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Chapter 10 - Standard Costing: A Managerial Tool
b.
$12,000 F
c.
$18,000 U
d.
$12,000 U
114. Claire Company uses a standard costing system. The following information pertains to direct labor costs for
February:
Standard direct labor rate per hour
$15.00
Actual direct labor rate per hour
$13.50
Labor rate variance
$18,000 F
Actual output
1,000 units
Standard hours allowed for actual production
10,000 hours
How many actual labor hours were worked during February for Claire Company?
a.
10,000 hours
b.
2,000 hours
c.
1,200 hours
d.
12,000 hours
115. If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the number of hours allowed,
the labor rate variance and labor efficiency variance will be
a.
LRV Favorable; LEV Favorable
b.
LRV Favorable; LEV Unfavorable
c.
LRV Unfavorable; LEV Favorable
d.
LRV Unfavorable; LEV Unfavorable
116. During January, 7,000 direct labor hours were worked at a standard cost of $20 per hour. If the direct labor rate
variance for January was $17,500 favorable, the actual cost per direct labor hour must be
a.
$17.50.
b.
$20.00.
c.
$22.50.
d.
$25.00.
117. During October, 10,000 direct labor hours were worked at a standard cost of $10 per hour. If the direct labor rate
variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be
a.
$10.40.
b.
$10.00.
Chapter 10 - Standard Costing: A Managerial Tool
c.
$9.60.
d.
$9.20.
118. Bender Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct
labor for the 100 units of Product AA are as follows:
Materials:
Standard
Actual
Standard:
200 pounds at $3.00 per pound
$ 600
Actual:
220 pounds at $2.85 per pound
$ 627
Direct labor:
Standard:
400 hours at $15.00 per hour
6,000
Actual:
368 hours at $16.50 per hour
6,072
What is the labor efficiency variance for Bender Corporation?
a.
$480 U
b.
$552 F
c.
$552 U
d.
$480 F
Figure 10-4.
High Fliers Company produces model airplanes. During the month of November, it produced 2,000 planes. The actual
labor hours were 7 hours per plane. Its standard labor hours are 10 hours per plane. The standard labor rate is $11 per
hour. At the end of November, High Fliers found that it had a favorable labor rate variance of $10,500.
119. Refer to Figure 10-4. What was High Fliers' actual cost per labor hour?
a.
$12.75
b.
$11.50
c.
$10.50
d.
$10.25
120. Refer to Figure 10-4. What was High Fliers' total labor variance?
a.
$61,500 F
b.
$76,500 F
c.
$76,500 U
d.
$61,500 U
Chapter 10 - Standard Costing: A Managerial Tool
Figure 10-6.
Extreme Builders constructs houses. The standard labor rate is $25 per hour and the standard number of hours is 15,000
hours per home. During the year, it constructed 12 homes using 18,000 labor hours per home and a rate of $28 per hour.
121. Refer to Figure 10-6. Calculate the Extreme Builders' labor rate variance.
a.
$540,000 U
b.
$540,000 F
c.
$648,000 U
d.
$648,000 F
122. Refer to Figure 10-6. Calculate the labor efficiency variance.
a.
$1,008,000 F
b.
$900,000 U
c.
$1,008,000 U
d.
$900,000 F
123. Assume that SQ = Standard Quantity, SP = Standard Price, AQ = Actual Quantity, and AP = Actual Price. The
correct entry along with the equation to record the issuance and usage of materials, assuming a favorable materials usage
variance, is as follows
a.
debit Work in Process, SQ × SP
credit Materials Usage Variance, (AQ − SQ) × SP
credit Materials, AQ × SP
b.
debit Work in Process, SQ × SP
debit Materials Usage Variance, (AQ − SQ) × SP
credit Materials, AQ × SP
c.
debit Work in Process, AQ × AP
credit Materials Usage Variance, (AQ − SQ) × SP
credit Materials, AQ × SP
d.
debit Work in Process, AQ × AP
debit Materials Usage Variance, (AQ − SQ) × SP
credit Materials, AQ × SP
e.
