Standard Costs and Variance Analysis Paper 5

1

Blaster, Inc., a manufacturer of portable radios, purchases the components from subcontractors to use to assemble into a complete radio. Each radio requires three units each of Part XBEZ52, which has a standard cost of $1.45 per unit. During May, Blaster experienced the following with respect to Part XBEZ52:
Purchases ($18,000) ...12,000 Units
Consumed in manufacturing ...10,000 Units
Radios manufactured... 3,000 Units
During May, Blaster incurred a materials efficiency variance of






2

Garland Company uses a standard cost system. The standard for each finished unit of product allows for 3 pounds of plastic at $0.72 per pound. During December, Garland bought 4,500 pounds of plastic at $0.75 per pound, and used 4,100 pounds in the production of 1,300 finished units of product. What is the materials purchase price variance for the month of December?






3

ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 Fact Pattern:units of direct materials in inventory were purchased for $105,000, and two units of direct materials are product. In November, the company produced 12,000 units of product. required to produce one unit of finalThe standard allowed for materials was $60,000, and the unfavorable quantity variance was $2,500. ChemKing’s standard price for one unit of direct materials is






4

ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 Fact Pattern:units of direct materials in inventory were purchased for $105,000, and two units of direct materials are product. In November, the company produced 12,000 units of product. required to produce one unit of finalThe standard allowed for materials was $60,000, and the unfavorable quantity variance was $2,500. ChemKing’s units of direct materials used to produce November output totaled






5

A favorable materials price variance coupled with an unfavorable materials usage variance most likely results from






6

Tower Company planned to produce 3,000 units of its single product, Titactium, during November. The standard specifications for one unit of Titactium include 6 pounds of materials at $.30 per pound. Actual production in November was 3,100 units of Titactium. The accountant computed a favorable direct materials purchase price variance of $380 and an unfavorable direct materials quantity variance of $120. Based on these variances, one could conclude that






7

David Rogers, purchasing manager at Fairway Manufacturing Corporation, was able to acquire a large quantity of direct materials from a new supplier at a discounted price. Marion Conner, inventory supervisor, is concerned because the warehouse has become crowded and some things had to be rearranged. Brian Jones, vice president of production, is concerned about the quality of the discounted materials. However, the Engineering Department tested the new materials and indicated that they are of acceptable quality. At the end of the month, Fairway experienced a favorable direct materials usage variance, a favorable direct labor usage variance, and a favorable direct materials price variance. The usage variances were solely the result of a higher yield from the new material. The favorable direct materials price variance is considered the responsibility of the






8

Price variances and efficiency variances can be key to the performance measurement within a company. In evaluating the performance within a company, a materials efficiency variance can be caused by all of the following except the






9

Todco planned to produce 5,000 units of its single product, Teragram, during November. The standard specifications for one unit of Teragram include ten pounds of materials at $.50 per pound. Actual production in November was 5,200 units of Teragram. The accountant computed a favorable materials purchase price variance of $580 and an unfavorable materials quantity variance of $320. Based on these variances, one could conclude that






10

Which one of the following variances is most controllable by the production control supervisor?






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