65. 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 efficiency variance for the current year was:
66. Chilé Products Ltd.
Chilé Products Ltd. bottles and sells hot pepper sauce. In 2009, the company had expected to sell 60,000 bottles
but actually bottled and sold 70,000 bottles. The standard direct materials cost for each bottle is $.28 comprised
of .80 ounces at a cost of $.35 per ounce. During 2009, 68,000 ounces of material were purchased out of which
55,000 ounces were used at a cost of $.32 per ounce.
Refer to the Chilé Products Ltd. information above. The direct materials price variance for 2009 was:
67. Chilé Products Ltd.
Chilé Products Ltd. bottles and sells hot pepper sauce. In 2009, the company had expected to sell 60,000 bottles
but actually bottled and sold 70,000 bottles. The standard direct materials cost for each bottle is $.28 comprised
of .80 ounces at a cost of $.35 per ounce. During 2009, 68,000 ounces of material were purchased out of which
55,000 ounces were used at a cost of $.32 per ounce.
Refer to the Chilé Products Ltd. information above. The direct materials usage variance for 2009 was:
68. Mystic Falls Inc.
Mystic Falls Inc. bottles and sells a popular soft drink. In 2009, the company had expected to sell 1,000,000
bottles but actually bottled and sold 900,000 bottles. The standard direct materials cost for each bottle is $.40
comprised of 10 ounces at a cost of $.04 per ounce. During 2009, 10,000,000 ounces of material were
purchased out of which 9,200,000 ounces were used at a cost of $.05 per ounce.
Refer to the Mystic Falls Inc. information above. The direct materials price variance for 2009 was:
69. Mystic Falls Inc.
Mystic Falls Inc. bottles and sells a popular soft drink. In 2009, the company had expected to sell 1,000,000
bottles but actually bottled and sold 900,000 bottles. The standard direct materials cost for each bottle is $.40
comprised of 10 ounces at a cost of $.04 per ounce. During 2009, 10,000,000 ounces of material were
purchased out of which 9,200,000 ounces were used at a cost of $.05 per ounce.
Refer to the Mystic Falls Inc. information above. The direct materials usage variance for 2009 was:
70. Peterson Inc. uses direct labor hours as the cost driver for variable overhead. In order to calculate the
variable overhead spending variance, which of the following items does not need to be known?
71. Bellow Ltd. uses direct labor hours as the cost driver for variable overhead. In order to calculate the variable
overhead efficiency variance, which of the following items does not need to be known?
72. The variable overhead efficiency variance:
73. Sampson Apparel Inc.
Sampson Apparel Inc. incurred actual variable overhead expenses of $62,000 in the current year for the
production of 10,000 units. Variable overhead was applied at a rate of $2.00 per direct labor hour and 3 direct
labor hours were budgeted for each unit. The company used 29,000 direct labor hours for production.
Refer to the Sampson Apparel Inc. information above. What was Sampson’s variable overhead spending
variance?
74. Sampson Apparel Inc.
Sampson Apparel Inc. incurred actual variable overhead expenses of $62,000 in the current year for the
production of 10,000 units. Variable overhead was applied at a rate of $2.00 per direct labor hour and 3 direct
labor hours were budgeted for each unit. The company used 29,000 direct labor hours for production.
Refer to the Sampson Apparel Inc. information above. What was Sampson’s variable overhead efficiency
variance?
75. Latimer Textiles Inc.
Latimer Textiles Inc. incurred actual variable overhead expenses of $27,000 in the current year for the
production of 8,000 units. Variable overhead was applied at a rate of $1.75 per direct labor hour and 2 direct
labor hours were budgeted for each unit. The company used 17,400 direct labor hours for production.
Refer to the Latimer Textiles Inc. information above. What was Latimer’s variable overhead spending
variance?
76. Latimer Textiles Inc.
Latimer Textiles Inc. incurred actual variable overhead expenses of $27,000 in the current year for the
production of 8,000 units. Variable overhead was applied at a rate of $1.75 per direct labor hour and 2 direct
labor hours were budgeted for each unit. The company used 17,400 direct labor hours for production.
Refer to the Latimer Textiles Inc. information above. What was Latimer’s variable overhead efficiency
variance?
77. Atkinson Landscaping
Atkinson Landscaping applies variable overhead based on direct labor hours. At the beginning of the current
year, Atkinson had estimated the following:
Estimated variable overhead
$56,000
Estimated units of production
10,000 units
Standard direct labor hours per unit
2.5 hours
During the year, 11,000 units were produced using a total of 27,200 direct labor hours and actual overhead costs were $60,000.
