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Cost Accounting 2 Fourth Year Second Semester 2020-2021 Review Questions CH (7) & CH (8) Part (Dr. El Ghareeb) (5) Presented By: Dr. Ahmed Mokhtar

This document contains a summary of 12 review questions related to cost accounting chapters 7 and 8 on direct materials and manufacturing labor variances. The questions cover topics such as calculating flexible budgets, material and labor price and efficiency variances, and solving various accounting problems involving standard costs, actual costs, and variances. Sample solutions and explanations are provided for each multiple choice question.
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0% found this document useful (0 votes)
220 views11 pages

Cost Accounting 2 Fourth Year Second Semester 2020-2021 Review Questions CH (7) & CH (8) Part (Dr. El Ghareeb) (5) Presented By: Dr. Ahmed Mokhtar

This document contains a summary of 12 review questions related to cost accounting chapters 7 and 8 on direct materials and manufacturing labor variances. The questions cover topics such as calculating flexible budgets, material and labor price and efficiency variances, and solving various accounting problems involving standard costs, actual costs, and variances. Sample solutions and explanations are provided for each multiple choice question.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Cost Accounting 2

Fourth Year
Second Semester 2020-2021
Review Questions
Ch (7) & Ch (8)
Part (Dr. El Ghareeb)(5)
Presented by: Dr. Ahmed Mokhtar
7-42 (The Assignment)

Direct materials and manufacturing labor variances, solving


unknowns. (CPA, adapted) On May 1, 2012, Bovar Company began
the manufacture of a new paging machine known as Dandy. The
company installed a standard costing system to account for
manufacturing costs. The standard costs for a unit of Dandy follow:
The Answer

Direct materials and manufacturing labor variances, solving


unknowns.
Review

1) Better Products Inc. planned to use $43 of material per unit but actually used $32 of material
per unit, and planned to make 1,510 units but actually made 1,340 units.

The flexible-budget amount for materials is ________.


A) $57,620
B) $64,930
C) $48,320
D) $42,880
Answer: A
Explanation: 1,340 units × $43 = $57,620

2) Better Products Inc. planned to use $36 of material per unit but actually used $34 of material
per unit, and planned to make 1,520 units but actually made 1,310 units.

The flexible-budget variance for materials is ________.


A) $3,040 favorable
B) $3,040 unfavorable
C) $2,620 unfavorable
D) $2,620 favorable
Answer: D
Explanation: ($34 − $36) × 1,310 = $2,620 F

3) Better Products Inc. planned to use $40 of material per unit but actually used $30 of material
per unit, and planned to make 1,560 units but actually made 1,310 units.

The sales-volume variance for materials is ________.


A) $10,000 favorable
B) $10,000 unfavorable
C) $7,500 unfavorable
D) $7,500 favorable
Answer: A
Explanation: (1,310 − 1,560) × $40 = $10,000 F
4) The actual information pertains to the month of June. As a part of the budgeting process, Great
Cabinets Company developed the following static budget for June. Great Cabinets is in the
process of preparing the flexible budget and understanding the results.

Actual Flexible Static


Results Budget Budget
Sales volume (in units) 20,000 22,000

Sales revenues $1,000,000 $ $1,100,000


Variable costs 480,000 $ ________ 530,200

Contribution margin 520,000 $ 569,800

Fixed costs 276,200 $ ________ 270,600


Operating profit $243,800 $ $299,200

The flexible budget will report ________ for the fixed costs.
A) $303,820
B) $270,600
C) $530,200
D) $246,000
Answer: B
Explanation: $270,600, given in the static budget

5) Classic Products Company manufactures colonial style desks. Some of the company's data was
misplaced. Use the following information to replace the lost data:

Actual Flexible Budget Flexible Sales-Volume Static


Results Variances Budget Variances Budget
Units sold 490,000 490,000 448,350
Revenues $187,950 $4,900 F (A) $6,260 U (B)
Variable
costs (C) $850 U $72,070 $10,400 F $82,470
Fixed costs $36,670 $3,700 F $40,370 0 $40,370
Operating
income $78,360 (D) $70,610 (E) $66,470

What are the actual variable costs (C)?


