Ch7 Standard Costing and Variance Analysis

Chapter 7—Standard Costing and Variance Analysis

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1. Specifications for materials are compiled on a bill of materials. ANS: T PTS: 1 DIF: Easy OB:! "# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #. Specifications for materials are compiled on a p+rc'ase re+isition. ANS: F PTS: 1 DIF: Easy OB:! "# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /. An operations flo0 doc+ment s'o0s all processes necessary to man+fact+re one +nit of a prod+ct. ANS: T PTS: 1 DIF: Easy OB:! "# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) . A standard cost card is prepared after man+fact+rin) standards 'a&e been de&eloped for direct materials- direct labor- and factory o&er'ead. ANS: T PTS: 1 DIF: Easy OB:! "# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2. A standard cost card is prepared before de&elopin) man+fact+rin) standards for direct materials- direct labor- and factory o&er'ead. ANS: F PTS: 1 DIF: Easy OB:! "# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 3. T'e total &ariance can pro&ide +sef+l information abo+t t'e so+rce of cost differences. ANS: F PTS: 1 DIF: Easy OB:! "# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !. T'e total &ariance does not pro&ide +sef+l information abo+t t'e so+rce of cost differences. ANS: T PTS: 1 DIF: Easy OB:! "# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)

4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

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7.

T'e form+la for price8rate &ariance is 9AP " SP

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ANS:T PTS: 1 DIF: ,oderate OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) <. T'e form+la for price8rate &ariance is 9AP " SP

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ANS:F PTS: 1 DIF: ,oderate OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 15. T'e price &ariance reflects t'e difference bet0een t'e +antity of inp+ts +sed and t'e standard +antity allo0ed for t'e o+tp+t of a period. ANS:F PTS: 1 DIF: ,oderate OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 11. T'e price &ariance reflects t'e difference bet0een t'e price paid for inp+ts and t'e standard price for t'ose inp+ts. ANS:T PTS: 1 DIF: ,oderate OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1#. T'e +sa)e &ariance reflects t'e difference bet0een t'e price paid for inp+ts and t'e standard price for t'ose inp+ts. ANS:F PTS: 1 NAT: AA$SB: %eflecti&e T'in(in)

DIF:

,oderate

OB: !"#

*O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1/. T'e +sa)e &ariance reflects t'e difference bet0een t'e +antity of inp+ts +sed and t'e standard +antity allo0ed for t'e o+tp+t of a period. ANS:T PTS: 1 DIF: ,oderate OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1. T'e form+la for +sa)e &ariance is 9A; " S; = SP. ANS:T PTS: 1 DIF: ,oderate OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 12. T'e form+la for +sa)e &ariance is 9A; " S; = AP. ANS:F PTS: 1 DIF: ,oderate OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


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13. T'e point of p+rc'ase model calc+lates t'e materials price &ariance +sin) t'e +antity of materials p+rc'ased. ANS:T PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1!. T'e point of p+rc'ase model calc+lates t'e materials price &ariance +sin) t'e +antity of materials +sed in prod+ction. ANS:F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 17. T'e difference bet0een t'e act+al 0a)es paid to employees and t'e standard 0a)es for all 'o+rs 0or(ed is t'e labor rate &ariance. ANS: T PTS: 1 DIF: Easy OB:! "/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1<. T'e difference bet0een t'e act+al 0a)es paid to employees and t'e standard 0a)es for all 'o+rs 0or(ed is t'e labor efficiency &ariance. ANS: F PTS: 1 DIF: Easy OB:! "/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #5. T'e difference bet0een t'e standard 'o+rs 0or(ed for a specific le&el of prod+ction and t'e act+al 'o+rs 0or(ed is t'e labor efficiency &ariance. ANS: AA$SB: T PTS: T'in(in) 1 DIF: Easy OB:! "/ NAT: %eflecti&e *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #1. T'e difference bet0een t'e standard 'o+rs 0or(ed for a specific le&el of prod+ction and t'e act+al 'o+rs 0or(ed is t'e labor rate &ariance. ANS: F PTS: 1 DIF: Easy OB:! "/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) ##. A fle6ible b+d)et is an effecti&e tool for b+d)etin) factory o&er'ead. ANS: T PTS: 1 DIF: Easy OB:! "/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #/. T'e difference bet0een act+al &ariable o&er'ead and b+d)eted &ariable o&er'ead based +pon act+al 'o+rs is referred to as t'e &ariable o&er'ead spendin) &ariance. ANS:T PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

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#. T'e difference bet0een act+al &ariable o&er'ead and b+d)eted &ariable o&er'ead based +pon act+al 'o+rs is referred to as t'e &ariable o&er'ead efficiency &ariance. ANS:F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #2. T'e difference bet0een b+d)eted &ariable o&er'ead for act+al 'o+rs and standard o&er'ead is t'e &ariable o&er'ead efficiency &ariance. ANS:T PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #3. T'e difference bet0een b+d)eted &ariable o&er'ead for act+al 'o+rs and standard o&er'ead is t'e &ariable o&er'ead spendin) &ariance. ANS:F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #!. T'e difference bet0een act+al and b+d)eted fi6ed factory o&er'ead is referred to as a fi6ed o&er'ead spendin) &ariance. ANS:T PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #7. T'e difference bet0een act+al and b+d)eted fi6ed factory o&er'ead is referred to as a fi6ed o&er'ead &ol+me &ariance. ANS:F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #<. T'e difference bet0een b+d)eted and applied fi6ed factory o&er'ead is referred to as a fi6ed o&er'ead &ol+me &ariance. ANS:T PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /5. A fi6ed o&er'ead &ol+me &ariance is a controllable &ariance. ANS:F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /1. A fi6ed o&er'ead &ol+me &ariance is a noncontrollable &ariance. ANS:T PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

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/#. A one"&ariance approac' calc+lates only a total o&er'ead &ariance. ANS: T PTS: 1 DIF: Easy OB:! "/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) //. A b+d)et &ariance is a controllable &ariance. ANS:T PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /. An o&er'ead efficiency &ariance is related entirely to &ariable o&er'ead. ANS:T PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /2. ,ana)ers 'a&e no ability to control t'e b+d)et &ariance. ANS:F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /3. Unfaorable &ariances are represented by debit balances in t'e o&er'ead acco+nt. ANS:T PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /!. Unfaorable &ariances are represented by credit balances in t'e o&er'ead acco+nt. ANS:F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /7. Fa&orable &ariances are represented by credit balances in t'e o&er'ead acco+nt. ANS:T PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /<. Fa&orable &ariances are represented by debit balances in t'e o&er'ead acco+nt. ANS:F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 5. Fa&orable &ariances are al0ays desirable for prod+ction. ANS: F PTS: 1 DIF: Easy OB:! " NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

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1. E6pected standards are a &al+able tool for moti&ation and control. ANS:F PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #. Practical standards are t'e most effecti&e standards for controllin) and moti&atin) 0or(ers. ANS:T PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /. Ideal standards are an effec ti&e means of controllin) &ariances and moti&atin) 0or(ers. ANS:F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) . Ideal standards do not allo0 for normal operatin) delays or '+man limitations. ANS:T PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2. E6pected standards )enerally yield !nfaorable &ariances. ANS:F PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 3. E6pected standards )enerally yield fa&orable &ariances. ANS:T PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !. Ideal standards )enerally yield fa&orable &ariances. ANS:F PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 7. Ideal standards )enerally yield !nfaorable &ariances. ANS:T PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


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<. Total +ality mana)ement 9T;, and >+st"in"time 9IT prod+ction systems are based on t'e premise of ideal prod+ction standards. ANS:T PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 25. In a totally a+tomated or)ani?ation- +sin) t'eoretical capacity 0ill )enerally pro&ide t'e lo0est fi6ed o&er'ead application rate. ANS:T PTS: 1 DIF: Diffic+lt OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 21. In a totally a+tomated or)ani?ation- +sin) t'eoretical capacity 0ill )enerally pro&ide t'e 'i)'est fi6ed o&er'ead application rate. ANS:F PTS: 1 DIF: Diffic+lt OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2#. A con&ersion &ariance combines labor and o&er'ead &ariances. ANS:T PTS: 1 DIF: ,oderate OB: !"3 NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2/. T'e effect of s+bstit+tin) a non"standard mi6 of materials d+rin) t'e prod+ction process is referred to as a material mi6 &ariance. ANS:T

PTS: 1

DIF:

,oderate

OB: !"!

NAT: AI$PA AA$SB: %eflecti&e$ompetencies: T'in(in) *O$: F+nctional ,eas+rement- %eportin) 2. T'e effect of s+bstit+tin) a non"standard mi6 of materials d+rin) t'e prod+ction process is referred to as a material yield &ariance. ANS:F PTS: 1 DIF: ,oderate OB: !"! NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 22. @'en m+ltiple labor cate)ories are +sed- t'e financial effect of +sin) a different mi6 of 0or(ers in a prod+ction process is referred to as a labor mi6 &ariance. ANS:T PTS: 1 DIF: ,oderate OB: !"! NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 23. @'en m+ltiple labor cate)ories are +sed- t'e financial effect of +sin) a different mi6 of 0or(ers in a prod+ction process is referred to as a labor yield &ariance. ANS:F PTS: 1 DIF: ,oderate OB: !"! NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

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2!. @'en m+ltiple labor cate)ories are +sed- t'e mo netary impact of +sin) a 'i)'er or lo0 er n+mber of 'o+rs t'an a standard allo0s is referred to as a labor mi6 &ariance. ANS:F PTS: 1 DIF: ,oderate OB: !"! NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 27. @'en m+ltiple labor cate)ories are +sed- t'e mo netary impact of +sin) a 'i)'er or lo0 er n+mber of 'o+rs t'an a standard allo0s is referred to as a labor yield &ariance. ANS:T PTS: 1 DIF: ,oderate OB: !"! NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2<. As prod+ction becomes more a+tomated- direct labor may be &ie0ed more as a con&ersion cost t'an as a prime cost. ANS:T PTS: 1 DIF: ,oderate OB: !"2 NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) C"#$LET%"&

1. T'e difference bet0een total act+al cost inc+rred and total standard cost applied is referred to as . ANS: total &ariance PTS: 1 DIF: Easy OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #. T'e t0o components of total material8labor &ariance are  and  ANS: price8rate &ariance +antity8efficiency &ariance PTS: 1 DIF: Easy OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /. T'e difference bet0een 0'at 0as paid for inp+ts and 0'at s'o+ld 'a&e been paid for inp+ts is referred to as a . ANS: price &ariance PTS: 1

DIF:

Easy

OB: !"#

NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


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. T'e difference bet0een standard +antity allo0ed and +antity +sed for a +nit of o+tp+t is (no0n as an . ANS: efficiency &ariance PTS: 1 DIF: Easy OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2. T'e difference bet0een act+al &ariable o&er'ead and b+d)eted &ariable o&er'ead based +pon act+al 'o+rs is referred to as t'e . ANS: &ariable o&er'ead spendin) &ariance PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 3. T'e difference bet0een b+d)eted &ariable o&er'ead for act+al 'o+rs and standard o&er'ead is t'e . ANS: &ariable o&er'ead efficiency &ariance PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !. T'e difference bet0een act+al and b+d)eted fi6ed factory o&er'ead is referred to as a . ANS: fi6ed o&er'ead spendin) &ariance PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 7. T'e difference bet0een b+d)eted and applied fi6ed factory o&er'ead is referred to as a . ANS: fi6ed o&er'ead &ol+me &ariance PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) <. Standards t'at pro&ide for no '+man lim itations or operatin) delays are referred to as . ANS: ideal standards PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

15

15. Standards t'at are attainable 0it' reasonable effort are referred to as . ANS: practical standards PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 11. Standards t'at reflect 0'at is e6pected to occ+r are referred to as . ANS: e6pected standards PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1#. Standards t'at allo0 for 0aste and inefficiency are referred to as . ANS: practical standards PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1/. @'en m+ltiple materials are +sed- t'e effect of s+bstit+tin) a non"standard mi6 of materials d+rin) t'e prod+ction process is referred to as a  &ariance. ANS: material mi6 PTS: 1 DIF: ,oderate OB: !"! NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1. @'en m+ltiple materials are +sed- t'e difference bet0een t'e total +antity and t'e standard +antity of o+tp+t 0'en a nonstandard mi6 of materials is +sed is (no0n as t'e  &ariance. ANS: material yield PTS: 1 DIF: ,oderate OB: !"! NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 12. @'en m+ltiple labor cate)ories are +sed- t'e financial effect of +sin) a different mi6 of 0or(ers in a prod+ction process is referred to as a  &ariance. ANS: labor mi6 PTS: 1 DIF: ,oderate OB: !"! NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

! $'apter

11

13. @'en m+ltiple labor cate)ories are +sed- t'e mo netary impact of +sin) a 'i)'er or lo0 er n+mber of 'o+rs t'an a standard allo0s is referred to as a  &ariance. ANS: labor yield PTS: 1 DIF: ,oderate OB: !"! NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #ULT%$LE C'"%CE

1. A primary p+rpose of +sin) a standard cost system is a. b. c. d.

to t'in)s easiermeas+re for mana)ers t'e prod+ction facility. to ma(e pro&ide a distinct of costincontrol. to minimi?e t'e cost per +nit of prod+ction. b and c are correct.

