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Exam 11: Relevant Costs for Decision Making

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Question 31

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To record the purchase of direct materials,the general ledger would include what entry to the materials price variance account?

A) $1,500 credit.
B) $1,500 debit.
C) $6,000 credit.
D) $6,000 debit.

E) A) and C)
F) C) and D)

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Question 32

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An unfavourable labour efficiency variance indicates that:

A) the actual labour rate was higher than the standard labour rate.
B) the labour rate variance must also be unfavourable.
C) actual labour hours worked exceeded standard labour hours for the production level achieved.
D) overtime labour was used during the period.

E) B) and D)
F) All of the above

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Question 33

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The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: What is the materials quantity variance for the month?

The following materials standards have been established for a particular product:

In a standard cost system,if the denominator activity (in hours)used to compute the predetermined overhead rate is equal to the actual activity (in hours)for the period,then there is no volume variance.

Henley Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct labour-hours.For the month of January,the fixed manufacturing overhead volume variance was $2,220 favourable.The company uses a fixed manufacturing overhead rate of $1.85 per direct labour-hour.During January,the standard direct labour-hours allowed for the month's output:

The variable overhead spending variance is:

The unitization of fixed overhead costs is useful from a control perspective.

Which of the following could result in a situation where the use of a standard cost system to control labour costs might not be the most useful?

A flexible budget enables managers to compute a richer set of variances than a static budget does.

In a certain standard costing system the following results occurred last period: labour rate variance,$1,000 U;labour efficiency variance,$2,800 F;and the actual labour rate was $0.20 more per hour than the standard labour rate.The number of actual direct labour hours used last period was:

The variable overhead efficiency variance reflects how efficiently variable overhead resources were used.

Wattis Manufacturing has established the following master flexible budget:

The material quantity variance is computed based on the quantity of all materials purchased during the period.

Quantity standards indicate how much of an input should be used for manufacturing one unit of product or in providing one unit of service.

Which of the following variances is caused by a difference between the denominator activity in the predetermined overhead rate and the standard hours allowed for the actual production of the period?

Dahl Company,a clothing manufacturer,uses a standard costing system.Each unit of a finished product contains 2 metres of cloth.However,there is unavoidable waste of 20%,calculated on input quantities,when the cloth is cut for assembly.The cost of the cloth is $3 per metre.The standard direct material cost for cloth per unit of finished product is:

If the actual labour hours worked exceed the standard labour hours allowed,what type of variance will occur?

The Lahn Company produces and sells a single product.Standards have been established for the product as follows: Direct materials: 5 grams.@ $3.50/gram.= $17.50/unit Direct labour: 3 hrs.@ $5.50/hr.= $16.50/unit Actual cost and usage figures for the past month follow:

The materials quantity variance is: