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Test Bank Chapter 23 Performance Evaluation Using Variances from Standard Costs

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Test Bank Chapter 23 Performance Evaluation Using Variances from Standard Costs

1. A variable cost system is an accounting system where standards are set for each manufacturing cost element. 
True    False

 

2. One reason not to depend solely on historical records to set standards is that there may be inefficiencies contained in past costs. 
True    False

 

3. Standard costs serve as a device for measuring efficiency. 
True    False

 

4. The standard cost is how much a product should cost to manufacture. 
True    False

 

5. Standard costs can be used with both the process cost and job order cost systems. 
True    False

 

6. Cost systems using detailed estimates of each element of manufacturing cost entering into the finished product are called standard cost systems. 
True    False

 

7. Cost systems using detailed estimates of each element of manufacturing cost entering into the finished product are called budgeted cost systems. 
True    False

 

8. Normally standard costs should be revised when labor rates change to incorporate new union contracts. 
True    False

 

9. Standard costs should always be revised when they differ from actual costs. 
True    False

 

10. Financial reporting systems that are guided by the principle of exceptions concept focus attention on variances from standard costs. 
True    False

 

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

 

12. It is correct to rely exclusively on past cost data when establishing standards. 
True    False

 

13. Ideal standards are developed under conditions that assume no idle time, no machine breakdowns, and no materials spoilage. 
True    False

 

14. Currently attainable standards do not allow for reasonable production difficulties. 
True    False

 

15. If employees are given bonuses for exceeding normal standards, the standards may be very effective in motivating employees. 
True    False

 

16. The fact that workers are unable to meet a properly determined direct labor standard is sufficient cause to change the standard. 
True    False

 

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

 

18. The difference between the standard cost of a product and its actual cost is called a variance. 
True    False

 

19. Standards are performance goals used to evaluate and control operations. 
True    False

 

20. Standards are set for only direct labor and direct materials. 
True    False

 

21. Principle of exceptions allows managers to focus on correcting variances between standard costs and actual costs. 
True    False

 

22. Because accountants have financial expertise, they are the only ones that are able to set standard costs for the production area. 
True    False

 

23. While setting standards, the managers should never allow for spoilage or machine breakdowns in their calculations. 
True    False

 

24. A budget performance report compares actual results with the budgeted amounts and reports differences for possible investigation. 
True    False

 

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

 

26. An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost. 
True    False

 

27. Standards are designed to evaluate price and quantity variances separately. 
True    False

 

28. If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600 units at $13, the direct materials quantity variance was $5,200 favorable. 
True    False

 

29. If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $2,200 unfavorable. 
True    False

 

30. If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 unfavorable. 
True    False

 

31. If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 favorable. 
True    False

 

32. If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $1,000 unfavorable. 
True    False

 

33. If the standard to produce a given amount of product is 600 direct labor hours at $17 and the actual was 500 hours at $15, the time variance was $1,500 unfavorable. 
True    False

 

34. If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 500 hours at $17, the time variance was $1,700 unfavorable. 
True    False

 

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

 

36. If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at $17, the rate variance was $1,200 favorable. 
True    False

 

37. Standard costs are determined by multiplying expected price by expected quantity. 
True    False

 

38. The direct labor time variance measures the efficiency of the direct labor force. 
True    False

 

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

 

40. The variance from standard for factory overhead resulting from incurring a total amount of factory overhead cost that is greater or less than the amount budgeted for the level of operations achieved is termed controllable variance. 
True    False

 

41. The most effective means of presenting standard factory overhead cost variance data is through a factory overhead cost variance report. 
True    False

 

42. Since the controllable variance measures the efficiency of using variable overhead resources, if budgeted variable overhead exceeds actual results, the variance is favorable. 
True    False

 

43. An unfavorable volume variance may be due to a failure of supervisors to maintain an even flow of work. 
True    False

 

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

 

45. Volume variance measures fixed factory overhead. 
True    False

 

46. Though favorable volume variances are usually good news, if inventory levels are too high, additional production could be harmful. 
True    False

 

47. Standard costs are a useful management tool that can be used solely as a statistical device apart from the ledger or they can be incorporated in the accounts. 
True    False