ANS: B PTS: 1 DIF: Easy OB: !"1 NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #. T'e standard cost card contains +antities and costs for a. direct material only. b. direct labor only. c. direct material and direct labor only. d. direct material- direct labor- and o&er'ead. ANS: D PTS: 1 DIF: Easy OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /. @'ic' of t'e follo0in) statements re)ardin) standard cost systems is tr+eC a. Fa&orable &ariances are not necessarily )ood &ariances. b. ,ana)ers 0ill in&esti)ate all &ariances from standard. c. T'e prod+ction s+per&isor is )enerally responsible for material price &ariances. d. Standard costs cannot be +sed for plannin) p+rposes since costs normally c'an)e in t'e f+t+re. ANS: A PTS: 1 DIF: Easy OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) . In a standard cost system- @or( in Process In&entory is ordinarily debited 0it' a. act+al costs of material and labor and a predetermined o&er'ead cost for o&er'ead. b. standard costs based on t'e le&el of inp+t acti&ity 9s+c' as direct labor 'o+rs 0or(ed. c. standard costs based on prod+ction o+tp+t. d. act+al costs of material- labor- and o&er'ead. ANS: $ PTS: 1 DIF: Easy OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

a. b. c. d.

1#

2. A standard cost system may be +sed in >ob order costin)- b+t not process costin). process costin)- b+t not >ob order costin). eit'er >ob order costin) or process costin). neit'er >ob order costin) nor process costin).

ANS: $ PTS: 1 DIF: Easy OB: !"1 NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 3. Standard costs may be +sed for a. prod+ct costin). b. plannin). c. controllin). d. all of t'e abo&e. ANS: D PTS: 1 DIF: Easy OB: !"1 NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !. A p+rpose of standard costin) is to a. replace b+d)ets and b+d)etin). b. simplify costin) proced+res. c. eliminate t'e need for act+al costin) for e6ternal reportin) p+rposes. d. eliminate t'e need to acco+nt for year"end +nderapplied or o&erapplied man+fact+rin) o&er'ead. ANS: B PTS: 1 DIF: Easy OB: !"1 NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 7. Standard costs a. are estimates of costs attainable only +nder t'e most ideal conditions. b. are diffic+lt to +se 0it' a process costin) system. c. can- if prop erly +sed- 'elp moti&ate employees. d. re+ire t'at si)nificant +nfa&orable &ariances be in&esti)ated- b+t do not re+i re t'at si)nificant fa&orable &ariances be in&esti)ated. ANS: $ PTS: 1 DIF: Easy OB: !"1 NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) <. A bill of material does not incl+de a. +antity of component inp+ts. b. price of component inp+ts. c. +ality of component inp+ts. d. type of prod+ct o+tp+t. ANS: B PTS: 1 DIF: Easy OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

1/

15. An operations flo0 doc+ment trac(s t'e cost and +antity of material t'ro+)' an operation. trac(s t'e net0or( of control points from receipt of a c+stomers order t'ro+)' t'e deli&ery of t'e finis'ed prod+ct. specifies tas(s to ma(e a +nit and t'e times allo0ed for eac' tas(. c'arts t'e s'ortest pat' by 0'ic' to arran)e mac'ines for completin) prod+cts.

a. b. c. d.

ANS:$ PTS: 1 DIF: ,oderate OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 11. A total &ariance is best defined as t'e difference bet0een total a. act+al cost and total cost applied for t'e standard o+tp+t of t'e period. b. standard cost and total cost applied to prod+ction. c. costfor of t'e t'e act+al act+al o+tp+t inp+t ofoft'e d. act+al act+al cost cost and and total total standard cost applied t'eperiod. period. ANS: D PTS: 1 DIF: Easy OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1#. T'e term standard 'o+rs allo0ed meas+res a. b+d)eted o+tp+t at act+al 'o+rs. b. b+d)eted o+tp+t at standard 'o+rs. c. act+al o+tp+t at standard 'o+rs. d. act+al o+tp+t at act+al 'o+rs. ANS: $ PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1/. A lar)e labor efficiency &ariance is prorated to 0'ic' of t'e follo0in) at year"endC

$ost of Goods Sold no a. no b. yes c. yes d.

no yes no yes

@IP In&entory

FG In&entory

no yes no yes

ANS: D PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1. @'ic' of t'e fo llo0in) factors s'o+ld not be considered 0'en decidin) 0'et'er to in&esti)ate a &arianceC a. ma)nit+de of t'e &ariance b. trend of t'e &ariances o&er time c. li(eli'ood t'at an in&esti)ation 0ill red+ce or eliminate f+t+re occ+rrences of t'e &ariance d. 0'et'er t'e &ariance is fa&orable or +nfa&orable ANS: D PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

1

12. At t'e end of a period- a si)nificant material +antity &ariance s'o+ld be a. closed to $ost of Goods Sold. b. allocated amon) %a0 ,aterial- @or( in Process- Finis'ed Goods- and $ost of Goods Sold. c. allocated amon) @or( in Process- Finis'ed Goods- and $ost of Goods Sold. d. carried for0ard as a balance s'eet acco+nt to t'e ne6t period. ANS: $ PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 13. @'en comp+tin) &ariances from standard costs- t'e difference bet0een act+al and standard price m+ltiplied by act+al +antity +sed yields a a. combined price"+antity &ariance. b. &ariance. c. price +antity &ariance. d. mi6 &ariance. ANS: B PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1!. A company 0is'in) to isolate &ariances at t'e point closest to t'e point of responsibility 0ill determine its material price &ariance 0'en a. material is p+rc'ased. b. material is iss+ed to prod+ction. c. material is +sed in prod+ction. d. prod+ction is completed. ANS: A PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 17. T'e material price &ariance 9comp+ted at point of p+rc'ase is a. t'e difference bet0een t'e act+al cost of material p+rc'ased and t'e standard cost of material p+rc'ased. b. t'e difference bet0een t'e act+al cost of material p+rc'ased and t'e standard cost of material +sed. c. primarily t'e responsibility of t'e prod+ction mana)er. d. bot' a and c. ANS: A PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

12

1<. T'e s+m of t'e material price &ariance 9calc+lated at point of p+rc'ase and material +antity &ariance e+als a. t'e total cost &ariance. b. t'e material mi6 &ariance. c. t'e material yield &ariance. d. no meanin)f+l n+mber. ANS: D PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #5. A company 0o+ld most li(ely 'a&e an !nfaorable labor rate &ariance and a fa&orable labor efficiency &ariance if a. t'e mi6 of 0or(ers +sed in t'e prod+ction process 0as more e6perienced t'an t'e normal b. mi6. t'e mi6 of 0or(ers +sed in t'e prod+ction process 0as less e6perienced t'an t'e normal mi6. c. 0or(ers from anot'er part of t'e plant 0ere +sed d+e to an e6tra 'ea&y prod+ction sc'ed+le. d. t'e p+rc'asin) a)ent ac+ired &ery 'i)' +ality material t'at res+lted in less spoila)e. ANS: A PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #1. If act+al direct labor 'o+rs 9D*Hs are less t'an standard direct labor 'o+rs allo0ed and o&er'ead is applied on a D*H basis- a9n a. fa&orable &ariable o&er'ead spendin) &ariance e6ists. b. fa&orable &ariable o&er'ead efficiency &ariance e6ists. c. fa&orable &ol+me &ariance e6ists. d. +nfa&orable &ol+me &ariance e6ists. ANS: B PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) ##. T'e total labor &ariance can be s+bdi&ided into all of t'e follo0in) e(cept a. rate &ariance. b. yield &ariance. c. learnin) c+r&e &ariance. d. mi6 &ariance. ANS: $ PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #/. T'e standard predominantly +sed in @estern c+lt+res for moti&ational p+rposes is a9n  standard. a. e6pected ann+al b. ideal c. practical d. t'eoretical ANS: $ PTS: 1 DIF: Easy OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

13

#. @'ic' of t'e follo0in) standards can commonly be reac'ed or sli)'tly e6ceeded by 0or(ers in a moti&ated 0or( en&ironmentC Ideal a. b. c. d.

no no yes no

Practical

E6pectedann+al

no yes yes yes

no yes no no

ANS: B PTS: 1 DIF: Easy OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #2. ,ana)ement 0o+ld )enerally e6pect !nfaorable &ariances if standards 0ere based on 0'ic' of t'e follo0in) capacity meas+resC Ideal

Practical

a. yes no b. no c.

E6pectedann+al

no no yes

d. yes

no no yes

yes

no

ANS: A PTS: 1 DIF: Easy OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #3. @'ic' of t'e follo0in) capacity le&els 'as traditionally been +sed to comp+te t'e fi6ed o&er'ead application rateC a. e6pected ann+al b. normal c. t'eoretical d. prior year ANS: A PTS: 1 DIF: Easy OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #!. A company 'as a fa&orable &ariable o&er'ead spendin) &ariance- an !nfaorable &ariable o&er'ead efficiency &ariance- and +nderapplied &ariable o&er'ead at t'e end of a period. T'e >o+rnal entry to record t'ese &ariances and close t'e &ariable o&er'ead control acco+nt 0ill s'o0 0'ic' of t'e follo0in)C OH spendin) &ariance a. b. c. d.

debit credit debit credit

OH efficiency &ariance credit debit credit debit

,OH credit credit debit debit

ANS:B PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

! $'apter

1!

#7. Bailey $orporation. inc+rred #-/55 direct labor 'o+rs to prod+ce 355 +nits of prod+ct. Eac' +nit s'o+ld ta(e  direct labor 'o+rs. Bailey $orporation applies &ariable o&er'ead to prod+ction on a direct labor 'o+r basis. T'e &ariable o&er'ead efficiency &ariance a. 0ill be +nfa&orable. b. 0ill be fa&orable. c. 0ill depend +pon t'e capacity meas+re selected to assi)n o&er'ead to prod+ction. d. is impossible to determine 0it'o+t additional information. ANS:B PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) #<. A &ariable o&er'ead spendin) &ariance is ca+sed by a. +sin) more or fe0er act+al 'o+rs t'an t'e standard 'o+rs allo0ed for t'e prod+ction ac'ie&ed. b. payin) a 'i)'er8lo0er a&era)e act+al o&er'ead price per +nit of t'e acti&ity base t'an t'e standard price allo0ed per +nit of t'e acti&ity base. c. lar)er8smaller 0aste and s'rin(a)e associated 0it' t'e reso+rces in&ol&ed t'an e6pected. d. bot' b and c are ca+ses. ANS:D PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /5. @'ic' of t'e follo0in) are considered controllable &ariancesC OH spendin) yes no no yes

a. b. c.

Total o&er'ead b+d)et yes no yes

ol+me

yes yes no

yes no d. ANS:D PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)

/1. A company may set predetermined o&er'ead rates based on normal- e6pected ann+al- or t'eoretical capacity. At t'e end of a period- t'e fi6ed o&er'ead spendin) &ariance 0o+ld a. be t'e same re)ardless of t'e capacity le&el selected. b. be t'e lar)est if t'eoretical capacity 'ad been selected. c. be t'e smallest if t'eoretical capacity 'ad been selected. d. not occ+r if act+al capacity 0ere t'e same as t'e capacity le&el selected. ANS: A PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

a. b. c. d.

17

/#. T'e &ariance least si)nificant for p+rposes of controllin) costs is t'e material +antity &ariance. &ariable o&er'ead efficiency &ariance. fi6ed o&er'ead spendin) &ariance. fi6ed o&er'ead &ol+me &ariance.

ANS: D PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) //. Fi6ed o&er'ead costs are a. best controlled on a +nit"by"+nit basis of prod+cts prod+ced. b. mostly inc+rred to pro&ide t'e capacity to prod+ce and are best controlled on a total basis at t'e time t'ey are ori)inally ne)otiated. c. on a per"+nit basis at all different acti&ity le&els 0it'in t'e rele&ant ran)e. d. constant best controlled as to spendin) d+rin) t'e prod+ction process. ANS:B PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /. T'e &ariance most +sef+l in e&al+atin) plant +tili?ation is t'e a. &ariable o&er'ead spendin) &ariance. b. fi6ed o&er'ead spendin) &ariance. c. &ariable o&er'ead efficiency &ariance. d. fi6ed o&er'ead &ol+me &ariance. ANS: D PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /2. A fa&orable fi6ed o&er'ead &ol+me &ariance occ+rs if a. t'ere is a fa&orable labor efficiency &ariance. b. t'ere is a fa&orable labor rate &ariance. c. prod+ction is less t'an planned. d. prod+ction is )reater t'an planned. ANS: D PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /3. T'e fi6ed o&er'ead application rate is a f+nction of a predetermined acti&ity le&el. If standard 'o+rs allo0ed for )ood o+tp+t e+al t'e predetermined acti&ity le&el for a )i&en period- t'e &ol+me &ariance 0ill be a. ?ero. b. fa&orable. c. +nfa&orable. d. eit'er fa&orable or +nfa&orable- dependin) on t'e b+d)eted o&er'ead. ANS: A PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

a. b. c. d.