None of these.
Chapter 10 - Standard Costing: A Managerial Tool
124. Which of the following is true regarding the disposition of materials and labor variances?
a.
The variances for materials and labor are closed directly to Cost of Goods Sold regardless of materiality.
b.
If the materials price variance is material, it is prorated among Materials Inventory, Materials Usage Variance,
Work in Process, and Finished Goods.
c.
The materials usage variance and the labor variances, if material, are prorated among Work in Process,
Finished Goods, and Cost of Goods Sold.
d.
The materials usage variance and the labor variances are always prorated among Work in Process, Finished
Goods, and Cost of Goods Sold.
e.
The materials usage variance and the labor variances are always closed to Cost of Goods Sold.
125. During September, a small roofing company purchased 500 bundles of a certain type of shingle at a price of $35 per
bundle, $5 less than the standard price. Its standard quantity of this type of shingle is 550 bundles. What is the journal
entry to record the purchase of materials?
a.
debit Materials, 20,000
credit Materials Price Variance, 2,500
credit Accounts Payable, 17,500
b.
debit Materials, 20,000
debit Materials Price Variance, 2,500
credit Accounts Payable, 22,500
c.
debit Materials, 17,500
credit Materials Price Variance, 2,500
credit Accounts Payable, 15,000
d.
debit Materials, 20,000
debit Materials Price Variance, 2,750
credit Accounts Payable, 17,250
126. During June, Cisco Company produced 15,000 chainsaw blades. The standard quantity of material allowed per unit
was 1.5 pounds of steel per blade at a standard cost of $5 per pound. The actual purchase price was $6.25 per pound.
Cisco determined that it had a favorable materials usage variance of $2,500 for June. What is the journal entry to record
the issuance and usage of materials?
a.
debit Work in Process, 112,500
credit Materials Usage Variance, 2,500
credit Materials, 110,000
b.
debit Work in Process, 110,000
debit Materials Usage Variance, 2,500
credit Materials, 112,000
c.
debit Work in Process, 112,500
debit Materials Usage Variance, 2,500
credit Materials, 115,000
d.
debit Work in Process, 140,625
credit Materials Usage Variance, 2,500
credit Materials, 138,125
Chapter 10 - Standard Costing: A Managerial Tool
Figure 10-7.
During April, a small roofing company purchased 700 bundles of a certain type of shingle at a price of $35 per bundle, $8
more than the standard price. Its standard quantity of this type of shingle is 725 bundles.
127. Refer to Figure 10-7. What is the journal entry to record the issuance and usage of materials assuming that the
roofing company purchased and used 700 bundles?
a.
debit Work in Process, 18,900
debit Materials Usage Variance, 675
credit Materials, 19,575
b.
debit Work in Process, 19,575
credit Materials Usage Variance, 675
credit Materials, 18,900
c.
debit Work in Process, 24,500
debit Materials Usage Variance, 875
credit Materials, 25,375
d.
debit Work in Process, 25,375
credit Materials Usage Variance, 875
credit Materials, 24,500
128. Refer to Figure 10-7. What is the journal entry to record the purchase of materials?
a.
debit Materials, 19,575
debit Materials Price Variance, 5,800
credit Accounts Payable, 25,375
b.
debit Materials, 24,500
credit Materials Price Variance, 5,600
credit Accounts Payable, 18,900
c.
debit Materials, 18,900
debit Materials Price Variance, 5,600
credit Accounts Payable, 24,500
d.
debit Materials, 25,375
credit Materials Price Variance, 5,800
credit Accounts Payable, 19,575
Chapter 10 - Standard Costing: A Managerial Tool
Figure 10-8.
The Perfect Tool Company (South America Division) produced 80,000 saw blades during the year. It took 1.5 hours of
labor per blade at a rate of $8.50 per hour. However, its standard labor rate is $8.00. Its labor efficiency variance was an
unfavorable $40,000.
129. Refer to Figure 10-8. What is Perfect's standard hours allowed for a volume of 80,000 blades?
a.
