Chapter 9—Standard Costing: A Functional-Based Control
Approach Key
1. Developing standards for input prices and quantities allows for a more detailed understanding of flexible
budget variances.
2. Price standards specify amounts and quantity standards specify prices.
3. Standard costs are the amount that should be spent to produce a product or service
4. Standard costing is used in process industries because it’s more difficult to utilize.
5. Both manufacturing and service firms may use standard costing systems.
6. The standard cost sheet shows costs needed to make many units of output.
7. The unit quantity standards can be used to compute the total amount of inputs allowed for the actual output.
8. In computing efficiency variances, managers compute the standard quantity of materials used and the
standard hours allowed.
9. All variances accounts are closed out at the end of the year.
10. The total budget variances are categorized into price variances and usage variances.
11. Unfavorable variances occur whenever actual prices or usage are less than standard prices or usage, and the
opposite for a favorable variance.
12. The direct materials price variance is the difference between actual and standard pricing.
13. The direct materials usage variance is the sum of the actual quantities and the standard quantities of units.
14. The most detailed method to compute overhead variances is the four-variance method.
15. The three-variance method requires dividing costs into fixed and variable amounts.
16. The variable overhead efficiency variance measures the change in variable overhead consumption due to
efficient or inefficient use of the activity driver used to assign overhead costs to products.
17. In standard costing, overhead is applied to a product by debiting work in process and crediting variable and
fixed overhead control accounts.
18. the direct materials mix variance is the difference in the standard cost of actual inputs and the standard costs
of inputs that should have been used.
19. A mix variance is created whenever the actual mix of inputs is equal to the standard mix.
20. A yield variance occurs when the actual output is the same as the standard output.
21. The condition where everything operates perfectly and demands maximum efficiency is called __________
.
22. The factors where actual performance differs from planned are called: __________ .
23. __________ standards are the standards used for continuous improvement.
24. The costing that establishes price and quantity standards for inputs is called __________ costing.
25. The document that shows the amount and cost of direct materials, direct labor, and overhead to make a unit
of output is called the standard __________ .
26. The variances that focus on the difference between actual quantity and standard quantity are called
27. All variances accounts are __________ at the end of the operating year.
28. The sum of the standard plus allowable deviation is called the upper __________ .
29. A production __________ would most likely be responsible for an unfavorable variable overhead efficiency
variance.
30. The __________ variance show the difference between actual output and expected output for a given
amount of input.
31. The following condition which demands maximum efficiency and can be achieved only if everything
operates perfectly is called:
32. Variances indicate
33. The unit standard cost is
34. In setting price standards, the purchasing manager must consider
35. Price standards are the responsibility of
36. All of the following are true of currently attainable standards EXCEPT
37. Which of the following is NOT true about Kaizen Standards?
38. Quantity price standards
39. The standard cost sheet includes all of the following EXCEPT
40. The standard cost sheet includes all of the following EXCEPT
41. Standard costing
42. Rowing Company has developed the following standards for one of its products:
Direct materials:
7 pounds ´ $8 per pound
Direct labor:
2 hours ´ $12.50 per hour
Variable manufacturing overhead:
2.5 hours ´ $7 per hour
The following activity occurred during the month of March:
Materials purchased:
5,000 pounds costing $42,500
Materials used:
3,600 pounds
Units produced:
500 units
Direct labor:
1,150 hours at $11.80/hour
Actual variable manufacturing overhead:
$7,500
The company records materials price variances at the time of purchase.
The variable standard cost per unit is
43. Which of the following equations measures the total budget variance?
44. Which of the following equations measures a price variance?
45. The usage variances focus on the difference between
46. During November, 10,000 units were produced. The standard quantity of material allowed per unit was 10
pounds at a standard cost of $3 per pound. If there was an unfavorable usage variance of $18,750 for November,
the actual quantity of materials used must be
47. During September, 12,000 pounds of materials were purchased at a cost of $8 per pound. If there was an
unfavorable direct materials price variance of $6,000 for June, the standard cost per pound must be
48. Price/rate variances focus on the differences between
49. Firecracker Company has developed the following standards for one of its products.
Direct materials:
15 pounds ´ $16 per pound
Direct labor:
4 hours ´ $24 per hour
Variable manufacturing overhead:
4 hours ´ $14 per hour
The following activity occurred during the month of October:
Materials purchased:
10,000 pounds costing $170,000
Materials used:
7,200 pounds
Units produced:
500 units
Direct labor:
2,300 hours at $23.60/hour
Actual variable manufacturing overhead:
$30,000
The company records materials price variances at the time of purchase.
