Chapter 12—Variance Analysis—A Tool for Cost Control and
Performance Evaluation Key
1. A budget for a single unit of a product or service is called a:
2. Which of the following statements regarding the standard cost for direct materials is true?
3. Variance analysis compares:
4. Which of the following statements is false regarding task analysis?
5. Task analysis:
6. A(n) ____ is attainable only when near-perfect conditions exist.
7. In most companies, machines break down occasionally and employees are often less than perfect. Which type
of standard acknowledges these characteristics when determining the standard cost of a product?
8. The type of budget that budgets standard costs for the actual volume of production is a:
9. Rogers Rods & Reels Ltd.
Rogers Rods & Reels Ltd. manufactures and sells various types of fishing equipment. At the end of 2008,
Rogers had estimated for the production and sale of 15,000 bass fishing rods. Each rod has a standard calling
for 1.5 pounds of direct material at a standard cost of $8.00 per pound and 15 minutes of direct labor time at a
standard cost of $.18 per minute. During 2009, Rogers actually produced and sold 16,000 rods. These 16,000
rods had an actual direct materials cost of $179,200 (25,600 pounds at $7.00 per pound) and an actual direct
labor cost of $44,800 (224,000 minutes at $.20 per minute). Each rod sells for $50.
Refer to the Rogers Rods & Reels Ltd. information above. What is Rogers’ net income (loss) based on a
flexible budget?
10. Rogers Rods & Reels Ltd.
Rogers Rods & Reels Ltd. manufactures and sells various types of fishing equipment. At the end of 2008,
Rogers had estimated for the production and sale of 15,000 bass fishing rods. Each rod has a standard calling
for 1.5 pounds of direct material at a standard cost of $8.00 per pound and 15 minutes of direct labor time at a
standard cost of $.18 per minute. During 2009, Rogers actually produced and sold 16,000 rods. These 16,000
rods had an actual direct materials cost of $179,200 (25,600 pounds at $7.00 per pound) and an actual direct
labor cost of $44,800 (224,000 minutes at $.20 per minute). Each rod sells for $50.
Refer to the Rogers Rods & Reels Ltd. information above. What is Rogers’ flexible budget variance?
11. Mary’s Fine Fashions
Mary’s Fine Fashions manufactures and sells various types of women’s clothing. At the end of 2008, Mary had
estimated for the production and sale of 25,000 short-sleeve shirts. Each shirt has a standard calling for 2.5
yards of direct material at a standard cost of $1.25 per yard and 12 minutes of direct labor time at a standard
cost of $.20 per minute. During 2009, the company actually produced and sold 23,000 shirts. These 23,000
shirts had an actual direct materials cost of $77,142 (59,340 yards at $1.30 per yard) and an actual direct labor
cost of $63,250 (253,000 minutes at $.25 per minute). Each shirt sells for $20.
Refer to the Mary’s Fine Fashions information above. What is Mary’s net income (loss) based on a flexible
budget?
12. Mary’s Fine Fashions
Mary’s Fine Fashions manufactures and sells various types of women’s clothing. At the end of 2008, Mary had
estimated for the production and sale of 25,000 short-sleeve shirts. Each shirt has a standard calling for 2.5
yards of direct material at a standard cost of $1.25 per yard and 12 minutes of direct labor time at a standard
cost of $.20 per minute. During 2009, the company actually produced and sold 23,000 shirts. These 23,000
shirts had an actual direct materials cost of $77,142 (59,340 yards at $1.30 per yard) and an actual direct labor
cost of $63,250 (253,000 minutes at $.25 per minute). Each shirt sells for $20.
Refer to the Mary’s Fine Fashions information above. What is Mary’s flexible budget variance?
13. Supreme Catering
At the end of January, Supreme Catering prepared the following budget for the upcoming month of February
estimating that they would serve 3,000 people:
Sales revenue per guest
$20
Variable costs per guest
8
Total fixed costs
$5,000
During February, there were 2,700 guests actually served. Actual costs incurred were $27,000 for variable costs and $6,500 for fixed costs. Each
guest was charged $20.