1<

/!. Act+al fi6ed o&er'ead min+s b+d)eted fi6ed o&er'ead e+als t'e fi6ed o&er'ead &ol+me &ariance. fi6ed o&er'ead spendin) &ariance. noncontrollable &ariance. controllable &ariance.

ANS: B PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /7. Total act+al o&er'ead min+s total b+d)eted o&er'ead at t'e act+al inp+t prod+ction le&el e+als t'e a. &ariable o&er'ead spendin) &ariance. b. total o&er'ead efficiency &ariance. c. total o&er'ead spendin) &ariance. d. total o&er'ead &ol+me &ariance. ANS: $ PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /<. A fa&orable fi6ed o&er'ead spendin) &ariance indicates t'at a. b+d)eted fi6ed o&er'ead is less t'an act+al fi6ed o&er'ead. b. b+d)eted fi6ed o&er'ead is )reater t'an applied fi6ed o&er'ead. c. applied fi6ed o&er'ead is )reater t'an b+d)eted fi6ed o&er'ead. d. act+al fi6ed o&er'ead is less t'an b+d)eted fi6ed o&er'ead. ANS: D PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 5. An !nfaorable fi6ed o&er'ead &ol+me &ariance is most often ca+sed by a. act+al fi6ed o&er'ead inc+rred e6ceedin) b+d)eted fi6ed o&er'ead. b. an o&er"application of fi6ed o&er'ead to prod+ction. c. an increase in t'e le&el of t'e finis'ed in&entory. d. normal capacity e6ceedin) act+al prod+ction le&els. ANS: D PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1. In a standard cost system- 0'en prod+ction is )reater t'an t'e estimated +nit or denominator le&el of acti&ity- t'ere 0ill be a9n a. +nfa&orable capacity &ariance. b. fa&orable material and labor +sa)e &ariance. c. fa&orable &ol+me &ariance. d. +nfa&orable man+fact+rin) o&er'ead &ariance. ANS: $ PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

#5

#. In analy?in) man+fact+rin) o&er'ead &ariances- t'e &ol+me &ariance is t'e difference bet0een t'e a. amo+nt s'o0n in t'e fle6ible b+d)et and t'e amo+nt s'o0n in t'e debit side of t'e o&er'ead control acco+nt. b. predetermined o&er'ead application rate and t'e fle6ible b+d)et application rate times act+al 'o+rs 0or(ed. c. b+d)et allo0ance based on standard 'o+rs allo0ed for act+al prod+ction for t'e period and t'e amo+nt b+d)eted to be applied d+rin) t'e period. d. act+al amo+nt spent for o&er'ead items d+rin) t'e period and t'e o&er'ead amo+nt applied to prod+ction d+rin) t'e period. ANS:$ PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /. ariance analysis for o&er'ead normally foc+ses on a. efficiency &ariances for mac'inery and indirect prod+ction costs. b. &ol+me &ariances for fi6ed o&er'ead costs. c. t'e controllable &ariance as a l+mp "s+m amo+nt. d. t'e difference bet0een b+d)eted and applied &ariable o&er'ead. ANS:A PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) . T'e efficiency &ariance comp+ted on a t'ree"&ariance approac' is a. e+al to t'e efficiency &ariance comp+ted on t'e fo+r"&ariance approac'. b. e+al to t'e &ariable o&er'ead spendin) &ariance pl+s t'e efficiency &ariance comp+ted on t'e fo+r"&ariance approac'. c. comp+ted as t'e difference bet0een applied &ariable o&er'ead and act+al &ariable o&er'ead. d. comp+ted as act+al &ariable o&er'ead min+s t'e fle6ible b+d)et for &ariable o&er'ead based on act+al 'o+rs 0or(ed. ANS: A PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2. T'e +se of separate &ariable and fi6ed o&er'ead rates is better t'an a combined rate beca+se s+c' a system a. is less e6pensi&e to operate and maintain. b. does not res+lt in +nderapplied or o&erapplied o&er'ead. c. is more effecti&e in assi)nin) o&er'ead costs to prod+cts. d. is easier to de&elop. ANS:$ PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

#1

3. Jnder t'e t0o"&ariance approac'- t'e &ol+me &ariance is comp+ted by s+btractin)  based on standard inp+t allo0ed for t'e prod+ction ac'ie&ed from b+d)eted o&er'ead. a. applied o&er'ead b. act+al o&er'ead c. b+d)eted fi6ed o&er'ead pl+s act+al &ariable o&er'ead d. b+d)eted &ariable o&er'ead ANS: A PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !. T'e o&er'ead &ariance calc+lated as total b+d)eted o&er'ead at t'e act+al inp+t prod+ction le&el min+s total b+d)eted o&er'ead at t'e standard 'o+rs allo0ed for act+al o+tp+t is t'e a. efficiency &a riance. b. &ariance. c. spendin) &ol+me &ariance. d. b+d)et &ariance. ANS: A PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 7. In a >+st"in"time in&entory systema. practical standards become ideal standards. b. ideal standards become e6pected standards. c. &ariances 0ill not occ+r beca+se of t'e ?ero"defects basis of IT. d. standard costin) cannot be +sed. ANS:B PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) <. A company +sin) &ery ti)'t 9'i)' standards in a standard cost system s'o+ld e6pect t'at a. no incenti&e bon+s 0ill be paid. b. most &ariances 0ill be +nfa&orable. c. employees 0ill be stron)ly moti&ated to attain t'e standards. d. costs 0ill be controlled better t'an if lo0er standards 0ere +sed. ANS: B PTS: 1 DIF: Easy OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) Crichton Co)pany T'e follo0in) information is for $ric'ton $ompanyKs +ly prod+ction: Standards* ,aterial *abor

/.5 feet per +nit L M.#5 per foot #.2 'o+rs per +nit L M!.25 per 'o+r

Act!al*

Prod+ction ,aterial *abor

#-!25 prod+ced t'e mont'L M.25 per foot 7-!55 +nits feet +sed <-555d+rin) feet p+rc'ased !-555 direct labor 'o+rs L M!.<5 per 'o+r

9%o+nd all ans0ers to t'e nearest dollar. 4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

! $'apter

##

25. %efer to $ric'ton $ompany. @'at is t'e material price &ariance 9calc+lated at point of p+rc'aseC a. M#-!55 J b. M#-!55 F c. M#-315 F d. M#-315 J ANS: A ,aterial Price ariance  9AP " SP = A;  9M.25 " M.#5 = <-555 feet p+rc'ased  M#-!55 J PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 21. %efer to $ric'ton $ompany. @'at is t'e material +antity &arianceC a. M/-152 F b. M1-525 F c. M/-152 J d. M1-7<5 J ANS: D ,aterial ;+antity ariance  9A; " S; = SP  97-!55 " 9#-!25 = / = M.#5  M1-7<5 J

PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2#. %efer to $ric'ton $ompany. @'at is t'e labor rate &arianceC a. M/-75 J b. M/-75 F c. M#-755 J d. M#-755 F ANS: $ *abor %ate ariance  9AP " SP = A;  9M!.<5 " M!.25 = !-555 'r +sed  M#-755 J PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2/. %efer to $ric'ton $ompany. @'at is t'e labor efficiency &arianceC a. M1-7!2 J b. M

! $'apter

#/

ANS: B *abor Efficiency ariance  9A; " S; = SP  9!-555 'r " 9#.2 'r8+nit = #-!25 +nits = M!.25  M
T'e follo0in) information is for %eic's $ompanyKs September prod+ction: Standards* ,aterial *abor

.5 feet per +nit L M/.!2 per foot /.5 'o+rs per +nit L M7.#2 per 'o+r

Act!al* Prod+ction ,aterial *abor

/-255 +nits prod+ced d+rin) t'e mont' 1-#55 feet +sed 1-!55 feet p+rc'ased L M/.!5 per foot 15-55 direct labor 'o+rs L M7./2 per 'o+r

9%o+nd all ans0ers to t'e nearest dollar. 2. %efer to %eic's $ompany. @'at is t'e material price &ariance 9calc+lated at point of p+rc'aseC a. M !/2 F b. M !/2 J c. M !15 F d. M !15 J ANS: A ,aterial Price ariance  9AP " SP = A;  9M/.!5 " M/.!2 = 1-!55 feet p+rc'ased  M!/2 F PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 22. %efer to %eic's $ompany. @'at is t'e material +antity &arianceC a. M ! 5 F b. M !25 F c. M ! 25 J d. M#-3#2 J ANS: $ ,aterial ;+antity ariance  9A; " S; = SP  91-#55 " 9/-255 =  = M/.!2  M!25 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

a. b. c. d.

23. M1-55 J M1-55 F M1-#5 J M1-#5 F

#

%efer to %eic's $ompany. @'at is t'e labor rate &arianceC

ANS: A *abor %ate ariance  9AP " SP = A;  9M7./2 " M7.#2 =15-55 'r +sed  M1-55 J PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2!. %efer to %eic's $ompany. @'at is t'e labor efficiency &arianceC a. M7#2 F b. M7#2 J c. M7/2 F d. M7/2 J ANS: A *abor Efficiency ariance  9A; " S; = SP  915-55 'r " 9/ 'r8+nit = /-255 +nits = M7.#2  M7#2 F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 'a+elton Co)pany

Ha?elton $ompany 'as t'e follo0in) information a&ailable for December 0'en /-255 +nits 0ere prod+ced 9ro+nd ans0ers to t'e nearest dollar. Standards* ,aterial *abor

/.2 po+nds per +nit L M.25 per po+nd 2.5 'o+rs per +nit L M15.#2 per 'o+r

Act!al* ,aterial p+rc'ased 1#-/55 po+nds L M.#2 ,aterial +sed 11-!25 po+nds 1!-/55 direct labor 'o+rs L M15.#5 per 'o+r

27. %efer to Ha?elton $ompany. @'at is t'e labor rate &arianceC a. M7!2 F b. M732 F c. M732 J d. M7!2 J


! $'apter

#2

ANS: B *abor %ate ariance  9AP " SP = A;  9M15.#5 " M15.#2 = 1!-/55 'rs.  M732 F PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2<. %efer to Ha?elton $ompany. @'at is t'e labor efficiency &arianceC a. M#-525 F b. M#-525 J c. M#-55 J d. M#-55 F ANS: A *abor efficiency &ariance  9A; " S;= SP 91!-/55 'rs "9/-255 +nits = 2.5 'r8+nit = M15.#28'r  M#-525 F PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 35. %efer to Ha?elton $ompany. @'at is t'e material price &ariance 9based on +antity p+rc'asedC a. M/-5!2 J b. M#-

! $'apter

#3

3#. %efer to Ha?leton $ompany. Ass+me t'at t'e company comp+tes t'e material price &ariance on t'e basis of material iss+ed to prod+ction. @'at is t'e total material &arianceC a. M#-725 J b. M#-725 F c. M2-177 J d. M2-177 F ANS: D Total ariance  911-!25 = M.#2 " 9/-255 = /.2 = M.25  M<-
@imberly $ompany 'as t'e follo0in) information a&ailable for ,arc' 0'en -#55 +nits 0ere prod+ced 9ro+nd ans0ers to t'e nearest dollar. Standards* ,aterial *abor

.5 po+nds per +nit L M2.#2 per po+nd 3.5 'o+rs per +nit L M15.55 per 'o+r

Act!al* ,aterial p+rc'ased 1!-255 po+nds L M2.15 ,aterial +sed 13-!55 po+nds #2-255 direct labor 'o+rs L M<.72 per 'o+r

3/. %efer to @imberly $ompany. @'at is t'e labor rate &arianceC a. M/-!75 F b. M/-!75 J c. M/-7#2 F d. M/-7#2 J ANS: $ *abor %ate ariance  9AP " SP = A;  9M<.72 " M15.55 = #2-255 'rs.  M/-7#2 F PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 3. %efer to @imberly $ompany. @'at is t'e labor efficiency &arianceC a. M #-<22 F b. M #-<22 J c. M /-555 J d. M /-555 F


! $'apter

#!