Refer to the Atkinson Landscaping information above. Atkinson’s variable overhead spending variance for the year was:
78. Atkinson Landscaping
Atkinson Landscaping applies variable overhead based on direct labor hours. At the beginning of the current
year, Atkinson had estimated the following:
Estimated variable overhead
$56,000
Estimated units of production
10,000 units
Standard direct labor hours per unit
2.5 hours
During the year, 11,000 units were produced using a total of 27,200 direct labor hours and actual overhead costs were $60,000.
Refer to the Atkinson Landscaping information above. Atkinson’s variable overhead efficiency variance for the year was:
79. The fixed overhead volume variance is calculated by taking the difference between:
80. Which of the following variances is generally not reported as being favorable or unfavorable?
81. Armstrong Products
Armstrong Products applies fixed overhead at a rate of $3 per direct labor hour. Each unit produced is expected
to take 2 direct labor hours. Armstrong expected production in the current year to be 10,000 units but 9,000
units were actually produced. Actual direct labor hours were 19,000 and actual fixed overhead costs were
$62,000.
Refer to the Armstrong Products information above. Armstrong’s fixed overhead spending variance is:
82. Armstrong Products
Armstrong Products applies fixed overhead at a rate of $3 per direct labor hour. Each unit produced is expected
to take 2 direct labor hours. Armstrong expected production in the current year to be 10,000 units but 9,000
units were actually produced. Actual direct labor hours were 19,000 and actual fixed overhead costs were
$62,000.
Refer to the Armstrong Products information above. Armstrong’s fixed overhead volume variance is:
83. Hayward Inc.
Hayward Inc. produces a unique item. Hayward’s management team wishes to perform a variance analysis on its
fixed overhead. Fixed overhead is applied to units produced using direct labor hours as its cost driver. The
company’s managerial accountant has compiled the following information:
Projecte
d data:
Estimated direct labor hours
50,000 hours
Estimated fixed overhead
$75,000
Actual
data:
Actual production
104,000 units
Actual direct labor hours used
52,000 hours
Actual fixed overhead
$80,000
Refer to the Hayward Inc. information above. Hayward’s fixed overhead spending variance is:
84. Hayward Inc.
Hayward Inc. produces a unique item. Hayward’s management team wishes to perform a variance analysis on its
fixed overhead. Fixed overhead is applied to units produced using direct labor hours as its cost driver. The
company’s managerial accountant has compiled the following information:
Projecte
d data:
Estimated direct labor hours
50,000 hours
Estimated fixed overhead
$75,000
Actual
data:
Actual production
104,000 units
Actual direct labor hours used
52,000 hours
Actual fixed overhead
$80,000
Refer to the Hayward Inc. information above. Hayward’s fixed overhead volume variance is:
85. Which of the following types of companies would not have a need to calculate a fixed overhead volume
variance?
86. Washington Inc. has an unfavorable fixed overhead spending variance. Which of the following would be the
most likely reason for this variance?
87. New Hampshire Products has a favorable fixed overhead spending variance. Which of the following would
be the most likely reason for this variance?
88. Which of the following statements about performing variance analysis is false?
89. Prestige Furnishings
Prestige Furnishings uses flexible budgeting. The company’s budget for variable and fixed overhead is $20,000
and $10,000, respectively. The company uses activity-based costing (ABC) and has traced the budgeted
overhead of $30,000 to three activities: material handling, assembly, and inspections. The costs associated with
each activity and their respective cost drivers are as follows:
Flexible
Budgeted
Activity
Budget
Cost Driver
Volume
Material handling
$ 8,000
Number of moves
100
Assembly
16,000
Number of labor hours
4,000
Inspections
6,000
Number of inspections
1,000
The actual cost and total volume for each activity during the current year are as follows:
Activity
Cost
Volume
Material handling
$ 8,190
105 moves
Assembly
15,000
4,200 labor hours
Inspections
6,100
1,100 inspections
Refer to the Prestige Furnishings information above. What is the overhead application rate for the material handling activity?