Refer to the Supreme Catering information above. Supreme Catering’s flexible budget for February would show net income of:
14. Supreme Catering
At the end of January, Supreme Catering prepared the following budget for the upcoming month of February
estimating that they would serve 3,000 people:
Sales revenue per guest
$20
Variable costs per guest
8
Total fixed costs
$5,000
During February, there were 2,700 guests actually served. Actual costs incurred were $27,000 for variable costs and $6,500 for fixed costs. Each
guest was charged $20.
Refer to the Supreme Catering information above. Supreme Catering’s flexible budget variance for February would show a variance of:
15. Trina makes handmade leis in Hawaii which she sells to local tourists. She anticipates August to be a busy
month with the sale of 500 leis. She has prepared the following static budget for August:
Sales
revenue
(500
units)
$5,000
Variable
costs:
Direct materials
1,000
Direct labor
1,000
Overhead
375
Fixed
costs
200
Net
income
$2,425
During August, Trina actually produced and sold 400 leis. What should be Trina’s net income in August based on a flexible budget?
16. Hathaway Inc. produces and sells golf umbrellas to local resorts. Hathaway anticipates April to be a busy
month with the sale of 1,000 umbrellas. The company has prepared the following static budget for April:
Sales
revenue
(1,000
units)
$40,000
Variable
costs:
Direct materials
5,000
Direct labor
6,000
Overhead
1,500
Fixed
costs
4,000
Net
income
$23,500
During April, Hathaway actually produced and sold 1,200 umbrellas. What should be Hathaway’s net income in April based on a flexible budget?
17. Hoppe Inc. manufactures widgets. Management has determined that each widget has a standard materials
cost of $3.50 when 2.5 ounces of raw material at a cost of $1.40 per ounce are used. The static budget for the
month of December showed an estimated production of 4,000 widgets in December. During December, 4,300
widgets were actually produced. The actual cost for each widget was $3.60 when 2.25 ounces of raw material at
a cost of $1.60 per ounce were purchased and used. What should be the total direct materials cost according to
Hoppe’s flexible budget for December?
18. Violetta Inc. manufactures plastic storage boxes. Management has determined that each medium-sized box
has a standard materials cost of $1.20 when 4 pounds of raw material at a cost of $.30 per pound are used. The
static budget for the month of March showed an estimated production of 15,000 boxes in March. During March,
17,000 boxes were actually produced. The actual cost for each box was $1.56 when 3.9 pounds of raw material
at a cost of $.40 per pound were purchased and used. What should be the total direct materials cost according to
Violetta’s flexible budget for March?
19. Holt Products manufactures desk-top computers. Management has determined that each computer has a
standard labor cost of $48.00 when 4 hours of labor at a cost of $12.00 per hour are used. The static budget for
the month of April showed an estimated production of 3,900 computers. During April, 4,200 computers were
actually produced. The actual direct labor cost for each computer was $57.60 when 4.5 hours of labor at a cost
of $12.80 per hour was used. What should be the total direct labor cost according to Holt’s flexible budget for
April?
20. Summerlin Law Offices applies overhead to clients based on direct labor hours. The office manager
determined that overhead will be applied at a rate of $25 per direct labor hour. The static budget for the month
of November showed an estimated 2,500 direct labor hours would be incurred. During November, 2,800 direct
labor hours were actually incurred and actual overhead costs were $58,800. What should be the total overhead
cost according to the firm’s flexible budget for November?
21. The difference between operating income on a flexible budget and actual operating income is called the:
22. The difference between operating income on a company’s flexible budget and operating income on its static
budget is called the:
23. The flexible budget variance:
24. Which of the following statements is true regarding the sales volume variance?
25. Dorffman Inc. has a $12,000 favorable flexible budget variance for May. If May’s actual net income was
$68,000, which of the following statements is true?
