143) Explain how standards and budgets are different.
144) Explain two reasons why splitting production costs into price and efficiency variances is
beneficial for management control.
145) The Tennison Company uses a standard cost system in which manufacturing overhead costs
are applied to units of the company’s single product on the basis of standard direct labor-hours
(DLHs). The standard cost card for the product follows:
Standard Cost Card-per unit of product
Direct Materials(4 yards at $3.50 per yard) $ 14
Direct Labor(1.5 DLHs at $8 per DLH) 12
Variable Overhead(1.5 DLHs at $2 per DLH) 3
Fixed Overhead(1.5 DLHs at $6 per DLH) 9
Standard cost per unit $ 38
The following data pertain to last year’s activities:
∙ The company manufactured 18,000 units of product during the year. A total of 70,200 yards of
material was purchased during the year at a cost of $3.75 per yard. All of this material was used
to manufacture the 18,000 units.
∙ The company worked 29,250 direct labor-hours during the year at a cost of $7.80 per hour.
∙ The denominator activity level was 22,500 direct labor-hours.
∙ Budgeted fixed manufacturing overhead costs were $135,000 while actual manufacturing
overhead costs were $133,200.
∙ Actual variable overhead costs were $61,425.
Required:
a. Compute the direct materials price and quantity variances for the year.
b. Compute the direct labor rate and efficiency variances for the year.
c. Compute the variable overhead rate and efficiency variances for the year.
d. Compute the fixed manufacturing overhead budget and volume variances for the year.
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146) Angie Manufacturing uses a standard cost system in which manufacturing overhead is
applied to units of product on the basis of standard machine-hours. At standard, each unit of
product requires one machine-hour to complete. The standard variable overhead is $1.75 per
machine-hour and Budgeted Fixed Manufacturing Costs are $300,000 per year. The denominator
level of activity is 150,000 machine-hours, or 150,000 units. Actual data for the year were as
follows:
Actual variable overhead cost $ 211,680
Actual fixed manufacturing overhead cost $ 315,000
Actual machine-hours 126,000
Units produced 120,000
Required:
a. What are the predetermined variable and fixed manufacturing overhead rates for the year?
b. Compute the variable overhead rate and efficiency variances for the year.
c. Compute the fixed manufacturing overhead budget and volume variances for the year.
147) Upton Company uses a standard cost system for its single product. The following data are
available:
Actual experience for the current year:
Purchases of raw materials (15,000 yards at $13 per yard) $ 195,000
Raw materials used 12,000 yards
Direct labor costs (10,200 hours at $10 per hour) $ 102,000
Actual variable overhead cost $ 84,150
Units produced 12,600 units
Standards per unit of product:
Raw materials 1.1 yards at $15 per yard
Direct labor 0.80 hours at $9.50 per hour
Variable overhead $8 per direct labor hour
Required:
Compute the following variances for raw materials, direct labor, and variable overhead,
assuming that the price variance for materials is recognized at point of purchase:
a. Direct materials price variance.
b. Direct materials quantity variance.
c. Direct labor rate variance.
d. Direct labor efficiency variance.
e. Variable overhead rate variance.
f. Variable overhead efficiency variance.
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148) Ralston Corporation makes a product with the following standard costs:
Inputs Standard Quantity or Hours Standard Price or Rate
Standard Cost Per Unit
Direct materials 6.9 liters $ 5.00 per liter $ 34.50
Direct labor 0.3 hours $ 17.00 per hour $ 5.10
Variable overhead 0.3 hours $ 6.00 per hour $ 1.80
The company reported the following results concerning this product in August.
Originally budgeted output 8,600 units
Actual output 8,400 units
Raw materials used in production 58,330 liters
Actual direct labor-hours 2,310 hours
Purchases of raw materials 62,500 liters
Actual price of raw materials $ 4.90 per liter
Actual direct labor rate $ 17.10 per hour
Actual variable overhead rate $ 5.50 per hour
The materials price variance is recognized when materials are purchased. Variable overhead is
applied on the basis of direct labor-hours.
Required:
a. Compute the materials quantity variance.
b. Compute the materials price variance.
c. Compute the labor efficiency variance.
d. Compute the direct labor rate variance.
e. Compute the variable overhead efficiency variance.
f. Compute the variable overhead rate variance.
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149) Pure Corporation makes a product with the following standard costs:
Inputs Standard Quantity or Hours Standard Price or Rate
Standard Cost Per Unit
Direct materials 4.3 pounds $ 6.00 per pound $ 25.80
Direct labor 0.7 hours $ 20.00 per hour $ 14.00
Variable overhead 0.7 hours $ 2.00 per hour $ 1.40
The company reported the following results concerning this product in September.
Originally budgeted output 1,900 units
Actual output 1,700 units
Raw materials used in production 7,210 pounds
Purchases of raw materials 7,600 pounds
Actual direct labor-hours 1,260 hours
Actual cost of raw materials purchases $ 43,320
Actual direct labor cost $ 25,578
Actual variable overhead cost $ 2,394
The company applies variable overhead on the basis of direct labor-hours. The direct materials
purchases variance is computed when the materials are purchased.
Required:
a. Compute the materials quantity variance.
b. Compute the materials price variance.
c. Compute the labor efficiency variance.
d. Compute the direct labor rate variance.
e. Compute the variable overhead efficiency variance.
f. Compute the variable overhead rate variance.