Você está na página 1de 31

Management Accounting, Cdn.

6e (Horngren/Sundem/Stratton/Beaulieu)
Chapter 12 Flexible Budgets and Variance Analysis
1) Flexible budgets are designed to show different possible costs for one anticipated level of output.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 491
Objective: 1
2) All master budgets are prepared for only one level of activity.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 491
Objective: 1
3) In a flexible budget, the fixed costs will remain constant regardless of different levels of activity shown
in the budget.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 491
Objective: 1
4) A performance report should include variances that indicate the difference between expected future
results and desired results.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 495
Objective: 3
5) If actual revenues and expenses exceed expected revenues and expenses, all variances in the
performance report will be favourable.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 495
Objective: 3
6) One cause of a flexible-budget variance might be a difference between expected and actual hourly
wages for factory workers.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 495
Objective: 3
7) As the terms are used in the budgeting process, it is possible for a company to be effective at the same
time it is inefficient.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 495
Objective: 3
8) Flexible budgets evaluate whether operations are effective or not.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 491
Objective: 1
1
2012 Pearson Canada Inc.

9) Favourable flexible-budget variances are always viewed as positive.


Answer: FALSE
Diff: 1
Type: TF
Page Ref: 495
Objective: 3
10) It is universally believed that the standards used in flexible budgets should be "perfection standards"
so that individuals will constantly be challenged to perform better.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 495
Objective: 3
11) In most companies, variances are investigated only if they exceed a minimum dollar or percentage
deviation from budgeted amounts.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 495
Objective: 3
12) The total flexible-budget variance can be broken down into a price variance and a usage variance.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 493
Objective: 2
13) A usage variance measures actual deviations from the quantity of inputs that should have been used
to achieve the actual output quantity.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 493
Objective: 2
14) The difference between applied and budgeted fixed overhead is the production-volume variance.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 493
Objective: 2
15) When actual volume is less than expected volume, fixed overhead is overapplied.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 493
Objective: 2
16) A cost system that applies actual direct materials and actual direct-labour costs to products or services
but uses standards for applying overhead is known as a standard costing system.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 495
Objective: 3
17) The only way to account for standard cost variances is to adjust income in the current period.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 493
2
2012 Pearson Canada Inc.

Objective: 2
18) Underapplied overhead is always the difference between the budgeted overhead and the overhead
applied.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 493
Objective: 1
Use the following information to answer the next question(s):
The standard cost sheet for one of the Vitton Company's products is presented below.
Direct materials (4 feet @ $6.00)
Direct labour (1 hour @ $12.00)
Variable overhead (1 hour @ $5.00)
Fixed overhead (1 hour @ $3.00*)
Standard unit cost

$24.00
12.00
5.00
3.00
$44.00

*Rate based on expected activity of 12,000 hours


The following results for last year were recorded.
Production (in units)
Direct materials (39,000 feet purchased
and used)
Direct labour (10,500 hours)
Variable overhead
Fixed overhead

10,000
$241,800
$131,250
$ 48,000
$ 40,000

19) The materials price variance is


A) $7,800 unfavourable.
B) $7,800 favourable.
C) $8,400 unfavourable.
D) $8,400 favourable.
Answer: A
Diff: 2
Type: MC
Page Ref: 501
20) The materials usage variance is
A) $4,000 favourable.
B) $4,000 unfavourable.
C) $6,000 favourable.
D) $6,000 unfavourable.
Answer: C
Diff: 2
Type: MC
Page Ref: 501

3
2012 Pearson Canada Inc.

21) The labour rate variance is


A) $5,250 favourable.
B) $5,250 unfavourable.
C) $5,000 favourable.
D) $5,000 unfavourable.
Answer: B
Diff: 2
Type: MC
Page Ref: 501
22) The labour efficiency variance is
A) $5,250 favourable.
B) $5,250 unfavourable.
C) $6,000 favourable.
D) $6,000 unfavourable.
Answer: D
Diff: 2
Type: MC
Page Ref: 501
23) The variable overhead spending variance is
A) $4,500 favourable.
B) $4,500 unfavourable.
C) $4,800 favourable.
D) $4,800 unfavourable.
Answer: A
Diff: 2
Type: MC
Page Ref: 501
24) The variable overhead efficiency variance is
A) $2,500 favourable.
B) $2,500 unfavourable.
C) $2,250 favourable.
D) $2,250 unfavourable.
Answer: A
Diff: 2
Type: MC
Page Ref: 501
25) The fixed overhead volume variance is
A) $4,000 unfavourable.
B) $4,000 favourable.
C) $6,000 favourable.
D) $6,000 favourable.
Answer: A
Diff: 2
Type: MC
Page Ref: 501

4
2012 Pearson Canada Inc.

