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Name:
Class:
Date:
chapter 13
Indicate whether the statement is true or false.
1. Financial reporting systems that are guided by the principle of exceptions concept focus attention on variances from
standard costs.
a. True
b. False
2. Supervisor salaries, maintenance, and indirect factory wages would normally appear in the factory overhead cost
budget.
a. True
b. False
3. Budgetary slack can be avoided if lower- and mid-level managers are requested to support all of their spending
requirements with specific operational plans.
a. True
b. False
4. Flexible budgeting builds the effect of changes in level of activity into the budget system.
a. True
b. False
5. The production budget is the starting point for preparation of the direct labor cost budget.
a. True
b. False
6. An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost.
a. True
b. False
7. Normally standard costs should be revised when labor rates change to incorporate new union contracts.
a. True
b. False
8. Standards are more widely used for nonmanufacturing expenses than for manufacturing costs.
a. True
b. False
9. The standard cost is a detailed estimate of how much a product should cost.
a. True
b. False
10. In preparing flexible budgets, the first step is to identify the fixed and variable components of the various costs and
expenses being budgeted.
a. True
b. False
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11. Changes in technology, machinery, or production methods may make past cost data irrelevant for future operations.
a. True
b. False
12. If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800
units at $12, the direct materials price variance was $1,000 favorable.
a. True
b. False
13. If Division Inc. expects to sell 200,000 units in 2016, desires ending inventory of 24,000 units, and has 22,000 units
on hand as of the beginning of the year, the budgeted volume of production for 2016 is 198,000 units.
a. True
b. False
14. If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at
$17, the time variance was $1,500 favorable.
a. True
b. False
15. The difference between the standard cost of a product and its actual cost is called a variance.
a. True
b. False
16. A favorable cost variance occurs when actual cost is less than budgeted cost at actual volumes.
a. True
b. False
17. In most businesses, cost standards are established principally by accountants.
a. True
b. False
18. The cash budget summarizes future plans for acquisition of fixed assets.
a. True
b. False
19. When budget goals are set too tight, the budget becomes less effective for planning and controlling operations.
a. True
b. False
20. The sales budget is the starting point for preparation of the direct labor cost budget.
a. True
b. False
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21. Many service businesses use process yield for assessing performance and the efficient use of assets.
a. True
b. False
22. If the standard to produce a given amount of product is 600 direct labor hours at $17 and the actual was 500 hours at
$15, the direct labor time variance was $1,700 favorable.
a. True
b. False
23. A variable cost system is an accounting system where standards are set for each manufacturing cost element.
a. True
b. False
24. The capital expenditure budget summarizes future plans for acquisition of fixed assets.
a. True
b. False
25. The budget procedure that requires all levels of management to start from zero in estimating sales, production, and
other operating data is called zero-based budgeting.
a. True
b. False
26. A budget performance report compares actual results with the budgeted amounts and reports differences for possible
investigation.
a. True
b. False
27. The cash budget presents the expected inflow and outflow of cash for a specified period of time.
a. True
b. False
28. Standard costs should be revised when they differ from actual costs.
a. True
b. False
29. The first budget to be prepared is usually the production budget.
a. True
b. False
30. Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget.
a. True
b. False
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31. The master budget of a small manufacturer would normally include all component budgets that impact the financial
statements.
a. True
b. False
32. Budgets are normally used by both profit-making businesses and nonprofit organizations.
a. True
b. False
33. If Division Inc. expects to sell 300,000 units in 2016, desires ending inventory of 22,000 units, and has 24,000 units
on hand as of the beginning of the year, the budgeted volume of production for 2016 is 298,000 units.
a. True
b. False
34. Once a static budget has been determined, it is changed regularly as the underlying activity changes.
a. True
b. False
35. As a device for measuring efficiency, standard cost systems enables management to determine the causes of
differences between what a product should cost and how much it actually costs to produce.
a. True
b. False
36. Process yield measures the efficiency of a process.
a. True
b. False
37. Ideal standards are developed under conditions that assume no idle time, no machine breakdowns, and no materials
spoilage.