210,000 hours
b.
189,000 hours
c.
115,000 hours
d.
125,000 hours
130. Refer to Figure 10-8. What is Perfect's labor rate variance?
a.
$57,500 U
b.
$57,500 F
c.
$60,000 U
d.
$60,000 F
131. Refer to Figure 10-8. What is the journal entry to record both labor variances?
a.
debit Work In Process, 920,000
debit Labor Rate Variance, 60,000
debit Labor Efficiency Variance, 40.000
credit Accrued Payroll, 1,020,000
b.
debit Work In Process, 960,000
debit Labor Rate Variance, 57,500
debit Labor Efficiency Variance, 40,000
credit Accrued Payroll, 1,057,500
c.
debit Work In Process, 920,000
debit Labor Rate Variance, 60,000
credit Labor Efficiency Variance, 40,000
credit Accrued Payroll, 940,000
d.
debit Work In Process, 960,000
debit Labor Rate Variance, 57,500
credit Labor Efficiency Variance, 40,000
credit Accrued Payroll, 977,500
Chapter 10 - Standard Costing: A Managerial Tool
Figure 10-9.
James Company manufactures t-shirts. During the year, it manufactured 250,000 t-shirts, using 2 hours of direct labor at a
rate of $8.50 per hour. The materials and labor standards for manufacturing the t-shirts are:
Direct materials (6 yards of fabric @ $3 per yard)
$18
Direct labor (2.4 hours @ $8.00 per hour)
17
It took James 1,400,000 yards at $2.50 per yard to make the 250,000 t-shirts.
132. Refer to Figure 10-9. What is James’ materials price variance assuming that materials purchased equals materials
used?
a.
$750,000 F
b.
$700,000 F
c.
$700,000 U
d.
$750,00 U
133. Refer to Figure 10-9. What is James’ materials usage variance?
a.
$250,000 F
b.
$300,000 F
c.
$300,000 U
d.
$250,000 U
134. Refer to Figure 10-9. What is James’ labor rate variance?
a.
$190,625 F
b.
$250,000 F
c.
$250,000 U
d.
$193,750 U
Chapter 10 - Standard Costing: A Managerial Tool
135. Refer to Figure 10-9. What is James’ labor efficiency variance?
a.
$800,000 U
b.
$850,000 F
c.
$800,000 F
d.
$850,000 U
136. Refer to Figure 10-9. What is the entry to record the purchase of materials?
a.
debit Materials, 3,500,000
debit Materials Price Variance, 750,000
credit Accounts Payable, 4,250,000
b.
debit Materials, 4,200,000
debit Materials Price Variance, 750,000
credit Accounts Payable, 4,950,000
c.
debit Materials, 4,200,000
credit Materials Price Variance, 700,000
credit Accounts Payable, 3,500,000
d.
debit Materials, 3,500,000
credit Materials Price Variance, 700,000
credit Accounts Payable, 4,200,000
137. Refer to Figure 10-9. What is the entry to record the issuance and usage of materials?
a.
debit Work in Process, 4,500,000
debit Materials Usage Variance, 300,000
credit Materials, 4,800,000
b.
debit Work in Process, 4,200,000
debit Materials Usage Variance, 300,000
credit Materials, 4,500,000
c.
debit Work in Process, 4,200,000
credit Materials Usage Variance, 300,000
credit Materials, 3,900,000
d.
debit Work in Process, 4,500,000
credit Materials Usage Variance, 300,000
credit Materials, 4,200,000
Chapter 10 - Standard Costing: A Managerial Tool
138. Refer to Figure 10-9. What is the entry to close the variances of labor and materials?
a.
debit Materials Price Variance, 700,000
debit Materials Usage Variance, 300,000
debit Labor Efficiency Variance, 800,000
credit Cost of Goods Sold, 1,800,000
debit Cost of Goods Sold, 250,000
credit Labor Rate Variance, 250,000
b.