Harrison Company had the following information:


Selling price per unit
Variable costs per unit: Manufacturing
Variable costs per unit: Selling and
administrative
Fixed costs per month: Manufacturing
Fixed costs per month: Selling and
administrative

$30
$15
$3
$20,000
$10,000

26) What are the total manufacturing costs for 10,000 units?
A) $150,000
B) $20,000
C) $170,000
D) $180,000
Answer: C
Diff: 1
Type: MC
Page Ref: 501
27) What are the total manufacturing costs for 15,000 units?
A) $30,000
B) $245,000
C) $225,000
D) $270,000
Answer: B
Diff: 1
Type: MC
Page Ref: 501
28) What are the total selling and administrative expenses for 10,000 units?
A) $30,000
B) $40,000
C) $180,000
D) $210,000
Answer: B
Diff: 2
Type: MC
Page Ref: 501
29) What are the total selling and administrative expenses for 15,000 units?
A) $300,000
B) $ 45,000
C) $ 55,000
D) $270,000
Answer: C
Diff: 2
Type: MC
Page Ref: 501

5
2012 Pearson Canada Inc.

30) What is the net income for 10,000 units?


A) $90,000
B) $120,000
C) $300,000
D) $270,000
Answer: A
Diff: 2
Type: MC
Page Ref: 501
31) What is the net income for 15,000 units?
A) $450,000
B) $180,000
C) $405,000
D) $150,000
Answer: D
Diff: 2
Type: MC
Page Ref: 501
Woodlund Company had the following information:
Selling price per unit
Variable costs per unit: Manufacturing
Variable costs per unit: Selling and
administrative
Fixed costs per month: Manufacturing
Fixed costs per month: Selling and
administrative

$120
$60
$12
$80,000
$40,000

32) What are the total manufacturing costs for 10,000 units?
A) $600,000
B) $80,000
C) $680,000
D) $720,000
Answer: C
Diff: 2
Type: MC
Page Ref: 592
33) What are the total manufacturing costs for 15,000 units?
A) $120,000
B) $980,000
C) $900,000
D) $1,080,000
Answer: B
Diff: 3
Type: MC
Page Ref: 501

6
2012 Pearson Canada Inc.

34) What are the total selling and administrative expenses for 10,000 units?
A) $120,000
B) $160,000
C) $720,000
D) $840,000
Answer: B
Diff: 2
Type: MC
Page Ref: 501
35) What are the total selling and administrative expenses for 15,000 units?
A) $1,200,000
B) $180,000
C) $220,000
D) $1,080,000
Answer: C
Diff: 2
Type: MC
Page Ref: 501
36) What is the net income for 10,000 units?
A) $360,000
B) $480,000
C) $1,200,000
D) $1,080,000
Answer: A
Diff: 2
Type: MC
Page Ref: 501
37) What is the net income for 15,000 units?
A) $1,800,000
B) $720,000
C) $1,620,000
D) $600,000
Answer: D
Diff: 2
Type: MC
Page Ref: 501
The total traceable costs of the account billing activity centre is $245,000. Cost behaviour analysis indicates
that fixed costs are $75,000. Activity analysis indicates that the cost driver for account billing activity is the
number of lines printed, and the total lines printed is 2,500,000.
38) What is the variable cost per line?
A) $0.068
B) $0.098
C) $0.030
D) Cannot be determined
Answer: A
Diff: 2
Type: MC
Page Ref: 501

7
2012 Pearson Canada Inc.

39) What is the cost function?


A) Costs = $ 75,000 + $0.098(Lines)
B) Costs = $ 75,000 + $0.068(Lines)
C) Costs = $245,000 + $0.068(Lines)
D) Cannot be determined
Answer: B
Diff: 2
Type: MC
Page Ref: 501
40) What would be the total flexible budget if the number of lines increased to 2,600,000?
A) $176,800
B) $245,000
C) $251,800
D) Cannot be determined
Answer: C
Diff: 2
Type: MC
Page Ref: 496
Objective: 4
41) Identify which of the statements below is NOT a reason why actual results would differ from those
projected in the master budget.
A) Current period projected sales volume differed from the prior period projection.
B) Actual sales volume differed from projected sales volume.
C) Variable costs per unit differed from expected amounts.
D) Actual fixed costs were different than expected.
Answer: A
Diff: 1
Type: MC
Page Ref: 491
Objective: 1
42) Which statement would NOT be a possible reason for a variance between a flexible budget and actual
results?
A) Material prices were different than expected.
B) Labour prices were different than expected.
C) The actual volume of activity was different than expected.
D) The amount of labour used per unit of output was different than expected.
Answer: C
Diff: 2
Type: MC
Page Ref: 491
Objective: 1
43) If the total sales activity variance was $15,000 favourable, and the total master-budget variance was
$17,500 favourable, then the total flexible-budget variance must have been
A) $32,500 favourable.
B) $ 2,500 favourable.
C) $ 2,500 unfavourable.
D) undeterminable.
Answer: B
Diff: 2
Type: MC
Page Ref: 496
Objective: 4
8
2012 Pearson Canada Inc.

44) Which of the following is NOT an example of "efficient" performance?


