60. Which of the following factors would cause an unfavorable material quantity variance?
61. During August, 10,000 pounds of raw material were purchased at a cost of $18.50 per pound. The direct
material price variance was $1,000 favorable. What was the standard price per pound?
62. Variance Accounts are
63. [Appendix] Which of the following are possible reasons for altering the material mix?
64. [Appendix] Hirsch Co. uses three types of direct materials in producing one of its products. The overall
material quantity variance is favorable. Which of the following combinations of mix and yield variance could
not have occurred?
Use the following to answer questions 65-70:
[Appendix] Zhons Corporation uses two materials and two types of labor in the production of one of its
products. The following standard cost information is available
Hilton – Chapter 16
65. What is the material mix variance?
66. What is the material yield variance?
67. What is material quantity variance?
68. What is the labor mix variance?
69. What is the labor yield variance
70. What is the labor efficiency variance?
71. Explain how standard are developed. As part of the discussion, differentiate between perfection and
practical standards.
72. The production manager at Danzig Co. has just returned from a conference where the concept of kaizen
costing was discussed. The manager has asked you to develop a brief report showing why kaizen costing might
be an improvement over the standard costing system now in place that can be presented to the Production Vice
President.
73. In the new cost management scheme of things, what are some of the disadvantages of the traditional
standard cost system (list at least four)?
74. Controller Tri Nuygen is analyzing the direct material and direct labor variances for 2008. He asks you to
prepare a memo outlining what to investigate and why.
The following information comes from the accounting records
Required
Compute the appropriate direct material and direct labor variances.
Prepare a memo outlining what items should be investigated and why.
75. What are some of the behavioral problems relating to traditional standard costing?
76. [Appendix] Discuss the issues underlying the calculation of a mix and yield variance for direct materials.
77. What are some of the advantages and disadvantages of the traditional standard cost system (list at least three
of each)?
78. Slyman Manufacturing Inc. has developed the following standards for one of its products. The materials are
not substitutable.
The records for March showed the following actual results:
Required:
(1) Calculate the following variances
(a) Material purchase price variance for material 1
(b) Material quantity variance for material 1
(c) Material purchase price variance for material 2
(d) Material quantity variance for material 2
(e) Labor rate variance
(f) Labor efficiency variance
2) Give at least one possible cause for each of the following variances:
(a) material 2 quantity variance
(b) labor rate variance
(c) labor efficiency variance
79. Ruth Industries developed the following standards for one of its products:
Actual results for September were:
Required:
(1) Calculate the following variances
(a) Material purchase price variance
(b) Material quantity variance
(c) Labor rate variance
(d) Labor efficiency variance
(2) Why would it be inappropriate to calculate the Material price variance at the time the material is used; might
there be a situation when it might be all right to do so?
80. O’Malley Company manufactures a single product. The following standards have been developed for it:
During May, the following actual activities occurred: Material purchased, 12,000 pounds for $45,600; material
used in the production of 2,000 units of product, 13,000 pounds; direct labor, 3,500 hours costing $56,000.
Required:
(1) Compute the following variances:
(a) material quantity variance
(b) labor rate variance
(c) labor efficiency variance
2) Give one possible explanation for each of the 3 variances computed.
81. [Appendix] ShuengLee CO. produces a product that uses three different materials. The standards are
Yield 9,000 units
During March, the following actual production information was available:
Yield 63,000 units
Required:
(1) Calculate the material quantity, mix and yield variances.
(2) Based on the actual mix numbers and standard prices, above, what does it seem as if the company was trying
to do and did it succeed?
82. [Appendix] Koach CO. produces a product that uses three different materials. The standards are
Yield 9,000 units
During July, the following actual production information was available:
Yield 96,600 units
Required:
(1) Calculate the material quantity, mix and yield variances.
(2) Based on the actual mix numbers and standard prices, above, what does it seem as if the company was trying
to do and did it succeed?
83. [Appendix] Lilac Company uses two different types of labor in the manufacture of its only product. The
standards are as follows:
Yield 8,000 units
The following actual production information was recorded in May:
Yield 63,000 units
Required:
(1) Calculate the labor efficiency, mix and yield variances.
(2) Based on the actual mix numbers and standard prices, above, what does it seem as if the company was trying
to do and did it succeed?
84. Mercury Company is meeting with the consultants it hired to help it with problems arising from its
increasing sales and increasing production to meet them. The consultants have informed the company that they
need to make price concessions in order to have their product sold over a large area. To do this, costs need to be
reduced and controlled. They recommended installation of a standard costing system and a flexible budgeting
system.
The CEO took the recommendations back to the company management, explained to all, and a team was set up
to develop the standards. The team was composed of the purchasing manager, processing manager, production
engineer, and V.P. of sales. Each member of the team rather than working to develop standards came up with
reasons why they wouldn’t work. The team made its report to the CEO who told them to come up with the
standards or he would have the consultants set them.
Required:
(1) What are the advantages and disadvantages of standard costing?
(2) What has gone wrong in this situation and will having the outside consultant do the work change anything?
85. Coiller Company uses a standard cost system for its only product. The bickering between purchasing and
production that occurs every month after the material variances are developed has the production vice president,
Mr. Adath, at his wits end. He has checked the job descriptions of the individuals involved and notes that the
purchasing department is responsible for the price at which materials and supplies are purchased and the
manufacturing department is responsible for the quantity of material used. This seems very clear cut to him so
he has gone to the cost accountant for some additional help.
Required: As the cost accountant, explain to Mr. Adath why, or why not, this division of duties solves the
conflict between price and quantity variances.
86. Az Company currently uses a traditional standard costing system. During the past two years the company
has been modernizing its plant and has tried to keep the old standard costing system in place by changing some
of the features to reflect the more automated situation. It has now come to a point, however, where the old
system just isn’t providing useful information for product costing, pricing, decision making, etc. The CEO Ms.
Yamaguchi has set up a team to look into the situation and initially come up with reasons why the old system
isn’t working anymore.
Required: What are the problems with traditional standard costing under the current manufacturing
environment?
87. The standard rate for direct labor was established at $15 per hour at the beginning of the year at Rodriguez
Inc. In September a new labor contract was negotiated that raised the rate to $18.50 per hour. Mr. Garcia, the
controller, decided not to change the standard rate since the end of the year was relatively close and new
standards would be developed, effective January 1.
During October 16,000 labor hours were used at an average cost of $19 per hour. The labor rate variance was
$64,000 unfavorable. The production manager was understandably upset by this variance and wanted an
explanation from Mr. Garcia.
Required:
(1) Assume you are Mr. Garcia. Explain to the production manager why the unfavorable rate variance was so
high.
(2) In general, can variances be analyzed to separate out items that cannot be controlled from those that can be?