Additional Practice Chapter 7 ACCT 401

1)
The company sells items for $18 each and used a budgeted selling price of $18 per unit.

Actual Budgeted
Units sold 43,000 units 33,000 units
Variable costs $166,000 $150,000
Fixed costs $41,000 $58,000

The static-budget variance of operating income is ____________ F

2) The company sells items for $19 each and had used a budgeted selling price of $20 per unit.

Actual Budgeted
Units sold 280,000 units 279,000 units
Variable costs $980,000 $881,000
Fixed costs $58,000 $45,000

the static-budget variance of revenues is _____________________ U!!!

the static-budget variance of operating income is________________________

3 --a company planned to use $153 of material per unit but actually used $140 of material per unit, and
planned to make 1,100 units but actually made 940 units.
The flexible-budget amount for materials is: ______

4-- 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: __________

5-- Corporation currently produces product A in an automated process. Expected production per month is
17,000 units, direct material costs are $7.50 per unit, and manufacturing overhead costs are $60,000 per
month. Manufacturing overhead is entirely fixed costs. What is the flexible budget for 17,000 units,
respectively? ______________ $187,500

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 Additional Practice Chapter 7 ACCT 401

6-- Company manufactures colonial 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 $187,250 $5,000 F (A) $6,260 U (B)
Variable
costs (C) $890 U $71,260 $10,800 F $82,060
Fixed costs $36,670 $3,740 F $40,410 0 $40,410
Operating
income $78,430 (D) $70,580 (E) $66,040

What amounts are reported for revenues

in the flexible-budget (A) ___________________
and
the static-budget (B), ____________________

7--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.
the standard cost per output unit IS ____________

8--Standard labor rate is $7.50 per hour. Standard labor allowed per unit is 0.7 hours. Actual cost per
labor hour is $7.00 and actual labor hour per unit is 1 hours.

the standard labor cost per output unit is ____

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 Additional Practice Chapter 7 ACCT 401

9== XYZ developed standard costs for direct material and direct labor. In 2020, XYZ estimated the
following standard costs for one of their major products.

Budgeted quantity Budgeted price

Direct materials 0.10 pounds $80 per pound
Direct labor 0.20 hours $25 per hour

During July, XYZ produced and sold 19,000 containers using 2500 pounds of direct materials at an average
cost per pound of $82 and 1900 direct manufacturing labor-hours at an average wage of $26.00 per hour.

July's direct material flexible-budget variance is: ________________ ????

The direct manufacturing labor flexible-budget variance during July is _______________

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 Additional Practice Chapter 7 ACCT 401

10==A firm developed standard costs for direct material and direct labor. In 2020, the firm estimated the
following standard costs for one of their most popular products.

Budgeted quantity Budgeted price

Direct materials 7 pounds $7.30 per pound
Direct labor 0.50 hours $10.00 per hour

During September, the firm produced and sold 2,000 units using 14,400 pounds of direct materials at an
average cost per pound of $7.00 and 950 direct labor hours at an average wage of $10.40 per hour.

The direct labor flexible-budget variance during September is: ________

11===The flexible-budget variance for materials is $2,000 (U).

The sales-volume variance is $18,000 (U).
The price variance for material is $38,000 (F).
The efficiency variance for direct manufacturing labor is $12,000 (F).
The efficiency variance for materials is _________________

$2,000(U) = $38,000(F) + Efficiency variance

Efficiency variance = $2,000 + $38,000 = $40,000 (U)

12=== A company purchases $650,000 of materials on credit. The standard cost for the materials is
$675,000.
The journal entry to record the purchase under a standard costing system is _____

Journal of usage of direct materials_____________________

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 Additional Practice Chapter 7 ACCT 401

13---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 $48,000 $1,900F $3,400U
Material B 69,000 800U 1,600F
Direct manufacturing labor 88,000 900U 2,200F

The actual amount spent for direct manufacturing labor was: ___________

A firm manufactures jackets. A certain window jacket requires the following:

Direct materials standard 10 square yards at $5 per yard

Direct manufacturing labor standard 5 hours at $10

During the second quarter, the company made 1,500 jackets and used 14,000 square yards of fabric costing
$72,000. Direct labor totaled 7,600 hours for $83,600.

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.

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 Additional Practice Chapter 7 ACCT 401

14--The following data for the 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

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 Additional Practice Chapter 7 ACCT 401

15---
During February the ABC Manufacturing Company's costing system reported several variances that the
production manager was surprised to see. Most of the company's monthly variances are under $125, even
though they may be either favorable or unfavorable. The following information is for the manufacture of
garden gates, its only product:

1. Direct materials price variance, $800 unfavorable.

2. Direct materials efficiency variance, $1,800 favorable.
3. Direct manufacturing labor price variance, $4,000 favorable.
4. Direct manufacturing labor efficiency variance, $600 unfavorable.

Required:
a. Provide the manager with some ideas as to what may have caused the price variances.
b. What may have caused the efficiency variances?
Answer:
a. Direct materials' unfavorable price variance may have been caused by: (1) paying a higher price than
the standard for the period, (2) changing to a new vendor, or (3) buying higher-quality materials.

Direct manufacturing labor's favorable price variance may have been caused by: (1) changing the work force by hiring
lower-paid employees, (2) changing the mix of skilled and unskilled workers, or (3) not giving pay raises as high as
anticipated when the standards were set for the year.

b. Direct materials' favorable efficiency variance may have been caused by: (1) employees/machinery working more
efficiency and having less scrap and waste materials, (2) buying better-quality materials, or (3) changing the
production process.

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 Additional Practice Chapter 7 ACCT 401

16====A firm makes separate journal entries for all cost accounting-related activities. It uses a standard
cost system for all manufacturing items. For the month of June, the following activities have taken place:

Direct Manufacturing Materials Purchased $300,000

Direct Manufacturing Materials Used 250,000
Direct Materials Price Variance 10,000 unfavorable
(at time of purchase)
Direct Materials Efficiency Variance 15,000 favorable
Direct Manufacturing Labor Price Variance 6,000 favorable
Direct Manufacturing Labor Efficiency Variance 4,000 favorable
Direct Manufacturing Labor Payable 170,000

Required:
Record the necessary journal entries to close the accounts for the month.

Materials Control 300,000

Direct Manufacturing Materials Price Variance 10,000
Accounts Payable Control 310,000

Work-in-Process Control 265,000

Direct Materials Efficiency Variance 15,000
Materials Control 250,000

Work-in-Process Control 180,000

Direct Manufacturing Labor Price Variance 6,000
Direct Manufacturing Labor Efficiency Variance 4,000
Wages Payable Control 170,000