88.
An unfavorable overhead volume variance results from:
89.
If fewer units are produced than had been estimated when standard unit costs were
determined, there would normally be:
90.
An unfavorable volume variance in a factory is generally:
91.
The Victor Corporation has been incurring favorable overhead volume variances in each of
the last several months. These persistent favorable variances indicate:
92.
Overhead volume variances indicate:
93.
A large unanticipated reduction in the property taxes on a company’s factory would, all
other things equal, most likely cause:
94.
An unfavorable labor rate variance could most likely result from all of the following
except
:
95.
Dawson Company has a union contract which calls for an 8% cost of living increase in the
wages paid to all factory workers as of July 1 of the current year. This suggests that:
96.
An unfavorable labor efficiency variance is most likely to occur if:
Essay Questions
97.
Standard costs
Define standard costs. Under what conditions should previously established standard costs
be revised?
98.
Accounting terminology
Listed below are seven technical accounting terms introduced or emphasized in this
chapter:
Each of the following statements may (or may not) describe one of these technical terms.
In the space provided beside each statement, indicate the accounting term described, or
answer “None” if the statement does not correctly describe any of the terms.
____ (a) A materials variance which is the responsibility of the Purchasing Department.
____ (b) The variance which exists whenever actual production levels differ from normal
levels.
____ (c) Unit costs expected to be incurred under normal conditions.
____ (d) A labor variance caused by a difference between standard and actual hours
required to complete a task.
____ (e) The variance caused by incurring more overhead costs than allowed for at a given
level of production.
99.
Establishing standard cost amounts
Explain why the determination of standard cost amounts should not be the sole
responsibility of a company’s cost accountant.
100.
Standard cost system materials variances
Levron Corporation manufactures a line of cosmetics. The standard price of the ingredients
in its beauty cream is $7 per ounce; the standard amount of material allowed per jar is 1.25
ounces. During December, 5,300 jars were produced, requiring 6,784 ounces of ingredients
at a total direct materials cost of $37,312.
(a) Calculate the materials price variance for December. Indicate whether it is favorable (F)
or unfavorable (U). $__________
(b) Who is responsible for this variance? _________
(c) Calculate the materials quantity variance for December. Indicate whether it is favorable
(F) or unfavorable (U). $__________
(d) What is Levron Corporation’s total materials variance for December? Indicate whether it
is favorable (F) or unfavorable (U). $__________
24–49
101.
Standard cost system labor variance
The following computations of March labor variances for Sam’s Supply Company are
incomplete. The missing items are labeled (a) through (d). If necessary, round your
answers.
Labor rate variance = 4,800 hours × [(a) – $8.50] = $350 favorable
Labor efficiency variance = (b) × [5,000 hours – (c)] = $(d)
On the appropriately labeled line, identify each missing item by name (a through c) and
show the missing value (a through d). Show supporting computations in the space
provided.
(a) _________________________ $_______________
(b) _________________________ $_______________
(c) _______________________________ hours
(d) $______________ F or U (Circle the correct term.)
(e) During March, the supervisor left for vacation without arranging for a replacement.
Which variances would have been most affected by this situation?
_________________________
Computations
102.
Standard cost system-materials and labor variances
Job no. 811 involved the production of 200 units of product MF. The total standard and
actual costs for materials and direct labor on this job are shown below:
Compute the following cost variances for job no. 811. Indicate whether each variance is
favorable (F) or unfavorable (U).
(a) Materials price variance: $_______________
(b) Materials quantity variance: $_______________
(c) Labor rate variance: $_______________
(d) Labor efficiency variance: $_______________