 

48. At the end of the fiscal year, the variances from standard are usually transferred to the finished goods account. 
True    False

 

49. Standard cost variances are usually not reported in reports to stockholders. 
True    False

 

50. Standards are more widely used for nonmanufacturing expenses than for manufacturing costs. 
True    False

 

51. Non-financial measures are often lined to the inputs or outputs of an activity or process. 
True    False

 

52. A company must choice either a standard system or nonfinancial performance measures to evaluate the performance of a company. 
True    False

 

53. Nonfinancial performance output measures are used to improve the input measures. 
True    False

 

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

 

55. A company should only use nonfinancial performance measures when financial measures cannot be calculated. 
True    False

 

56. Which of the following conditions normally would not indicate that standard costs should be revised? 
A. The engineering department has revised product specifications in responding to customer suggestions.
B. The company has signed a new union contract which increases the factory wages on average by $5.00 an hour.
C. Actual costs differed from standard costs for the preceding week.
D. The world price of raw materials increased.

 

57. Standards that represent levels of operation that can be attained with reasonable effort are called: 
A. theoretical standards
B. ideal standards
C. variable standards
D. normal standards

 

58. Standard costs are used in companies for a variety of reasons. Which of the following is not one of the benefits for using standard costs? 
A. Used to indicate where changes in technology and machinery need to be made.
B. Used to identify inventory
C. Used to plan direct materials, direct labor, and factory factory overhead.
D. Used to control costs.

 

59. The principle of exceptions allows managers to 
A. focus on correcting variances between standard costs and actual costs.
B. focus on correcting variances between variable costs and actual costs.
C. focus on correcting variances between competitor’s costs and actual costs.
D. focus on correcting variances between competitor’s costs and standard costs.

 

60. Periodic comparisons between planned objectives and actual performance are reported in: 
A. zero-base reports
B. budget performance reports
C. master budgets
D. budgets

 

61. The standard price and quantity of direct materials are separated because: 
A. GAAP reporting requires this separation
B. direct materials prices are controlled by the purchasing department, and quantity used is controlled by the production department
C. standard quantities are more difficult to estimate than standard prices
D. standard prices change more frequently than standard quantities

 

62. Standard costs are divided into which of the following components? 
A. Variance Standard and Quantity Standard
B. Materials Standard and Labor Standard
C. Quality Standard and Quantity Standard
D. Price Standard and Quantity Standard

 

63. A favorable cost variance occurs when 
A. Actual costs are more than standard costs.
B. Standard costs are more than actual costs.
C. Standard costs are less than actual costs.
D. None of the above.

 

64. The total manufacturing cost variance consists of: 
A. Direct materials price variance, direct labor cost variance, and fixed factory overhead volume variance
B. Direct materials cost variance, direct labor rate variance, and factory overhead cost variance
C. Direct materials cost variance, direct labor cost variance, variable factory overhead controllable variance
D. Direct materials cost variance, direct labor cost variance, factory overhead cost variance

 

65. Which of the following is not a reason standard costs are separated in two components? 
A. the price and quantity variances need to be identified separately to correct the actual major differences.
B. identifying variances determines which manager must find a solution to major discrepancies.
C. if a negative variance is over-shadowed by a favorable variance, managers may overlook potential corrections.
D. variances brings attention to discrepancies in the budget and requires managers to revise budgets closer to actual.

 

66. The standard costs and actual costs for direct materials for the manufacture of 3,000 actual units of product are as follows:
 

Standard Costs

 

Direct materials (per completed unit)

1.04 kilograms @$8.75

 

 

 

 

Actual Costs

 

Direct materials

2,500 kilograms @ $8

 

 


The amount of direct materials price variance is: 
A. $2,250 unfavorable
B. $1,950 favorable
C. $1,875 favorable
D. $1,950 unfavorable

 

67. The standard costs and actual costs for direct materials for the manufacture of 2,500 actual units of product are as follows:
 

Standard Costs

 

Direct materials

2,500 kilograms @ $8

 

 

 

 

Actual Costs

 

