(G) What are the primary limitations of the traditional financial control model?
Please see Feedback for answers.
Feedback:
(A) Actual operating income = $88,000 (B) Master budget operating income = $200,000 (C) Flexible-budget operating income = $120,000
(D) Operating income variance = $112,000 U = $88,000 - $200,000 (E) Sales volume variance, in terms of operating income = $120,000 $200,000 = $80,000U (F) The key elements of the traditional financial-control model are flexible budgets and standard costs. Together, these
two items allow us to decompose the total operating-income variance for a period into its constituent parts. As seen above, the total operatingincome variance for a period can be broken down into a total flexible-budget (FB) variance and a sales-volume variance. The former can then
be broken down into selling price, variable cost, and fixed cost variances, with each variable cost variance capable of being broken down into
its price and quantity components.
(G) The following are among the limitations of short-term financial-performance indicators (and by extension short-term financial-control
systems):
1. The construction, application, and use of a standard cost system, such as described in Chapter 14, may be quite expensive. (In addition, the
benefits of such systems are being called into question today.)
2. Financial-performance indicators tell us "what happened," but are not necessarily good for predicting future performance. In other words,
such indicators are backward, not forward, looking. Nonfinancial performance indicators, by contrast, can be leading indicators of future
financial performance.
3. Operating personnel may have difficulty understanding financial-performance metrics, including the variances discussed in Chapter 14.
That is, these individuals may not find such information useful for improving operating performance.
4. Financial-performance indicators fail to focus on improving basic business processes, which one can argue should be the goal of a
comprehensive control system. Basic business processes include the following: operating processes; customer-management processes;
innovation processes; and, social-legal-environmental processes.
5. Focusing too much on individual variances may result in local, but not global, optimization in terms of performance. For example,
achieving significant cost savings on direct materials may lead to unfavorable cost variances "down stream." The net result could very well be
less-than-optimum total performance.
6. When short-term performance indicators are used, including short-term financial performance indicators, managers and employees are
encouraged to take actions that increase short-term performance, regardless of the impact on long-term or strategic performance. In brief,
short term financial performance indicators can lead to behavior that is not goal-congruent.
Blocher - Chapter 14 #167
Difficulty: Hard
Learning Objective: 14-3
Learning Objective: 14-6
168. Contemporary furniture manufactures office desks. The firm budgeted to sell 5,000 desks at $200 per desk in 2010. Budgeted costs
include $80 variable cost per desk, and $200,000 fixed cost/year. In 2010 the company sold 6,000 desks at $190, and incurred $78
variable cost per desk and $220,000 fixed cost for the year.
Required: Prepare, in proper form, a variance analysis report identifying both flexible budget and sales-volume variances.
Please see Feedback for answers.
Feedback:
169.
Feedback:
170. James has the following information pertaining to its usage of direct labor in a recent period:
Required: (A) Calculate the labor efficiency variance for the period.
(B) Calculate the labor rate variance for the period.
(C) Prepare, in proper form, the journal entry to record wage expense for the period, including any associated standard cost variances.
Please see Feedback for answers.
Feedback:
171. Appliance, Inc. manufactured 10,000 units. The standard cost sheet indicates that the standard direct labor cost per unit is $3.00. The
performance report for the period includes a favorable direct labor rate variance of $2,000, and a favorable direct labor efficiency
variance of $500.
Required: What was the total actual cost of direct labor incurred during the period?
Please see Feedback for answers.
Feedback:
172. The Chen Company uses a standard cost system. As such, all of its inventories are carried on the books at standard, not actual, cost.
During the most recent accounting period, the company had the following summary transactions:
(A) Purchased, on credit, direct materials; the standard cost of these materials was $30,000, while the actual cost was $32,000.
(B) Issued to production direct materials. The standard cost of materials that should have been used for this period's output was $35,000,
while the standard cost of materials actually used in production during the period was $33,000.
(C) Actual direct labor cost, which has been incurred but not yet paid, for the period was $75,000. The standard direct labor cost for this
period's output was $80,000. The direct labor efficiency variance for the period was $10,000(F).
(D) For the units completed during the period, the standard direct labor cost was $78,000, while the standard direct materials cost was
$34,000.