a. True
b. False
38. Standards are designed to evaluate price and quantity variances separately.
a. True
b. False
39. Standard costs serve as a device for measuring efficiency.
a. True
b. False
40. If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600
units at $13, the direct materials quantity variance was $4,800 favorable.
a. True
b. False
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41. If the standard to produce a given amount of product is 900 units of direct materials at $11 and the actual was 800
units at $12, the direct materials quantity variance was $1,100 unfavorable.
a. True
b. False
42. The budgeted volume of production is based on the sum of (1) the expected sales volume and (2) the desired ending
inventory, less (3) the estimated beginning inventory.
a. True
b. False
43. The budgeted direct materials purchases are based on the sum of (1) the materials needed for production and (2) the
desired ending materials inventory, less (3) the estimated beginning materials inventory.
a. True
b. False
44. If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800
units at $12, the direct materials quantity variance was $2,200 favorable.
a. True
b. False
45. The budgeted volume of production is normally computed as the sum of (1) the expected sales volume and (2) the
desired ending inventory.
a. True
b. False
46. Currently attainable standards allow for unreasonable production difficulties.
a. True
b. False
47. A formal written statement of management's plans for the future, expressed in financial terms, is called a budget.
a. True
b. False
48. If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800
units at $12, the direct materials price variance was $800 favorable.
a. True
b. False
49. Using a standard costing system for nonmanufacturing expenses is easily administered because the expenses generally
relate to a repetitive, measurable output.
a. True
b. False
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50. The master budget of a small manufacturer would normally include all necessary component budgets except the
capital expenditures budget.
a. True
b. False
51. If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at
$17, the rate variance was $1,200 favorable.
a. True
b. False
52. Employees view budgeting more positively when goals are established for them by senior management.
a. True
b. False
53. The direct labor time variance measures the efficiency of the direct labor force.
a. True
b. False
54. The budgeted direct materials purchases are normally computed as the sum of (1) the materials for production and (2)
the desired beginning inventory.
a. True
b. False
55. Goal conflict can be avoided if budget goals are carefully designed for consistency across all areas of the organization.
a. True
b. False
56. A budget procedure that provides for the maintenance at all times of a 12-month projection into the future is called
continuous budgeting.
a. True
b. False
57. Nonmanufacturing activities are usually controlled using a static budget rather than a standard costing system.
a. True
b. False
58. The first budget to be prepared is usually the sales budget.
a. True
b. False
59. The fact that workers are unable to meet a properly determined direct labor standard is sufficient cause to change the
standard.
a. True
b. False
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60. Supervisor salaries, maintenance, and indirect factory wages would normally appear in the selling and administrative
expenses budget.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
61. Production estimates for August are as follows:
Estimated inventory (units), August 1 3,000
Desired inventory (units), August 31 2,000
Expected sales volume (units), August 40,000
For each unit produced, the direct materials requirements are as follows:
Direct material A ($2 per lb.) 5 lbs.
Direct material B ($11 per lb.) 1 lb.
The number of pounds of materials A and B required for August production is:
a. 195,000 lbs. of A; 39,000 lbs. of B.
b. 200,000 lbs. of A; 40,000 lbs. of B.
c. 205,000 lbs. of A; 41,000 lbs. of B.
d. 210,000 lbs. of A; 42,000 lbs. of B.
62. Production estimates for July are as follows:
Estimated inventory (units), July 1 725
Desired inventory (units), July 31 1,200
Expected sales volume (units), July 7,500
For each unit produced 4 hours of direct labor is required. The labor rate per hour is $15. The number of direct labor hours
required for July production is _____.
a. 25,200
b. 27,100
c. 31,900
d. 34,800
63. The standard costs and actual costs for direct labor for the manufacture of 2,500 actual units of product are as follows:
Standard Costs
Direct labor 7,500 hours @ $12
Actual Costs
Direct labor 7,400 hours @ $11.40
The amount of the direct labor rate variance is _____.
a. $4,440 unfavorable
b. $4,500 favorable
c. $4,440 favorable
d. $4,500 unfavorable
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64. The _____ is an integrated set of operating, investing, and financing budgets for a period of time.