Direct materials

2,600 kilograms @ $8.75

 

 


The amount of the direct materials quantity variance is: 
A. $875 favorable
B. $800 unfavorable
C. $800 favorable
D. $875 unfavorable

 

68. The following data relate to direct materials costs for November:
 

Actual costs

4,700 pounds at $5.40

Standard costs

4,500 pounds at $6.20

 

 



 What is the direct materials price variance? 
A. $3,600 favorable
B. $160 favorable
C. $3,760 favorable
D. $3,600 unfavorable

 

69. The following data relate to direct materials costs for November:
 

Actual costs

4,700 pounds at $5.40

Standard costs

4,500 pounds at $6.20

 

 



 What is the direct materials quantity variance? 
A. $3,600 favorable
B. $1,240 favorable
C. $3,600 favorable
D. $1,240 unfavorable

 

70. If the actual quantity of direct materials used in producing a commodity differs from the standard quantity, the variance is termed a: 
A. controllable variance
B. price variance
C. quantity variance
D. rate variance

 

71. If the price paid per unit differs from the standard price per unit for direct materials, the variance is termed a: 
A. variable variance
B. controllable variance
C. price variance
D. volume variance

 

72. The following data is given for the Stringer Company:
 

Budgeted production

26,000 units

Actual production

27,500 units

Materials:

 

  Standard price per ounce

$6.50

  Standard ounces per completed unit

8

  Actual ounces purchased and used in production

228,000

  Actual price paid for materials

$1,504,800

Labor:

 

  Standard hourly labor rate

$22 per hour

  Standard hours allowed per completed unit

6.6

  Actual labor hours worked

183,000

  Actual total labor costs

$4,020,000

Overhead:

 

  Actual and budgeted fixed overhead

$1,029,600

  Standard variable overhead rate

$24.50 per standard labor hour

  Actual variable overhead costs

$4,520,000

 

 

  Overhead is applied on standard labor hours.

 The direct material price variance is: 
A. 22,800U
B. 22,800F
C. 52,000U
D. 52,000F

 

73. The following data is given for the Stringer Company:
 

Budgeted production

26,000 units

Actual production

27,500 units

Materials:

 

  Standard price per ounce

$6.50

  Standard ounces per completed unit

8

  Actual ounces purchased and used in production

228,000

  Actual price paid for materials

$1,504,800

Labor:

 

  Standard hourly labor rate

$22 per hour

  Standard hours allowed per completed unit

6.6

  Actual labor hours worked

183,000

  Actual total labor costs

$4,020,000

Overhead:

 

  Actual and budgeted fixed overhead

$1,029,600

  Standard variable overhead rate

$24.50 per standard labor hour

  Actual variable overhead costs

$4,520,000

 

 

  Overhead is applied on standard labor hours.

 The direct material quantity variance is: 
A. 22,800F
B. 22,800U
C. 52,000F
D. 52,000U

 

74. The Lucy Corporation purchased and used 129,000 board feet of lumber in production, at a total cost of $1,548,000. Original production had been budgeted for 22,000 units with a standard material quantity of 5.7 board feet per unit and a standard price of $12 per board foot. Actual production was 23,500 units.

 Compute the material price variance. 
A. 0
B. 59,400U
C. 59,400F
D. 6,000U

 

75. The Lucy Corporation purchased and used 129,000 board feet of lumber in production, at a total cost of $1,548,000. Original production had been budgeted for 22,000 units with a standard material quantity of 5.7 board feet per unit and a standard price of $12 per board foot. Actual production was 23,500 units.

