Chapter 10 – Standard Costing and Analysis of Direct Costs
46. Consider the following information:
Direct material purchased and used, 80,000 gallons
Standard quantity of direct material allowed for May production, 76,000 gallons
Actual cost of direct materials purchased and used, $176,000
Unfavorable direct-material quantity variance, $9,400
47. Enrique Industries purchased and consumed 50,000 gallons of direct material that was
used in the production of 11,000 finished units of product. According to engineering
specifications, each finished unit had a manufacturing standard of five gallons. If a review of
Enrique’s accounting records at the end of the period disclosed a material price variance of
$5,000U and a material quantity variance of $3,000F, what is the actual price paid for a gallon
of direct material?
48. Storkin Enterprises recently used 24,000 labor hours to produce 8,600 completed units.
According to manufacturing specifications, each unit is anticipated to take 2.75 hours to
complete. The company’s actual payroll cost amounted to $456,000. If the standard labor cost
per hour is $19.20, Storkin’s labor rate variance is:
49. Davner Enterprises recently used 14,000 labor hours to produce 7,500 completed units.
According to manufacturing specifications, each unit is anticipated to take two hours to
complete. The company’s actual payroll cost amounted to $158,200. If the standard labor cost
per hour is $11, Davner’s labor efficiency variance is:
50. Action Enterprises recently used 14,000 labor hours to produce 7,500 completed units.
According to manufacturing specifications, each unit is anticipated to take two hours to
complete. The company’s actual payroll cost amounted to $158,200. If the standard labor cost
per hour is $11, Action’s labor rate variance is:
Use the following information to answer Questions 51 & 52.
Airon Company recently completed 10,600 units of its single product, consuming 32,000
labor hours that cost the firm $480,000. According to manufacturing specifications, each unit
should have required 3 hours of labor time at $15.40 per hour.
51. On the basis of this information, determine Airon’s labor rate variance and labor
efficiency variance.
Rate Efficiency
52. On the basis of this information, determine Airon’s total labor variance.
Use the following data that relate to product no. 33 of Volusia Corporation to answer
Questions 53 & 54:
Direct labor standard: 5 hours at $14 per hour
Direct labor used in production: 45,000 hours at a cost of $639,000
Manufacturing activity: 8,900 units completed
53. The direct-labor rate variance is:
54. The direct-labor efficiency variance is:
55. Consider the following information:
Actual direct labor hours 34,500
Standard direct labor hours 35,000
Total actual direct labor cost $241,500
Direct-labor efficiency variance $3,200F
56. Rickett Corporation had a favorable direct-labor efficiency variance of $6,000 for the
period just ended. The actual wage rate was $0.50 more than the standard rate of $12.00. If
the company’s standard hours allowed for actual production totaled 9,500, how many hours
did the firm actually work?
Chapter 10 – Standard Costing and Analysis of Direct Costs
Use the following information to answer Questions 57 – 60:
Thomas Enterprises purchased 56,000 pounds (cost = $420,000) of direct material to be used
in the manufacture of the company’s sole product. According the production specifications,
each completed unit requires five pounds of direct material at a standard cost of $7.80 per
pound. Direct materials consumed by the end of the period totaled 53,500 pounds in the
manufacture of 10,900 finished units.
An examination of Thomas’ payroll records revealed that the company worked 22,000 labor
hours (cost = $319,000) during the period, and specifications called for each completed unit
requiring two hours of labor at a standard cost of $14.80 per hour. Assume that the company
computes variances at the earliest point in time.
57. Thomas’ direct-material price variance was:
58. Thomas’ direct-material quantity variance was:
59. Thomas’ direct-labor efficiency variance was
60. Thomas’ direct-labor rate variance was
Use the following information to answer Questions 61-65:
Cost standards for one unit of product no. C77:
Direct material
3 pounds at $2.50 per pound
$ 7.50
Direct labor
5 hours at $7.50 per hour
37.50
Actual results:
Units produced
7,800 units
Direct material purchased
26,000 pounds at $2.70
$ 70,200
Direct material used
23,100 pounds at $2.70
62,370
Direct labor
40,100 hours at $7.30
292,730
Assume that the company computes variances at the earliest point in time.
61. The direct-material quantity variance is:
62. The direct-material price variance is:
63. The direct-labor rate variance is:
64. The direct-labor efficiency variance is:
65. The standard hours allowed for the work performed are:
66. When considering whether to investigate a variance, managers should consider all of the
following except the variance’s:
67. Which of the following combinations of direct-material variances might prompt
management to undertake a detailed variance investigation?
68. Consider the following statements about variance investigation:
I. Variance investigation involves a look at only unfavorable variances.
II. Variance investigation is typically based on a cost-benefit analysis.
III. Variance investigation is often performed by establishing guidelines similar to the
following: Investigate variances that are greater than $X or greater than Y% of standard cost.
69. A statistical control chart is best used for determining:
70. The individual generally responsible for the direct-material price variance is the:
71. A production supervisor generally has little influence over the:
72. Which department would normally begin an investigation regarding an unfavorable
materials quantity variance?
73. Bender Corporation has a favorable materials quantity variance. Which department would
likely be asked to explain the cause of this variance?
74. Vito, Inc. had an unfavorable labor efficiency variance and an unfavorable materials
quantity variance. Which department might be held accountable for these variances?
75. A direct-material quantity variance can be caused by all of the following except:
76. A direct-labor efficiency variance cannot be caused by:
77. Loren Company recently purchased materials from a new supplier at a very attractive
price. The materials were found to be of poor quality, and the company’s laborers struggled
significantly as they shaped the materials into finished product.
In a desperation move to make up for some of the time lost, the manufacturing supervisor
brought in more-senior employees from another part of the plant. Which of the following
variances would have a high probability of arising from this situation?
78. Listed below are five variances (and possible causes) that are under review by
management of Knight Company. Which of the following is least likely to cause the variance
indicated?
79. Lamar Corporation’s purchasing manager obtained a special price on an aluminum alloy
from a new supplier, resulting in a direct-material price variance of $9,500F. The alloy
produced more waste than normal, as evidenced by a direct-material quantity variance of
$2,000U, and was also difficult to use. This slowed worker efficiency, generating a $2,500U
labor efficiency variance.
To help remedy the situation, the production manager used senior line employees, which gave
rise to a $900U labor rate variance. If overall product quality did not suffer, what variance
amount is best used in judging the appropriateness of the purchasing manager’s decision to
acquire substandard material?
80. Standard costs:
81. Which of the following is a criticism of standard costing, as applied to today’s
manufacturing environment?
82. Which of the following journal entries definitely contains an error?