A) More goods were produced and sold than anticipated.
B) Direct labour hours per unit were less than expected.
C) Direct material used per unit was less than expected.
D) More outputs were achieved with less inputs than predicted.
Answer: A
Diff: 1
Type: MC
Page Ref: 491
Objective: 1
45) With regard to flexible-budget variances, Caulkins Corporation showed a $2,000 unfavourable
variable cost variance and a $450 favourable fixed cost variance. The variance for operating income was
A) $1,550 unfavourable.
B) $2,450 favourable.
C) $2,450 unfavourable.
D) undeterminable.
Answer: A
Diff: 2
Type: MC
Page Ref: 496
Objective: 4
46) Flexible-budget variances are designed to measure
A) effectiveness of operations at projected level of activity.
B) effectiveness of operations at actual level of activity.
C) efficiency of operations at projected level of activity.
D) efficiency of operations at actual level of activity.
Answer: D
Diff: 2
Type: MC
Page Ref: 491
Objective: 1
47) Flexible budgets help to measure
A) differences between projected and actual activity levels.
B) the efficiency of operations at the actual activity level.
C) the amount by which standard and expected prices differ.
D) the reasons why projected activity levels were not attained.
Answer: B
Diff: 1
Type: MC
Page Ref: 491
Objective: 1
48) Who is best able to explain the reasons for flexible-budget variances?
A) The company president
B) A salesperson
C) A manufacturing department foreperson
D) A machine operator
Answer: C
Diff: 1
Type: MC
Page Ref: 491
Objective: 1

9
2012 Pearson Canada Inc.

49) A favourable sales-activity variance means that


A) managers have been efficient in the implementation of a sales budget.
B) managers have been effective in accomplishing a planned sales level.
C) demand for the company product is strong.
D) the sales force has done an excellent job.
Answer: B
Diff: 2
Type: MC
Page Ref: 496
Objective: 4
The following data are for Parker Corporation for 20X4.

Units
Sales
Variable costs
Contribution margin
Fixed costs
Operating income

Master
Budget
16,000
$160,000
96,000
$ 64,000
40,000
$ 24,000

Actual
18,000
$180,000
117,000
$ 63,000
38,000
$ 25,000

50) The total of the flexible-budget variances is


A) $7,000 favourable.
B) $7,000 unfavourable.
C) $1,000 favourable.
D) $1,000 unfavourable.
Answer: B
Diff: 2
Type: MC
Page Ref: 496
Objective: 4
51) The total of the sales-activity variances is
A) $8,000 favourable.
B) $8,000 unfavourable.
C) $7,000 favourable.
D) $7,000 unfavourable.
Answer: A
Diff: 2
Type: MC
Page Ref: 496
Objective: 4
52) The total of the master-budget variances is
A) $8,000 favourable.
B) $8,000 unfavourable.
C) $1,000 unfavourable.
D) $1,000 favourable.
Answer: D
Diff: 2
Type: MC
Page Ref: 496
Objective: 4
10
2012 Pearson Canada Inc.

Flexible Budget for


Actual Sales
Activity
18,000
$180,000
108,000
$ 72,000
40,000
$ 32,000

The following information is for Doran Corporation:


Direct Material
Standard price per unit of input*
Actual price per unit of input
Standard inputs allowed per unit of output
Actual units of input
Actual units of output

$10
$9
2 pounds
31,000 pounds
15,000 units

*Direct material is measured in pounds


53) The price variance for direct material is
A) $30,000 favourable.
B) $30,000 unfavourable.
C) $31,000 unfavourable.
D) $31,000 favourable.
Answer: D
Diff: 2
Type: MC
Page Ref: 501
54) The usage variance for direct material is
A) $10,000 unfavourable.
B) $9,000 unfavourable.
C) $9,000 favourable.
D) $10,000 favourable.
Answer: A
Diff: 2
Type: MC
Page Ref: 501
55) The total flexible-budget variance for direct material is
A) $21,000 unfavourable.
B) $21,000 favourable.
C) $40,000 favourable.
D) $40,000 unfavourable.
Answer: B
Diff: 2
Type: MC
Page Ref: 501

11
2012 Pearson Canada Inc.

The following information pertains to Finger Company:


Direct Labour
Standard price per unit of input*
Actual price per unit of input
Standard inputs allowed per unit of output
Actual units of input
Actual units of output

$20
$22
2 hours
9,500 hours
5,000 units

*Direct labour is measured in hours


56) The price variance for direct labour is
A) $20,000 favourable.
B) $20,000 unfavourable.
C) $19,000 favourable.
D) $19,000 unfavourable.
Answer: D
Diff: 2
Type: MC
Page Ref: 501
57) The direct-labour usage variance is
A) $11,000 favourable.
B) $11,000 unfavourable.
C) $10,000 favourable.
D) $10,000 unfavourable.
Answer: C
Diff: 2
Type: MC
Page Ref: 501
58) The total flexible-budget variance for direct labour is
A) $ 9,000 unfavourable.
B) $ 9,000 favourable.
C) $30,000 unfavourable.
D) $30,000 favourable.
Answer: A
Diff: 2
Type: MC
Page Ref: 496
Objective: 4

12
2012 Pearson Canada Inc.