 Compute the material quantity variance. 
A. 63,000F
B. 63,000U
C. 59,400F
D. 59,400U

 

76. If the wage rate paid per hour differs from the standard wage rate per hour for direct labor, the variance is termed a: 
A. variable variance
B. rate variance
C. quantity variance
D. volume variance

 

77. If the actual direct labor hours spent producing a commodity differs from the standard hours, the variance is termed a: 
A. time variance
B. price variance
C. quantity variance
D. rate variance

 

78. The following data relate to direct labor costs for the current period:
 

Standard costs

  7,500 hours at $11.40

Actual costs

  6,000 hours at $12.00

 

 


What is the direct labor time variance? 
A. $  4,500 favorable
B. $18,000 unfavorable
C. $  3,600 favorable
D. $17,100 favorable

 

79. The following data relate to direct labor costs for the current period:
 

Standard costs

  6,000 hours at $12.00

Actual costs

  7,500 hours at $11.40

 

 


What is the direct labor rate variance? 
A. $18,000 unfavorable
B. $  4,500 favorable
C. $17,100 unfavorable
D. $  3,600 favorable

 

80. The following data relate to direct labor costs for the current period:
 

Standard costs

 9,000 hours at $5.50

Actual costs

 8,500 hours at $5.75

 

 


What is the direct labor rate variance? 
A. $2,250.00 unfavorable
B. $2,125.00 unfavorable
C. $2,250.00 favorable
D. $2,125.00 favorable

 

81. The following data relate to direct labor costs for the current period:
 

Standard costs

  36,000 hours at $22.00

Actual costs

  35,000 hours at $23.00

 

 


What is the direct labor time variance? 
A. $36,000 unfavorable
B. $35,000 unfavorable
C. $23,000 favorable
D. $22,000 favorable

 

82. The standard costs and actual costs for direct labor for the manufacture of 2,500 actual units of product are as follows:
 

                   Standard Costs                       

 

Direct labor

7,500 hours @ $11.80

 

 

                    Actual Costs                         

 

Direct labor

7,400 hours @ $11.40

 

 


The amount of the direct labor rate variance is: 
A. $2,960 unfavorable
B. $4,500 favorable
C. $2,960 favorable
D. $4,500 unfavorable

 

83. The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are as follows:
 

                 Standard Costs                     

 

Direct labor

7,500 hours @ $11.80

 

 

                 Actual Costs                        

 

Direct labor

7,400 hours @ $11.40

 

 


The amount of the direct labor time variance is: 
A. $1,180 favorable
B. $1,140 unfavorable
C. $1,180 unfavorable
D. $1,140 favorable

 

84. The following data relate to direct labor costs for February:
 

Actual costs

7,700 hours at $14.00

Standard costs

7,000 hours at $16.00

 

 



 What is the direct labor time variance? 
A. $7,700 favorable
B. $7,700 unfavorable
C. $11,200 unfavorable
D. $11,200 favorable

 

85. The following data relate to direct labor costs for February:
 

Actual costs

7,700 hours at $14.00

Standard costs

7,000 hours at $16.00

 

 



 What is the direct labor rate variance? 
A. $14,000 favorable
B. $14,000 unfavorable
C. $15,400 favorable
D. $15,400 unfavorable

 

86. The following data is given for the Harry Company:
 

Budgeted production

26,000 units

Actual production

27,500 units

Materials:

 

  Standard price per ounce

$6.50

  Standard ounces per completed unit

8

  Actual ounces purchased and used in production

228,000

  Actual price paid for materials

$1,504,800

Labor:

 

  Standard hourly labor rate

$22 per hour

  Standard hours allowed per completed unit

6.6

  Actual labor hours worked

183,000

  Actual total labor costs

$4,020,000

Overhead:

 

  Actual and budgeted fixed overhead

$1,029,600

  Standard variable overhead rate

$24.50 per standard labor hour

  Actual variable overhead costs

$4,520,000

 

 

  Overhead is applied on standard labor hours.

 The direct labor rate variance is: 
A. 6,000U
B. 6,000F
C. 33,000F
D. 33,000U

 

87. The following data is given for the Harry Company:
 

Budgeted production

26,000 units

Actual production

27,500 units

Materials:

 

  Standard price per ounce

$6.50

  Standard ounces per completed unit

8

  Actual ounces purchased and used in production

228,000

  Actual price paid for materials

$1,504,800

Labor:

 

  Standard hourly labor rate

$22 per hour

  Standard hours allowed per completed unit

6.6

  Actual labor hours worked

183,000

  Actual total labor costs

$4,020,000

Overhead:

 

  Actual and budgeted fixed overhead

$1,029,600

  Standard variable overhead rate

$24.50 per standard labor hour

  Actual variable overhead costs

$4,520,000

 

 

  Overhead is applied on standard labor hours.

