Standard Costs and Variance Analysis Paper 15

1

Howard Company produces and sells replacement parts for cotton processing equipment. Which one of the following cost variances are least likely to be controllable by Howard’s production manager?






2

Huffman Corporation’s budget indicated that it should produce 50,000 units of finished goods while incurring 20,000 hours of direct labor and $150,000 of variable manufacturing overhead. Huffman actually produced 52,000 finished goods units using 22,000 hours of direct labor and incurring $160,000 of variable manufacturing overhead. If Huffman uses a standard cost system and applies variable manufacturing overhead based upon direct labor hours, its variable overhead spending variance is






3

Last year, Elegis Skin Care, Inc., budgeted $600,000 of fixed overhead for its plant that manufactures moisturizing cream. The $600,000 was based on a denominator activity level of 40,000 machine hours. There are 0.1 standard machine hours for each bottle of moisturizing cream. 350,000 bottles of moisturizing cream were produced, and 360,000 bottles were sold last year. What was the production volume variance?






4

A company using a standard cost system established a standard fixed cost per finished unit of $4.00 and forecasted production and sales of 300,000 units. For the year, the company experienced an unfavorable production volume variance of $14,000. Which one of the following would be the cause of this variance?






5

Which one of the following is a variance that could appear if a company uses a normal costing system?






6

Michael Corporation’s flexible budgeted cost for indirect materials, a variable overhead cost, is $2.15 per unit of output. The company’s flexible budget performance report for last month showed a $4,500 favorable variance for the indirect materials. During that month, 19,700 units were produced. Budgeted activity for the month had been 19,000 units. The actual costs incurred for indirect materials were






7

International Corporation uses a standard costing system and allocates variable overhead costs based on direct labor hours. The annual budget projected 1,000 finished units, 10,000 hours of direct labor, and $100,000 of variable overhead costs. At the end of the year, 750 units were completed using 8,000 hours of direct labor and $75,000 in variable overhead. What is the variable overhead spending variance?






8

Which of the following overhead variances would be helpful in bringing attention to a potential short-term problem in the control of overhead costs?
Spending Variance
Volume Variance






9

Pierre Enterprises, a company that manufactures a product using scarce and costly materials, utilizes management by exception. Pierre’s flexible budget indicated $2,000,000 of material costs, $3,000,000 of direct labor, and $5,000,000 of manufacturing overhead to support $20,000,000 of sales. Under this system, which one of the following variances would not be further investigated?






10

Sugar Plums, Inc., manufactures dresses for children. The variable overhead costs are allocated on the basis of budgeted direct labor hours. According to the December budget, each dress takes 4 direct labor hours to produce. Budgeted variable manufacturing overhead cost per labor hour is $12, and the budgeted number of dresses to be made is 1,040. Actual variable manufacturing costs in December were $52,164 for 1,080 dresses produced. Actual direct labor hours were 4,536 hours. The variable overhead spending variance is






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