26. Prevo Products Inc. has a $15,000 unfavorable flexible budget variance for July. If July’s actual net income
was $300,000, which of the following statements is true?
27. Taylor Products Inc. has an $8,000 unfavorable flexible budget variance for October. If October’s flexible
budget net income was $175,000, which of the following statements is true?
28. Smith Corp. has a $6,000 favorable flexible budget variance for January. If January’s flexible budget net
income was $100,000, which of the following statements is true?
29. Chapman Products has a favorable materials usage variance. Which of the following would be the most
likely reason for this variance?
30. Miller Company has an unfavorable materials price variance. Which of the following would be the least
likely reason for this variance?
31. For purposes of the calculation for the direct materials price variance, when the quantity of materials
purchased and used are different, which quantity of materials is relevant?
32. For purposes of the calculation for the direct materials usage variance when the quantity of materials
purchased and used are different, which quantity of materials is relevant?
33. Byron Products has a favorable materials price variance. Which of the following would be the least likely
reason for this variance?
34. Lukey Products has an unfavorable materials usage variance. Which of the following would be the most
likely reason for this variance?
35. Tulley Manufacturing has an unfavorable direct labor rate variance. Which of the following would be the
most likely reason for this variance?
36. Bukowitz Inc. has a favorable direct labor rate variance. Which of the following would be the most likely
reason for this variance?
37. Dabney Inc. has a favorable direct labor efficiency variance. Which of the following would be the most
likely reason for this variance?
38. Coppelli Inc.
In early 2009, Coppelli Inc. had budgeted for the production and sale of 24,000 units. The standard sales price
and variable cost per unit were budgeted to be $6.00 and $2.00, respectively. Actual sales for 2009 totaled
25,300 units, and the actual sales price and variable cost per unit were $6.50 and $2.10, respectively. Both
budgeted and actual fixed costs were $30,000.
Refer to the Coppelli Inc. information above. What was Coppelli’s sales volume variance for 2009?
39. Coppelli Inc.
In early 2009, Coppelli Inc. had budgeted for the production and sale of 24,000 units. The standard sales price
and variable cost per unit were budgeted to be $6.00 and $2.00, respectively. Actual sales for 2009 totaled
25,300 units, and the actual sales price and variable cost per unit were $6.50 and $2.10, respectively. Both
budgeted and actual fixed costs were $30,000.
Refer to the Coppelli Inc. information above. What was Coppelli’s sales price variance for 2009?
40. Fox Manufacturing
At the beginning of the year, Fox Manufacturing had budgeted for the production and sale of 84,000 units. The
standard sales price and variable cost per unit were budgeted to be $25.00 and $10.00, respectively. Actual sales
for the year totaled 81,000 units, and the actual sales price and variable cost per unit were $24.00 and $10.00,
respectively. Both budgeted and actual fixed costs were $75,000.
Refer to the Fox Manufacturing information above. What was Fox’s sales volume variance for the year?
41. Fox Manufacturing
At the beginning of the year, Fox Manufacturing had budgeted for the production and sale of 84,000 units. The
standard sales price and variable cost per unit were budgeted to be $25.00 and $10.00, respectively. Actual sales
for the year totaled 81,000 units, and the actual sales price and variable cost per unit were $24.00 and $10.00,
respectively. Both budgeted and actual fixed costs were $75,000.
Refer to the Fox Manufacturing information above. What was Fox’s sales price variance for the year?
42. Differences in sales revenue between the flexible budget and actual results can be attributable to:
43. Martin Corp. had an unfavorable sales price variance of $4,800 for 2006. Martin had budgeted for sales of
10,000 units at a sales price of $5 each. Actual sales in 2006 totaled 12,000 units. What was the actual sales
price per unit?
44. JAX Inc.
In early 2009, JAX Inc. had budgeted for the production and sales of 6,000 units at a sales price of $20 per unit.
