Cost Accounting – Week 6

Question 1

Sweet Charity Company produces candy canes. During November, 7,000 direct labor hours were incurred at a standard cost of $20 per hour. If the direct labor rate variance for November was $17,500 favorable, the actual cost per direct labor hour incurred was ________.

• Selected: $17.50.This answer is correct.
• $20.00.
• $22.50.
• $25.00.

Correct! Standard direct labor cost = units produced X direct labor-hours per unit X standard direct labor cost per unit = 7,000 X $20 = $140,000
$140,000 – $17,500 = $122,500 total actual direct labor cost
$122,500/7,000 hours = $17.50

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Question 2

Sweet Charity Company produces two different products (candy canes and lollipops). If the company recorded actual fixed manufacturing overhead of $54,000 and also recorded a $1,300 unfavorable spending variance and a $1,000 unfavorable production volume variance, the static budget fixed manufacturing overhead was ________.

• Selected: $56,300This answer is incorrect.
• $50,300
• $53,000
• $52,700

Reconsider your response. Review Module 6, Page III. Also, review Chapter 8 of your text.

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Question 3

Twisty Taffy Company manufactures bags of saltwater taffy. Its budgeted fixed overhead rate is $6 per direct labor hour based on budgeted fixed costs of $600,000. The direct labor hours allowed per bag is one. In June, Twisty Taffy manufactured 110,000 bags of taffy, and expensed $630,000 of fixed overhead; actual hours of direct labor amounted to 212,000. What is Twisty Taffy’s fixed overhead production volume variance for June?

• $60,000 (F)
• $24,000 (F)
• $36,000 (U)
• Selected: $30,000 (U)This answer is incorrect.

Reconsider your response. Review Module 6, Page III. Review the calculations and recompute your answer.

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Question 4

True or False: If a company produces a greater volume of units than planned within its static budget, the production volume variance is favorable.

• Selected:TrueThis answer is correct.
• False

Correct! The production volume variance is favorable when the amount of units produced exceeds the amount planned in the static budget.

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Question 5

Efficiency variances arise when a difference in usage occurs between ________.

• Selected: actual quantity used and budget quantity allowed for actual productionThis answer is correct.
• actual costs of inputs and budget costs of inputs
• actual quantity used and budget quantity allowed for budgeted production
• both a and b

Correct! Efficiency variances result when the actual quantity used differs from the budget quantity allowed for actual production.

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Question 6

The formula for a direct material price variance is ________.

• Selected: AQ X (AP – BP)This answer is correct.
• BP X (AQ – BQ)
• BQ X (AP – BP)
• (AQ – BQ) X (AP – BP)

Correct! The formula for a direct material price variance is the actual quantity used multiplied by the difference between the actual price and the budgeted price, or AQ X (AP – BP).

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Question 7

The formula for a direct labor efficiency variance is ________.

• AQ X (AP – BP)
• Selected: BP X (AQ – BQ)This answer is correct.
• BQ X (AP – BP)
• (AQ – BQ) X (AP – BP)

Correct! The formula for a direct labor efficiency variance is the budgeted price, multiplied by the budgeted quantity allowed for actual production less the actual quantity used.

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Question 8

Swiss Chocolate Company manufactures boxes of chocolate truffles. Its primary material costs include the cost of cacao, which it imports from Brazil. One possible cause of a direct material price variance is ________.

• increased cost of property taxes
• increased cost of FICA taxes on labor
• Selected: increased cost of duties on imported goodsThis answer is correct.
• increased cost of unemployment taxes

Correct! Increased cost of duties on imported goods will result in increases in the cost of imported raw material.

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Question 9

Swiss Chocolate Company manufactures boxes of chocolate truffles. The budgeted fixed overhead cost assigned to each box manufactured and charged to WIP is called the ________

• Selected: actual overhead costThis answer is incorrect.
• predicted overhead cost
• allocated overhead cost
• projected overhead cost

Reconsider your response. Read Chapter 8 in your text again, as well as Module 6, Page III.

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Question 10

Twisty Taffy Company manufactures bags of saltwater taffy. Its budgeted fixed overhead rate is $6 per direct labor hour based on budgeted fixed costs of $600,000. The direct labor hours allowed per bag is one. In June, Twisty Taffy manufactured 110,000 bags of taffy, and expensed $630,000 of fixed overhead; actual hours of direct labor amounted to 212,000. What is Twisty Taffy’s fixed overhead spending variance for June?

• $60,000 (F)
• $24,000 (F)
• Selected: $36,000 (U)This answer is incorrect.
• $30,000 (U)

Reconsider your response. Review Module 6, Page III. Review the calculations and recompute your answer.

 

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Question 1

Twisty Taffy Company manufactures bags of saltwater taffy. Its budgeted fixed overhead rate is $6 per direct labor hour based on budgeted fixed costs of $600,000. The direct labor hours allowed per bag is one. In June, Twisty Taffy manufactured 110,000 bags of taffy, and expensed $630,000 of fixed overhead; actual hours of direct labor amounted to 212,000. What is Twisty Taffy’s fixed overhead spending variance for June?

• $60,000 (F)
• Selected: $24,000 (F)This answer is incorrect.
• $36,000 (U)
• $30,000 (U)

Reconsider your response. Review Module 6, Page III. Review the calculations and recompute your answer.

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Question 2

True or False: When variable overhead is allocated on the basis of direct labor hours and an unfavorable labor efficiency variance occurs, the variable overhead efficiency variance may be either favorable or unfavorable.

• TrueThis answer is incorrect.
• False

Reconsider your response. Note to review Module 6, Page III.

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Question 3

Sweet Charity Company produces two different products (candy canes and lollipops). If the company recorded actual fixed manufacturing overhead of $54,000 and also recorded a $1,300 unfavorable spending variance and a $1,000 unfavorable production volume variance, the total overhead applied was ________.

• $56,300
• Selected: $50,300This answer is incorrect.
• $53,700
• $52,700

Reconsider your response. Review Module 6, Page III. Also, review Chapter 8 of your text.

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Question 4

Swiss Chocolate Company manufactures boxes of chocolate truffles. The budgeted fixed overhead cost assigned to each box manufactured and charged to WIP is called the ________

• actual overhead cost
• Selected: predicted overhead costThis answer is incorrect.
• allocated overhead cost
• projected overhead cost

Reconsider your response. Read Chapter 8 in your text again, as well as Module 6, Page III.

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Question 5

Sweet Charity Company produces candy canes. During November, 7,000 direct labor hours were incurred at a standard cost of $20 per hour. If the direct labor rate variance for November was $17,500 favorable, the actual cost per direct labor hour incurred was ________.

• Selected: $17.50.This answer is correct.
• $20.00.
• $22.50.
• $25.00.

Correct! Standard direct labor cost = units produced X direct labor-hours per unit X standard direct labor cost per unit = 7,000 X $20 = $140,000
$140,000 – $17,500 = $122,500 total actual direct labor cost
$122,500/7,000 hours = $17.50

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Question 6

The Tasty Toffee Company manufactures traditional English toffee candy bars. During January, 40,000 boxes of bars were produced. The standard quantity of molasses allowed per unit was 5 pints at a budgeted cost of $2.50 per pint. If there was a favorable material efficiency variance of $25,000 for January, the actual quantity of molasses used must have been ________.

• 210,000 pints.
• Selected: 190,000 pints.This answer is correct.
• 105,000 pints.
• 95,000 pints.

Correct! Actual usage X actual price = 40,000 X 5 X $2.50 = $500,000
$500,000 actual material cost incurred – $25,000 favorable material efficiency variance = $475,000
$475,000/$2.50 = 190,000 pints

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Question 7

True or False: Unfavorable material efficiency variances are often noted to occur in conjunction with favorable material price variances.

• True
• FalseThis answer is incorrect.

Reconsider your response. Review Module 6, page IV for the answer to this question.

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Question 8

Sweet Charity Company produces two different products (candy canes and lollipops). If the company recorded actual fixed manufacturing overhead of $54,000 and also recorded a $1,300 unfavorable spending variance and a $1,000 unfavorable production volume variance, the static budget fixed manufacturing overhead was ________.

• Selected: $56,300This answer is incorrect.
• $50,300
• $53,000
• $52,700

Reconsider your response. Review Module 6, Page III. Also, review Chapter 8 of your text.

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Question 9

Efficiency variances arise when a difference in usage occurs between ________.

• Selected: actual quantity used and budget quantity allowed for actual productionThis answer is correct.
• actual costs of inputs and budget costs of inputs
• actual quantity used and budget quantity allowed for budgeted production
• both a and b

Correct! Efficiency variances result when the actual quantity used differs from the budget quantity allowed for actual production.

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Question 10

True or False: If a company produces a greater volume of units than planned within its static budget, the production volume variance is favorable.