ANS: $ *abor efficiency &ariance  9A; " S;= SP 9#2-255 'rs "9-#55 +nits = 3.5 'r8+nit = M15.558'r  M/-555 J PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 32. %efer to @imberly $ompany. @'at is t'e material price &ariance 9based on +antity p+rc'asedC a. M#-252 F b. M#-252 F c. M#-3#2 F d. M#-3#2 F ANS: $ ,aterial price &ariance  9AP " SP = A;  9M2.15 " M2.#2 = 1!-255  M#-3#2 F PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 33. %efer to @imberly $ompany. @'at is t'e material +antity &arianceC a. M 2 15 F b. M 2#2 J c. M 2 #2 F d. M/-3!2 J ANS: $ ,aterial +antity &ariance  9A; " S; = SP  913-!55 " 9-#55 +nits = .5 lb8+nit = M2.#2  M2#2 F PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 3!. %efer to @imberly $ompany. Ass+me t'at t'e company comp+tes t'e material price &ariance on t'e basis of material iss+ed to prod+ction. @'at is t'e total material &arianceC a. M1-525 J b. M1-525 F c. M/-5/5 J d. M/-5/5 F ANS: D Total ariance  913-!55 = M2.15 " 9-#55 = .5 = M2.#2  M72-1!5.55 " M77-#55.55  M/-5/5 F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

#7

Strong #an!fact!ring

T'e follo0in) information is a&ailable for Stron) ,an+fact+rin) $ompany for t'e mont' of +ne 0'en t'e company prod+ced #-155 +nits: Standard* ,aterial *abor

# po+nds per +nit L M2.75 per po+nd / direct labor 'o+rs per +nit L M15.55 per 'o+r

Act!al* ,aterial *abor

-#25 po+nds p+rc'ased and +sed L M2.32 per po+nd 3-/55 direct labor 'o+rs at M<.!2 per 'o+r

37. %efer to Stron) ,an+fact+rin) $ompany. @'at is t'e material price &arianceC a. b. c. d.

M3/!.25 J M3/!.25 F M3/5.55 J M3/5.55 F

ANS: B ,aterial price &ariance  9AP " SP = A;  9M2.32 " M2.75 = -#25 lbs  M3/!.25 F PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 3<. %efer to Stron) ,an+fact+rin) $ompany. @'at is t'e material +antity &arianceC a. M#!2 F b. M#<5 F c. M#<5 J d. M#!2 J ANS: $ ,aterial +antity &ariance  9A; " S; = SP  9-#25 " 9# lbs8+nit = #-155 +nits= M2.758+nit  M#<5 J PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !5. %efer to Stron) ,an+fact+rin) $ompany. @'at is t'e labor rate &arianceC a. M1-2!2 J b. M1-2!2 F c. M1-2< J d. M5 ANS: B *abor %ate ariance  9AP " SP = A; 9M<.!2  M1-2!2 F " M15.55 = 3-/55 'rs PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

! $'apter

#<

!1. %efer to Stron) ,an+fact+rin) $ompany. @'at is t'e labor efficiency &arianceC a. M!/1.#2 F b. M!/1.#2 J c. M!25.55 F d. none of t'e ans0ers are correct ANS: D *abor efficiency &ariance  9A; " S; = SP  93-/55 " 9#-155 +nits = / 'rs8+nit = M15.55  M5 PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) Fleet-ood Co)pany

Fleet0ood $ompany +ses a standard cost system for its prod+ction process and applies o&er'ead based on direct labor 'o+rs. T'e follo0in) information is a&ailable for ,ay 0'en Fleet0ood prod+ced -255 +nits: Standard* D*H per +nit ariable o&er'ead per D*H Fi6ed o&er'ead per D*H B+d)eted &ariable o&er'ead B+d)eted fi6ed o&er'ead

2.50 $1.75 $3.10 $21,875 $38,750

Act!al* Direct labor 'o+rs ariable o&er'ead Fi6ed o&er'ead

10,000 $26,250 $38,000

!#. %efer to Fleet0ood $ompany. Jsin) t'e one"&ariance approac'- 0'at is t'e total o&er'ead &arianceC a. M3-53#.25 J b. M/-3#2.55 J c. M<-37!.25 J d. M3-23#.25 J ANS: $ Total ariance  Act+al O&er'ead " Applied O&er'ead  M9#3-#25  /7-555 " 9M91.!2  /.15 = #.25 'rs8+nit = -255 +nits  M3-#25.55 " M2-3#.25  M<-37!.25J PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !/. %efer to Fleet0ood $ompany. Jsin) t'e t0o"&ariance approac'- 0'at is t'e controllable &arianceC a. b. c. d.

M2-71#.25 J M2-71#.25 F M-/!2.55 J M-/!2.55 F


! $'apter

/5

ANS: A $ontrollable ariance  Act+al O&er'ead " B+d)eted O&er'ead Based on Standard ;+antity  M3-#25.55 " M99-255 +nits = #.2 D*H8+nit = M1.!2  /7-!25  M93-#25 " M27-/!.25  M2-71#.25 J PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !. %efer to Fleet0ood $ompany. Jsin) t'e t0o"&ariance approac'- 0'at is t'e noncontrollable &arianceC a. b. c. d.

M/-1#2.55 F M/-7!2.55 J M/-7!2.55 F M3-53#.25 J

ANS: B Jncontrollable ariance  B+d)eted O&er'ead Based on S; " Applied O&er'ead  M927-/!.25 " 2-23#.25  M/-7!2.55 J PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !2. %efer to Fleet0ood $ompany. Jsin) t'e t'ree"&ariance approac'- 0'at is t'e spendin) &arianceC a. M -/!2.55 J b. M /-3#2.55 F c. M 7-555.55 J d. M12-!25.55 J ANS: $ OH Spendin) ariance  Act+al OH " B+d)eted OH based +pon Inp+ts Jsed  M3-#25 " 9915-555 'rs = M1.!2  M/7-!25  M93-#25 " 23-#25  M7-555.55 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !3. %efer to Fleet0ood $ompany. Jsin) t'e t'ree"&ariance approac'- 0'at is t'e efficiency &arianceC a. M<-
! $'apter

/1

!!. %efer to Fleet0ood $ompany. Jsin) t'e t'ree"&ariance approac'- 0'at is t'e &ol+me &arianceC a. M/-1#2.55 F b. M/-7!2.55 F c. M/-7!2.55 J d. M3-53#.25 J ANS: $ ol+me ariance  B+d)et Based on Standard ;+antity " O&er'ead Applied  M927-/!.25 " 2-23#.55  M/-7!2.55 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !7. %efer to Fleet0ood $ompany. Jsin) t'e fo+r"&ariance approac'- 0'at is t'e &ariable o&er'ead spendin) &arianceC a. M-/!2.55 J b. M-/!2.55 F c. M7-!25.55 J d. M3-23#.25 J ANS: $ ariable O&er'ead Spendin) ariance  Act+al OH " B+d)eted OH8Act+al ;+antity  M#3-#25.55 " 915-555 = M1.!28OH 'r  M9#3-#25.55 " 1!-255.55  M7-!25.55 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !<. %efer to Fleet0ood $ompany. Jsin) t'e fo+r"&ariance approac'- 0'at is t'e &ariable o&er'ead efficiency &arianceC a. M#-17!.25 J b. M<-
M!-555.55 M/-1#2.55 J F M ! 25.55 J M !2 5.55 F


! $'apter

/#

ANS: D Fi6ed OH Spendin) ariance  Act+al Fi6ed OH " Applied Fi6ed OH  M9/7-555 " /7-!25  M!25.55 F PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 71. %efer to Fleet0ood $ompany. Jsin) t'e fo+r"&ariance approac'- 0'at is t'e &ol+me &arianceC a. M/-1#2.55 F b. M/-7!2.55 F c. M3-53/.55 J d. M/-7!2.55 J ANS: D ol+me ariance  B+d)et Based on Standard ;+antity " O&er'ead Applied  M927-/!.25 " 2-23#.55  M/-7!2.55 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) .enesis Co)pany

Genesis $ompany +ses a standard cost system for its prod+ction process and applies o&er'ead based on direct labor 'o+rs. T'e follo0in) information is a&ailable for September 0'en Genesis prod+ced 2-555 +nits: Standard* D*H per +nit ariable o&er'ead per D*H

Fi6ed o&er'ead pero&er'ead D*H B+d)eted &ariable B+d)eted fi6ed o&er'ead

3.00 $1.80 $3.25 $27,250 $49,500

Act!al* Direct labor 'o+rs ariable o&er'ead Fi6ed o&er'ead

16,000 $31,325 $49,750

7#. %efer to Genesis $ompany. Jsin) t'e one"&ariance approac'- 0'at is t'e total o&er'ead &arianceC a. M #!2 J b. M 1-555 J c. M -/#2 J d. M 2-/#2 J ANS: D Total ariance  Act+al O&er'ead " Applied O&er'ead  M9/1-/#2  <-!25 " 9M91.75  /.#2 = /.55 'rs8+nit = 2-555 +nits  M71-5!2.55 " M!2-!25.55  M2-/#2.55 J PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

! $'apter

//

7/. %efer to Genesis $ompany. Jsin) t'e t0o"&ariance approac'- 0'at is t'e controllable &arianceC a. M-5!2 J b. M-5!2 F c. M-2!2 J d. M-2!2 F ANS: $ $ontrollable ariance  Act+al O&er'ead " B+d)eted O&er'ead Based on Standard ;+antity  M71-5!2 " M992-555 +nits = /.5 D*H8+nit = M1.75  <-255  M971-5!2 " M!3-255  M-2!2 J PTS: 1

DIF:

Easy

OB: !"/

NAT: AA$SB:AnalyticalS(ills

*O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 7. %efer to Genesis $ompany. Jsin) t'e t0o"&ariance approac'- 0'at is t'e noncontrollable &arianceC a. M ! 25 F b. M !25 J c. M1-555 F d. M1-555 J ANS: B Jncontrollable ariance  B+d)eted O&er'ead Based on S; " Applied O&er'ead  M9!3-255 " !2-!25  M!25 J PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 72. %efer to Genesis $ompany. Jsin) t'e t'ree"&ariance approac'- 0'at is t'e spendin) &arianceC a. M#-2#2 J b. M#-!!2 J c. M-/!2 J d. M-/!2 F ANS: B OH Spendin) ariance  Act+al OH " B+d)eted OH based +pon Inp+ts Jsed  M71-5!2 " 9913-555 'rs = M1.75  M<-255  M971-5!2 " !7-/55  M#-!!2 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 73. %efer to Genesis $ompany. Jsin) t'e t'ree"&ariance approac'- 0'at is t'e efficiency &arianceC a. M1-755 F b. M1-755 J c. M#-525 J d. M#-225 F


! $'apter

/

ANS: B OH Efficiency ariance  B+d)eted OH based on Act+al " B+d)eted OH based on Standard  9913-555 = M1.75 M<-255 " 992-555 = /.55 = M1.75  M<-255  M9!7-/55.55 " !3-255.55  M1-755.55 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 7!. %efer to Genesis $ompany. Jsin) t'e t'ree"&ariance approac'- 0'at is t'e &ol+m e &arianceC a. M !25 F b. M !25 J c. M1-555 J d. M1-555 F ANS: B ol+me ariance  B+d)et Based on Standard ;+antity " O&er'ead Applied  M9!3-255.55 " !2-!25.55  M!25 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 77. %efer to Genesis $ompany. Jsin) t'e fo+r"&ariance approac'- 0'at is t'e &ariable o&er'ead spendin) &arianceC a. M#-2#2J b. M-5!2 F c. M-5!2 J d. M-/#2 J ANS: A ariable O&er'ead Spendin) ariance  Act+al OH " B+d)eted OH8Act+al ;+antity  M/1-/#2 " 913-555 = M1.758OH 'r  M9/1-/#2 " #7-755  M#-2#2 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 7<. %efer to Genesis $ompany. Jsin) t'e fo+r"&ariance approac'- 0'at is t'e &ariable o&er'ead efficiency &arianceC a. M #25 J b. M #25 F c. M1-755 J d. M1-755 F ANS: $ OH Efficiency ariance  B+d)eted OH based on Act+al " B+d)eted OH8Standard ;ty  9913-555 = M1.758'r " 992-555 = / 'rs8+nit = M1.758'r  M9#7-755 " #!-555  M1-755 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

! $'apter

/2

<5. %efer to Genesis $ompany. Jsin) t'e fo+r"&ariance approac'- 0'at is t'e fi6ed o&er'ead spendin) &arianceC a. M # 25 J b. M #25 F c. M1-555 J d. M#-#25 F ANS: A Fi6ed OH Spendin) ariance  Act+al Fi6ed OH " Applied Fi6ed OH  M9<-!25 " <-255  M#25 J PTS: 1

DIF:

Easy

OB: !"/


*O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) <1. %efer to Genesis $ompany. Jsin) t'e fo+r"&ariance approac'- 0'at is t'e &ol+me &arianceC a. M ! 25 F b. M !25 J c. M1-555 F d. M1-555 J ANS: B ol+me ariance  B+d)et Based on Standard ;+antity " O&er'ead Applied  M9<-255 " 92-555 6 / 6 /.#2  M<-255 " M7-!25  M!25 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) Ritchie Co)pany

%itc'ie $ompany +ses a standard cost system for its prod+ction process. %itc'ie $ompany applies o&er'ead based on direct labor 'o+rs. T'e follo0in) information is a&ailable for +ly: Standard* Direct labor 'o+rs per +nit ariable o&er'ead per 'o+r Fi6ed o&er'ead per 'o+r 9based on 11-<<5 D*Hs Act!al* Jnits prod+ced Direct labor 'o+rs ariable o&er'ead Fi6ed o&er'ead

2.20 $2.50 $3.00

4,400 8,800 $29,950 $42,300

<#. %efer to %itc'ie $ompany Jsin) t'e fo+r"&ariance approac'- 0'at is t'e &ariable o&er'ead spendin) &arianceC a. M!-<25 J b. M#2 F c. M!-
! $'apter

/3

ANS: A ariable OH Spendin) ariance  Act+al OH " B+d)eted OH8Act+al  M9#<-<25 " ##-555  M!-<25 PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)
DIF:

,oderate

OB: !"/



! $'apter

/!

