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Exam 10: Standard Costing and Variance Analysis

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Question 31

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Sometimes a firm may allocate a portion of period-end variances to the Work in Process Inventory account.

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Question 32

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How would a manager interpret a positive direct labor efficiency variance?

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"If the actual number of hours worked ex...

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Question 33

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The following information is provided for Jibson, Inc.: What is the direct labor efficiency variance?

Even when a variance occurs, inventory is carried on the books (in both Work in Process Inventory and Finished Goods Inventory) at standard cost.

Reasons for using standard costing include:

Mineral Extraction Inc. is a mining company in Texas. Management is preparing the budgets for the upcoming year and is calculating the standard labor cost per load of ore. If a machine used in the mining process were running at 100% capacity, it could extract 3 loads per day at a rate of 3.5 machine hours/load. However, the labor union contract indicates that machine operators cannot be required to work more than eight hours per day and the company currently operates one shift per day. Each day, the equipment must be set up and taken down, requiring the help of all machine operators. The set-up and take-down process for the equipment requires a half hour in the morning and a half hour at the end of the day. Assume that the set-up and take-down time is incorporated into the overall time workers can be on the job each day and that set up / take down time is incorporated into the standard labor cost per load. Four workers are required to operate the machinery at a given time. The standard wage rate is $22 per direct labor hour. What is the standard direct labor cost per load of ore?

When are variances normally closed to Cost of Goods Sold?

Standard costing can be used to apply costs for which of the following?

Why are fixed costs separated from variable costs in standard costing?

The following information is provided for Dexter Corporation: What is the variable overhead flexible budget variance?

How do damaged goods affect the direct materials efficiency variance?

Use the following information to answer Questions below . The following data relates to Koontz Corporation's operations for the month. 1,000 finished units of product were produced and the normal monthly capacity is 2,200 direct labor hours. -What is the variable overhead efficiency variance?

If the actual wage rate equals the budgeted rate, why would there be a direct labor flexible budget variance?

Urban Transit Authority (UTA) runs a mass transit system in a large metropolitan area. UTA applies the costs of its services to each bus route. The variable overhead application rate is $6/hour. The standard route takes 2 hours to complete. This year, the company ran 48,000 routes, averaged 2.10 hours per route, and incurred $598,000 in variable overhead costs. What is the entry to record variable overhead applied throughout the period?

Planning to purchase materials in bulk amounts will affect the standard price for direct materials.

The direct materials price variance is found by the following equation: Actual Quantity Used in Production × (Actual Price - Standard Price)

When should standard costs be modified?

The calculations for variable overhead variances are significantly different from those for direct labor variances.

Is it possible to have a favorable direct materials flexible budget variance when there is an unfavorable direct materials efficiency variance? Explain your answer.

When direct materials are requisitioned into production, a price variance may need to be recorded.