debit Materials Price Variance, 750,000
debit Materials Usage Variance, 250,000
debit Labor Efficiency Variance, 850,000
credit Cost of Goods Sold, 1,850,000
debit Cost of Goods Sold, 300,000
credit Labor Rate Variance, 300,000
c.
debit Cost of Goods Sold, 1,800,000
credit Materials Price Variance, 700,000
credit Materials Usage Variance, 300,000
credit Labor Efficiency Variance, 800,000
debit Labor Rate Variance, 250,000
credit Cost of Goods Sold, 250,000
d.
debit Cost of Goods Sold, 1,850,000
credit Materials Price Variance, 750,000
credit Materials Usage Variance, 250,000
credit Labor Efficiency Variance, 850,000
debit Labor Rate Variance, 300,000
credit Cost of Goods Sold, 300,000
139. Top Notch Music Inc. produces car stereos. During the year Top Notch Music produced 7,000 stereos. Materials and
labor standards for producing these units are as follows:
Direct materials (1 electronic component kit @ $185)
$185
Direct materials (2 plastic casing @ $45)
90
Direct labor (8 hours @ $15)
120
Required:
A. Compute the standards hours allowed for a volume of 7,000 stereos and the planned
cost.
B. Compute the standard number of kits and casings allowed for a value of 7,000 units
and the planned cost for each direct material.
C. Compute the total budget variances for materials and labor assuming that actual
number of electronic kits purchased and used were 7,300 at a price of $179 and actual
Chapter 10 - Standard Costing: A Managerial Tool
plastic casings purchased were 14,400 at a price of $43. Actual labor was 57,200 hours at
$15.75 per hour.
140. Leeds Company uses the following rule to determine whether labor efficiency variances should be investigated:
A labor efficiency variance will be investigated when the variance is greater than either $100 or 10% of the standard labor
cost.
During September, the company used 500 direct labor hours at a rate of $15 per hour. Its standard rate is 475 direct labor
hours at a rate of $14.50 per hour.
A.
Determine the company's labor efficiency variance and whether it is favorable or
unfavorable.
B.
Should the variance be investigated?
141. Acme Brick Company uses the following rule to determine whether materials usage variances should be investigated:
A materials usage variance will be investigated when the variance is greater than either $5,000 or 10% of the standard
cost.
During June, the company purchased and used 9,500 pounds of concrete for $5 per pound. It was able to make 20,000
bricks. Its standard quantity of materials allowed is 0.45 pound of concrete per brick at a standard price of $6 per pound.
Chapter 10 - Standard Costing: A Managerial Tool
A.
Determine Acme's material usage variance and whether it is favorable or unfavorable.
B.
Should the variance be investigated?
142. Westminster Company has the following information concerning its direct materials:
Direct Materials:
Standard Quantity
100,000
Actual Quantity
80,000
Standard Price
$3
Actual Price
$4
A.
Determine the materials price variance and whether it is favorable or unfavorable.
B.
Determine the materials usage variance and whether it is favorable or unfavorable.
C.
Westminster has set control limits stating that actual costs should be investigated if they
fall outside the acceptable range of the standard materials cost ±10%.
i.
What is the standard materials cost?
ii.
What are the upper and lower control limits?
iii.
What is the actual materials cost?
iv.
Should the actual materials cost be investigated?
143. PURE Inc. produces flavored waters, sold in gallons. Recently the company adopted the following materials standard
for one gallon of its raspberry flavored water:
Direct materials (90 oz. @ $0.08)
$ 7.20
During the first month of operations the company experienced the following results:
A. Gallon units produced: 80,000
B. Ounces of materials purchased and used: 7,320,000 ounces at $0.07
C. No beginning or ending inventories of raw materials
Chapter 10 - Standard Costing: A Managerial Tool
Required:
A. Compute the materials price variance indicating if it is favorable or unfavorable.
B. Compute the materials usage variance indicating if it is favorable or unfavorable.
144. McDaniel Company manufactures 100-pound bags of fertilizer that have the following unit standard costs for direct
materials and direct labor:
Direct materials (100 lbs. @ $1.00 per lb.)