(E) For the units sold during the period, the standard materials cost was $30,000, while the standard direct labor cost was $76,000
Required: Given the above information, provide the correct journal entries for the following:
(A) Purchase of direct materials
(B) Issuance of materials to production.
(C) Direct labor cost for the period.
(D) The labor and materials cost associated with finished production this period.
(E) The labor and materials cost associated with items sold during the period.
Please see Feedback for answers.
Feedback:
173. Define what is meant by the term "just in time production" (JIT). As indicated in your text, management accountants can supply relevant
information to management as it considers a move to JIT. In this regard, describe some of the principal advantages of using a JIT system,
and then describe some of the incremental costs that would likely be associated with a move to such a system.
Please see Feedback for answers.
Feedback: 1. Definition: JIT can be viewed as a particular operating strategy. We can define a JIT process as one in which production at any
stage of the process does not occur until an order is received from a customereither internal or external. In this sense, the system is
described as demand-pull, rather than push. Two characteristics of JIT systems can be observed: (a) the relentless pursuit of quality by all
elements of the value chain, which leads to (b) significant reductions in the amount of inventories held.
2. Principal benefits of adopting a JIT system include the following: (a) decreased production costs, because of increased quality (e.g., cost of
rework and internal failure costs are decreased as quality increases), (b) reduction in out-of-pocket costs for carrying inventory (e.g.,
reductions in clerical and recordkeeping costs, as well as reductions in information-processing costs), (c) reduction in opportunity costs
associated with holding inventory, (d) increases in sales volume and market share attributable to increases in product/service quality, (e)
increases in sales volume and market share attributable to reductions in cycle/processing times (alternatively, increased profitability because
of faster customer-response time (CRT)).
3. Principal costs associated with a move to a JIT system: (a) educational and training costs for employees, both initial and on-going, (b)
changes in the management accounting and control system (to monitor appropriate activities related to the success of a JIT system), and (c)
cost of redesigning or reconfiguring the production layout (e.g., conversion to cellular manufacturing or flexible manufacturing systems)
Blocher - Chapter 14 #173
Difficulty: Medium
Learning Objective: 14-6
174. Chapter 14 argues that a comprehensive management accounting and control system would include nonfinancial as well as financial
performance indicators. Two such nonfinancial performance indicators were discussed in conjunction with organizations that adopt a
just-in-time (JIT) production philosophy: customer-response time (CRT) and process cycle efficiency (PCE). Explain each of these two
performance indicators.
Please see Feedback for answers.
Feedback: As indicated in the text, both CRT and PCE are measures that the accountant can develop and monitor in conjunction with a move
to JIT. Both of these measures focus on time-based performance, presumably a critical success factor for those organizations embracing JIT.
Customer Response Time (CRT)
Total CRT can be defined as the lapse of time (e.g., in days) between when a customer receives and order and when the customer placed that
order. Insights into better managing CRT are possible once we break the measure down into its components. For example: CRT = Receipt
Time + Manufacturing Lead Time + Delivery Time. Receipt time is the time-lapse between when a customer places an order and when that
order is received by the manufacturing department. Manufacturing lead time (also called manufacturing cycle time, or production cycle time)
is defined as the amount of time between when manufacturing receives an order and when that order is completed. Note that manufacturing
lead time can be further broken down into the following two components: (1) Waiting time, that is, the lapse of time between when an order is
received by the manufacturing department and when that order is set up to run, and (2) Manufacturing time, which is the difference in time
between when the customer's order is set up and when that order is completed. Delivery time is then defined as the amount of time between
the time a job is finished and the time that the order is received by the customer.
Processing Cycle Efficiency (PCE)
PCE is an alternative (and complementary) measure of process efficiency. This performance metric captures the relationship between actual
processing time and total production time. In formula form, we can write: PCE = Processing time/Total manufacturing time. PCE =
Processing time/(Processing time + Moving time + Storage time + Inspection time). PCE = Value-added-time/(Value-added time + Nonvalue-added time). Note that the higher the PCE, the greater the efficiency (up to the maximum value of 1.0).
Blocher - Chapter 14 #174
Difficulty: Medium
Learning Objective: 14-6
175. Explain the calculation and interpretation of a sales price variance for any given period. How does this variance relate to the total
flexible-budget variance for the period?
Please see Feedback for answers.
