Total standard cost …………………………… $14.50
During the current period, the company operated at 80% of capacity and produced 128,000 units.
Actual costs were:
Direct material (380,000 lbs.) …………….
$779,000
Direct labor (63,000 hrs.) ………………….
507,150
Fixed overhead …………….………………
365,000
Variable overhead …………………………
220,000
Calculate the variable overhead spending and efficiency variance and the fixed overhead spending
and volume variances. Indicate whether each is favorable or unfavorable.
153
201) Naches Co. assigned direct labor cost to its products in May for 1,300 standard hours of direct
labor at the standard $8 per hour rate. The direct labor rate variance for the month was $200
favorable and the direct labor efficiency variance was $150 favorable. Prepare the journal entry to
charge Work in Process Inventory for the standard labor cost of the goods manufactured in May
and to record the direct labor variances. Assuming that the direct labor variances are immaterial,
prepare the journal entry that Naches would make to close the variance accounts.
202) Firenze Company’s fixed budget for the first quarter of the calendar year appears below. Prepare
flexible budgets that show variable costs per unit, fixed costs and two different flexible budgets for
sales volumes of 22,000 and 24,000.
Sales (20,000 units)
$800,000
Cost of goods sold:
Direct materials
$160,000
Direct labor
150,000
Variable overhead
100,000
Fixed overhead
120,000
530,000
Gross profit
$ 270,000
Selling expenses:
Sales commissions (all variable)
40,000
Advertising (all fixed)
50,000
General and administrative expenses:
Salaries (all fixed)
80,000
Rent (all fixed)
30,000
Depreciation (all fixed)
20,000
220,000
Net income from operations
$ 50,000
203) Gala Enterprises reports the following information regarding the production of one of its products for
the month. Compute the direct materials cost variance, the direct materials price variance, the direct
materials quantity variance and identify each as either favorable or unfavorable.
Direct materials standard (6 lbs. @ $3/lb.) $18 per finished unit
Actual direct materials used 179,000 lbs.
Actual finished units produced 30,000 units
Actual cost of direct materials used $554,900
156
204) Gala Enterprises reports the following information regarding the production on one of its products
for the month. Compute the direct labor cost variance, the direct labor rate variance, the direct labor
efficiency variance and identify each as either favorable or unfavorable.
Direct labor standard (2 hrs. @ $15/hr.) $30 per finished unit
Actual direct labor hours 60,800 hrs.
Actual finished units produced 30,000 units
Actual cost of direct labor $905,920
205) Gala Enterprises collected the following data regarding production of one of its products. Compute
the variable overhead cost variance, the variable overhead spending variance, the variable overhead
efficiency variance, the fixed overhead cost variance, the fixed overhead spending variance, and the
fixed overhead volume variance.
Direct labor standard (2 hrs. @ $15/hr.) $30.00 per finished unit
Actual direct labor hours 60,800 hrs.
Budgeted units 31,000 units
Actual finished units produced 30,000 units
Standard variable OH rate (2 hrs. @ $14.00/hr.) $28.00 per finished unit
Standard fixed OH rate ($310,000/31,000 units) $10.00 per unit
Actual variable overhead costs incurred $857,600
Actual fixed overhead costs incurred $312,000
SHORT ANSWER QUESTIONS
206) ________ are preset costs for delivering a product or service under normal conditions.
207) Companies promoting continuous improvement strive to achieve ________ standards by
eliminating inefficiencies and waste.
208) A standard that takes into account the reality that some loss usually occurs with any process under
normal application of the process is known as a ________ standard.
209) Differences between actual costs and standard costs are known as ________. These differences
may be subdivided into ________ and ________.
210) Direct materials variances are called price and quantity variances. However, when referring to
direct labor, these variances are usually called and variances.
211) In the analysis of variances, management commonly focuses on four categories of production costs:
________ cost, ________ cost; ________ cost; and ________ cost.
212) A management approach that focuses attention on significant differences from plans and gives less
attention to areas where performance is reasonably close to standards is known as ________.
213) A fixed budget is also called a ________ budget.
214) A favorable variance for a cost means that when compared to the budget, the actual cost is
________ than the budgeted cost.
215) A flexible budget is also called a ________ budget.
216) A contains relevant information that compares actual results to planned activities.
217) The difference between the actual sales and the flexible budget sales is called the ________
variance.
218) The difference between the flexible budget sales and the fixed budget sales is called the ________
variance.
219) In preparing flexible budgets, the costs that remain constant in total are ________ costs. Those
costs that change in total are ________ costs.
220) If actual price per unit of materials is greater than the standard price per unit of materials, the direct
materials price variance is .
221) The difference between the total actual overhead cost incurred and the total standard overhead cost
applied is the ________.
222) The sum of the variable overhead spending variance, the variable overhead efficiency variance, the
fixed overhead spending variance is the ________.
223) The fixed overhead variance can be broken down into the ________ variance and the ________
variance.
224) At the end of the accounting period, immaterial variances are closed to ________.