*O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) <3. %efer to %itc'ie $ompany Jsin) t'e t'ree"&ariance approac'- 0'at is t'e spen din) &arianceC a. M#/-725 J b. M#/-725 F c. M1-#75 F d. M1-#75 J ANS: D Spendin) ariance  Act+al O&er'ead " B+d)et OH8Act+al Jse  M!#-#25 " 997-755 'rs = M#.258'r  M/2-
M#1-325 M13-75 J J M2-!!2 J M1#-575 J


! $'apter

/7

ANS: D $ontrollable ariance  Act+al O&er'ead " B+d)eted O&er'ead Based on Standard ;+antity  M!#-#25.55 " 9 -55 +nits = M#.258'r=#.#5 'rs8+nit  M/2-

! $'apter

/<

15/. One +nit re+ires # direct labor 'o+rs to prod+ce. Standard &ariable o&er'ead per +nit is M1.#2 and standard fi6ed o&er'ead per +nit is M1.!2. If //5 +nits 0ere prod+ced t'is mont'- 0'at total amo+nt of o&er'ead is applied to t'e +nits prod+cedC a. M<<5 b. M1-<75 c. M335 d. cannot be determined 0it'o+t (no0in) t'e act+al 'o+rs 0or(ed ANS: A //5 +nits = 9M1.#2  M1.!2  M<<5 PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 15. Ponca $ity $ompany +ses a standard cost acco+ntin) system. T'e follo0in) o&er'ead costs and prod+ction data are a&ailable for September: Standard fi6ed OH rate per D*H Standard &ariable OH rate per D*H B+d)eted mont'ly D*Hs Act+al D*Hs 0or(ed Standard D*Hs allo0ed for act+al prod+ction O&erall OH &ariance"fa&orable

$1 $4 40,000 39,500 39,000 $2,000

T'e total applied man+fact+rin) o&er'ead for September s'o+ld be a. M1<2-555. b. M1
24,000 $48,000 $108,000 $6.50

Act!al data for "ctober -ere as follo-s* Direct labor 'o+rs 0or(ed Total OH Standard D*Hs allo0ed for capacity attained

22,000 $147,000 21,000

Jsin) t'e t0o"0ay analysis of o&er'ead &ariances- 0'at is t'e controllable &ariance for OctoberC a. M/-555 F b. M2-555 F c. M<-555 F d. M15-255 J 4 #511 $en)a)e *earnin). All %i)'ts %eser&ed. ,ay not be copied- scanned- or d+plicated- in 0'ole or in part- e6cept for +se as permitted in a license distrib+ted 0it' a certain prod+ct or ser&ice for classroom +se.

! $'apter

5

ANS: A $ontrollable ariance  Act+al O&er'ead " B+d)et Based on S; for Act+al O+tp+t  M1!-555 " 99#1-555 = M#.558'r  M157-555  M91!-555 " 125-555  M/-555 F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 153. T'e follo0in) information is a&ailable from t'e Fit?)erald $ompany: Act+al OH Fi6ed OH e6penses- act+al Fi6ed e6penses- b+d)eted Act+alOH 'o+rs Standard 'o+rs ariable OH rate per D*H

$15,000 $7,200 $7,000 3,500 3,800 $2.50

Ass+min) t'at Fit?)erald +ses a t'ree"0ay analysis of o&er'ead &ariances- 0'at is t'e o&er'ead spendin) &arianceC a. M!25 F b. M!25 J c. M<25 F d. M1-255 J ANS: A Spendin) ariance  Act+al O&er'ead " B+d)eted O&er'ead8Act+al Ho+rs  M12-555 " 99/-255 = M#.25  M!-555  M912-555 " 12-!25  M!25 F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 15!. Norris $ompany +ses a t0o"0ay analysis of o&er'ead &ariances. Selected data for t'e ,arc' prod+ction acti&ity are as follo0s: Act+al &ariable OH inc+rred ariable OH rate per ,H Standard ,Hs allo0ed Act+al ,Hs

$196,000 $6 33,000 32,000

Ass+min) t'at b+d)eted fi6ed o&er'ead costs are e+al to act+al fi6ed costs- t'e controllable &ariance for ,arc' is a. M#-555 F. b. M-555 J. c. M-555 F. d. M3-555 F.


! $'apter

1

ANS: A $ontrollable ariance  Act+al OH " B+d)eted OH based on Standard ;ty  M1<3-555 " 9//-555 = M38'r  M#-555 F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 157. S+perior F+el $ompany +ses a standard cost system. O&er'ead cost information for an+ary is as follo0s: Total act+al o&er'ead inc+rred Fi6ed o&er'ead b+d)eted Total standard o&er'ead rate per ,H ariable o&er'ead rate per ,H Standard ,Hs allo0ed for act+al prod+ction

$12,600 $3,300 $4 $3 3,500

@'at is t'e total o&er'ead &arianceC a. M1-#55 F b. M1-#55 J c. M1-55 F d. M1-55 J ANS: $ Total O&er'ead ariance  Act+al O&er'ead " Standard O&er'ead  M91#-355 " 9/-255 ,H = M8,H  M91#-355 " 1-555  M1-55 F PTS: 1 DIF: Easy OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) &ational Toy Co)pany

National Toy $ompany 'as de&eloped standard o&er'ead costs based on a capacity of 175-555 mac'ine 'o+rs as follo0s: Standard costs per +nit: ariable portion Fi6ed portion

# 'o+rs L M/  # 'o+rs L M2 

M 3 15 M13

D+rin) No&ember- 72-555 +nits 0ere sc'ed+led for prod+ction- b+t only 75-555 +nits 0ere act+ally prod+ced. T'e follo0in) data relate to No&ember: Act+al mac'ine 'o+rs +sed 0ere 132-555. Act+al o&er'ead inc+rred totaled M1-/!7-555 9M217-555 &ariable pl+s M735-555 fi6ed. All in&entories are carried at standard cost.


! $'apter

#

15<. %efer to National Toy $ompany. T'e &ariable o&er'ead spendin) &ariance for No&ember 0as a. M12-555 J. b. M#/-555 J. c. M/7-555 F. d. M/7-555 J. ANS: B ariable OH Spendin) ariance  Act+al OH " B+d)eted FOH8Act+al Inp+t  M217-555 " 9132-555 D*H = M/8'r  M9217-555 " <2-555  M#/-555 J PTS: 1

DIF:

,oderate

OB: !"/


*O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 115. %efer to National Toy $ompany. T'e &ariable o&er'ead efficiency &ariance for No&ember 0as a. M12-555 J. b. M#/-555 J. c. M/7-555 F. d. M/7-555 J. ANS: A ariable OH Efficiency ariance  B+d)eted OH8Act+al " B+d)eted OH8Standard  M<2-555 " 975-555 +nits = # 'rs8+nit = M/  M9<2-555 " 75-555  M12-555 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 111. %efer to National Toy $ompany. T'e fi6ed o&er'ead spendin) &ariance for No&ember 0as a. M5-555 J. b. M5-555 F. c. M35-555 F. d. M35-555 J. ANS: B Fi6ed O&er'ead Spendin) ariance  Act+al Fi6ed OH " B+d)eted Fi6ed OH  M9735-555 " 9175-555 ,H = M28'r  M9735-555 " M<55-555  M5-555 F PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 11#. %efer to National Toy $ompany. T'e fi6ed o&er'ead &ol+me &ariance for No&ember 0as a. M35-555 J. b. M35-555 F. c. d. M155-555 M155-555 F. J.


! $'apter

/

ANS: D Fi6ed FOH ol+me ariance  B+d)eted Fi6ed FOH " Applied FOH  M9<55-555 " 755-555  M155-555 J PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) Classic Cleaning Co)pany

$lassic $leanin) $ompany man+fact+res a cleanin) sol&ent. T'e company employs bot' s(illed and +ns(illed 0or(ers. To prod+ce one 22")allon dr+m of sol&ent re+ires ,aterials A and B as 0ell as s(illed labor and +ns(illed labor. T'e standard and act+al material and labor information is presented belo0: Standard* ,aterial A: /5.#2 )allons L M1.#2 per )allon ,aterial B: #.!2 )allons L M#.55 per )allon

S(illed *abor:  'o+rs L M1# per 'o+r Jns(illed *abor: # 'o+rs L M ! per 'o+r Act!al* ,aterial A: 15-!13 )allons p+rc'ased and +sed L M1.25 per )allon ,aterial B: 1!-7 )allons p+rc'ased and +sed L M1.<5 per )allon

S(illed labor 'o+rs: 1-<25 L M11.<5 per 'o+r Jns(illed labor 'o+rs: 1-/55 L M!.12 per 'o+r D+rin) t'e c+rrent mont' $lassic $leanin) $ompany man+fact+red 255 22")allon dr+ms. %o+nd all ans0ers to t'e nearest 0'ole dollar. 11/. %efer to $lassic $leanin) $ompany. @'at is t'e total material price &arianceC a. M7!! F b. M7!! J c. M

! $'apter



ANS: B Total ,aterial ,i6 ariance  Act+al ,i6-;ty- Std Price " Std ,i6- Price-Act+al ;ty  M97-/3/ " -!3!  M/-2<3 J PTS: 1 DIF: Diffic+lt OB: !"! NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 112. %efer to $lassic $leanin) $ompany. @'at is t'e total material yield &arianceC a. M1-111 J b. M1-111 F c. M#-3!5 J d. M#-3!5 F ANS: A ,aterial ield ariance  Std ,i6- Std Price-Act+al ;ty " Std ,i6- ;ty- Price  M9-!3! " M/-323  M1-111 J PTS: 1 DIF: Diffic+lt OB: !"! NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 113. %efer to $lassic $leanin) $ompany. @'at is t'e labor rate &arianceC a. M5 b. M1-57/ J c. M#-27/ J d. M1-57/ F ANS: A *abor %ate ariance  Act+al ,i6- ;ty-Price " Act+al ,i6-;ty-Std Price  M9/#-255 " /#-255  M5 PTS: 1 DIF: ,oderate OB: !"! NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 11!. %efer to $lassic $leanin) $ompany. @'at is t'e labor mi6 &arianceC a. M1-57/ J b. M#-277 J c. M1-57/ F d. M#-277 F ANS: $ *abor ,i6 ariance  Act+al ,i6-;ty- Std Price " Std ,i6- Act+al ;ty- Std Price  M9/#-255 " //-27/  M1-57/ F PTS: 1 DIF: Diffic+lt OB: !"! NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

a. b. c. d.

117. M#-27/ J M#-27/ F M1-1/7 F M1-1/7 J

2

%efer to $lassic $leanin) $ompany. @'at is t'e labor yield &arianceC

ANS: A *abor ield ariance  Std ,i6- Act ;ty- Std Price " Std ,i6- ;ty- Price  M9//-27/ " M/1-555  M#-27/ J PTS: 1 DIF: Diffic+lt OB: !"! NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 11<. T'e s+m of t'e material mi6 and material yield &ariances e+als a. t'e material p+rc'ase price &ariance. b. t'e material +antity &ariance. c. t'e total material &ariance. d. none of t'e abo&e. ANS: B PTS: 1 DIF: Easy OB: !"! NAT: AA$SB: Analytical S(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1#5. T'e s+m of t'e labor mi6 and labor yield &ariances e+als a. t'e labor efficiency &ariance. b. t'e total labor &ariance. c. t'e labor rate &ariance. d. not'in) beca+se t'ese t0o &ariances cannot be added since t'ey +se different costs. ANS: A PTS: 1 NAT: AA$SB: Analytical S(ills

DIF:

Easy

OB: !"!

*O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) S'"RT A&S,ER

1. *ist and disc+ss briefly t'e t'ree standards of attainability. ANS: E6pected standards reflect 0'at is act+ally e6pected to occ+r in t'e f+t+re period. T'is standard ta(es into consideration 0aste and inefficiencies and ma(es allo0ances for t'em. Practical standards can be reac'ed or e6ceeded most of t'e time 0it' reasonable effort. T'is standard allo0s for normal- +na&oidable time problems or delays. Ideal standards pro&ide for no inefficiencies of any type. T'is standard does not allo0 for normal operatin) delays or '+man limitations. PTS: 1

DIF:

,oderate

OB: !"

NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

3

#. Disc+ss briefly t'e type of information contained on 9a a bill of materials and 9b an operations flo0 doc+ment. ANS: 9a A bill of materials contains t'e identification of components- a description of components- and t'e +antity of eac' material re+ired for a prod+ct. 9b An operations flo0 doc+ment contains an identification n+mber- descriptions of t'e tas(s to be performed- t'e departments doin) t'e 0or(- and standard n+mber of 'o+rs and8or min+tes to perform eac' tas(. PTS: 1 DIF: ,oderate OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) /. Define t'e follo0in) terms: standard cost system- total &ariance- material price &ariance- and labor efficiency &ariance. ANS: A standard cost system records bot' standard costs and act+al costs in t'e acco+ntin) records. T'is process allo0s for better cost control beca+se act+al costs can be easily compared to standard costs. A total &ariance is t'e difference bet0een act+al inp+t cost for material or labor and t'e standard cost for material or labor for t'e o+tp+t prod+ced. T'e material price &ariance is t'e difference bet0een t'e act+al price paid for material and t'e standard price of t'e material times t'e act+al +antity +sed or p+rc'ased. T'e labor efficiency &ariance compares t'e n+mber of 'o+rs act+ally 0or(ed 0it' t'e standard 'o+rs allo0ed for t'e prod+ction ac'ie&ed and &al+es t'is difference at t'e standard labor rate. PTS: 1 DIF: ,oderate NAT: AA$SB: %eflecti&e T'in(in)

OB: !"/

*O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) . Disc+ss 'o0 establis'in) standards benefits t'e follo0in) mana)ement f+nctions: performance e&al+ation and decision ma(in). ANS: Performance e&al+ation is en'anced by t'e +se of standard costs beca+se it allo0s mana)ement to pinpoint de&iations from standard costs and points o+t &ariances. T'e &ariances are analy?ed and indi&id+al responsibility can be assessed for t'e &ariances- dependin) on t'e nat+re of t'e ca+ses. T'e a&ailability of standard cost information facilitates many decisions. T'ese costs can be +sed in b+d)etin)- cost estimates for >obs- and determinin) contrib+tions made by &ario+s prod+ct lines andt'+s- can be +sed to decide 0'et'er to add ne0 lines or drop old lines. PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

!

2. Disc+ss 0'y standards may need to be c'an)ed after t'ey 'a&e been in effect for some period of time. ANS: Standards may need to be c'an)ed from time to time beca+se of c'an)in) economic conditionsa&ailability of materials- +ality of materials- and labor rates or s(ill le&els. Standards s'o+ld be re&ie0ed periodically to ass+re mana)ement t'at c+rrent standards are bein) establis'ed and +sed. PTS: 1 DIF: ,oderate OB: !" NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 3. Disc+ss 'o0 &ariable and fi6ed o&er'ead application rates are calc+lated. ANS: T'e &ariable o&er'ead application rate is calc+lated by di&idin) total b+d)eted &ariable o&er'ead by its related le&el of acti&ity. Any le&el of acti&ity 0it'in t'e rele&ant ran)e may be selected since OH cost per +nit is constant t'ro+)'o+t t'e rele&ant ran)e. T'e fi6ed o&er'ead application rate is calc+lated by di&idin) total b+d)eted fi6ed o&er'ead by t'e specific capacity le&el e6pected for t'e period. PTS: 1 DIF: ,oderate OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !. @'y are fi6ed o&er'ead &ariances considered noncontrollableC ANS: ,ana)ement 'as limited ability to control fi6ed o&er'ead costs in t'e s'ort r+n beca+se t'ese costs are inc+rred to pro&ide t'e capacity to prod+ce. Fi6ed costs can be controllable to a limited e6tent at t'e point of commitment t'erefore- t'e FOH spendin) &ariance can be considered- in part- controllable. On t'e ot'er 'and- t'e &ol+me &ariance arises solely beca+se mana)ement 'as selected a specific le&el of acti&ity on 0'ic' to calc+late t'e FOH application rate. If act+al acti&ity differs at all from t'is selected base- a &ol+me &ariance 0ill occ+r. Prod+ction le&els are controllable to a &ery limited e6tent in t'e prod+ction area. Prod+ction is more often related to ability to sell and demand t'+s- t'ese le&els are not controllable by t'e prod+ction mana)er. PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

7

7. a. b. c. d. e. f. ). '.

Pro&ide t'e correct term for eac' of t'e follo0in) definitions:

a cost t'at fl+ct+ates 0it' lar)e c'an)es in le&el of acti&ity a ran)e of acti&ity o&er 0'ic' costs be'a&e as predicted t'e capacity le&el at 0'ic' a firm belie&es it 0ill operate at d+rin) t'e comin) prod+ction cycle t'e difference bet0een act+al &ariable o&er'ead and b+d)eted &ariable o&er'ead based on inp+ts t'e difference bet0een total act+al o&er'ead and total applied o&er'ead t'e difference bet0een total b+d)eted o&er'ead based on inp+ts and applied o&er'ead t'e difference bet0een total act+al o&er'ead and total b+d)eted o&er'ead based on o+tp+t t'e difference bet0een act+al fi6ed o&er'ead and b+d)eted fi6ed o&er'ead

ANS: a. step fi6ed cost b. rele&ant ran)e c. e6pected ann+al capacity d. &ariable o&er'ead spendin) &ariance e. total o&er'ead &ariance f. &ol+me &ariance ). efficiency &ariance '. fi6ed o&er'ead spendin) &ariance PTS: 1 DIF: ,oderate OB: !"# NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) <. Distin)+is' bet0een t'e fo+r"&ariance- t'ree"&ariance- t0o"&ariance- and one"&ariance approac'es for comp+tin) factory o&er'ead &ariances. ANS: T'e fo+r &ariance approac' is t'e most complete meas+rement of all of t'e o&er'ead &ariances. It is composed of fo+r separate &ariances: ariable Spendin)  Act+al OH " 9OH %ate 6 A; Efficiency  9OH %ate 6 A; " 9OH %ate 6 S; Fi6ed Spendin)  Act+al FOH " B+d)eted FOH ol+me  B+d)eted FOH " 9FOH rate 6 S; T'e t'ree &ariance approac' comp+tes t'e follo0in) &ariances: Spendin)""Total Act+al O&er'ead " Q9OH 6 A;  B+d)eted FOHR""T'is e+als t'e &ariable and fi6ed o&er'ead spendin) &ariances comp+ted +nder t'e fo+r &ariance approac'. Efficiency""Q9OH rate 6 A;  BFOHR " Q9OH rate 6 S;  BFOHR""T'is e+als t'e &ariable OH efficiency &ariance comp+ted +nder t'e fo+r"&ariance approac'. ol+me""BFOH " 9FOH rate 6 S; T'is e+als t'e &ol+me &ariance comp+ted +nder t'e fo+r &ariance approac'.


! $'apter

<

T'e t0o &ariance approac' comp+tes t'e follo0in) &ariances: B+d)et""Total Act+al O&er'ead " QOH rate 6 S;  B+d)eted FOHR"" E+als t'e spendin) and efficiency &ariances comp+ted +nder t'e t'ree &ariance approac'. ol+me""same as &ol+me &ariance +nder t'e fo+r &ariance approac'. T'e one &ariance approac' simply s+btracts total act+al o&er'ead from t'e combined fi6ed and &ariable o&er'ead rate times t'e standard +antity. T'e one"- t0o"- and t'ree" &ariance approac'es are )enerally +sed 0'en t'ere is not s+fficient information to comp+te fo+r &ariances. PTS: 1 DIF: Diffic+lt OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 15. E6plain t'e so+rce of &ariable o&er'ead spendin) and efficiency &ariances and 'o0 t'ese &ariances are comp+ted. ANS: T'e &ariable o&er'ead spendin) &ariance is t'e difference bet0een act+al &ariable o&er'ead and b+d)eted o&er'ead based on act!al ho!rs ariable o&er'ead spendin) &ariances are ca+sed by bot' price and &ol+me differences. Spendin) &ariances associated 0it' price can occ+r beca+se o&er timec'an)es in OH prices 'a&e not been incl+ded in t'e standard rate. $'an)es of t'is nat+re are typically beyond t'e control of mana)ement. On t'e ot'er 'and &ariable o&er'ead spendin) &ariances associated 0it' 0!antity differences can be ca+sed 0aste or s'rin(a)e. ,ana)ement s'o+ld be 'eld acco+ntable for t'ese spendin) &ariances. T'e &ariable o&er'ead efficiency &ariance is t'e difference bet0een b+d)eted OH for act+al 'o+rs and applied OH. T'is &ariance +antifies t'e effect of +sin) more or less of t'e acti&ity or reso+rce 0'ic' is t'e base for &ariable o&er'ead application.

Act+alOH

B+d)eted OH 9For act+al acti&ity 9SP6A;

Applied OH 9for standard +antity allo0ed 9SP6S;

 Spendin)

Efficiency

PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 11. E6plain t'e so+rce of fi6ed o&er'ead spendin) and &ol+me &ariances and 'o0 t'ese &ariances are comp+ted.


! $'apter

25

ANS: T'e total fi6ed o&er'ead &ariance 9FOH is di&ided into its price and prod+ction &ol+me se)ments in t'e follo0in) manner: Applied FOH 9for standard ty allo0ed Act+al FOH

B+d)eted FOH

9SP  S;

 FOH Spendin) ariance

FOH ol+me ariance

T'e FOH spendin) &ariance is t'e difference bet0een act+al FOH and b+d)eted FOH. T'is amo+nt normally represents t'e difference bet0een b+d)eted and act+al costs for t'e n+mero+s FOH components- b+t it can also reflect reso+rce mismana)ement. T'e FOH &ol+me &ariance is t'e difference bet0een b+d)eted and applied fi6ed o&er'ead. T'is &ariance is ca+sed solely be prod+cin) at a le&el t'at differs from t'at +sed to comp+te t'e predetermined o&er'ead rate. T'is &ariance is considered to be +ncontrollable. PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB: %eflecti&e T'in(in) *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) $R"1LE# #oore Co)pany

,oore $ompany 'as t'e follo0in) information a&ailable for t'e c+rrent year: Standard* ,aterial *abor Act!al* ,aterial *abor

/.2 feet per +nit L M#.35 per foot 2 direct labor 'o+rs L M7.25 per +nit

<2-3#2 feet +sed 9155-555 feet p+rc'ased L M#.25 per foot 1##-55 direct labor 'o+rs inc+rred per +nit L M7./2 per 'o+r #2-255 +nits 0ere prod+ced

1. %efer to ,oore $ompany. $omp+te t'e material p+rc'ase price and +antity &ariances. ANS: ,aterial price &ariance: 155-555 × M#.25  155-555 × M#.35 

$250,000 260,000 $ 10,000F

,aterial +antity &ariance: <2-3#2 × M#.35  7<-#25 × M#.35 

$248,625 232,050 $ 16,575 U

PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

21


! $'apter

2#

#.

%efer to ,oore $ompany. $omp+te t'e labor rate and efficiency &ariances.

ANS: *abor rate &ariance: 1##-55 × M7./2  1##-55 × M7.25 

$1,022,040 1,040,400 $

*abor efficiency &ariance: 1##-55 × M7.25  1#!-255 × M7.25 

18,360F

$1,040,400 1,083,750 $

43,350F

PTS: DIF:$ompetencies: ,oderate ,eas+rementOB: !"/ %eportin) NAT: AA$SB:AnalyticalS(ills *O$: 1 AI$PA F+nctional 'ooer Co)pany

Hoo&er $ompany applies o&er'ead based on direct labor 'o+rs and 'as t'e follo0in) a&ailable for t'e c+rrent mont': Standard* Direct labor 'o+rs per +nit ariable o&er'ead per D*H Fi6ed o&er'ead per D*H 9based on 7-<55 D*Hs Act!al* Jnits prod+ced Direct labor 'o+rs ariable o&er'ead Fi6ed o&er'ead

5 $.75 $1.90

1,800 8,900 $6,400 $17,500

/. %efer to Hoo&er $ompany. $omp+te all t'e appropriate &ariances +sin) t'e t0o"&ariance approac'. ANS: Act+al 9M3-55  M1!-255 1!dget Variance* BFOH 97-<55 × M1.<5 OH 91-755 × 2 × M.!2 Vol!)e Variance* Applied OH: 91-755 × 2 × M#.32

$23,900 $240 U

$16,910 6,750

$23,660 $190 F

$23,850

PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

2/

. %efer to Hoo&er $ompany. $omp+te all t'e appropriate &ariances +sin) t'e t'ree" &ariance approac'. ANS: Act+al Spending Variance* Fle6ible B+d)et Based on Act+al Inp+t BFOH OH 97-<55 × M.!2 Efficiency Variance* Fle6ible B+d)et Based on Standard D*Hs BFOH OH 91-755 × 2 × M.!2 Vol!)e Variance* Applied OH: 91-755 × 2 × M#.32