 The direct labor time variance is: 
A. 6,000F
B. 6,000U
C. 33,000U
D. 33,000F

 

88. The Flapjack Corporation had 8,200 actual direct labor hours at an actual rate of $12.40 per hour. Original production had been budgeted for 1,100 units, but only 1,000 units were actually produced. Labor standards were 7.6 hours per completed unit at a standard rate of $13.00 per hour.

 Compute the labor rate variance. 
A. 4,920U
B. 4,920F
C. 4,560U
D. 4,560U

 

89. The Flapjack Corporation had 8,200 actual direct labor hours at an actual rate of $12.40 per hour. Original production had been budgeted for 1,100 units, but only 1,000 units were actually produced. Labor standards were 7.6 hours per completed unit at a standard rate of $13.00 per hour.

 Compute the labor time variance. 
A. 9,880F
B. 9,880U
C. 7,800U
D. 7,800F

 

90. 

 

Standard

Actual

Material Cost Per Yard

$2.00

$2.10

Standard Yards per Unit

4.5 yards

4.75 yards

Units of Production

 

9,500

 

 

 



 Calculate the Total Direct Materials cost variance using the above information: 
A. $9,262.50 Unfavorable
B. $9,262.50 Favorable
C. $3,780.00 Unfavorable
D. $3,562.50 Favorable

 

91. 

 

Standard

Actual

Material Cost Per Yard

$2.00

$2.10

Standard Yards per Unit

4.5 yards

4.75 yards

Units of Production

 

9,500

 

 

 



 Calculate the Direct Materials Price variance using the above information: 
A. $1,795.50 Favorable
B. $378.00 Favorable
C. $4,512.50 Unfavorable
D. $378.00 Unfavorable

 

92. 

 

Standard

Actual

Material Cost Per Yard

$2.00

$2.10

Standard Yards per Unit

4.5 yards

4.75 yards

Units of Production

 

9,500

 

 

 



 Calculate the Direct Materials Quantity variance using the above information: 
A. $4,512.50 Unfavorable
B. $4,512.50 Favorable
C. $4,750 Unfavorable
D. $4,750 Favorable

 

93. 

 

Standard

Actual

Rate

$12.00

$12.25

Hours

18,500

17,955

Units of Production

 

9,450

 

 

 



 Calculate the Total Direct Labor Variance using the above information 
A. $2,051.25 Favorable
B. $2,051.25 Unfavorable
C. $2,362.50 Unfavorable
D. $2,362.50 Favorable

 

94. 

 

Standard

Actual

Rate

$12.00

$12.25

Hours

18,500

17,955

Units of Production

 

9,450

 

 

 



 Calculate the Direct Labor Time Variance using the above information 
A. $2,362.50 Favorable
B. $2,362,50 Unfavorable
C. $6,540.00 Favorable
D. $6,540.00 Unfavorable

 

95. 

 

Standard

Actual

Rate

$12.00

$12.25

Hours

18,500

17,955

Units of Production

 

9,450

 

 

 



 Calculate the Direct Labor Rate Variance using the above information 
A. $4,488.75 Unfavorable
B. $6,851.25 Favorable
C. $4,488.75 Favorable
D. $6,851.25 Unfavorable

 

96. Which of the following is not a reason for a direct materials quantity variance? 
A. Malfunctioning equipment
B. Purchasing of inferior raw materials
C. Increased material cost per unit
D. Spoilage of materials

 

97. The formula to compute direct labor rate variance is to calculate the difference between 
A. actual costs + (actual hours * standard rate)
B. actual costs - standard cost
C. (actual hours * standard rate) - standard costs
D. actual costs - (actual hours * standard rate)

 

98. The formula to compute direct labor time variance is to calculate the difference between 
A. actual costs - standard costs
B. actual costs + standard costs
C. (actual hours * standard rate) - standard costs
D. actual costs - (actual hours * standard rate)

 