The direct materials price variance is
50. Figure 9-1
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:
Standard
Actual
210 pounds at $3.00 per pound
$630
240 pounds at $2.85 per pound
$684
6,000
6,072
Refer to Figure 9-1. What is the material usage variance for Bender Corporation?
51. Figure 9-1
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:
Standard
Actual
210 pounds at $3.00 per pound
$630
240 pounds at $2.85 per pound
$684
6,000
6,072
Refer to Figure 9-1. What is the material price variance for Bender Corporation?
52. During September, 40,000 units were produced. The standard quantity of material allowed per unit was 5
pounds at a standard cost of $2.50 per pound. If there was a favorable usage variance of $25,000 for September,
the actual quantity of materials used must have been
53. Montana Company uses a standard costing system. The following information pertains to direct labor costs
for the month of February:
Standard direct labor rate per hour
$15.00
Actual direct labor rate per hour
$13.50
Labor rate variance
$18,000 favorable
Actual output
1,000 units
Standard hours allowed for actual production
10,000 hours
How many actual labor hours were worked during February for Montana Company?
54. Montana Company uses a standard costing system. The following information pertains to direct labor costs
for the month of February:
Standard direct labor rate per hour
$15.00
Actual direct labor rate per hour
$13.50
Labor rate variance
$18,000 favorable
Actual output
1,000 units
Standard hours allowed for actual production
10,000 hours
What is the total labor budget variance for Montana Company?
55. Which of the following equations measures the direct labor rate variance?
56. Malkovich Company uses a standard costing system. The following information pertains to direct materials
for the month of July:
Standard price per lb.
$18.00
Actual purchase price per lb.
$16.50
Quantity purchased
3,100 lbs.
Quantity used
2,950 lbs.
Standard quantity allowed for actual output
3,000 lbs.
Actual output
1,000 units
Malkovich Company reports its material price variances at the time of purchase.
What is the standard quantity of direct materials per unit for Malkovich Company?
57. Malkovich Company uses a standard costing system. The following information pertains to direct materials
for the month of July:
Standard price per lb.
$18.00
Actual purchase price per lb.
$16.50
Quantity purchased
3,100 lbs.
Quantity used
2,950 lbs.
Standard quantity allowed for actual output
3,000 lbs.
Actual output
1,000 units
Malkovich Company reports its material price variances at the time of purchase.
What is the material usage variance for Malkovich Company?
58. Malkovich Company uses a standard costing system. The following information pertains to direct materials
for the month of July:
Standard price per lb.
$18.00
Actual purchase price per lb.
$16.50
Quantity purchased
3,100 lbs.
Quantity used
2,950 lbs.
Standard quantity allowed for actual output
3,000 lbs.
Actual output
1,000 units
Malkovich Company reports its material price variances at the time of purchase.
What is the journal entry to record material purchases?
59. 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
Labor Rate Variance
Labor Efficiency Variance
60. During January, 7,175 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
61. 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
62. Figure 9-2
Bodacious 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
Refer to 9-2. What is the labor efficiency variance for Bodacious Corporation?
63. Refer to Figure 9-2. What is the journal entry to record labor variances?
64. As a general rule, an investigation of a variance should be undertaken only if the
65. The standard plus the allowable deviation is called the:
66. A materials price variance would NOT be caused by
67. Which of the following factors would cause an unfavorable material quantity variance?
68. Which of the following factors would cause an unfavorable labor rate variance?
69. Using more highly skilled direct laborers might affect which of the following variances?
70. A five-percent wage increase for all factory employees would affect which of the following variances?
71. Which is NOT an acceptable method of disposing of variances?
72. The standard overhead cost assigned to each unit of product manufactured is called the
73. An unfavorable variable overhead spending variance may be caused by
74. Colina Production Company uses a standard costing system. The following information pertains to 2014.
Direct labor hours is the driver used to assign overhead costs to products.
Actual production
5,500 units
Actual factory overhead costs ($16,500 is fixed)
$40,125
Actual direct labor costs (11,250 hours)
$131,625
Standard direct labor for 5,500 units:
Standard hours allowed
11,000 hours
Labor rate
$12.00
The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000 units is as follows:
Variable factory overhead
$22,500
Fixed factory overhead
13,500
Total factory overhead
$36,000
What is the variable overhead efficiency variance for Colina Production Company?
75. Colina Production Company uses a standard costing system. The following information pertains to 2014.
Direct labor hours is the driver used to assign overhead costs to products.
Actual production
5,500 units
Actual factory overhead costs ($16,500 is fixed)
$40,125
Actual direct labor costs (11,250 hours)
$131,625
Standard direct labor for 5,500 units:
Standard hours allowed
11,000 hours
Labor rate
$12.00
The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000 units is as follows:
Variable factory overhead
$22,500
Fixed factory overhead
13,500
Total factory overhead
$36,000
What is the fixed overhead volume variance for Colina Production Company?