The following information is available regarding the standard cost for each unit:
Direct materials:
Direct labor:
Actual results for 2009 were determined to be as follows:
Number of units produced
and sold:
Sales revenue:
Direct materials cost:
Direct labor cost:
Refer to the JAX Inc. information above. What was JAX Inc.’s sales volume variance for 2009?
45. JAX Inc.
In early 2009, JAX Inc. had budgeted for the production and sales of 6,000 units at a sales price of $20 per unit.
The following information is available regarding the standard cost for each unit:
Direct materials:
Direct labor:
Actual results for 2009 were determined to be as follows:
Number of units produced
and sold:
Sales revenue:
Direct materials cost:
Direct labor cost:
Refer to the JAX Inc. information above. What was JAX Inc.’s sales price variance for 2009?
46. JAX Inc.
In early 2009, JAX Inc. had budgeted for the production and sales of 6,000 units at a sales price of $20 per unit.
The following information is available regarding the standard cost for each unit:
Direct materials:
Direct labor:
Actual results for 2009 were determined to be as follows:
Number of units produced
and sold:
Sales revenue:
Direct materials cost:
Direct labor cost:
Refer to the JAX Inc. information above. What was JAX Inc.’s direct materials price variance for 2009?
47. JAX Inc.
In early 2009, JAX Inc. had budgeted for the production and sales of 6,000 units at a sales price of $20 per unit.
The following information is available regarding the standard cost for each unit:
Direct materials:
Direct labor:
Actual results for 2009 were determined to be as follows:
Number of units produced
and sold:
Sales revenue:
Direct materials cost:
Direct labor cost:
Refer to the JAX Inc. information above. What was JAX Inc.’s direct materials usage variance for 2009?
48. JAX Inc.
In early 2009, JAX Inc. had budgeted for the production and sales of 6,000 units at a sales price of $20 per unit.
The following information is available regarding the standard cost for each unit:
Direct materials:
Direct labor:
Actual results for 2009 were determined to be as follows:
Number of units produced
and sold:
Sales revenue:
Direct materials cost:
Direct labor cost:
Refer to the JAX Inc. information above. What was JAX Inc.’s direct labor rate variance for 2009?
49. JAX Inc.
In early 2009, JAX Inc. had budgeted for the production and sales of 6,000 units at a sales price of $20 per unit.
The following information is available regarding the standard cost for each unit:
Direct materials:
Direct labor:
Actual results for 2009 were determined to be as follows:
Number of units produced
and sold:
Sales revenue:
Direct materials cost:
Direct labor cost:
Refer to the JAX Inc. information above. What was JAX Inc.’s direct labor efficiency variance for 2009?
50. Carlton Corporation
Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for
the production and sale of 1,000 handbags; however, 900 handbags were actually produced and sold. Each bag
has a standard requiring two yards of material at a cost of $4.00 per yard and 1 hour of assembly time at a cost
of $9.50 per hour. Actual costs for the production of 900 bags were $7,215 for materials (1,850 yards purchased
and used @ $3.90 per yard) and $10,125 for labor (1,125 hours @ $9.00 per hour).
Refer to the Carlton Corporation information above. Carlton’s direct materials price variance is:
51. Carlton Corporation
Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for
the production and sale of 1,000 handbags; however, 900 handbags were actually produced and sold. Each bag
has a standard requiring two yards of material at a cost of $4.00 per yard and 1 hour of assembly time at a cost
of $9.50 per hour. Actual costs for the production of 900 bags were $7,215 for materials (1,850 yards purchased
and used @ $3.90 per yard) and $10,125 for labor (1,125 hours @ $9.00 per hour).