90. Prestige Furnishings
Prestige Furnishings uses flexible budgeting. The company’s budget for variable and fixed overhead is $20,000
and $10,000, respectively. The company uses activity-based costing (ABC) and has traced the budgeted
overhead of $30,000 to three activities: material handling, assembly, and inspections. The costs associated with
each activity and their respective cost drivers are as follows:
Flexible
Budgeted
Activity
Budget
Cost Driver
Volume
Material handling
$ 8,000
Number of moves
100
Assembly
16,000
Number of labor hours
4,000
Inspections
6,000
Number of inspections
1,000
The actual cost and total volume for each activity during the current year are as follows:
Activity
Cost
Volume
Material handling
$ 8,190
105 moves
Assembly
15,000
4,200 labor hours
Inspections
6,100
1,100 inspections
Refer to the Prestige Furnishings information above. What is the overhead application rate for the assembly activity?
91. Prestige Furnishings
Prestige Furnishings uses flexible budgeting. The company’s budget for variable and fixed overhead is $20,000
and $10,000, respectively. The company uses activity-based costing (ABC) and has traced the budgeted
overhead of $30,000 to three activities: material handling, assembly, and inspections. The costs associated with
each activity and their respective cost drivers are as follows:
Flexible
Budgeted
Activity
Budget
Cost Driver
Volume
Material handling
$ 8,000
Number of moves
100
Assembly
16,000
Number of labor hours
4,000
Inspections
6,000
Number of inspections
1,000
The actual cost and total volume for each activity during the current year are as follows:
Activity
Cost
Volume
Material handling
$ 8,190
105 moves
Assembly
15,000
4,200 labor hours
Inspections
6,100
1,100 inspections
Refer to the Prestige Furnishings information above. What is the spending variance for the materials handling activity?
92. Prestige Furnishings
Prestige Furnishings uses flexible budgeting. The company’s budget for variable and fixed overhead is $20,000
and $10,000, respectively. The company uses activity-based costing (ABC) and has traced the budgeted
overhead of $30,000 to three activities: material handling, assembly, and inspections. The costs associated with
each activity and their respective cost drivers are as follows:
Flexible
Budgeted
Activity
Budget
Cost Driver
Volume
Material handling
$ 8,000
Number of moves
100
Assembly
16,000
Number of labor hours
4,000
Inspections
6,000
Number of inspections
1,000
The actual cost and total volume for each activity during the current year are as follows:
Activity
Cost
Volume
Material handling
$ 8,190
105 moves
Assembly
15,000
4,200 labor hours
Inspections
6,100
1,100 inspections
Refer to the Prestige Furnishings information above. What is the efficiency variance for the materials handling activity?
93. Prestige Furnishings
Prestige Furnishings uses flexible budgeting. The company’s budget for variable and fixed overhead is $20,000
and $10,000, respectively. The company uses activity-based costing (ABC) and has traced the budgeted
overhead of $30,000 to three activities: material handling, assembly, and inspections. The costs associated with
each activity and their respective cost drivers are as follows:
Flexible
Budgeted
Activity
Budget
Cost Driver
Volume
Material handling
$ 8,000
Number of moves
100
Assembly
16,000
Number of labor hours
4,000
Inspections
6,000
Number of inspections
1,000
The actual cost and total volume for each activity during the current year are as follows:
Activity
Cost
Volume
Material handling
$ 8,190
105 moves
Assembly
15,000
4,200 labor hours
Inspections
6,100
1,100 inspections
Refer to the Prestige Furnishings information above. What is the efficiency variance for the assembly activity?
94. Prestige Furnishings
Prestige Furnishings uses flexible budgeting. The company’s budget for variable and fixed overhead is $20,000
and $10,000, respectively. The company uses activity-based costing (ABC) and has traced the budgeted
overhead of $30,000 to three activities: material handling, assembly, and inspections. The costs associated with
each activity and their respective cost drivers are as follows:
Flexible
Budgeted
Activity
Budget
Cost Driver
Volume
Material handling
$ 8,000
Number of moves
100
Assembly
16,000
Number of labor hours
4,000
Inspections
6,000
Number of inspections
1,000
The actual cost and total volume for each activity during the current year are as follows:
Activity
Cost
Volume
Material handling
$ 8,190
105 moves
Assembly
15,000
4,200 labor hours
Inspections
6,100
1,100 inspections
Refer to the Prestige Furnishings information above. What is the overall efficiency variance with respect to all of the activities?
95. Which of the following statements is false regarding variance analysis in the modern manufacturing
environment?
96. Which of the following statements is true regarding variance analysis in the modern manufacturing
environment?
97. Which of the following statements is true regarding “management by exception”?
98. When managers use the process called “management by exception”:
99. Managers who properly apply the concept called “management by exception” will:
100. As a manager, how might you determine the standard price and quantity of materials, labor, and overhead
for a particular product?
101. What is “task analysis” and how is it used in the context of variance analysis?