Why does a company use a standard costing system?A.to identify variances from actual cost that assist them in maintaining profitsB.to identify nonperformers in the workplaceC.to identify what vendors are unreliableD.to identify defective materials 2.LO 8.1This standard is set at a level that may be reached with reasonable effort. Get answer to your question and much more 3.LO 8.1This standard is set at a level that could be achieved if everything ran perfectly. Get answer to your question and much more 4.LO 8.1This variance is the difference involving spending more or using more than thestandard amount. Get answer to your question and much more 5.LO 8.1This variance is the difference involving spending less, or using less than thestandard amount.A.favorable varianceB.unfavorable varianceC.no varianceD.variance 6.LO 8.2What are some possible reasons for a material price variance? a a a c c a c
b
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b Questions
The expected price of materials per unit and the expected quantity usage are needed to help determine a standard.
Fixed overhead and variable overhead should be considered
Paying more or less than the standard price
Buying a different quality level of material; good or bad purchasing/negotiation
A direct labor rate variance is the actual rate paid being different from the standard rate
Employees have a different level of experience than standards; the labor market is tighter or looser than expected; contract renegotiation.
\(\text {Total direct labor variance} = (\text {Actual hours} × \text {Actual rate}) – (\text {Standard hours} × \text {Standard rate})\) or the total direct labor variance is also found by combining the direct labor rate variance and the direct labor time variance.
The difference between the actual and standard amounts of the allocation base cause variable overhead efficiency variance.
It is caused by paying or using less than the standard amount
It may not be a good outcome when buying substandard material or hiring substandard employees
Causes may include substandard material, quantity discount, negotiated better price, quantity discount, or price drop.
Causes may include higher-quality material, better-qualified employees, or a change in manufacturing process.
Causes may include less-qualified employees or a change in quality level of employees due to a change in process.
Causes may include better material, higher-quality employees, or a change in process.
Exercise Set A
Sitka Industries made \(3,000\) ladders in July and used \(8,800\) pounds of material to make these units. Smith Industries bought \(15,500\) pounds of material in the current period. There was a \(\$250\) unfavorable direct materials price variance.
All material purchased was used in production.
During May, the company used \(12.5\%\) more hours than the standard allowed.
What is the variable overhead efficiency variance?
Exercise Set B
Smith Industries made \(3,000\) baskets in July and used \(15,500\) pounds of material to make these units. Smith Industries paid \(\$39,370\) for the \(15,500\) pounds of material.
Problem Set A
At the beginning of the month, Ed Co. bought \(25,000\) feet of rubber for \(\$6,875\). The company made \(3,000\) large O rings and \(4,000\) small O rings. The company used \(14,500\) feet of rubber.
What is the variable overhead efficiency variance?
Problem Set B
Actual direct costs incurred to make \(50\) gallons of ice cream:
All material used was bought during the current period.
Actual direct costs incurred to make \(50\) gallons of ice cream:
All materials used were bought during the current period.
Thought Provokers
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