Standard Costs and Variance Analysis Paper 7


A company isolates its raw material price variance in order to provide the earliest possible information to the manager responsible for the variance. The budgeted amount of material usage for the year was computed as follows:
150,000 units of finished goods × 3 lbs./unit × $2.00/lb. = $900,000
Actual results for the year were the following.
Finished goods produced 160,000 units
Raw materials purchased 500,000 pounds
Raw materials used 490,000 pounds
Cost per pound $2.02
The raw material price variance for the year was


Richter Company has an unfavorable materials efficiency (usage) variance for a particular month. Which one of the following is least likely to be the cause of this variance?


During the month of May, Tyler Company experienced a significant unfavorable material efficiency variance in the production of its single product at one of Tyler’s plants. Which one of the following reasons would beleast likely to explain why the unfavorable variance arose?


TwoCo established a standard direct material cost of $20 per finished unit for its main product. The standard is calculated using direct materials of 4 pounds and a standard rate of $5 per pound. For the month of March, TwoCo expected to produce 32,000 units. During the month, TwoCo purchased and used 130,000 pounds of material and produced 31,000 finished units. The actual price paid per pound was $5.40. What was the material quantity variance for the month of March?


Bettis Company began business on January 1 of the current year. The firm’s standard cost system allows for 4 yards of fabric at $1.55 per yard for each finished unit of product. During the year, Bettis produced 20,000 units of finished product and sold 18,000 units. Although there was no work-in-process inventory at the end of the year, there were 2,100 yards of fabric included in the ending raw materials inventory. If the materials quantity variance was $1,240 unfavorable, how many yards of fabric did Bettis buy during the year?


The inventory control supervisor at Wilson Manufacturing Corporation reported that a large quantity of a part purchased for a special order that was never completed remains in stock. The order was not completed because the customer defaulted on the order. The part is not used in any of Wilson’s regular products. After consulting with Wilson’s engineers, the vice president of production approved the substitution of the purchased part for a regular part in a new product. Wilson’s engineers indicated that the purchased part could be substituted providing it was modified. The units manufactured using the substituted part required additional direct labor hours resulting in an unfavorable direct labor efficiency variance in the Production Department. The unfavorable direct labor efficiency variance resulting from the substitution of the purchased part in inventory is best assigned to the


Under a standard cost system, direct labor price variances are usually not attributable to


The static budget for the month of May was for 9,000 units with direct materials at $15 per unit. Direct labor was budgeted at 45 minutes per unit for a total of $81,000. Actual output for the month was 8,500 units with $127,500 in direct materials and $77,775 in direct labor expense. The direct labor standard of 45 minutes was maintained throughout the month. Variance analysis of the performance for the month of May shows a(n)


An unfavorable direct labor efficiency variance could be caused by a(n)


Tub Co. uses a standard cost system. The following information pertains to direct labor for product B for the month of October:
Standard hours allowed for
actual production 2,000
Actual rate paid per hour $8.40
Standard rate per hour $8.00
Labor efficiency variance $1,600 U
What were the actual hours worked?


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