The Clamen Company makes table lamps, for which the following standards have been developed:

Direct materials
Direct labour

Standard Inputs
Expected for Each
Unit of Output
20 pounds
6 hours

Standard Price Expected


per
Unit of Output
$2 per pound
$8 per hour

During October, production of 100 lamps was expected, but 110 lamps were actually completed.
Direct materials purchased and used were 2,100 pounds at an actual price of $2.20 per pound.
Direct labour cost for the month was $5,310, and the actual pay per hour was $9.00.
59) The standard cost of direct material for each lamps produced is
A) $48.00.
B) $40.00.
C) $44.00.
D) $21.00.
Answer: B
Diff: 2
Type: MC
Page Ref: 501
60) The direct-material price variance for October is
A) $420 unfavourable.
B) $420 favourable.
C) $400 favourable.
D) $400 unfavourable.
Answer: A
Diff: 2
Type: MC
Page Ref: 501
61) The direct-material usage variance for October is
A) $220 unfavourable.
B) $220 favourable.
C) $200 unfavourable.
D) $200 favourable.
Answer: D
Diff: 2
Type: MC
Page Ref: 501
62) The direct-labour price variance for the month of October is
A) $600 unfavourable.
B) $600 favourable.
C) $590 unfavourable.
D) $590 favourable.
Answer: C
Diff: 2
Type: MC
Page Ref: 501

13
2012 Pearson Canada Inc.

63) The direct-labour usage variance for the month of October is


A) $560 favourable.
B) $560 unfavourable.
C) $630 favourable.
D) $630 unfavourable.
Answer: A
Diff: 2
Type: MC
Page Ref: 501
The following data apply to Walker Corporation for the year 20X4.

Standard quantity per unit


Standard price per unit
Actual quantity used per unit
Actual price paid for material
Price variance
Usage variance
Flexible-budget variance
Actual quantity of production

Direct Material
Product X
3 pounds
$4.00 per pound
?
$5.00 per pound
$400 U
$800 F
?
200 units

Direct Material
Product Y
4 pounds
?
3 pounds
$10.00 per pound
$900 F
?
$4,200 F
300 units

64) For product X, the actual quantity used per unit was
A) 1.0 pound.
B) 2.0 pounds.
C) 3.0 pounds.
D) 3.5 pounds.
Answer: B
Diff: 2
Type: MC
Page Ref: 501
65) For Product X, the flexible-budget variance was
A) $800 unfavourable.
B) $800 favourable.
C) $1,200 favourable.
D) $400 favourable.
Answer: D
Diff: 2
Type: MC
Page Ref: 496
Objective: 4
66) For Product X, the total actual quantity used was
A) 600 pounds.
B) 500 pounds.
C) 400 pounds.
D) 300 pounds.
Answer: C
Diff: 2
Type: MC
Page Ref: 501

14
2012 Pearson Canada Inc.

67) For Product Y, the standard price per unit was


A) $11.00 per pound.
B) $5.33 per pound.
C) $10.75 per pound.
D) $10.00 per pound.
Answer: A
Diff: 2
Type: MC
Page Ref: 501
68) For Product Y, the usage variance was
A) $3,300 unfavourable.
B) $3,300 favourable.
C) $2,400 unfavourable.
D) $2,400 favourable.
Answer: B
Diff: 2
Type: MC
Page Ref: 501
69) For Product Y, the total standard material cost for producing the 300 units was
A) $9,000.
B) $9,900.
C) $13,200.
D) $12,000.
Answer: C
Diff: 2
Type: MC
Page Ref: 501
70) For Product Y, the total actual cost for producing the 300 units was
A) $9,000.
B) $9,900.
C) $12,000.
D) $13,200.
Answer: A
Diff: 2
Type: MC
Page Ref: 501
71) When actual volume is less than expected volume, the fixed overhead volume variance is
A) favourable.
B) overapplied.
C) unfavourable.
D) indeterminable.
Answer: C
Diff: 1
Type: MC
Page Ref: 491
Objective: 1

15
2012 Pearson Canada Inc.

72) When actual volume is less than expected volume, fixed overhead is
A) favourable.
B) underapplied.
C) overapplied.
D) indeterminable.
Answer: B
Diff: 1
Type: MC
Page Ref: 491
Objective: 1
73) The costing system that uses actual direct labour and materials cost but uses standards for applying
overhead is called
A) actual costing.
B) standard costing.
C) variance costing.
D) normal costing.
Answer: D
Diff: 1
Type: MC
Page Ref: 511
Objective: 8
74) Which costing methods generate fixed overhead volume variances?
A) Normal and standard.
B) Standard and actual.
C) Actual and normal.
D) Actual, normal, and standard.
Answer: A
Diff: 1
Type: MC
Page Ref: 511
Objective: 8
A company had the following information pertaining to two different cases:

Budgeted fixed overhead


Variable factory overhead per directlabour hour
Standard direct-labour hours
Flexible-budget variance
Production-volume variance

Case X
$130,000

Case Y
$230,000

$ 24
11,000
$ 10,000 F
$ 6,000 U

$ 14
6,000
$ 20,000 U
$ 8,000 F

75) Actual factory overhead cost in Case X was


A) $264,000.
B) $384,000.
C) $120,000.
D) $130,000.
Answer: A
Diff: 2
Type: MC
Page Ref: 501

16
2012 Pearson Canada Inc.