Refer to the Carlton Corporation information above. Carlton’s direct materials usage variance is:
52. Carlton Corporation
Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for
the production and sale of 1,000 handbags; however, 900 handbags were actually produced and sold. Each bag
has a standard requiring two yards of material at a cost of $4.00 per yard and 1 hour of assembly time at a cost
of $9.50 per hour. Actual costs for the production of 900 bags were $7,215 for materials (1,850 yards purchased
and used @ $3.90 per yard) and $10,125 for labor (1,125 hours @ $9.00 per hour).
Refer to the Carlton Corporation information above. Carlton’s direct labor rate variance is:
53. Carlton Corporation
Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for
the production and sale of 1,000 handbags; however, 900 handbags were actually produced and sold. Each bag
has a standard requiring two yards of material at a cost of $4.00 per yard and 1 hour of assembly time at a cost
of $9.50 per hour. Actual costs for the production of 900 bags were $7,215 for materials (1,850 yards purchased
and used @ $3.90 per yard) and $10,125 for labor (1,125 hours @ $9.00 per hour).
Refer to the Carlton Corporation information above. Carlton’s direct labor efficiency variance is:
54. Moreland Manufacturing Inc.
Moreland Manufacturing Inc. produces and sells stainless steel faucets. In the current year, the company had
budgeted for the production and sale of 6,000 faucets but, due to unexpected demand, 7,000 faucets were
actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40
per ounce and 15 minutes of assembly time at a cost of $.20 per minute. Actual costs for the production of 7,000
faucets were $41,359.50 for materials (106,050 ounces purchased and used @ $.39 per ounce) and $21,560 for
labor (98,000 minutes @ $.22 per minute).
Refer to the Moreland Manufacturing Inc. information above. Moreland’s direct materials price variance is:
55. Moreland Manufacturing Inc.
Moreland Manufacturing Inc. produces and sells stainless steel faucets. In the current year, the company had
budgeted for the production and sale of 6,000 faucets but, due to unexpected demand, 7,000 faucets were
actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40
per ounce and 15 minutes of assembly time at a cost of $.20 per minute. Actual costs for the production of 7,000
faucets were $41,359.50 for materials (106,050 ounces purchased and used @ $.39 per ounce) and $21,560 for
labor (98,000 minutes @ $.22 per minute).
Refer to the Moreland Manufacturing Inc. information above. Moreland’s direct materials usage variance is:
56. Moreland Manufacturing Inc.
Moreland Manufacturing Inc. produces and sells stainless steel faucets. In the current year, the company had
budgeted for the production and sale of 6,000 faucets but, due to unexpected demand, 7,000 faucets were
actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40
per ounce and 15 minutes of assembly time at a cost of $.20 per minute. Actual costs for the production of 7,000
faucets were $41,359.50 for materials (106,050 ounces purchased and used @ $.39 per ounce) and $21,560 for
labor (98,000 minutes @ $.22 per minute).
Refer to the Moreland Manufacturing Inc. information above. Moreland’s direct labor rate variance is:
57. Moreland Manufacturing Inc.
Moreland Manufacturing Inc. produces and sells stainless steel faucets. In the current year, the company had
budgeted for the production and sale of 6,000 faucets but, due to unexpected demand, 7,000 faucets were
actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40
per ounce and 15 minutes of assembly time at a cost of $.20 per minute. Actual costs for the production of 7,000
faucets were $41,359.50 for materials (106,050 ounces purchased and used @ $.39 per ounce) and $21,560 for
labor (98,000 minutes @ $.22 per minute).
Refer to the Moreland Manufacturing Inc. information above. Moreland’s direct labor efficiency variance is:
58. Paw-Paw Products
Paw-Paw Products produces and sells flannel covered dogbeds. In the current year, Paw-Paw had expected to
sell 8,000 beds but actually produced and sold 8,500 beds. The following information is available regarding the
standard cost to produce a single dogbed:
Direct materials:
5 yards at $1.50 per yard
Direct labor:
40 minutes at $.20 per minute
In the current year, 44,000 yards of material were purchased and used at a cost of $1.60 per yard and 365,500 direct labor minutes were incurred at a
cost of $.23 per minute.