99. The formula to compute direct materials price variance is to calculate the difference between 
A. actual costs - (actual quantity * standard price)
B. actual cost + standard costs
C. actual cost - standard costs
D. (actual quantity * standard price) -standard costs

 

100. The formula to compute direct material quantity variance is to calculate the difference between 
A. actual costs - standard costs
B. standard costs - actual costs
C. (actual quantity * standard price) - standard costs
D. actual costs - (standard price * standard costs)

 

101. Which of the following would not lend itself to applying direct labor variances? 
A. Help desk
B. Research and development scientist
C. Customer service personnel
D. Telemarketer

 

102. The standard costs and actual costs for factory overhead for the manufacture of 2,500 units of actual production are as follows:
 

                                                Standard Costs                                       

 

Fixed overhead (based on 10,000 hours)

3 hours @ $.80 per hour

Variable overhead

3 hours @ $2.00 per hour

 

 

                Actual Costs                          

 

     Total variable cost, $18,000

 

     Total fixed cost, $8,000

 

 

 



 The amount of the factory overhead volume variance is: 
A. $2,000 favorable
B. $2,000 unfavorable
C. $2,500 unfavorable
D. $0

 

103. The standard costs and actual costs for factory overhead for the manufacture of 2,500 units of actual production are as follows:
 

                                                Standard Costs                                       

 

Fixed overhead (based on 10,000 hours)

3 hours @ $.80 per hour

Variable overhead

3 hours @ $2.00 per hour

 

 

                Actual Costs                          

 

     Total variable cost, $18,000

 

     Total fixed cost, $8,000

 

 

 



 The amount of the total factory overhead cost variance is: 
A. $2,000 favorable
B. $5,000 unfavorable
C. $2,500 unfavorable
D. $0

 

104. The standard costs and actual costs for factory overhead for the manufacture of 2,500 units of actual production are as follows:
 

                                                Standard Costs                                       

 

Fixed overhead (based on 10,000 hours)

3 hours @ $.80 per hour

Variable overhead

3 hours @ $2.00 per hour

 

 

                Actual Costs                          

 

     Total variable cost, $18,000

 

     Total fixed cost, $8,000

 

 

 



 The amount of the factory overhead controllable variance is: 
A. $2,000 unfavorable
B. $3,000 favorable
C. $0
D. $3,000 unfavorable

 

105. The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows:
 

Standard:

25,000 hours at $10

  $250,000


Actual:


Variable factory overhead

  
   $202,500

 

Fixed factory overhead

      60,000

 

 

 



 What is the amount of the factory overhead volume variance? 
A. $12,500 favorable
B. $10,000 unfavorable
C. $12,500 unfavorable
D. $10,000 favorable

 

106. The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows:
 

Standard:

25,000 hours at $10

  $250,000


Actual:


Variable factory overhead

  
   $202,500

 

Fixed factory overhead

      60,000

 

 

 



 What is the amount of the factory overhead controllable variance? 
A. $10,000 favorable
B. $2,500 unfavorable
C. $10,000 unfavorable
D. $2,500 favorable

 

107. Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the: 
A. factory overhead cost volume variance
B. direct labor cost time variance
C. direct labor cost rate variance
D. factory overhead cost controllable variance

 

108. The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of 80,000 machine hours. The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows:
 

Actual:

Variable factory overhead

$360,000

 

Fixed factory overhead

104,000


Standard hours allowed for units produced:


60,000 hours

 

 

 

 



 What is the amount of the factory overhead volume variance? 
A. $12,000 unfavorable
B. $12,000 favorable
C. $14,000 unfavorable
D. $26,000 unfavorable

 

109. The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of 80,000 machine hours. The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows:
 

Actual:

Variable factory overhead

$360,000

 

Fixed factory overhead

104,000


Standard hours allowed for units produced:


60,000 hours

 

 

 

 



 What is the amount of the factory overhead controllable variance? 
A. $12,000 unfavorable
B. $12,000 favorable
C. $14,000 unfavorable
D. $26,000 unfavorable

 

110. Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in a: 
A. quantity variance
B. controllable variance
C. volume variance
D. rate variance

 

