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124) A company’s direct labor standards for a given operation and the actual results for the
current period are provided below:
Standard rates:
Level One: $20 per hour
Level Two: $15 per hour
Time to produce one unit:
Two (2) Level One workers at 15-minutes each
Three (3) Level Two workers at 10 minutes each
Actual Results:
Units produced: 10,000
Labor used:
4,000 hours of Level One workers at $25 per hour
6,800 hours of Level Two workers at $15 per hour
Required:
(Be sure to indicate whether the variance is favorable or unfavorable.)
a. Compute the labor rate variances for each worker level.
b. Compute the labor efficiency variances for each worker level.
c. Compute the labor mix variances for each worker level.
d. Compute the labor yield variances for each worker level.
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125) A company’s direct labor standards for a given operation and the actual results for the
current period are provided below:
Standard rates:
Class A: $24 per hour
Class B: $12 per hour
Time to produce one unit:
Three (3) Class A workers at 20 minutes each
Two (2) Class B workers at 15-minutes each
Actual Results:
Units produced: 6,000
Labor used:
5,800 hours of Class A workers; total payroll: $156,600
3,500 hours of Class B workers; total payroll: $49,000
Required:
(Be sure to indicate whether the variance is favorable or unfavorable.)
a. Compute the labor rate variances for each worker level.
b. Compute the labor efficiency variances for each worker level.
c. Compute the labor mix variances for each worker level.
d. Compute the labor yield variances for each worker level.
126) The Foggybottom Chemicals produces a product by mixing three ingredients to make a
finished product. The standard cost of producing a 50-gallon drum of the product is $19.50. The
standard materials mix and related standard cost of each chemical used in a 50-gallon batch are:
The quantities of chemicals purchased and used during the current production period are shown
in the schedule below. A total of 520 batches were manufactured during the current production
period. The costs and chemical usage variations at the end of the production period are:
Required:
(Be sure to indicate whether the variance is favorable or unfavorable.)
a. If variances are recorded at the earliest possible moment, what is the material price variance
(in total and for each ingredient)?
b. What is the material efficiency variance (in total and for each ingredient)?
c. What is the material yield variance (in total and for each ingredient)?
d. What is the material mix variance (in total and for each ingredient)?
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127) A company’s direct labor standards for a given operation and the actual results for the
current period are provided below:
Standard rates:
Advanced: $18 per hour
Trained: $15 per hour
Novice: $10 per hour
Time to produce one unit:
One (1) Advanced worker at 30 minutes each = 30 minutes/unit
Three (3) Trained workers at 20 minutes each = 60 minutes/unit
Two (2) Novice workers at 15 minutes each = 30 minutes/unit
120 minutes/unit
Actual Results:
Units produced: 4,000
Labor used:
2,200 hours of Advanced workers
4,300 hours of Trained workers
1,900 hours of Novice workers
Required:
(Be sure to indicate whether the variance is favorable or unfavorable.)
a. Compute the labor efficiency variances for each worker level.
b. Compute the labor mix variances for each worker level.
c. Compute the labor yield variances for each worker level.
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128) Tallon & Associates is a consulting firm specializing in business location studies. The
results for last year, along with the budget, are as follows:
Required:
(Be sure to indicate whether the variance is favorable or unfavorable.)
a. Prepare a flexible budget using billable hours as the measure of output.
b. Prepare a sales activity variance analysis.
c. Compute the sales price variance.
129) The standard direct labor cost for room cleaning at Texas Hotels is $2.50 per room ($10 per
hour in wages divided by 4 rooms cleaned per hour). Actual labor costs were $11,330 for the
month. During the period there were 1,100 labor hours worked; 3,920 rooms were cleaned
during the month.
Required:
(Be sure to indicate whether the variance is favorable or unfavorable.)
a. Compute the labor price variance for the period.
b. Compute the labor efficiency variance for the period.
130) What is the advantage of recognizing materials price variances at the time of purchase
rather than at the time of use?
131) Explain the difference between the market share variance and the industry volume variance.
132) Explain the difference between the sales mix variance and the sales quantity variance.
133) When deciding how many variances to calculate, what two items need to be considered? Be
sure to define your terms.
134) Explain what production mix and production yield variances measure. How do these
variances relate to efficiency variances?
135) Olsen Company uses a standard cost system for its only product. The bickering between
purchasing and production that occurs every month after the material variances are developed
has the production vice president, Mr. Becker, at his wits end. He has checked the job
descriptions of the individuals involved and notes that the purchasing department is responsible
for the price at which materials and supplies are purchased and the manufacturing department is
responsible for the quantity of material used. This seems very clear cut to him so he has gone to
the cost accountant for some additional help.
Required:
As the cost accountant, explain to Mr. Becker why, or why not, this division of duties solves the
conflict between price and quantity variances.
136) Advantage Co. sells two types of drives—standard and specialty. The budget is based on a
combination of last year’s information as well as forecasted industry sales and the company’s
market share. The following information is provided for June:
Budgeted Actual
Standard Specialty Standard Specialty
Selling price per drive $ 50 $ 70 $ 52 $ 70
Variable price per drive 24 40 24 42
Contribution margin $ 26 $ 30 $ 28 $ 28
Sales (units) 5,000 1,000 4,500 1,500
Fixed costs $60,000 $63,000
Required:
1) Prepare a static budget and flexible budget for the company for June.
2) What is the sales activity variance?
137) Maxine Watters, the managerial accountant, has been asked by the President of Coolare
Ceiling Fan Company to prepare an analysis of the effectiveness of the new management team.
The company manufactures paper fans.
2020 standards:
Direct materials – 4 parts @ $2 per part
Direct labor – one half hour (0.5) @ $10 per hour
Estimated production – 100,000
Actual results 2020:
Direct materials – 585,000 parts at a total cost of $1,462,500 were purchased and used
Direct labor – 51,000 hours at a cost of $561,000
Actual production – 130,000 fans
Required:
Requirement: Compute the direct material and direct labor price and efficiency variances.
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138) Resolution Company is meeting with the consultants it hired to help it with problems
arising from its increasing sales and increasing production to meet them. The consultants have
informed the company that they need to make price concessions in order to have their product
sold over a large area. To do this, costs need to be reduced and controlled. They recommended
installation of a standard costing system and a flexible budgeting system.
The CEO took the recommendations back to the company management, explained to all, and a
team was set up to develop the standards. The team was composed of the purchasing manager,
processing manager, production engineer, and V.P. of sales. Each member of the team, rather
than working to develop standards, came up with reasons why they wouldn’t work. The team
made its report to the CEO who told them to come up with the standards or he would have the
consultants set them.
Required:
(a) What are the advantages and disadvantages of standard costing?
(b) What has gone wrong in this situation and will having the outside consultant do the work
change anything?