76) The applied factory overhead cost in Case X was


A) $400,000.
B) $136,000.
C) $124,000.
D) $388,000.
Answer: D
Diff: 2
Type: MC
Page Ref: 501
77) The applied factory overhead cost in Case Y was
A) $322,000.
B) $238,000.
C) $346,000.
D) $222,000.
Answer: A
Diff: 2
Type: MC
Page Ref: 501
78) Prorating the variances refers to assigning the variances to
A) cost of goods sold only.
B) inventories and cost of goods sold.
C) inventories only.
D) inventories, cost of goods sold, and sales.
Answer: B
Diff: 2
Type: MC
Page Ref: 511
Objective: 9
79) The fixed overhead volume variance arises because fixed-overhead accounting must serve two
masters: the control-budget purpose and the
A) product-costing purpose.
B) period-costing purpose.
C) stockholders.
D) creditors.
Answer: A
Diff: 1
Type: MC
Page Ref: 508
Objective: 7

17
2012 Pearson Canada Inc.

A company had the following information pertaining to two different cases:

Budgeted fixed overhead


Variable factory overhead per directlabour hour
Standard direct-labour hours
Flexible-budget variance
Production-volume variance

Case X
$130,000

Case Y
$230,000

$ 24
11,000
$ 10,000 F
$ 6,000 U

14
6,000
$ 20,000 U
$ 8,000 F

80) The total overhead variance in Case X was


A) $126,000 unfavourable.
B) $16,000 favourable.
C) $4,000 favourable.
D) $134,000 favourable.
Answer: C
Diff: 2
Type: MC
Page Ref: 501
81) The total overhead variance in Case Y was
A) $242,000 unfavourable.
B) $12,000 unfavourable.
C) $28,000 unfavourable.
D) $218,000 favourable.
Answer: B
Diff: 2
Type: MC
Page Ref: 501
82) The variance of actual results from the master budget.
Answer: Master-budget variance
Diff: 1
Type: SA Page Ref: 491
Objective: 1
83) A variance that occurs when actual expenses are more than budgeted expenses.
Answer: Unfavourable expense variance
Diff: 1
Type: SA Page Ref: 491
Objective: 1
84) A budget that adjusts for changes in sales volume and other cost driver activities.
Answer: Flexible budget
Diff: 1
Type: SA Page Ref: 491
Objective: 1
85) The variances between the flexible budget and the actual results.
Answer: Flexible-budget variances
Diff: 1
Type: SA Page Ref: 491
Objective: 1

18
2012 Pearson Canada Inc.

86) The differences between the master budget amounts and the amounts in the flexible budget.
Answer: Activity-level variances
Diff: 1
Type: SA Page Ref: 491
Objective: 1
87) The degree to which a goal, objective, or target is met.
Answer: Effectiveness
Diff: 1
Type: SA Page Ref: 491
Objective: 1
88) The degree to which inputs are used in relation to a given level of outputs.
Answer: Efficiency
Diff: 1
Type: SA Page Ref: 491
Objective: 1
89) The cost most likely to be attained.
Answer: Standard cost
Diff: 1
Type: SA Page Ref: 491
Objective: 1
90) A carefully determined cost per unit that should be attained.
Answer: Standard cost
Diff: 1
Type: SA Page Ref: 491
Objective: 1
91) Levels of performance that can be achieved by realistic levels of effort.
Answer: Currently attainable standards
Diff: 1
Type: SA Page Ref: 491
Objective: 1
92) The difference between the actual overhead incurred and the overhead applied.
Answer: Under/overapplied overhead
Diff: 1
Type: SA Page Ref: 491
Objective: 1
93) The amount of fixed manufacturing overhead applied to each unit of production.
Answer: Fixed-overhead rate
Diff: 1
Type: SA Page Ref: 501
94) A variance that appears whenever actual production deviates from the expected volume of
production used in computing the fixed-overhead rate.
Answer: fixed overhead volume variance
Diff: 1
Type: SA Page Ref: 508
Objective: 7

19
2012 Pearson Canada Inc.

95) A cost system that applies actual direct materials and actual direct-labour costs to products or services
but uses standards for applying overhead.
Answer: Normal costing
Diff: 1
Type: SA Page Ref: 511
Objective: 8
96) Assigning the variances to the inventories and cost of goods sold related to the production during the
period the variances arose.
Answer: Prorating the variance
Diff: 1
Type: SA Page Ref: 511
Objective: 9
97) Given the following data:

Standard price per unit of input


Actual price per unit of input
Standard inputs allowed per unit
of output
Actual units of input
Actual units produced

Direct
Material
$15 per foot
$17 per foot

Direct
Labour
$15 per hour
$14 per hour

4 feet
1,750 feet
400 units

2 hours
850 hours

Required: Compute the price, usage and flexible-budget variances for direct material and labour. Indicate
whether each variance is favourable or unfavourable.
Answer:
Direct material:
Price variance = ($17 - $15) 1,750 = $3,500 unfavourable
Usage variance = [1,750 - (400 4)] $15 = $2,250 unfavourable
Flexible-budget variance = $3,500 U + $2,250 U = $5,750 unfavourable
Direct labour:
Price variance = ($14 - $15) 850 = $850 favourable
Usage variance = [850 - (400 2)] $15 = $750 unfavourable
Flexible-budget variance = $850 F - $750 U = $100 favourable
Diff: 3
Type: ES
Page Ref: 501

20
2012 Pearson Canada Inc.

