3) Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts.
Standards for direct labor are as follows:
Hours per unit 0.5 Price per hour $18.00
Actual direct labor for the month: 1,200 hours for a total cost of $24,000
Planned production for the month: 3,000 units
The journal entry to record the payment of direct labor wages would be to:
A) debit Manufacturing wages $21,600, credit Wages payable $24,000, debit Labor efficiency variance $2,400.
B) debit Manufacturing wages $24,000, credit Wages payable $21,600, credit Labor price variance $2,400.
C) debit Manufacturing wages $27,000, credit Wages payable $24,000, credit Labor price variance $3,000.
D) debit Manufacturing wages $21,600, credit Wages payable $24,000, debit Labor price variance $2,400.
4) Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts.
Standards for direct labor are as follows:
Hours per unit 0.5 Price per hour $18.00
Actual direct labor for the month: 1,200 hours for a total cost of $24,000
Planned production for the month: 3,000 units
The journal entry to record the usage of direct labor would be to:
A) debit WIP $27,000, credit Manufacturing wages $24,000, credit Labor efficiency variance $2,400.
B) debit WIP $21,600, credit Manufacturing wages $24,000, debit Labor price variance $2,400.
C) debit WIP $21,600, credit Manufacturing wages $27,000, debit Labor efficiency variance $5,400.
D) debit WIP $27,000, credit Manufacturing wages $21,600, credit Labor efficiency variance $5,400.
5) Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts.
Standards for manufacturing overhead are as follows:
Variable overhead: $30 per direct labor hour
Fixed overhead: $10 per direct labor hour
Actual overhead incurred (variable and fixed): $45,600
Other data provided:
Standards for direct labor are as follows:
Hours per unit 0.5 Price per hour $18.00
Actual direct labor for the month: 1,200 hours for a total cost of $24,000
Planned production for the month: 3,000 units
The journal entry to allocate overhead (both variable and fixed) to production would be to:
A) debit WIP $60,000, credit Manufacturing overhead $60,000.
B) debit WIP $45,600, credit Manufacturing overhead $45,600.
C) debit WIP $60,000, credit Manufacturing overhead $45,600, credit Variable overhead efficiency variance
$14,400.
D) debit WIP $45,600, credit Manufacturing overhead $60,000, debit Variable overhead efficiency variance
$14,400.
6) Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts.
Atlantic produced 3,000 units of product during the month. Data on standard costs and
actuals are as follows:
Direct materials: Standard Actual
Pounds per unit 2.0 3.3
Price per pound $5.00 $4.80
Materials cost per unit $10.00 $16.00
Number of units 3,000 3,000
Direct materials cost $30,000 $48,000
Direct labor: Standard Actual
Hours per unit 0.5 0.4
Cost per hour $18.00 $20.00
Labor cost per unit $9.00 $8.00
Number of units 3,000 3,000
Direct labor cost $27,000 $24,000
Variable overhead* Standard Actual
Hours per unit 0.5 0.4
Cost per hour $30.00 $29.00
Variable overhead cost per unit $15.00 $11.60
Number of units 3,000 3,000
Variable overhead cost $45,000 $34,800
* allocated on direct labor hours
Fixed overhead* Standard Actual
Hours per unit 0.5 0.4
Cost per hour $10.00 $9.00
Fixed overhead cost per unit $5.00 $3.60
Number of units 3,000 3,000
Fixed overhead cost $15,000 $10,800
* allocated on direct labor hours
The journal entry to transfer the cost to Finished goods from Work in process is to:
A) debit WIP $117,600, credit Finished goods $117,600.
B) debit Finished goods $117,000, credit WIP $117,000.
C) debit WIP $117,600, credit Finished goods $117,000, credit WIP variance $600.
D) debit WIP $117,000, credit Finished goods $117,600, debit WIP variance $600.
7) For companies using standard costing accounting procedures, when recording the use of direct materials in the
production process, Work in process inventory is debited for which of the following?
A) Standard quantity for actual production times standard cost per pound
B) Standard quantity for actual production times actual cost per pound
C) Actual quantity times standard cost per pound
D) Actual quantity times actual cost per pound
8) When recording direct labor incurred in the production process, which of the following shows the effect on Work
in process inventory?