Refer to the Paw-Paw Products information above. The company’s direct material price variance for the current year was:
59. Paw-Paw Products
Paw-Paw Products produces and sells flannel covered dogbeds. In the current year, Paw-Paw had expected to
sell 8,000 beds but actually produced and sold 8,500 beds. The following information is available regarding the
standard cost to produce a single dogbed:
Direct materials:
5 yards at $1.50 per yard
Direct labor:
40 minutes at $.20 per minute
In the current year, 44,000 yards of material were purchased and used at a cost of $1.60 per yard and 365,500 direct labor minutes were incurred at a
cost of $.23 per minute.
Refer to the Paw-Paw Products information above. The company’s direct material usage variance for the current year was:
60. Paw-Paw Products
Paw-Paw Products produces and sells flannel covered dogbeds. In the current year, Paw-Paw had expected to
sell 8,000 beds but actually produced and sold 8,500 beds. The following information is available regarding the
standard cost to produce a single dogbed:
Direct materials:
5 yards at $1.50 per yard
Direct labor:
40 minutes at $.20 per minute
In the current year, 44,000 yards of material were purchased and used at a cost of $1.60 per yard and 365,500 direct labor minutes were incurred at a
cost of $.23 per minute.
Refer to the Paw-Paw Products information above. The company’s direct labor rate variance for the current year was:
61. Paw-Paw Products
Paw-Paw Products produces and sells flannel covered dogbeds. In the current year, Paw-Paw had expected to
sell 8,000 beds but actually produced and sold 8,500 beds. The following information is available regarding the
standard cost to produce a single dogbed:
Direct materials:
5 yards at $1.50 per yard
Direct labor:
40 minutes at $.20 per minute
In the current year, 44,000 yards of material were purchased and used at a cost of $1.60 per yard and 365,500 direct labor minutes were incurred at a
cost of $.23 per minute.
Refer to the Paw-Paw Products information above. The company’s direct labor efficiency variance for the current year was:
62. Meow Products Ltd.
Meow Products Ltd. produces and sells scratching posts for cats. In the current year, the company had expected
to sell 12,000 posts but actually produced and sold 10,000 posts. The following information is available
regarding the standard cost to produce a single post:
Direct materials:
3 feet @ 1.75 per foot
Direct labor:
15 minutes @ $.30 per minute
In the current year, 38,000 feet of material were purchased out of which 35,000 feet were used at a cost of $1.55 per foot, and 160,000 direct labor
minutes were incurred at a cost of $.32 per minute.
Refer to the Meow Products Ltd. information above. The company’s direct materials price variance for the current year was:
63. Meow Products Ltd.
Meow Products Ltd. produces and sells scratching posts for cats. In the current year, the company had expected
to sell 12,000 posts but actually produced and sold 10,000 posts. The following information is available
regarding the standard cost to produce a single post:
Direct materials:
3 feet @ 1.75 per foot
Direct labor:
15 minutes @ $.30 per minute
In the current year, 38,000 feet of material were purchased out of which 35,000 feet were used at a cost of $1.55 per foot, and 160,000 direct labor
minutes were incurred at a cost of $.32 per minute.
Refer to the Meow Products Ltd. information above. The company’s direct materials usage variance for the current year was:
64. Meow Products Ltd.
Meow Products Ltd. produces and sells scratching posts for cats. In the current year, the company had expected
to sell 12,000 posts but actually produced and sold 10,000 posts. The following information is available
regarding the standard cost to produce a single post:
Direct materials:
3 feet @ 1.75 per foot
Direct labor:
15 minutes @ $.30 per minute
In the current year, 38,000 feet of material were purchased out of which 35,000 feet were used at a cost of $1.55 per foot, and 160,000 direct labor
minutes were incurred at a cost of $.32 per minute.
Refer to the Meow Products Ltd. information above. The company’s direct labor rate variance for the current year was: