Managerial Accounting Exam4

The sources of quantitative standards include:

a. historical experience.

b. input from operating personnel.

c. engineering studies.

d. All of these choices are correct.

all of these choices are correct

Standard cost systems are adopted:

a. to facilitate product costing.

b. to enhance the operational control of firms that emphasize continuous improvement.

c. to improve planning and control and to facilitate product costing.

d. to improve planning and control.

Feedback Area

to improve planning and control and to facilitate product costing

The _____ shows the quantity of each input that should be used to produce one unit of output.

a. standard cost sheet

b. time sheet

c. production budget

d. operator budget

standard cost sheet

Flying High Company manufactures model airplanes. During the month, it manufactured 10,000 airplanes. Each one used an average of 6.5 direct labor hours and an average of 1.5 sheets of aluminum. It normally manufactures 7,500 airplanes. Materials and labor standards for making the airplanes are:

Line Item Description	Cost
Direct materials (1 sheet of aluminum @ $10.00)	$10.00
Direct materials (other accessories @ $8.75)	8.75
Direct labor (6 hours @ $7.00)	42.00

Compute the standard number of sheets of aluminum allowed for a volume of 10,000 airplanes.

a. 10,000 sheets

b. 15,000 sheets

c. 7,500 sheets

d. 11,250 sheets

10,000 sheets

All of the following are true regarding variance investigation except:

a. the investigation should be undertaken only if the anticipated benefits are greater than the expected costs.

b. every variance is investigated.

c. managers must consider whether a variance will recur.

d. it is difficult to assess the costs and benefits of variance analysis on a case-by-case basis.

every variance is investigated

Aqua Marine Company's standard cost is $750,000. The allowable deviation is ±5%. Its actual costs for three months are as follows:

Line Item Description	Amount
January	$600,000
February	560,000
March	620,000

The upper and lower control limits are _____, respectively.

a. $684,200 and $557,000

b. $742,000 and $670,000

c. $712,500 and $643,500

d. $787,500 and $712,500

787,000 and 712,500

Which of the following is not true of the use of materials variance information?

a. The purchasing agent has the responsibility for controlling the materials price variance.

b. The production manager is generally responsible for materials usage.

c. The production department is responsible for acquiring quality materials.

d. The production manager is concerned with minimizing scrap, waste, and rework.

the production department is responsible for acquiring quality materials

During June, Zinc Company produced 10,000 chainsaw blades. The standard quantity of material allowed per unit was 2 pounds of steel per blade at a standard cost of $5 per pound. Zinc determined that it had a favorable materials usage variance of $1,500 for June. Calculate the actual quantity of materials used by Zinc Company in June.

a. 19,700 pounds

b. 13,305 pounds

c. 17,425 pounds

d. 12,645 pounds

19,700 pounds

1. 
   Question Content AreaMover Company has developed the following standards for one of its products:
   
   

   Line Item Description	Cost
   Direct materials:	7.5 pounds × $8 per pound
   Direct labor:	2 hours × $12 per hour

   
   The following activity occurred during March:
   
   

   Line Item Description	Cost
   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

   
   The company records materials price variances at the time of purchase. The variable standard cost per unit for materials and labor is:

   a. $74.

   b. $84.

   c. $38.

   d. $98.

84

Which of the following statements is not true?

a. A favorable labor rate variance could result from lower-wage workers quitting.

b. An unfavorable materials usage variance could result from not efficiently utilizing raw materials, thus causing waste.

c. A favorable materials price variance could result from purchasing identical materials from another supplier at a lower price.

d. A favorable labor efficiency variance could result from using higher-quality materials that result in fewer inspections.

a favorable labor rate variance could result from lower-wage workers quitting

Bortello Corporation produces high-quality leather boots. The company has a standard cost system and has set the following standards for materials and labor:

Line Item Description	Cost
Leather (12 strips @ $20)	$240
Direct labor (10 hours @ $12)	120
Total prime cost	360

During the year, Bortello produced 125 boots. Actual leather purchased was 1,700 strips at $16 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour.

Calculate the labor rate variance and the labor efficiency variance, respectively.

a. $4,500 F and $3,000 F

b. $4,500 U and $3,000 U

c. $4,500 F and $3,000 U

d. $4,500 U and $3,000 F

4,500 U and 3,000 U

Extreme Builders constructs houses. The standard labor rate is $25 per hour and the standard number of hours is 15,000 hours per house. During the year, it constructed 12 houses using 18,000 labor hours per house at a rate of $28 per hour.

Calculate Extreme Builders' labor rate variance.

a. $540,000 U

b. $648,000 U

c. $540,000 F

d. $648,000 F

648,000 U

1. 
   Question Content AreaIn a standard cost system, variable overhead is applied using:

   a. actual direct labor hours.

   b. standard direct labor hours.

   c. budgeted indirect labor hours.

   d. direct labor hours at practical capacity.

standard direct labor hours

Inefficient usage of labor implies a(n):

a. favorable variable overhead efficiency variance.

b. favorable variable overhead spending variance.

c. unfavorable variable overhead efficiency variance and an unfavorable variable overhead spending variance.

d. unfavorable variable overhead efficiency variance.

favorable variable overhead spending variance

Hexene Inc. produces a specialized machine part used in forklifts. For last year's operations, the following data were gathered:

Line Item Description	Numerical Data
Units produced	40,000
Direct labor	32,000 hours @ $10.00
Actual variable overhead	$140,000

Hexene employs a standard costing system. During the year, a variable overhead rate of $6.00 was used. The labor standard requires 0.75 hours per unit produced. The variable overhead spending and efficiency variances are:

a. $16,000 F and $8,400 F, respectively.

b. $52,000 F and $12,000 U, respectively.

c. $9,600 U and $45,000 F, respectively.

d. $45,000 U and $6,500 U, respectively.

52,000 F and 12,000 U

Gluten Corporation uses a standard costing system. Information for the month of May is as follows:

Line Item Description	Numerical Data
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	$18.00

The factory overhead rate is based on a normal volume of 11,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows:

Line Item Description	Amount
Variable overhead	$48,000
Fixed overhead	24,000
Total overhead	$72,000

What is the variable overhead efficiency variance for Gluten?

a. $8,000 U

b. $2,000 U

c. $4,000 U

d. $20,000 U

4,000 U

Rhodium Company is planning to produce 5,000,000 speakers for the coming year. The actual production was 3,000,000 speakers. Each speaker requires 0.50 direct labor hour per unit. Predetermined overhead rates are calculated using expected production, measured in direct labor hours. The budgeted variable overhead for the coming year is $500,000. The actual variable overhead incurred was $650,000. The applied variable overhead for the year is:

a. $300,000.

b. $740,000.

c. $450,000.

d. $725,000.

300,000

Fixed overhead was budgeted at $200,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $8,000 favorable and the fixed overhead spending variance was $6,000 unfavorable, fixed overhead applied must be:

1. a. $208,000.

   b. $206,000.

   c. $202,000.

   d. $194,000.

208,000

King Company calculates its predetermined rates using practical volume, which is 325,000 units. The standard cost system allows 3 direct labor hours per unit produced. Overhead is applied using direct labor hours. The total budgeted overhead is $4,260,000, of which $994,000 is fixed overhead. The actual results for the year are as follows:

Line Item Description	Numerical Data
Units produced:	318,000
Direct labor:	965,000 hours @ $12.00/hour
Variable overhead:	$3,302,000
Fixed overhead:	$998,000

The predetermined variable overhead rate (rounded to two decimal places) is:

a. $3.00 per direct labor hour.

b. $3.35 per direct labor hour.

c. $5.50 per direct labor hour.

d. $2.50 per direct labor hour.

3.35 per direct labor hour