76. If variable manufacturing overhead is applied based on direct labor hours and there is an unfavorable direct
labor efficiency variance
77. Harrangue Company’s standard variable overhead rate is $6 per direct labor hour, and each unit requires 2
standard direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual
variable overhead costs, and 2,900 units of product manufactured.
What is the total variable overhead variance for March for Harrangue?
78. Harrangue Company’s standard variable overhead rate is $6 per direct labor hour, and each unit requires 2
standard direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual
variable overhead costs, and 2,900 units of product manufactured.
What is the variable overhead efficiency variance for March for Harrangue?
79. Biscuit Company has developed the following standards for one of its products. Direct labor hours is the
driver used to assign overhead costs to products.
Direct materials:
10 pounds ´ $3 per pound
Direct labor:
2.5 hours ´ $8 per hour
Variable manufacturing overhead:
2.5 hours ´ $2 per hour
The following activity occurred during the month of June:
Materials purchased:
125,000 pounds at $2.60 per pound
Materials used:
110,000 pounds
Units produced:
10,000 units
Direct labor:
24,000 hours at $7.50 per hour
Actual variable manufacturing overhead:
$51,000
The company records materials price variances at the time of purchase.
The direct labor rate variance is
80. Biscuit Company has developed the following standards for one of its products. Direct labor hours is the
driver used to assign overhead costs to products.
Direct materials:
10 pounds ´ $3 per pound
Direct labor:
2.5 hours ´ $8 per hour
Variable manufacturing overhead:
2.5 hours ´ $2 per hour
The following activity occurred during the month of June:
Materials purchased:
125,000 pounds at $2.60 per pound
Materials used:
110,000 pounds
Units produced:
10,000 units
Direct labor:
24,000 hours at $7.50 per hour
Actual variable manufacturing overhead:
$51,000
The company records materials price variances at the time of purchase.
The variable manufacturing overhead efficiency variance is
81. Biscuit Company has developed the following standards for one of its products. Direct labor hours is the
driver used to assign overhead costs to products.
Direct materials:
10 pounds ´ $3 per pound
Direct labor:
2.5 hours ´ $8 per hour
Variable manufacturing overhead:
2.5 hours ´ $2 per hour
The following activity occurred during the month of June:
Materials purchased:
125,000 pounds at $2.60 per pound
Materials used:
110,000 pounds
Units produced:
10,000 units
Direct labor:
24,000 hours at $7.50 per hour
Actual variable manufacturing overhead:
$51,000
The company records materials price variances at the time of purchase.
The direct labor efficiency variance is
82. Which of the following people is most likely responsible for an unfavorable variable overhead efficiency
variance?
83. A variable overhead efficiency variance could be caused by
84. If a company produces fewer units than expected, there will be
85. Total fixed overhead budget variance is always equal to
86. Croissant Company’s standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs
of $600,000. The standard allows one direct labor hour per unit. During 2014, Crawford produced 110,000 units
of product, (within the relevant range of activity) incurred $630,000 of fixed overhead costs, and recorded
212,000 actual hours of direct labor.
What is Croissant’s fixed overhead spending variance for 2014?
87. Somalian Corporation uses a standard costing system. Information for the month of May is as follows:
Actual manufacturing overhead costs ($26,000 is fixed)
$80,000
Direct labor:
Actual hours worked
12,000 hrs.
Standard hours allowed for actual production
10,000 hrs.
Average actual labor cost per hour
$18
The factory overhead rate is based on a normal volume of 12,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows:
Variable factory overhead
$48,000
Fixed factory overhead
24,000
Total factory overhead
$72,000
What is the variable overhead efficiency variance for Somalian?
88. Somalian Corporation uses a standard costing system. Information for the month of May is as follows:
Actual manufacturing overhead costs ($26,000 is fixed)
$80,000
Direct labor:
Actual hours worked
12,000 hrs.
Standard hours allowed for actual production
10,000 hrs.
Average actual labor cost per hour
$18
The factory overhead rate is based on a normal volume of 12,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows:
Variable factory overhead
$48,000
Fixed factory overhead
24,000
Total factory overhead
$72,000
What is the fixed overhead spending variance for Somalian?
89. Croissant Company’s standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs
of $600,000. The standard allows 1 direct labor hour per unit. During 2014, Croissant produced 110,000 units of
product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.
What is the standard activity level on which Croissant based its fixed overhead rate?
90. Croissant Company’s standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs
of $600,000. The standard allows 1 direct labor hour per unit. During 2014, Croissant produced 110,000 units of
product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.
What is Croissant’s fixed overhead volume variance for 2014?