98) The following data are for the month of August for Murdock Corporation, a company that makes
saucers.

Direct material
Direct labour

Standard Inputs
Expected for Each
Unit of Output
10 pounds
3 hours

Standard
Price per
Unit of Input
$ 6 per pound
$10 per hour

During the month of August, the company actually produced 1,000 saucers, which is 50 units less than
expected. Direct material purchased and used amounted to 10,500 pounds at a cost of $6.25 per pound.
Actual direct labour was 2,900 hours at an actual cost of $10.50 per hour.
Required:
a. What is the standard cost per saucer for direct material and direct labour?
b. Compute the price and usage variances for direct material and direct labour.
Answer:
a. Direct material standard cost:
10 $6 = $60 per unit
Direct labour standard cost:
3 $10 = $30 per unit
b.

Direct material:
Price variance = ($6.25 - $6.00) 10,500 = $2,625 unfavourable
Usage variance = (10,500 - 10,000) $6 = $3,000 unfavourable
Direct labour:
Price variance = ($10.50 - $10.00) 2,900 = $1,450 unfavourable
Usage variance = (2,900 - 3,000) $10.00 = $1,000 favourable
Diff: 3
Type: ES
Page Ref: 501

21
2012 Pearson Canada Inc.

99) The following data pertain to June operations for the Harley Company:

Direct material
Direct labour

Actual Inputs
for Each Unit
of Output
10 yards
2 hours

Actual Price
per Unit
of Input
$ 8 per yard
$10 per hour

Actual output was 750 units. The Company's per unit standards call for 9 yards of direct material at $9.00
per yard and 3 hours of direct labour at $10.50 per hour.
Required: Compute the price and usage variances for direct material and direct labour.
Answer:
Direct material:
Price variance = ($8 - $9) (10 750) = $7,500 favourable
Usage variance = [7,500 - (750 9)] $9 = $6,750 unfavourable
Direct labour:
Price variance = ($10.00 - $10.50) (750 2) = $750 favourable
Usage variance = [1,500 - (750 3)] $10.50 = $7,875 favourable
Diff: 3
Type: ES
Page Ref: 501
100) Fill in the missing information in the following table:

Actual quantity used per unit


Actual price paid
Standard quantity per unit
Standard price per unit
Price variance
Usage variance
Flexible-budget variance

Direct
Material
3.5 pounds
$6 per pound
3 pounds
(a)
$1,400 F
(b)
$400 U

Direct
Labour
(c)
$17 per hour
4 hours
$16 per hour
$1,500 U
$600 F
(d)

Actual quantity produced 400 units


Answer:
a. [($6.00 - (a)) (400 3.5)] = $1,400 unfavourable
(a) = Standard price per unit of direct material = $5 per pound
b. $1,400 Favourable + (b) = $400 unfavourable
(b) = Usage variance = $1,800 unfavourable
c. ($17 - $16) A = $1,500 unfavourable
A = Actual hours used = 1,500 hours
(c) = 1,500 hours/400 units = 3.75 hours per unit
d. $1,500 U - $600 F = $900 unfavourable flexible-budget variance
Diff: 3
Type: ES
Page Ref: 501

22
2012 Pearson Canada Inc.

101) Washington, Inc. has budgeted fixed factory overhead costs at $150,000 per month and variable
factory overhead at a rate of $6 per direct-labour hour. The standard direct-labour hours allowed for
January production were 18,000. An analysis of the factory overhead indicates that during January there
was an unfavourable flexible budget variance of $5,000 and a favourable production volume variance of
$3,000.
Required:
a. Compute the actual factory overhead cost for January.
b. Calculate the applied overhead cost for January.
Answer:
a. $5,000 + $150,000 + (18,000 $6) = $263,000
b. (18,000 $6) + $150,000 + $3,000 = $261,000
Diff: 3
Type: ES
Page Ref: 501
102) Warren Company's overhead cost information is given below:
Standard applied overhead
Budgeted overhead based on
standard machine hours allowed
Budgeted overhead based on
actual machine hours used
Actual overhead

$152,000
162,000
170,000
166,000

Required:
a. Compute the total overhead variance.
b. Calculate the flexible-budget variance.
c. Determine the fixed overhead volume variance.
Answer:
a. $166,000 - $152,000 = $14,000 unfavourable
b. $166,000 - $162,000 = $4,000 unfavourable
c. $162,000 - $152,000 = $10,000 unfavourable
Diff: 3
Type: ES
Page Ref: 501

23
2012 Pearson Canada Inc.