A) Debit for standard quantity for actual production times standard cost per hour
B) Credit for standard quantity usage for actual production times actual cost per hour
C) Debit for actual quantity times standard cost per hour
D) Credit for standard quantity for actual production times standard cost per hour
9) Atlas Manufacturing is closing the year 2012. Atlas uses standard costing methodology in its accounting system
and for internal performance reporting. Atlas’s ending balances are shown here:
Using the standard costing system, how much is Net operating income?
A) $8,780
B) $6,290
C) $7,100
D) $7,530
10) Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts. They
are ready to close out their Manufacturing overhead account for the month. The T-account for overhead is shown
below:
In addition to the above, Atlantic calculated the following overhead variances:
Variable overhead: Spending (price) variance: $5,000 F
Efficiency variance: $4,850 U
Fixed overhead: Spending (price) variance: $1,200 F
Volume variance: $3,350 U
The journal entry to close out the overhead account and record the overhead variances would be:
A) Variable overhead spending variance 5,000
Fixed overhead spending variance 1,200
Manufacturing overhead 2,000
Variable overhead efficiency variance 4,850
Fixed overhead volume variance 3,350
B) Fixed overhead efficiency variance 4,850
Fixed overhead volume variance 3,350
Variable overhead spending variance 5,000
Variable overhead efficiency variance 1,200
Manufacturing overhead 2,000
C) Variable overhead spending variance 5,000
Fixed overhead spending variance 1,200
Manufacturing overhead 2,000
Fixed overhead volume variance 4,850
Variable overhead efficiency variance 3,350
D) Variable overhead efficiency variance 4,850
Fixed overhead volume variance 3,350
Variable overhead spending variance 5,000
Fixed overhead spending variance 1,200
Manufacturing overhead 2,000
11) Alpine Productions uses a standard costing system for recording transactions; they also prepare an internal-use
income statement using standard cost methodology. At the end of 2011, Alpine reported the following data:
Sales revenues: $500,000
Cost of goods sold (standard costing) $382,500
Marketing & admin expenses $105,000
Variances:
Sales revenue $4,000 F
Direct materials price variance 20 U
Direct materials efficiency variance 300 F
Direct labor price variance 75 U
Direct labor efficiency variance 10 F
Variable overhead spending variance 225 U
Variable overhead efficiency variance 80 F
Fixed overhead spending variance 420 U
Fixed overhead volume variance 110 F
Using standard costing methodology, the net operating income is:
A) $14,990.
B) $16,260.
C) $13,975.
D) $87,740.
80
12) Atlas Manufacturing is closing the year 2012. Atlas uses standard costing methodology in its accounting system
and for internal performance reporting. Atlas’s ending balances are shown here:
Using the format below, please prepare a statement of operating income.
Sales revenue (standard)
Sales revenue variance
Sales revenue (actual)
Cost of goods sold (standard)
Manufacturing variances
(Credit balances in parentheses)
Direct materials price variance
Direct materials efficiency variance
Direct labor price variance
Direct labor efficiency variance
Variable overhead spending variance
Variable overhead efficiency variance
Fixed overhead spending variance
Fixed overhead volume variance
Cost of goods sold (actual)
Gross profit
Selling & admin. expenses
Net operating income/(loss)
82
13) Alpine Productions uses a standard costing system for recording transactions; they also prepare an internal-use
income statement using standard cost methodology. At the end of 2011, Alpine reported the following data:
Sales Revenues: $500,000
Cost of Goods Sold (standard costing) $382,500
Marketing & Admin expenses $105,000
Variances:
Sales revenue $4,000 F
Direct materials price variance 20 U
Direct materials efficiency variance 300 F
Direct labor price variance 75 U
Direct labor efficiency variance 10 F
Variable overhead spending variance 225 U
Variable overhead efficiency variance 80 F
Fixed overhead spending variance 420 U
Fixed overhead volume variance 110 F
Using the format below, please prepare a statement of operating income.
Sales revenue (standard)
Sales revenue variance
Sales revenue (actual)
Cost of goods sold (standard)
Manufacturing variances
(Credit balances in parentheses)
Direct materials price variance
Direct materials efficiency variance
Direct labor price variance
Direct labor efficiency variance
Variable overhead spending variance
Variable overhead efficiency variance
Fixed overhead spending variance
Fixed overhead volume variance
Cost of goods sold (actual)
Gross profit
Marketing and admin. expenses
Net operating income/(loss)