111. The controllable variance measures: 
A. operating results at less than normal capacity
B. the efficiency of using variable overhead resources
C. operating results at more than normal capacity
D. control over fixed overhead costs

 

112. The unfavorable volume variance may be due to all of the following factors except: 
A. failure to maintain an even flow of work
B. machine breakdowns
C. unexpected increases in the cost of utilities
D. failure to obtain enough sales orders

 

113. Favorable volume variances may be harmful when: 
A. machine repairs cause work stoppages
B. supervisors fail to maintain an even flow of work
C. production in excess of normal capacity cannot be sold
D. all of the above

 

114. The following data is given for the Bahia Company:
 

Budgeted production

1,000 units

Actual production

   980 units

Materials:

 

  Standard price per pound

$2.00

  Standard pounds per completed unit

12

  Actual pounds purchased and used in production

11,800

  Actual price paid for materials

$23,000

Labor:

 

  Standard hourly labor rate

$14 per hour

  Standard hours allowed per completed unit

4.5

  Actual labor hours worked

4,560

  Actual total labor costs

$62,928

Overhead:

 

  Actual and budgeted fixed overhead

$27,000

  Standard variable overhead rate

$3.50 per standard direct labor hour

  Actual variable overhead costs

$15,500

 

 

  Overhead is applied on standard labor hours.

The factory overhead controllable variance is: 
A. $65U
B. $65F
C. $540U
D. $540F

 

115. The following data is given for the Bahia Company:
 

Budgeted production (at 100% production capacity)

1,000 units

Actual production

   980 units

Materials:

 

  Standard price per pound

$2.00

  Standard pounds per completed unit

12

  Actual pounds purchased and used in production

11,800

  Actual price paid for materials

$23,000

Labor:

 

  Standard hourly labor rate

$14 per hour

  Standard hours allowed per completed unit

4.5

  Actual labor hours worked

4,560

  Actual total labor costs

$62,928

Overhead:

 

  Actual and budgeted fixed overhead

$27,000

  Standard variable overhead rate

$3.50 per standard labor hour

  Actual variable overhead costs

$15,500

 

 

  Overhead is applied on standard labor hours.

The factory overhead volume variance is: 
A. $65U
B. $65F
C. $540U
D. $540F

 

116. The following data is given for the Zoyza Company:
 

Budgeted production (at 100% production capacity)

26,000 units

Actual production

27,500 units

Materials:

 

  Standard price per ounce

$6.50

  Standard ounces per completed unit

8

  Actual ounces purchased and used in production

228,000

  Actual price paid for materials

$1,504,800

Labor:

 

  Standard hourly labor rate

$22 per hour

  Standard hours allowed per completed unit

6.6

  Actual labor hours worked

183,000

  Actual total labor costs

$4,020,000

Overhead:

 

  Actual and budgeted fixed overhead

$1,029,600

  Standard variable overhead rate

$24.50 per standard labor hour

  Actual variable overhead costs

$4,520,000

 

 

  Overhead is applied on standard labor hours.

 The factory overhead controllable variance is: 
A. $73,250F
B. $73,250U
C. $59,400F
D. $59,400U

 

117. The following data is given for the Zoyza Company:
 

Budgeted production (at 100% production capacity)

26,000 units

Actual production

27,500 units

Materials:

 

  Standard price per ounce

$6.50

  Standard ounces per completed unit

8

  Actual ounces purchased and used in production

228,000

  Actual price paid for materials

$1,504,800

Labor:

 

  Standard hourly labor rate

$22 per hour

  Standard hours allowed per completed unit

6.6

  Actual labor hours worked

183,000

  Actual total labor costs

$4,020,000

Overhead:

 

  Actual and budgeted fixed overhead

$1,029,600

  Standard variable overhead rate

$24.50 per standard labor hour

  Actual variable overhead costs

$4,520,000

 

 

  Overhead is applied on standard labor hours.

 The factory overhead volume variance is: 
A. $73,250U
B. $73,250F
C. $59,400F
D. $59,400U

 

118. The St. Augustine Corporation originally budgeted for $360,000 of fixed overhead at 100% production capacity. Production was budgeted to be 12,000 units.

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