Feedback: The sales price variance is essentially calculated by holding quantity constant and letting the selling price vary. The resulting
amount, for a given product, represents the impact on operating income of selling the product at an amount different from that envisioned
when the master (static) budget was developed. The selling price variance is therefore = actual volume of sales x (budgeted selling price per
unit - actual selling price per unit). The selling price variance is one component of the total flexible budget variance for a given period. Other
components include the total variable cost flexible budget variance, the total fixed cost variance. Together, this set of three variances explains
the total flexible-budget variance for the period, that is, the difference between actual operating income and the flexible-budget operating
income.
Blocher - Chapter 14 #175
Difficulty: Easy
Learning Objective: 14-3
176. Subscript "a" = actual; subscript "s" = standard; Q = quantity of direct materials issued to production; P = price paid for unit of direct
materials.
Required: Use the above notation to develop a formula for each of the following standard cost variances: (A) Direct materials price
variance (calculated at point of production, not point of purchase).
(B) Direct materials usage variance.
(C) Flexible-budget (FB) variance for direct materials.
(D) Joint price-quantity variance for direct materials.
Please see Feedback for answers.
Feedback: (A) Materials price variance = Qa x (Pa - Ps)
(B) Materials usage variance = Ps x (Qa - Qs)
(C) FB variance for direct materials = total direct materials variance for the period = materials price variance + materials quantity variance =
[Qa x (Pa - Ps)] + [Ps x (Qa - Qs)] = (Qa x Pa) - (Qa x Ps) + (Ps x Qa) - (Ps x Qs) = (Qa x Pa) - (Ps x Qs) = Actual materials cost - FB (i.e.,
standard) materials cost
(D) Joint price/efficiency variance for direct materials = (difference between actual and standard price per unit) x (difference between actual
quantity used and the standard quantity allowed for this period's output) = (Pa - Ps) + (Qa - Qs)
Blocher - Chapter 14 #176
Difficulty: Hard
Learning Objective: 14-3
177. Chapter 14 introduces you to the concept of operational control systems. Within the context of this discussion, certain limitations of
financial control systems were presented. Provide a summary of the primary limitations of short-term financial performance indicators,
such as the variances discussed in the main part of the chapter.
Please see Feedback for answers.
Feedback: As indicated in the text, the traditional model of (short-term) financial control relied on the use of flexible budgets, standard costs,
and variances similar to the ones presented in the early part of Chapter 14. As such, the focus of financial control was on short-term financial
results. A comprehensive management accounting and control system will likely have both financial (both short-term and long-term)
performance indicators as well as nonfinancial performance indicators. The latter are important for a number of reasons, including the
following:
(1) The construction, application, and use of a standard cost system, such as described in Chapter 14, may be quite expensive. (In addition, the
benefits of such systems are being called into question today.)
(2) Financial-performance indicators tell us "what happened," but are not necessarily good for predicting future performance. In other words,
such indicators are backward, not forward, looking. Nonfinancial performance indicators, by contrast, can be leading indicators of future
financial performance.
(3) Operating personnel may have difficulty understanding financial-performance metrics, including the variances discussed in Chapter 14.
That is, these individuals may not find such information useful for improving operating performance.
(4) Financial-performance indicators fail to focus on improving basic business processes, which one can argue should be the goal of a
comprehensive control system. Basic business processes include the following: operating processes; customer-management processes;
innovation processes; and, social-legal-environmental processes.
(5) An over focus on individual variances may result in local, but not global, optimization in terms of performance. For example, achieving
significant cost savings on direct materials may lead to unfavorable cost variances "down stream." The net result could very well be less-thanoptimum total performance.
(6) When short-term performance indicators are used, including short-term financial performance indicators, managers and employees are
encouraged to take actions that increase short-term performance, regardless of the impact on long-term or strategic performance. In brief,
short term financial performance indicators can lead to behavior that is not goal-congruent.
Blocher - Chapter 14 #177
Difficulty: Medium
Learning Objective: 14-6
14 Summary
Category
Blocher - Chapter 14
Difficulty: Easy
Difficulty: Hard
Difficulty: Medium
Learning Objective: 14-1
Learning Objective: 14-2
Learning Objective: 14-3
Learning Objective: 14-4
Learning Objective: 14-5
Learning Objective: 14-6
# of Questions
177
70
12
95
8
11
119
25
6
18