a. standard budget
b. budget performance report
c. zero-based budget
d. master budget
65. In computing _____, output is measured as the percentage of units from a process that pass inspection.
a. standard units
b. process yield
c. process variance
d. utilization rate
66. The following data relate to direct labor costs for the current period:
Standard costs 36,000 hours at $23.50
Actual costs 35,000 hours at $23.00
What is the direct labor time variance?
a. $23,000 unfavorable
b. $23,500 unfavorable
c. $23,500 favorable
d. $23,000 favorable
67. The first budget customarily prepared as part of an entity's master budget is the _____.
a. production budget
b. cash budget
c. sales budget
d. direct materials purchases
68. Kohlman Company began its operations on March 31 of the current year. Projected manufacturing costs for the first
three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June. Depreciation,
insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was paid on
March 31, and property taxes will be paid in November. Three-fourths of the remainder of the manufacturing costs are
expected to be paid in the month in which they are incurred with the balance to be paid in the following month.
The cash payments for manufacturing in the month of June are _____.
a. $294,000
b. $235,200
c. $183,200
d. $381,500
69. A _____ summarizes actual costs, standard costs, and the differences for the units produced.
a. zero-base report
b. budget performance report
c. budgeted balance sheet
d. budgeted income statement
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70. The formula to compute direct labor time variance is _____.
a. Actual costs – Standard costs
b. Actual costs + Standard costs
c. (Actual hours × Standard rate) – Standard costs
d. Actual costs – (Actual hours × Standard rate)
71. The formula to compute direct material quantity variance is _____.
a. Actual costs – Standard costs
b. Standard costs – Actual costs
c. (Actual quantity × Standard price) – Standard costs
d. Actual costs – (Standard price × Standard costs)
72. Answer Corporation uses standard cost system. The standard costs and actual costs for direct materials, direct labor,
and factory overhead for the manufacture of 2,500 units of product are as follows:
Standard Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12
Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity—10,000 hrs.):
Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000
The amount of the direct labor rate variance is _____.
a. $4,440 unfavorable
b. $4,500 favorable
c. $4,440 favorable
d. $4,500 unfavorable
73. Cape Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated
beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials
expected to be used for each unit of finished product are as follows.
Material A .50 lb. per unit @ $0.60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound
The amount of direct material C purchased during the year is _____.
a. $789,600
b. $768,000
c. $746,400
d. $650,400
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74. Kohlman Company began its operations on March 31 of the current year. Projected manufacturing costs for the first
three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June. Depreciation,
insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was paid on
March 31, and property taxes will be paid in November. Three-fourths of the remainder of the manufacturing costs are
expected to be paid in the month in which they are incurred with the balance to be paid in the following month.
The cash payments for manufacturing in the month of May are _____.
a. $185,600
b. $156,800
c. $124,800
d. $146,400
75. The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of
2,500 units of product are as follows:
Standard Costs
Direct labor 7,500 hours @ $12
Actual Costs
Direct labor 7,400 hours @ $11.40
The amount of the direct labor time variance is _____.
a. $1,200 favorable
b. $1,140 unfavorable
c. $1,200 unfavorable
d. $1,140 favorable
76. Production and sales estimates for June are as follows:
Estimated inventory (units), June 1 18,500
Desired inventory (units), June 30 19,000
Expected sales volume (units):
Area X 3,000
Area Y 4,000
Area Z 5,500
Unit sales price $20
The number of units expected to be manufactured in June is _____.
a. 10,000
b. 12,000
c. 13,000
d. 12,500
77. It would be most appropriate to develop direct labor time standards for use in administrative activities when the
activity involves _____.
a. Repetitive task that produces common output
b. Non-repetitive task that produces common output
c. Top-level management
d. Task related to non-measurable output
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78. Which of the following is true of standards?
a. Standards are an integrated set of operating, investing, and financing budgets for a period of time.
b. Standards help employees focus on the larger objectives of an organization by giving less importance to their own
operations.
c. Standards are easy to maintain in a dynamic manufacturing environment.
d. Standards limit operating improvements by discouraging improvement beyond the standard.