• Selected:TrueThis answer is correct.
• False

Correct! The production volume variance is favorable when the amount of units produced exceeds the amount planned in the static budget.

 

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Question 1

The Tasty Toffee Company manufactures traditional English toffee candy bars. During January, 40,000 boxes of bars were produced. The standard quantity of molasses allowed per unit was 5 pints at a budgeted cost of $2.50 per pint. If there was a favorable material efficiency variance of $25,000 for January, the actual quantity of molasses used must have been ________.

• 210,000 pints.
• Selected: 190,000 pints.This answer is correct.
• 105,000 pints.
• 95,000 pints.

Correct! Actual usage X actual price = 40,000 X 5 X $2.50 = $500,000
$500,000 actual material cost incurred – $25,000 favorable material efficiency variance = $475,000
$475,000/$2.50 = 190,000 pints

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Question 2

Efficiency variances arise when a difference in usage occurs between ________.

• Selected: actual quantity used and budget quantity allowed for actual productionThis answer is correct.
• actual costs of inputs and budget costs of inputs
• actual quantity used and budget quantity allowed for budgeted production
• both a and b

Correct! Efficiency variances result when the actual quantity used differs from the budget quantity allowed for actual production.

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Question 3

True or False: Every budget variance should be investigated, regardless of the amount. This is because one never knows when fraud is present.

• TrueThis answer is incorrect.
• False

Reconsider your response. Review Chapter 7 of your text to understand when it is appropriate to investigate variances.

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Question 4

The Swiss Chocolate Company manufactures chocolate truffles. In December, 12,000 pounds of chocolate were used in production at a cost of $8 per pound. The company recorded an unfavorable direct materials price variance of $6,000 for December. The standard cost per pound of chocolate is ________.

• $8.50
• $8.00
• Selected: $7.50This answer is correct.
• $7.00

Correct! Actual usage X actual price = (12,000 x $8) = $96,000
$96,000 – $6,000 price variance unfavorable = $90,000
$90,000/6,000 pounds used = $7.50 standard cost

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Question 5

Sweet Charity Company produces two different products (candy canes and lollipops). If the company recorded actual fixed manufacturing overhead of $54,000 and also recorded a $1,300 unfavorable spending variance and a $1,000 unfavorable production volume variance, the total overhead applied was ________.

• Selected: $56,300This answer is incorrect.
• $50,300
• $53,700
• $52,700

Reconsider your response. Review Module 6, Page III. Also, review Chapter 8 of your text.

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Question 6

Twisty Taffy Company manufactures bags of saltwater taffy. Its budgeted fixed overhead rate is $6 per direct labor hour based on budgeted fixed costs of $600,000. The direct labor hours allowed per bag is one. In June, Twisty Taffy manufactured 110,000 bags of taffy, and expensed $630,000 of fixed overhead; actual hours of direct labor amounted to 212,000. What is Twisty Taffy’s fixed overhead spending variance for June?

• $60,000 (F)
• $24,000 (F)
• $36,000 (U)
• Selected: $30,000 (U)This answer is correct.

Correct! Note the calculation: $630,000 – $600,000 = $30,000 (U). The fixed overhead spending variance is unfavorable since the amount of total overhead actually incurred exceeds the static budget lump sum.

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Question 7

True or False: An unfavorable labor price variance may be caused by increases in the cost of utilities.

• True
• Selected:FalseThis answer is correct.

Correct! Utilities cost increases would likely affect overhead spending, not labor price variances.

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Question 8

Swiss Chocolate Company manufactures boxes of chocolate truffles. Its primary material costs include the cost of cacao, which it imports from Brazil. One possible cause of a direct material price variance is ________.

• increased cost of property taxes
• increased cost of FICA taxes on labor
• Selected: increased cost of duties on imported goodsThis answer is correct.
• increased cost of unemployment taxes

Correct! Increased cost of duties on imported goods will result in increases in the cost of imported raw material.

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Question 9

Twisty Taffy Company manufactures bags of saltwater taffy. Its budgeted fixed overhead rate is $6 per direct labor hour based on budgeted fixed costs of $600,000. The direct labor hours allowed per bag is one. In June, Twisty Taffy manufactured 110,000 bags of taffy, and expensed $630,000 of fixed overhead; actual hours of direct labor amounted to 212,000. What is Twisty Taffy’s fixed overhead production volume variance for June?

• $60,000 (F)
• Selected: $24,000 (F)This answer is incorrect.
• $36,000 (U)
• $30,000 (U)

Reconsider your response. Review Module 6, Page III. Review the calculations and recompute your answer.