$23,900 $315 U

$16,910 6,675

$23,585 $75 F

$16,910 6,750

$23,660 $190 F

$23,850

PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 2. %efer to Hoo&er $ompany. $omp+te all t'e appropriate &ariances +sin) t'e fo+r"&ariance approac'. ANS: Act+al OH Variable Spending Variance* Fle6. B+d. Based on Act+al Inp+t Ho+rs 97-<55 × M.!2 Variable Efficiency Variance* Applied OH 91-755 × 2 × M.!2 Act+al FOH F"' Spending Variance* BJDGETED FOH F"' Vol!)e Variance* Applied FOH 91-755 × 2 × M1.<5

$6,400 $275 F

$6,675 $75 F

$6,750 $17,500 $590 U

$16,910 $190 F

$17,100

PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) Tr!)an Co)pany

Tr+man $ompany applies o&er'ead based on direct labor 'o+rs and 'as t'e follo0in) a&ailable for t'e c+rrent mont': Standard* Direct labor 'o+rs per +nit

ariable o&er'ead per D*H Fi6ed o&er'ead per D*H 9based on 11-<55 D*Hs

6 $.80 $2.10


! $'apter

2


! $'apter

Act!al* Jnits prod+ced Direct labor 'o+rs ariable o&er'ead Fi6ed o&er'ead

22

2,000 11,900 $9,900 $25,500

3. %efer to Tr+man $ompany. $omp+te all t'e appropriate &ariances +sin) t'e t0o"&ariance approac'. ANS: Act+al 9M<-<55  M#2-255 1!dget Variance* BFOH 911-<55 × M#.15 OH 9#555 × 3 × M.75 Vol!)e Variance* Applied OH: 9#-555 × 3 × M#.<5

$35,400 $810 U

$24,990 9,600

$34,590 $210 F

$34,800

PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) !. %efer to Tr+man $ompany. $omp+te all t'e appropriate &ariances +sin) t'e t'ree"&ariance approac'. ANS: Act+al Spending Variance* Fle6ible B+d)et Based on Act+al Inp+t BFOH OH 911-<55 × M.75 Efficiency Variance* Fle6ible B+d)et Based on Standard D*Hs BFOH OH 9#-555 × 3 × M.75 Vol!)e Variance* Applied OH: 9#-555 × 3 × M#.<5

$35,400 $890 U

$24,990 9,520

$34,510 $80 F

$24,990 9,600

$34,590 $210 F

$34,800

PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 7. %efer to Tr+man $ompany. $omp+te all t'e appropriate &ariances +sin) t'e fo+r"&ariance approac'. ANS: Act+al OH Variable Spending Variance* Fle6. B+d. Based on Act+al Inp+t Ho+rs 911-<55 × M.75 Variable Efficiency Variance* Applied OH 9#-555 × 3 × M.75

$9,900 $380 U

$9,520 $80 F

$9,600


! $'apter

Act+al FOH F"' Spending Variance* BJDGETED FOH 911-<55 6 M#.15 F"' Vol!)e Variance* Applied FOH 9#-555 × 3 × M#.15

23 $25,500 $510 U

$24,990 $210 F

$25,200

PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) <. Hidal)o $ompany 'as made t'e follo0in) information a&ailable for its prod+ction facility for t'e c+rrent mont'. Fi6ed o&er'ead 0as estimated at 1<-555 mac'ine 'o+rs for t'e prod+ction cycle. Act+al mac'ine 'o+rs for t'e period 0ere 17-<55- 0'ic' )enerated /-<55 +nits. ,aterial p+rc'ased 975-555 pieces ,aterial +antity &ariance ,ac'ine 'o+rs +sed 917-<55 'o+rs OH spendin) &ariance Act+al fi6ed o&er'ead Act+al labor cost Act+al labor 'o+rs

$314,000 $6,400U $50U $60,000 $40,120 5,900

Hidal)o $ompanyKs standard costs are as follo0s: Direct material Directlabor ariable o&er'ead 9applied on a mac'ine 'o+r basis Fi6ed o&er'ead 9applied on a mac'ine 'o+r basis

#5 pieces L M per piece 1.2'o+rsLM3per'o+r .7 'o+rs L M#.25 per 'o+r .7 'o+rs L M/ per 'o+r

Determine t'e follo0in) items: a. material p+rc'ase price &ariance b. standard +antity allo0ed for material c. total standard cost of material allo0ed d. act+al +antity of material +sed e. labor rate &ariance f. standard 'o+rs allo0ed for labor ). total standard cost of labor allo0ed '. labor efficiency &ariance i. act+al &ariable o&er'ead inc+rred >. standard mac'ine 'o+rs allo0ed (. &ariable o&er'ead efficiency &ariance l. b+d)eted fi6ed o&er'ead m. applied fi6ed o&er'ead n. fi6ed o&er'ead spendin) &ariance o. &ol+me &ariance p. total o&er'ead &ariance


! $'apter

ANS: a. act+al material cost act+al pieces at standard cost 975-555 × M material p+rc'ase price &ariance b.

/-<55 +nits × #5 pieces per +nit  !7-555 standard +antity allo0ed

c.

total standard cost of material 9!7-555 × M M/1#-555

d.

standard cost of act+al material +sed M/1#-555  M3-55 J +antity &ariance M/17-55 U M  !<-355 act+al pieces +sed

e.

act+al labor cost 2-<55 act+al D*Hs × M3 labor rate &ariance

2! $314,000 320,000 $

6,000F

$318,400

$ 40,120 35,400 $

4,720U

f.

/-<55 +nits × 1.2 standard 'o+rs per +nit

).

2-725 SHA × M3

$ 35,100

'.

act+al 'o+rs × standard rate 9from e standard cost of labor allo0ed 9from ) labor efficiency &ariance

$ 35,400

act+al mac'ine 'o+rs × standard OH rate 917-<55 × M#.25 OH spendin) &ariance act+al OH

$ 47,250

i.

>.

/-<55 +nits × .7 standard 'o+rs per +nit  17-!#5 ,H allo0ed

(.

standard 'o+rs allo0ed 9from > × standard OH rate 917-!#5 × M#.25 act+al mac'ine 'o+rs × standard rate 9from i 917-<55 × M#.25 &ariable o&er'ead efficiency &ariance

5,850SHA

$

35,100 300U

50U $ 47,300

$ 46,800 47,250 $

450U

l.

1<-555 mac'ine 'o+rs × M/

$ 57,000

m.

/-<55 +nits × .7 'o+rs per +nit × M/.55

$ 56,160

n.

act+al fi6ed o&er'ead b+d)eted fi6ed o&er'ead 9from l fi6ed o&er'ead spendin) &ariance

$ 60,000 57,000 $ 3,000U

o.

b+d)eted fi6ed o&er'ead 9from l applied fi6ed o&er'ead 9from m &ol+me &ariance

$ 57,000 56,160

total act+al o&er'ead QM35-555  M!-/55 9from iR

$107,300

p.

$

840U


! $'apter

27

total applied o&er'ead 917-!#5 SHA × M2.25 Total o&er'ead &ariance

102,960 $

4,340U

PTS: 1 DIF: Diffic+lt OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 15. Starr $ompany 'as made t'e follo0in) information a&ailable for its prod+ction facility for t'e c+rrent mont'. Fi6ed o&er'ead 0as estimated at ##-555 mac'ine 'o+rs for t'e prod+ction cycle. Act+al mac'ine 'o+rs for t'e period 0ere #1-!55- 0'ic' )enerated -#55 +nits. $529,650 $7,000U

,aterial p+rc'ased 915!-555 pieces ,aterial +antity &ariance ,ac'ine 'o+rs +sed 9##-255 'o+rs OH spendin) &ariance Act+al fi6ed o&er'ead Act+al labor cost Act+al labor 'o+rs

$100U $81,000 $60,300 8,500

Starr $ompanyKs standard costs are as follo0s: Direct material Directlabor ariable o&er'ead 9applied on a mac'ine 'o+r basis Fi6ed o&er'ead 9applied on a mac'ine 'o+r basis

#2 pieces L M2 per piece #.5'o+rsLM!per'o+r 2.# 'o+rs L M/.55 per 'o+r 2.# 'o+rs L M/.25 per 'o+r

Determine t'e follo0in) items: a. material p+rc'ase price &ariance b. standard +antity allo0ed for material c. total standard cost of material allo0ed d. e. f. ). '. i. >. (. l. m. n. o. p.

act+al +antity of material +sed labor rate &ariance standard 'o+rs allo0ed for labor total standard cost of labor allo0ed labor efficiency &ariance act+al &ariable o&er'ead inc+rred standard mac'ine 'o+rs allo0ed &ariable o&er'ead efficiency &ariance b+d)eted fi6ed o&er'ead applied fi6ed o&er'ead fi6ed o&er'ead spendin) &ariance &ol+me &ariance total o&er'ead &ariance

ANS: a. act+al material cost act+al pieces at standard cost 915!-555 6 M2 material p+rc'ase price &ariance b.

-#55 +nits × #2 pieces per +nit  152-555 standard +antity allo0ed

c.

total standard cost of material 9152-555 × M2 M2#2-555

$529,650 535,000 $ 5,350F


! $'apter

2<


! $'apter

d.

e.

35

standard cost of act+al material +sed M2#2-555  M!-555 J +antity &ariance M2/#-555 U M2  153-55 act+al pieces +sed

$532,000

$ 60,300

act+al labor cost 7.255 act+al D*Hs × M! labor rate &ariance

59,500 $

800U

f.

-#55 +nits × #.5 standard 'o+rs per +nit

).

7-55 SHA × M!

$ 58,800

'.

act+al 'o+rs × standard rate 9from e standard cost of labor allo0ed 9from ) labor efficiency &ariance

$ 59,500

act+al mac'ine 'o+rs × standard OH rate 9##-255 × M/.55 OH spendin) &ariance act+al OH

$ 67,500

i.

8,400SHA

$

58,800 700U

100U $ 67,600

>.

-#55 +nits × 2.# standard 'o+rs per +nit  #1-75 ,H allo0ed

(.

standard 'o+rs allo0ed 9from > × standard OH rate 9#1-75 × M/.55 act+al mac'ine 'o+rs × standard rate 9from i 9##-255 × M/.55 &ariable o&er'ead efficiency &ariance

$ 65,520 67,500 $

1,980U

l.

##-555 mac'ine 'o+rs × M/.25

$ 77,000

m.

-#55 +nits × 2.# 'o+rs per +nit × M/.25

$ 76,440

n.

act+al fi6ed o&er'ead b+d)eted fi6ed o&er'ead 9from l fi6ed o&er'ead spendin) &ariance

$ 81,000 77,000 $ 4,000U

o.

b+d)eted fi6ed o&er'ead 9from l applied fi6ed o&er'ead 9from m &ol+me &ariance

$ 77,000 76,440 $ 560U

p.

total act+al o&er'ead QM71-555  M3!-355 9from iR total applied o&er'ead 9#1-75 SHA × M3.25 Total o&er'ead &ariance

$148,600

PTS: 1

DIF:

Diffic+lt

OB: !"/

141,960 $

6,640U


*O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

31

Stonegate Co)pany

T'e follo0in) information is a&ailable for Stone)ate $ompany for t'e c+rrent year: Standard* ,aterial : /.5 po+nds per +nit L M.#5 per po+nd ,aterial : .2 po+nds per +nit L M/./5 per po+nd $lass S labor: / 'o+rs per +nit L M15.25 per 'o+r $lass JS labor: ! 'o+rs per +nit L M7.55 per 'o+r Act!al* ,aterial : /.3 po+nds per +nit L M.55 per po+nd 9p+rc'ased and +sed ,aterial : . po+nds per +nit L M/.#2 per po+nd 9p+rc'ased and +sed $lass S labor: /.7 'o+rs per +nit L M15.35 per 'o+r

$lass JS labor: 2.! 'o+rs per +nit L M!.75 per 'o+r Stone)ate $ompany prod+ced a total of 2-!25 +nits. 11. %efer to Stone)ate $ompany. $omp+te t'e material price- mi6- and yield &ariances 9ro+nd to t'e nearest dollar. ANS: Standard:

 

/.58!.25V .28!.235V

Act!al*  /.3 × 2-!25 × M.55   . × 2-!25 × M/.#2 

$

658,800 654,225

$1,313,025 $43,005 F price

Act!al × Standard $rices*  /.3 × 2-!25 × M.#5 



. × 2-!25 × M/./5 

$

691,740

664,290 $1,356,030 $16,470 U i!

Standard 2ty × Act!al #i( × Standard $rices*  5V × /33-555= × M.#5   35V × /33-555 × M/./5 

$

614,880 724,680

$1,339,560

Standard × Standard*  5V × //-1#2== × M.#5   35V × //-1#2 × M/./5 

$

$83,722 U yie"d

576,450 679,388

$1,255,838

=92-!25 × 7  /33-555 ==92-!25 × !.2  //-1#2 PTS: 1 DIF: Diffic+lt OB: !"! NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

3#

1#. %efer to Stone)ate $ompany. $omp+te t'e labor rate- mi6- and yield &ariances 9ro+nd to t'e nearest dollar. ANS: Standard:

S JS

/815/5V !815  !5V

Act!al × Act!al $rices* S /.7 × 2-!25 × M15.35  JS 2.! × 2-!25 × M!.75 

Act+al:

S JS

/.78<.25V 2.!8<.2  35V

$1,842,810 2,034,045 $3,876,855 $34,770 F r#te

Act!al × Standard $rices* S

JS

/.7 × 2-!25 × M15.25  2.! × 2-!25 × M 7.55 

$1,825,425 2,086,200 $3,911,625 $108,656 U i!