79. Cape Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated
beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials
expected to be used for each unit of finished product are as follows.
Material A .50 lb. per unit @ $0.60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound
The amount of direct material B purchased during the year is _____.
a. $1,224,000
b. $1,390,600
c. $1,088,000
d. $1,057,400
80. Cape Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated
beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials
expected to be used for each unit of finished product are as follows.
Material A .50 lb. per unit @ $0.60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound
The amount of direct material A purchased during the year is _____.
a. $216,000
b. $186,600
c. $192,000
d. $245,400
81. Benjamin Corporation began its operations on September 1 of the current year. Budgeted sales for the first three
months of business are $250,000, $300,000, and $420,000, respectively, for September, October, and November. The
company expects to sell 20% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the
month of the sale, 25% in the month following the sale, and the remainder in the following month.
The cash collections from accounts receivable in November are _____.
a. $305,200
b. $294,000
c. $235,200
d. $381,500
82. A hotel has 50 suites in total, and the number of booked suites for the month of April is 20. Calculate the occupancy
rate of suites of the hotel.
a. 40%
b. 250%
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d. 45%
83. Two major budgets comprising the budgeted balance sheet are _____.
a. the cash budget and the capital expenditures budget
b. the sales budget and the production budget
c. the cost of goods sold budget and the selling and administrative expenses budget
d. the static budget and the flexible budget
84. Based on the following information, calculate the overall process yield.
Process M:
Units passing inspection 7,755 units
Units entering process 11,750 units
Process N:
Units passing inspection 5,762 units
Units entering process 6,700 units
a. 80.93%
b. 60.82%
c. 66.00%
d. 56.76%
85. Below is budgeted production and sales information for Octofic Cans, Inc. for the month of March:
Aluminum Tin
Estimated beginning inventory 12,000 units 6,000 units
Desired ending inventory 15,000 units 4,000 units
Region I, anticipated sales 380,000 units 85,000 units
Region II, anticipated sales 125,000 units 25,000 units
The unit selling price for aluminum cans is $0.15 and for tin cans is $0.20.
Budgeted production for aluminum cans during the month is _____.
a. 383,000 units
b. 508,000 units
c. 502,000 units
d. 532,000 units
86. A budget that provides the starting point for the preparation of a direct labor cost budget is the _____.
a. selling and administrative expenses budget
b. capital expenditures budget
c. production budget
d. factory overhead budget
87. If the expected sales volume for the current period is 25,000 units, the desired ending inventory is 700 units, and the
beginning inventory is 450 units, the number of units set forth in the production budget, representing total production for
the current period, is _____.
a. 25,250 units
b. 21,500 units
c. 22,300 units
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88. The _____ estimates the number of units to be manufactured to meet budgeted sales and desired inventory levels.
a. capital expenditures budget
b. production budget
c. sales budget
d. cash budget
89. Frogue Corporation uses a standard cost system. The following information was provided for the period that just
ended:
Actual price per kilogram $2.50
Actual kilograms of material used 31,000
Actual hourly labor rate $18.10
Actual hours of production 4,900 labor hrs.
Standard price per kilogram $2.80
Standard kilograms per completed unit 6 kilograms
Standard hourly labor rate $18.00
Standard time per completed unit 1 hr.
Actual total factory overhead $34,900
Actual fixed factory overhead $18,000
Standard fixed factory overhead rate $1.20 per labor hour
Standard variable factory overhead rate $3.80 per labor hour
Maximum plant capacity 15,000 hours
Units completed during the period 5,000
The direct materials cost variance is _____.
a. $6,500 unfavorable
b. $9,000 unfavorable
c. $9,000 favorable
d. $6,500 favorable
90. The _____ is held responsible for an unfavorable quantity variance caused by low-quality direct materials.
a. sales department
b. investment department
c. purchasing department
d. operating department
91. The _____ budget shows the expected results of a responsibility center for several activity levels.
a. flexible
b. standard
c. break-even
d. static
92. In a production budget, if the number of units expected to be sold during the year is 8,000, the number of units desired
in ending inventory is 470 units, and the number of units in beginning inventory is 510 units, the total production for the
year is _____.
a. 7,160
b. 6,660
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c. 7,810
d. 7,960
93. A _____ shows the expected results of a responsibility center for only one activity level.
a. break-even budget
b. standard costing system
c. static budget
d. budgetary slack
94. The _____ estimates the expected receipts and payments of cash for a period of time.
a. capital expenditures budget
b. cash sales budget
c. cash budget
d. production budget
95. Based on the following production and sales estimates for May, determine the number of units expected to be
manufactured in May.