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Question 10

The formula for a direct labor efficiency variance is ________.

• AQ X (AP – BP)
• Selected: BP X (AQ – BQ)This answer is correct.
• BQ X (AP – BP)
• (AQ – BQ) X (AP – BP)

Correct! The formula for a direct labor efficiency variance is the budgeted price, multiplied by the budgeted quantity allowed for actual production less the actual quantity used.

 

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Question 1

Swiss Chocolate Company manufactures boxes of chocolate truffles. If the property taxes on the manufacturing plant decreased as a result of revaluation, the ________.

• Selected: fixed overhead spending variance would be impacted favorablyThis answer is correct.
• variable overhead spending variance would be impacted favorably
• fixed overhead production volume variance would be impacted favorably
• variable overhead efficiency variance would be impacted favorably

Correct! Decreased cost of property taxes will result in a favorable impact on fixed overhead spending versus the static budget. Neither the production volume variance nor either of the variable overhead variances would be affected.

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Question 2

The Swiss Chocolate Company manufactures chocolate truffles. In December, 12,000 pounds of chocolate were used in production at a cost of $8 per pound. The company recorded an unfavorable direct materials price variance of $6,000 for December. The standard cost per pound of chocolate is ________.

• $8.50
• $8.00
• Selected: $7.50This answer is correct.
• $7.00

Correct! Actual usage X actual price = (12,000 x $8) = $96,000
$96,000 – $6,000 price variance unfavorable = $90,000
$90,000/6,000 pounds used = $7.50 standard cost

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Question 3

True or False: When variable overhead is allocated on the basis of direct labor hours and an unfavorable labor efficiency variance occurs, the variable overhead efficiency variance may be either favorable or unfavorable.

• True
• Selected:FalseThis answer is correct.

Correct! When variable overhead is allocated on the basis of direct labor hours, and an unfavorable labor efficiency variance occurs, this indicates that more labor hours were incurred than the standard allowed. This will result ultimately in an unfavorable variable overhead efficiency variance. There is no possibility of a favorable variance.

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Question 4

True or False: Every budget variance should be investigated, regardless of the amount. This is because one never knows when fraud is present.

• True
• Selected:FalseThis answer is correct.

Correct! Variances should only be investigated when there is a cost-benefit to conducting research to find the causal factors. Most variances should be considered within the threshold of materiality.

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Question 5

True or False: Unfavorable material efficiency variances are often noted to occur in conjunction with favorable material price variances.

• Selected:TrueThis answer is correct.
• False

Correct! Often favorable prices of material are secured when quality is substandard. This can precipitate greater use of materials due to excess waste and discarding portions of purchases.

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Question 6

True or False: An unfavorable labor price variance may be caused by increases in the cost of utilities.

• True
• Selected:FalseThis answer is correct.

Correct! Utilities cost increases would likely affect overhead spending, not labor price variances.

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Question 7

Sweet Charity Company produces two different products (candy canes and lollipops). If the company recorded actual fixed manufacturing overhead of $54,000 and also recorded a $1,300 unfavorable spending variance and a $1,000 unfavorable production volume variance, the static budget fixed manufacturing overhead was ________.

• $56,300
• $50,300
• $53,000
• Selected: $52,700This answer is correct.

Correct! $54,000 – $1,300 = $52,700

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Question 8

Sweet Charity Company produces two different products (candy canes and lollipops). If the company recorded actual fixed manufacturing overhead of $54,000 and also recorded a $1,300 unfavorable spending variance and a $1,000 unfavorable production volume variance, the total overhead applied was ________.

• $56,300
• $50,300
• Selected: $53,700This answer is correct.
• $52,700

Correct! $54,000 – $1,300 + $1,000 = $53,700

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Question 9

The formula for a direct labor efficiency variance is ________.

• AQ X (AP – BP)
• Selected: BP X (AQ – BQ)This answer is correct.
• BQ X (AP – BP)
• (AQ – BQ) X (AP – BP)

Correct! The formula for a direct labor efficiency variance is the budgeted price, multiplied by the budgeted quantity allowed for actual production less the actual quantity used.

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Question 10

The formula for a direct material price variance is ________.

• Selected: AQ X (AP – BP)This answer is correct.
• BP X (AQ – BQ)
• BQ X (AP – BP)
• (AQ – BQ) X (AP – BP)

Correct! The formula for a direct material price variance is the actual quantity used multiplied by the difference between the actual price and the budgeted price, or AQ X (AP – BP).