103) The following information was compiled by Bovinnette Company:


Expected volume of production
Actual level of production
Budgeted fixed overhead
Actual fixed overhead
Variable overhead rate per direct-labour hour
Actual variable overhead
Standard direct-labour hours allowed per unit produced
Standard direct-labour rate per hour
Actual direct-labour hours of input
Actual direct-labour rate per hour

100,000 units
95,000 units
$200,000
$207,500
$9
$395,000
.50 hour
$8.00
46,500 hours
$8.25

Required:
Compute the following variances:
a. Direct-labour flexible-budget variance
b. Variable factory overhead flexible-budget variance
c. Fixed factory overhead flexible-budget variance
d. Fixed factory overhead production-volume variance
Answer:
a. (46,500 $8.25) - (95,000 .5 $8.00) = $3,625 unfavourable
b. $395,000 - (95,000 .5 $9) = $32,500 favourable
c. $207,500 - $200,000 = $7,500 unfavourable
d. $200,000 - (95,000 $2*) = $10,000 unfavourable
*$200,000/100,000 units = $2 per unit

Diff: 3

Type: ES

Page Ref: 501

24
2012 Pearson Canada Inc.

104) The Walton Manufacturing Company has developed the following standards for one of their
products, a walnut fern stand.
_______________________________________________________
STANDARD VARIABLE COST CARD
One Walnut Fern Stand
Materials: 5 square feet x $8 per square foot
$40.00
Direct labour: 2 hours x $10/DLH
20.00
Variable manufacturing overhead: 2 hours x $5/DLH 10.00
Total standard variable cost per unit
$70.00
_______________________________________________________
The company records materials price variances at the time of purchase. The following activity occurred
during the month of April:
Materials purchased:
Materials used:
Units produced:
Direct labour:
Actual variable
manufacturing overhead:

5,000 square feet costing $46,000


4,250 square feet
900 units
2,200 hours costing $19,800
$10,500

a. Calculate the direct materials price and usage variances.


b. Calculate the direct labour rate variance, the direct labour efficiency variance, and the total direct
labour variance.
c. Compute the variable manufacturing overhead spending and efficiency variances.
Answer:
a.
Direct materials price variance:
(Actual Price - Standard Price) x Actual Quantity Purchased
(AP - SP) x AQ = ($9.20 - $8.00) 5,000 = $6,000 Unfavourable
Direct materials usage variance:
(Actual Quantity Used - Standard Quantity Allowed) x Standard Price
(AQ - SQ) SP = (4,250 - 4,500) x $8/sq.ft.) = $2,000 Favourable

25
2012 Pearson Canada Inc.

b.
Direct labour rate variance:
(Actual Rate - Standard Rate) x actual labour hours
($9 - $10) x 2,200 = $2,200 Favourable
Direct labour efficiency variance:
(Actual Labour Hours - Standard Labour Hours Allowed) x Standard Rate
(AH - SH) x SR = (2,200 hours - 1,800) x $10 = $4,000 Unfavourable
c.
Variable manufacturing overhead spending variance:
[Actual Variable Overhead - (Actual Hours x Standard Variable Overhead Rate)]
= ($10,500 - (2,200 x $5 per hour) = $500 Favourable
Variable manufacturing overhead efficiency variance:
= (AQ - SQ) x SVOR
= (2,200 - 1,800) x $5 per hour = $2,000 Unfavourable
Diff: 3

Type: ES

Page Ref: 501

26
2012 Pearson Canada Inc.

105) The Garson Company manufactures roofing shingles. The production process involves heating and
compressing asphalt into sheets and then rolling coarse sand into the hot asphalt. The sheets are then
cooled, cut into shingles, and packaged.
The following standard costs were developed:
STANDARD COST CARD
PER SHINGLE
Materials:
Asphalt
Sand
Direct labour
Variable overhead
Fixed overhead

2 lbs. x $0.08/lb.
2 lbs. x $0.02/lb.
.01 hrs. x $7.00/hr.
.01 hrs. x $3.00/hr.

$0.16
0.04
0.07
0.03
?

Total standard cost per shingle

The following information is available regarding the company's operations for the period.
Shingles produced:
Materials purchased:
Asphalt:
Sand:
Materials used:
Asphalt:
Sand:
Direct labour:
Manufacturing overhead incurred:
Variable:
Fixed:

500,000
800,000 pounds @ $0.07 per pound
900,000 pounds @ $0.03 per pound
775,000 pounds
850,000 pounds
5,100 hours costing $36,000
$16,500
$48,000

Budgeted fixed manufacturing overhead for the period is $60,000 and the standard fixed overhead rate is
based on expected capacity of 6,000 direct labour hours.
a. Calculate the standard fixed manufacturing overhead rate.
b. Complete the standard cost card for roofing shingles.
c. Calculate the following variances:
Materials price and usage variances
Labour rate and efficiency variances
Variable manufacturing overhead spending and efficiency variances
Fixed manufacturing overhead budget and volume variances

27
2012 Pearson Canada Inc.

Answer:
a.
SFOR = Estimated Fixed Overhead/Estimated Direct Labour Hours
= $60,000/6,000 DLH = $10 per DLH
b.

STANDARD COST CARD


PER SHINGLE
Direct materials:
Asphalt
Sand
Direct labour
Variable manufacturing overhead
Fixed manufacturing overhead
.01 hr. x $10/hr.
Total Standard cost per shingle

$0.16
0.04
0.07
0.03
0.10
$0.40

c.
Materials price variance asphalt:
(AP - SP) x AQ Purchased
= ($0.07 - $0.08) x 800,000 lbs. = $8,000 Favourable
Materials price variance sand:
(AP - SP) x AQ Purchased
= ($0.03 - $0.02) x 900,000 lbs. = $9,000 Unfavourable
Materials usage variance asphalt:
(AQ - SQ) x SP = (775,000 lbs. - 1,000,000 lbs.) x $0.08
= $18,000 Favourable
Materials usage variance sand:
(AQ - SQ) x SP = (850,000 lbs. - 1,000,000 lbs.) x $0.02
= $3,000 Favourable
Direct labour rate variance:
(AR - SR) x AH
= ($7.06*/hr. - $7.00/hr.) x 5,100 DLH = $300 Unfavourable
*rounded

28
2012 Pearson Canada Inc.

Direct labour efficiency variance:


(AH - SH) x SP
= (5,100 DLH - 5,000 DLH) x $7.00/hr. = $700 Unfavourable
Variable manufacturing overhead spending variance:
[Actual Variable Overhead - (Actual Hours x Standard Variable Overhead Rate)]
= [$16,500 - (5,100 DLH x $3.00/hr.)] = $1,200 Unfavourable
Variable manufacturing overhead efficiency variance:
= (AQ - SQ) x SVOR = (5,100 - 5,000) x $3.00/hr. = $300 Unfavourable
Fixed manufacturing overhead budget variance:
(Actual Fixed Overhead - Budgeted Fixed Overhead)
= $48,000 - $60,000 = $12,000 Favourable
Fixed manufacturing overhead volume variance:
(Budgeted Fixed Overhead - Applied Fixed Overhead)
= $60,000 - (5,000 x $10/hr.) = $10,000 Unfavourable
Diff: 3

Type: ES

Page Ref: 501

29
2012 Pearson Canada Inc.

106) The Fenmore Company uses standard costing for direct materials and direct labour. Management
would like to use standard costing for variable and fixed overhead also.
The following monthly cost functions were developed for manufacturing overhead items:
OVERHEAD ITEM

COST FUNCTION

Indirect materials
Indirect labour
Repairs and maintenance
Utilities
Insurance
Rent
Depreciation

$0.10 per DLH


$0.40 per DLH
$0.20 per DLH
$0.25 per DLH
$ 2,000
$ 4,000
$20,000

The cost functions are considered reliable within a relevant range of 30,000 to 55,000 direct labour hours.
Fenmore expects to operate at 40,000 direct labour hours per month.
Information for the month of September is as follows:
Actual Overhead Costs Incurred:
Indirect materials
Indirect labour
Repairs and maintenance
Utilities
Insurance
Rent
Depreciation
Total

$ 4,500
17,000
8,000
10,000
2,100
4,000
20,000
$65,600

Actual direct labour hours worked


Standard direct labour hours
allowed for production achieved:

42,000
44,000

a. Calculate the standard manufacturing overhead rate based upon expected capacity showing the
breakdown between the fixed overhead rate and the variable overhead rate.
b. Calculate the variable manufacturing overhead spending variance.
c. Calculate the variable manufacturing overhead efficiency variance.
d. Calculate the fixed manufacturing overhead budget variance.
e. Calculate the fixed manufacturing overhead volume variance.

30
2012 Pearson Canada Inc.

Answer:
a. Predetermined manufacturing overhead rate:
Manufacturing overhead items:
Indirect materials
$0.10 per DLH
Indirect labour
0.40 per DLH
Repairs and maintenance
0.20 per DLH
Utilities
0.25 per DLH
Insurance
$ 2,000
Rent
4,000
Depreciation
20,000 ____________
Variable manufacturing overhead
Fixed manufacturing overhead

$26,000

$0.95 per DLH

SVOR = $0.95 Per DLH


SFOR = Estimated FMO/Estimated DLH = $26,000/40,000 DLH = $0.65 per DLH
Total Overhead Rate = SFOR + SVOR = $0.65 + $0.95 = $1.60 per DLH
b.
Variable overhead spending variance:
[Actual Variable Overhead - (Standard Variable Overhead Rate x Actual Hours)]
= ($4,500 + $17,000 + $8,000 + $10,000) - (42,000 x $0.95)
= $39,500 - $39,900 = $400 Favourable
c.
Variable manufacturing overhead efficiency variance:
(AQ - SQ) x SVOR
= (42,000 DLH - 44,000 DLH) x $0.95/hr. = $1,900 Favourable
d.
Fixed overhead budget variance:
(Actual Fixed Overhead - Budgeted Fixed Overhead)
= $26,100 - $26,000 = $100 Unfavourable
e.
Fixed overhead volume variance:
(Budgeted Fixed Overhead - Applied Fixed Overhead)
= $26,000 - (44,000 DLH x $0.65/hr.)
= $26,000 - $28,600 = $2,600 Favourable
Diff: 3

Type: ES

Page Ref: 501

31
2012 Pearson Canada Inc.