Estimated inventory (units), May 1 20,000
Desired inventory (units), May 31 15,000
Expected sales volume (units):
South region 30,000
West region 40,000
North region 20,000
Unit sales price $10
a. 85,000 units
b. 90,000 units
c. 95,000 units
d. 105,000 units
96. Production and sales estimates for June are as follows:
Estimated inventory (units), June 1 8,000
Desired inventory (units), June 30 9,000
Expected sales volume (units):
Area X 3,000
Area Y 4,000
Area Z 5,500
Unit sales price $25
The budgeted total sales for June is _____.
a. $300,000
b. $337,500
c. $312,500
d. $287,500
97. The following is budgeted production and sales information for Octofic Cans, Inc. for the month of March:
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Aluminum Tin
Estimated beginning inventory 12,000 units 6,000 units
Desired ending inventory 15,000 units 4,000 units
Region I, anticipated sales 380,000 units 85,000 units
Region II, anticipated sales 125,000 units 25,000 units
The unit selling price for aluminum cans is $0.15 and for tin cans is $0.20.
Budgeted sales for the month are _____.
a. $97,550
b. $123,000
c. $82,750
d. $81,550
98. Production estimates for August are as follows:
Estimated inventory (units), August 1 12,000
Desired inventory (units), August 31 9,000
Expected sales volume (units), August 75,000
For each unit produced, the direct materials requirements are as follows:
Direct material A ($5 per lb.) 3 lbs.
Direct material B ($15 per lb.) 1/2 lb.
The total direct materials purchases of materials A and B required for August production is _____.
a. $1,260,000 for A; $630,000 for B
b. $1,080,000 for A; $540,000 for B
c. $1,125,000 for A; $562,500 for B
d. $1,170,000 for A; $585,000 for B
99. Based on the following information, calculate the direct labor rate variance.
Actual rate 2,500 hours at $15.00
Standard rate 2,650 hours at $15.50
a. 1,250 favorable
b. 1,000 unfavorable
c. 2,500 favorable
d. 1,300 unfavorable
100. If the wage rate paid per hour differs from the standard wage rate per hour for direct labor, the variance is termed
_____.
a. variable variance
b. rate variance
c. quantity variance
d. volume variance
101. The standard costs and actual costs for direct materials for the manufacture of 2,500 actual units of product are as
follows:
Standard Costs
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Direct materials (per completed unit) 1.04 kilograms @ $8.75
Actual Costs
Direct materials 2,500 kilograms @ $8
The amount of direct materials price variance is _____.
a. $1,875 unfavorable
b. $1,950 favorable
c. $1,875 favorable
d. $1,950 unfavorable
102. Which of the following processes is involved in budgeting?
a. Assessing the utilization rate of assets
b. Identifying the industry standards of stock returns
c. Periodically comparing actual results with the goals
d. Dismissing all managers who fail to achieve operational goals specified in the budget
103. As of January 1 of the current year, the Butner Company had accounts receivables of $50,000. Sales for January,
February, and March were as follows: $120,000, $140,000, and $150,000. Twenty percent of each month's sales are for
cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with the remaining 40% collected in
the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of
February?
a. $132,000
b. $105,600
c. $133,600
d. $95,200
104. The following is the information about Standard Inc.
The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500
units of product are as follows:
Standard Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12
Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity—10,000 hrs.):
Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000
The amount of the direct materials quantity variance is _____.
a. $875 favorable
b. $875 unfavorable
c. $800 favorable
d. $800 unfavorable
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105. Managers plan _____ in a budget in order to provide a cushion for unexpected events or improve the appearance of
operations.