A) $71,220
B) $72,920
C) $72,070
D) $82,470
Answer: B
Explanation: $72,070 + $850 = $72,920
Complete the other unknowns yourself
6) Standard material cost per kg of raw material is $6.50. Standard material allowed per unit is 5
Kg. Actual material used per unit is 6.00 Kg. Actual cost per kg is $6.00. What is the standard cost
per output unit?
A) $30.00
B) $36.00
C) $32.50
D) $39.00
Answer: C
Explanation: Standard cost per output unit = Standard material cost per kg × standard material
allowed per unit = $6.50 × 5 kg = $32.50

7) A favorable efficiency variance for direct manufacturing labor indicates that ________.
A) a lower wage rate than planned was paid for direct labor
B) a higher wage rate than planned was paid for direct labor
C) less direct manufacturing labor-hours were used during production than planned for actual
output
D) more direct manufacturing labor-hours were used during production than planned for actual
output
Answer: C

8) Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII
estimated the following standard costs for one of their major products, the 10-gallon plastic
container.

Budgeted quantity Budgeted price


Direct materials 0.70 pounds $70 per pound
Direct labor 0.10 hours $35 per hour

During June, Heavy Products produced and sold 25,000 containers using 23,000 pounds of direct
materials at an average cost per pound of $75 and 17,500 direct manufacturing labor-hours at an
average wage of $35.75 per hour.

The direct material price variance during June is ________.


A) $115,000 unfavorable
B) $500,000 favorable
C) $500,000 unfavorable
D) $13,125 favorable
Answer: A
Explanation: Direct material price variance = 23,000 × ($75 − $70) = $115,000 U
Complete the other variances for direct material and direct labor
yourself
9) Handley Manufacturing Company has prepared the following flexible budget for August and
is in the process of interpreting the variances. F denotes a favorable variance and U denotes an
unfavorable variance.

Flexible Variances
Budget Price Efficiency
Material A $45,000 $1,100F $3,200U
Material B 61,000 800U 2,000F
Direct manufacturing labor 83,000 600U 2,500F

The actual amount spent for Material B was ________.


A) $58,200
B) $59,800
C) $61,000
D) $62,200
Answer: B
Explanation: $61,000 + $800 U - $2,000 F = $59,800

10) Midend's Camera Shop has prepared the following flexible budget for September and is in
the process of interpreting the variances. F denotes a favorable variance and U denotes an
unfavorable variance.

Flexible Variances
Budget Price Efficiency
Material A $27,000 $2,000U $1,200F
Material B 32,000 400F 700U
Material C 46,000 1,800U 2,300F

The actual amount spent for Material A was ________.


A) $30,200
B) $26,200
C) $27,800
D) $23,800
Answer: C
Explanation: Actual amount spent for Material A = $27,000 + $2,000 U − $1,200 F = $27,800
11) Fine Lumber Inc. mills and finishes furniture kits. A certain kit requires the following:

Direct materials standard 2 square yards at $13.50 per yard


Direct manufacturing labor standard 1.5 hours at $20.00 per hour

During the third quarter, the company made 1,500 kits and used 3,150 square yards of wood
costing $42,600. Direct labor totaled 2,100 hours for $46,150.

Required:
a. Compute the direct materials price and efficiency variances for the quarter.
b. Compute the direct manufacturing labor price and efficiency variances for the quarter.
Answer:
a. Direct materials variances:

Actual unit cost = $42,600/3,150 square yards


= $13.33 per square yard

Price variance = 3,150 × ($13.50 - $13.33)


= $535.50 favorable

Efficiency variance = $13.50 × [3,150 - (1,500 × 2)]


= $2,025 unfavorable

b. Direct manufacturing labor variances:

Actual labor rate = $46,150/2,100


= $21.98 per hour

Price variance = 2,100 × ($21.98 - $20.00)


= $4,150 unfavorable

Efficiency variance = $20.00 × (2,100 - (1,500 × 1.5)


= $3,000 favorable
12) The following data for the Prender Company pertain to the production of 800 urns during
August.

Direct Materials (all materials purchased were used):

Standard cost: $4.80 per pound of urn.


Total actual cost: $4,480.
Standard cost allowed for units produced was $4,800.
Materials efficiency variance was $96 unfavorable.

Direct Manufacturing Labor:

Standard cost is 2 urns per hour at $19.20 per hour.


Actual cost per hour was $19.60.
Labor efficiency variance was $288 favorable.

Required:
a. What is standard direct material amount per urn?
b. What is the direct material price variance?
c. What is the total actual cost of direct manufacturing labor?
d. What is the labor price variance for direct manufacturing labor?