$100.00
Direct labor (0.5 hours at $24 per hour)
12.00
Total standard prime cost per 100 lb. bag
$112.00
The following activities were recorded for October:
•
1,000 bags were manufactured.
•
95,000 lbs. of materials costing $76,000 were purchased.
•
102,500 lbs. of materials were used.
•
$12,000 was paid for 475 hours of direct labor.
There were no beginning or ending work-in-process inventories.
Required:
A.
Compute the direct materials variances.
B.
Compute the direct labor variances.
C.
Give possible reasons for the occurrence of each of the preceding variances.
Chapter 10 - Standard Costing: A Managerial Tool
145. DuRoss Company produces coats. The company uses a standard costing system and has set the following standards
for materials and labor:
Fabric (8 yards @ $6)
$48
Direct labor (2 hours @ $18)
36
Total prime cost
$84
During the year DuRoss produced 55,000 coats. Actual fabric purchased was 460,000 yards at $5.75 per yard. There were
no beginning or ending inventories of fabric. Actual direct labor was 120,000 hours at $19.25 per hour.
Required:
A. Compute the cost of leather and direct labor that should be incurred for the production of 55,000 coats.
B. Compute the total budget variances for materials and labor.
C. Compute the materials price variance.
D. Compute the materials usage variance.
E. Compute the labor rate variance.
F. Compute the labor efficiency variance.
Chapter 10 - Standard Costing: A Managerial Tool
146. Moving Baby Company produces baby strollers. During the year 90,000 strollers were produced. The actual labor
used was 225,000 hours at $12.75 per hour. Moving Baby has the following labor standards: 2 hours at $13.00 per hour.
Required:
A. Compute the labor rate variance, indicating if it is favorable or unfavorable.
B. Compute the labor efficiency variance, indicating if it is favorable or unfavorable.
147. Starling Manufacturing has developed the following standards for one of its products.
Materials: 5 yards × $6 per yard
$30
Direct labor: 2 hours × $8 per hour
16
The company records materials price variances at the time of purchase.
The following activity occurred during December:
Materials purchased:
5,200 yards costing $29,900
Materials used:
4,750 yards
Units produced:
1,000 units
Direct labor:
2,100 hours costing $17,850
Required:
A.
Calculate the direct materials price variance.
B.
Calculate the direct materials usage variance.
C.
Calculate the direct labor rate variance.
D.
Calculate the direct labor efficiency variance.
148. Eastminster Company has the following information:
Direct Materials:
Direct Labor:
Standard Quantity
10,000
Standard Hours
2,000
Actual Quantity
12,000
Actual Hours
1,875
Standard Price
$14
Standard Rate
$10
Actual Price
$12
Actual Rate
$11
A.
Determine the materials price variance and whether it is favorable or unfavorable.
B.
Determine the materials usage variance and whether it is favorable or unfavorable.
C.
Determine the labor rate variance and whether it is favorable or unfavorable.
D.
Determine the labor efficiency variance and whether it is favorable or unfavorable.
Chapter 10 - Standard Costing: A Managerial Tool
149. Crawford Corporation has the following information:
Direct Materials:
Direct Labor:
Standard Quantity
1,500
Standard Hours
500
Actual Quantity
1,400
Actual Hours
525
Standard Price
$20
Standard Rate
$14
Actual Price
$17.50
Actual Rate
$14
A.
Determine the materials price variance and whether it is favorable or unfavorable.
B.
Determine the materials usage variance and whether it is favorable or unfavorable.
C.
Determine the labor rate variance and whether it is favorable or unfavorable.
D.
Determine the labor efficiency variance and whether it is favorable or unfavorable.
150. Allison Company adopted a standard cost system several years ago. The standard costs for the prime costs of its
single product follow:
Material: 10 kilograms @ $4.50 per kilogram
$45.00
Labor: 6 hours @ $8.50 per hour
$51.00
The following operating data were taken from the records for November:
1.
Units completed:
5,800 units
2.
Budgeted output:
6,000 units