a. budgetary slack
b. favorable variance
c. budgetary margin
d. opportunity gap
106. An unfavorable time variance is caused by _____.
a. a shortage of skilled employees
b. improper scheduling of skilled employees
c. lack of enough sales orders
d. low-quality (inferior) direct materials
107. Based on the following information, calculate the direct materials quantity variance.
Actual quantity 2,500 pounds at $6.00
Standard quantity 2,900 pounds at $5.50
a. $2,250 unfavorable
b. $2,200 favorable
c. $2,500 favorable
d. $2,700 unfavorable
108. Which of the following budgets summarizes plans for acquiring fixed assets?
a. A selling and administrative expenses budget
b. A factory overhead budget
c. A cash budget
d. A capital expenditures budget
109. Which of the following formulas is used to calculate process yield?
a. Actual rate per hour × Actual time of a process
b. Service units used/Available service units of a process
c. Units entering process/Units passing inspection
d. Units passing inspection/Units entering process
110. The following data relate to direct labor costs for the current period of Executive Inc.:
Standard costs 6,000 hours at $12.00
Actual costs 7,500 hours at $11.60
What is the direct labor rate variance?
a. $3,000 unfavorable
b. $3,000 favorable
c. $2,400 unfavorable
d. $2,400 favorable
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111. The process of developing budget estimates by requiring all levels of management to estimate sales, production, and
other operating data as though operations were being initiated for the first time is referred to as _____.
a. flexible budgeting
b. continuous budgeting
c. zero-based budgeting
d. master budgeting
112. Production and sales estimates for May for the Hudson Co. are as follows:
Estimated inventory (units), May 1 17,500
Desired inventory (unit), May 31 19,300
Expected sales volume (units):
Area W 4,200
Area X 7,000
Area Y 9,000
Unit sales price $15
The number of units expected to be sold in May is _____.
a. 22,000
b. 18,400
c. 23,800
d. 20,200
113. Answer Corporation uses standard cost system. The standard costs and actual costs for direct materials, direct labor,
and factory overhead for the manufacture of 2,500 units of product are as follows:
Standard Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12
Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity—10,000 hrs.):
Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000
The amount of the direct labor time variance is _____.
a. $1,200 favorable
b. $1,140 unfavorable
c. $1,200 unfavorable
d. $1,140 favorable
114. The following data relate to direct labor costs for the current period:
Standard costs 8,850 hours at $6.50
Actual costs 7,500 hours at $6.25
Name:
Class:
Date:
chapter 13
What is the direct labor rate variance?
a. $1,875.00 unfavorable
b. $2,212.50 unfavorable
c. $1,875.00 favorable
d. $2,212.50 favorable
115. Kohlman Company began its operations on March 31 of the current year. Projected manufacturing costs for the first
three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June. Depreciation,
insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was paid on
March 31, and property taxes will be paid in November. Three-fourths of the remainder of the manufacturing costs are
expected to be paid in the month in which they are incurred with the balance to be paid in the following month.
The cash payments for manufacturing in the month of April are _____.
a. $128,000
b. $117,600
c. $156,800
d. $96,000
116. Efficient Corporation uses a standard cost system. The following information was provided for the period that just
ended:
Actual price per gallon $11.75
Actual gallons of material used 5,000
Actual hourly labor rate $17.00
Actual hours of production 24,300
Standard price per gallon $12.00
Standard gallons per completed unit 1/2
Standard hourly labor rate $12.00
Standard time per completed unit 3 hrs.
Units completed during the period 9,000
The direct materials cost variance is _____.
a. $1,125 favorable
b. $4,750 unfavorable
c. $6,000 unfavorable
d. $7,125 unfavorable
117. Standards that can be achieved only under perfect operating conditions, such as no idle time, no machine
breakdowns, and no materials spoilage, are called _____.
a. theoretical standards
b. appropriate standards
c. normal standards
d. break-even standards
118. The following is budgeted production and sales information for Octofic Cans, Inc., for the month of March:
Aluminum Tin
Estimated beginning inventory 12,000 units 6,000 units
Desired ending inventory 15,000 units 4,000 units
Region I, anticipated sales 380,000 units 85,000 units