Answer:
a. Standard cost per urn = $4,800 / 800
= $6.00 per urn

Standard number of pounds per urn = $6.00 / $4.80


= 1.25 pound per urn

b. Materials price variance = Total variance - efficiency variance


= ($4,480 − $4,800) − $96 unfavorable
= $416 favorable

c. Total standard labor cost of actual hours = ((800/2) × $19.2) − $288 favorable
= $7,392
Actual hours = $7,392/19.2 = 385 hours
Total actual costs = 385 × $19.60 = $7,546

d. Labor price variance = $7,546 − $7,392


= $154 unfavorable
13) A variance is ________.
A) the difference between actual fixed cost per unit and standard variable cost per unit
B) the standard units of inputs for one output
C) the difference between an actual result and a budgeted performance
D) the difference between actual variable cost per unit and standard fixed cost per unit
Answer: C

14) An unfavorable variance indicates that ________.


A) the actual costs are less than the budgeted costs
B) the actual revenues exceed the budgeted revenues
C) the actual units sold are less than the budgeted units
D) the budgeted contribution margin is more than the actual amount
Answer: C

15) At the start of the budget period, management will have made most decisions regarding the
level of fixed overhead costs to be incurred.
Answer: TRUE

16) Which of the following mathematical expression is used to calculate budgeted variable
overhead cost rate per output unit?
A) Budgeted output allowed per input unit × Budgeted variable overhead cost rate per input unit
B) Budgeted input allowed per output unit ÷ Budgeted variable overhead cost rate per input unit
C) Budgeted output allowed per input unit ÷ Budgeted variable overhead cost rate per input unit
D) Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit
Answer: D

17) Really Great Corporation manufactures industrial-sized landscaping trailers and uses
budgeted machine-hours to allocate variable manufacturing overhead. The following information
pertains to the company's manufacturing overhead data:

Budgeted output units 40,000 units


Budgeted machine-hours 10,000 hours
Budgeted variable manufacturing overhead costs for 40,000 units $310,000

Actual output units produced 36,500 units


Actual machine-hours used 14,600 hours
Actual variable manufacturing overhead costs $350,400

What is the budgeted variable overhead cost rate per output unit?
A) $9.60
B) $12.40
C) $7.75
D) $31.00
Answer: C
Explanation: Machine hour per unit = 10,000 ÷ 40,000 = 0.25
Budgeted cost per machine hour = $310,000 ÷ 10,000 = $31.00
Budgeted cost per unit = $31.00 × 0.25 = $7.75
18) The variable overhead spending variance measures the difference between ________,
multiplied by the actual quantity of variable overhead cost-allocation base used.
A) the actual variable overhead cost per unit and the budgeted variable overhead cost per unit
B) the standard variable overhead cost rate and the budgeted variable overhead cost rate
C) the actual variable overhead cost per unit and the budgeted fixed overhead cost per unit
D) the actual quantity per unit and the budgeted quantity per unit
Answer: A
19) Majestic Corporation manufactures wheel barrows and uses budgeted machine hours to
allocate variable manufacturing overhead. The following information relates to the company's
manufacturing overhead data:

Budgeted output units 43,500 units


Budgeted machine-hours 17,400 hours
Budgeted variable manufacturing overhead costs for 43,500 units $382,800

Actual output units produced 45,500 units


Actual machine-hours used 14,500 hours
Actual variable manufacturing overhead costs $435,709

What is the flexible-budget variance for variable manufacturing overhead?


A) $35,309 unfavorable
B) $52,909 unfavorable
C) $35,309 favorable
D) $52,909 favorable
Answer: A
Explanation: Budgeted machine hours per unit = 17,400 ÷ 43,500 = 0.4
Budgeted machine hours allowed for 45,500 units = 45,500 × 0.4 = 18,200
Budgeted variable overhead rate per machine hour = $382,800 ÷ 17,400 = $22.00
Flexible-budget amount = 18,200 × $22.00 = $400,400
Flexible-budget variance = $435,709 − $400,400 = $35,309 unfavorable
20) Lazy Guy Corporation manufactured 6,000 chairs during June. The following variable
overhead data relates to June:
Budgeted variable overhead cost per unit $10.00
Actual variable manufacturing overhead cost $52,800
Flexible-budget amount for variable manufacturing overhead $46,900
Variable manufacturing overhead efficiency variance $790 unfavorable
What is the variable overhead spending variance?
A) $5,110 favorable
B) $5,900 favorable
C) $5,900 unfavorable
D) $5,110 unfavorable
Answer: D
Explanation: Variable overhead flexible-budget variance = $52,800 - $46,900 = $5,900 (U)
Variable overhead spending variance = $5,900 (U) − $790 (U) = $5,110 (U)
Solve 7-37 in your textbook yourself

Good Luck

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