Standard 2ty × Act!al #i( × Standard $rices* S /5V × /-3#2=

$1,369,069

×

JS

M15.25  !5V × /-3#2 × M 7.55 

2,433,900 $3,802,969 $200,156 F yie"d

Standard × Standard* S

JS

/5V × 2!-255== × M15.25  !5V × 2!-255 × M 7.55 

$1,441,125

2,562,000 $4,003,125

=92-!25 × <.2  /-3#2 ==92-!25 × 15  2!-255 PTS: 1 DIF: Diffic+lt OB: !"! NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


! $'apter

3/

1/. Green Acres $orporation prod+ces a prod+ct +sin) t'e follo0in) standard proportions and costs of material:

Po+nds ,aterial A ,aterial B ,aterial $ Standard s'rin(a)e 9// 18/V Net 0ei)'t and cost

50 40 60 150 50 100

$ost Per Po+nd $5.00 6.00 3.00 4.4667 6.70

Amo+nt $250.00 240.00 180.00 $670.00 $670.00


! $'apter

3

A recent prod+ction r+n yieldin) 155 o+tp+t po+nds re+ired an inp+t of: $ost Per Po+nd

Amo+nt 40 50 65

,aterial A ,aterial B ,aterial $

$5.15 6.00 2.80

Re0!ired* ,aterial price- mi6- and yield &ariances.

ANS: ,ATE%IA* P%I$E A%IAN$E ,ATE%IA* A

9M2.12 " 2.55 × 5 

$ 6U

,ATE%IA* B ,ATE%IA* $

9M3.55 " 3.55 × 25  9M#.75 " /.55 × 32 

0 13F $ 7F

,IA%IAN$E A B $

IE*DA%IAN$E

40

×

$5  $200

51 2%3

×

$5  $258.33

50

×

$5  $250

50

×

$6  $300

41 1%3

×

$6  $248.00

40

×

$6  $240

60 $670

×

$3  $180

65 × $3$195 $695

62 × $3  $186.00 $692.33

$2.67 U&F

$22.33 U&F

PTS: AI$PA 1 DIF:$ompetencies: ,oderate ,eas+rementOB: !"! %eportin) NAT: AA$SB:AnalyticalS(ills *O$: F+nctional 1. Beet'o&en $ompany be)an b+siness early in an+ary +sin) a standard costin) for its sin)le prod+ct. @it' standard capacity set at 15-555 standard prod+cti&e 'o+rs per mont'- t'e follo0in) standard cost s'eet 0as set +p for one +nit of prod+ct: $10.00 3.00

Direct material"2 pieces L M#.55 Direct labor 9&ariable"1 sp' L M/.55 ,an+fact+rin) o&er'ead: Fi6ed"1 sp' L M/.55 ariable"1 sp' L M#.55

$3.00 2 .00

5.00

Fi6ed costs are inc+rred e&enly t'ro+)'o+t t'e year. T'e follo0in) +nfa&orable &ariances from standard costs 0ere recorded d+rin) t'e first mont' of operations: ,aterial price ,aterial +sa)e *abor rate *abor efficiency O&er'ead &ol+me

$

0 4,000 800 300 6,000


! $'apter

32 1,000

O&er'ead b+d)et 9# &ariance analysis

Re0!ired* Determine t'e follo0in): 9a fi6ed o&er'ead b+d)eted for a year 9b t'e n+mber of +nits completed d+rin) an+ary ass+min) no 0or( in process at an+ary /1 9c debits made to t'e @or( in Process acco+nt for direct material- direct labor- and man+fact+rin) o&er'ead 9d n+mber of pieces of material iss+ed d+rin) an+ary 9e total of direct labor payroll recorded for an+ary 9f total of man+fact+rin) o&er'ead recorded in an+ary.

ANS: a. M/ × 15-555 × 1#  M/35-555 b. M3-5558M/  #-555 +nder 15-555 " #-555  7-555 +nits c. D,  7-555 × M15  M75-555- D*  7-555 × M/  M#-555,OH  7-555 × M2  M5-555 d. STD ;  5-555 9 " 5-555 × M#  M-555 +nit-   #-555 pieces iss+ed e. M#-555  M755  M/55  M#2-155 f. M5-555  M3-555  M1-555  M!-555 PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 12. A firm prod+cin) one prod+ct 'as a b+d)eted o&er'ead of M155-555- of 0'ic' M#5-555 is &ariable. T'e b+d)eted direct labor is 15-555 'o+rs. Re0!ired* Fill in t'e blan(s.

a. Prod+ction

Fle6ibleB+d)et

1 #5V 155V

b.

 

75V



35V



@'at is t'e b+d)et &ariance at t'e 75 percent le&el if t'e act+al o&er'ead inc+rred is M7!-555C

ANS: TOTA* $OST E;JATION  M75-555 FI 

a.

#5-555 15-555

9M# &ariable per +nit

A  M75-555  91#-555 × M#  M15-555 B  M75-555  915-555 × M#  M155-555 $  M75-555  9 7-555 × M#  M <3-555 D  M75-555  9 3-555 × M#  M <#-555 APP*I$ATION %ATE 

M155-555 15-555

JNITS  M158+nit


! $'apter

b.

33

BJDGET A%IAN$E  A$TJA* FOH " BJDGETED FOH M<-555 FA  M7!-555 " M<3-555

PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 13. B+)s Be Gone $ompany man+fact+res a prod+ct effecti&e in controllin) beetles. T'e company +ses a standard cost system and a fle6ible b+d)et. Standard cost of a )allon is as follo0s: Direct material: # +arts of A  +arts of B Total direct material

$14 16 $30

Direct labor: # 'o+rs ,an+fact+rin) o&er'ead Total

16 12 $58

T'e fle6ible b+d)et system pro&ides for M25-555 of fi6ed o&er'ead at normal capacity of 15-555 direct labor 'o+rs. ariable o&er'ead is pro>ected at M1 per direct labor 'o+r. Act+al res+lts for t'e period indicated t'e follo0in): Prod+ction: Direct material: A B Direct labor: O&er'ead:

2-555 )allons 1#-555 +arts p+rc'ased at a cost of M!.#58+art 15-255 +arts +sed #5-555 +arts p+rc'ased at a cost of M/.<58+art 1<-755 +arts +sed <-755 'o+rs 0or(ed at a cost of M!<-/75 Fi6ed M7-155 ariable #1-555 Totalo&er'ead

M3<-155

Re0!ired*

1. #.

@'at is t'e application rate per direct labor 'o+r- t'e total o&er'ead cost e+ation- t'e standard +antity for eac' material- and t'e standard 'o+rsC $omp+te t'e follo0in) &ariances: a. Total material price &ariance b. Total material +antity &ariance c. *abor rate &ariance d. *abor efficiency &ariance e. ,OH &ol+me &ariance f. ,OH efficiency &ariance ). ,OH spendin) &ariance- bot' fi6ed and &ariable

ANS: 1. App rate  M38D*H TOH$  M25-555  M18D*H Std O 9A 2-555 × #  15-555 9B 2-555 ×   #5-555 Std Hrs. 2-555 × #  15-555


! $'apter

3!


! $'apter

#.

a.

37 $2,400 U

1. 9M!.#5 " M!.55 × 1#-555  #. 9M/.<5 " M.55 × #5-555 

2,000 F $

b.

1. 915-255 " 15-555 #. 91<-755 " #5-555

$3,500 U

M!.55  M.55 

× ×

400 U

800 F $2,700 U

c.

M!<-/75 " 9<-755 × M7  M<75 J

d.

9<-755 " 15-555 × M7  M1-355 F

e.

915-555 " 15-555 × M2  5

f.

9<-755 " 15-555 × M1  M#55 F

).

Fi6 Spd ar Spd

M7-155 " M25-555  M1-<55 F M#1-555 " 9<-755 × M1  M11-#55 J

PTS: 1 DIF: ,oderate OB: !"/ NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 1!. S'erman $orporation operates a factory. One of its departments 'as t'ree (inds of employees on its direct labor payroll- classified as pay )rades A- B- and $. T'e employees 0or( in 15"person cre0s in t'e follo0in) proportions: No. of @or(ersin Standard $re0

Pay Grade A B $ Total

3

6 1 10

Standard Ho+rly @a)e %ate 6 8

Standard $ostper $re0 Ho+r $4 18

$24 8 $50

T'e 0or( cre0s cannot 0or( s'ort"'anded. To (eep a +nit operatin) 0'en one of t'e re)+lar cre0 members is absent- t'e 'ead of t'e department first tries to reassi)n one of t'e departments ot'er 0or(ers from indirect labor operations. If no one in t'e department is able to step in- plant mana)ement 0ill p+ll maintenance department 0or(ers off t'eir re)+lar 0or(- if possible- and assi)n t'em temporarily to t'e department. T'ese maintenance 0or(ers are all classified as Grade D employees- 0it' a standard 0a)e rate of M15 an 'o+r. T'e follo0in) data relate to t'e operations of t'e department d+rin) t'e mont' of ,ay: 1.

Act+al 0or( time- 1-555 cre0 'o+rs.

#.

Act+al direct labor 'o+rs: Grade A- 2-55 'o+rs. Grade B- /-#55 'o+rs. Grade $- 1-/55 'o+rs.


! $'apter

3<

Grade D/.

155 'o+rs.

Standard cre0 'o+rs for act+al o+tp+t- <75.

Re0!ired* $omp+te labor rate- mi6- and yield &ariances.

ANS:

,IA%IAN$E $21,600

×

A B $ D

5,400 3,200

$4  $6 

19,2006,000 3,000

1,300 × $8  100 × $10 

10,4001,000 1,000

×

IE*DA%IAN$E $24,000

× ×

$4  $6 

×

$8 

×

$4  18,000 5,880 2,940 × $6  8,000 980 × $8  $50,000

$23,520 17,640 7,840 $49,000

$52,200

,I A%IAN$E IE*D A%IAN$E %ATE A%IAN$E

 M#-#55 JNF  M1-555 JNF  M 755 JNF 9M2/-555 " M2#-#55

PTS: 1 DIF: Diffic+lt OB: !"! NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin) 17. @ea&er $orporation man+fact+res a certain prod+ct by mi6in) t'ree (inds of materials in lar)e batc'es. T'e blend master 'as t'e responsibility for maintainin) t'e +ality of t'e prod+ct- and t'is often re+ires alterin) t'e proportions of t'e &ario+s in)redients. Standard costs are +sed to pro&ide material control information. T'e standard material inp+ts per batc' are: ;+antity 9po+nds ,aterial A ,aterial B ,aterial $ Total batc'

420 70 10 500

Price 9per po+nd $0.06 0.12 0.25

Standard $ost of ,aterial $25.20 8.40 2.50 $36.10

T'e finis'ed prod+ct is pac(ed in 25"po+nd bo6es t'e standard material cost of eac' bo6 is- t'ereforeM/.31. D+rin) an+ary- t'e follo0in) materials 0ere p+t in process: ,aterial A ,aterial B ,aterial $ Total

181,000lbs. 33,000 6,000 220,000lbs.

In&entories in process totaled 2-555 po+nds at t'e be)innin) of t'e mont' and 7-555 po+nds at t'e end of t'e mont'. It is ass+med t'at t'ese in&entories consisted of materials in t'eir standard proportions. Finis'ed o+tp+t d+rin) an+ary amo+nted to -155 bo6es.


! $'apter

!5

Re0!ired* $omp+te t'e total material +antity &ariance for t'e mont' and brea( it do0n into mi6 and yield components.

ANS: ,aterial ;+antity ariance: A B $

$

9171-555 " 1!#-#55 × M5.53  9//-555 " #7-!55 × M5.1#  93-555 " -155 × M5.#2 

528JNF 516JNF 475JNF

$1,519

A B $

181,000 × $0.06  $10,860

184,800

×

$0.06  $11,088 172,200

×

$0.06  $10,332

33,000 × $0.12 

3,960

30,800

×

$0.12 

3,696

28,700

×

$0.12 

3,444

6,000 × $0.25 

1,500 $16,320

4,400

×

$0.25 

1,100 $15,884

4,100

×

$0.25 

1,025 $14,801

'() *A+(A&-  $ 436 U&F (-/ *A+(A& $1,083 U&F ot#" $1,519 U&F

PTS: 1 DIF: ,oderate OB: !"! NAT: AA$SB:AnalyticalS(ills *O$: AI$PA F+nctional $ompetencies: ,eas+rement- %eportin)


Ch7 Standard Costing and Variance Analysis

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