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Exam 11: Relevant Costs for Decision Making

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Question 71

True/False

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A limitation of a static budget is that a favourable revenue variance based upon higher than planned activity levels will usually result in unfavourable variable cost variances.

A) True
B) False

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Question 72

Multiple Choice

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Drake Company purchased materials on account.The entry to record the purchase of materials having a standard cost of $1.50 per gram from a supplier at $1.60 per gram would include a:

A) credit to raw materials inventory.
B) debit to work in process.
C) credit to materials price variance.
D) debit to materials price variance.

E) B) and D)
F) None of the above

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Question 73

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When all direct material units purchased in a period are not used in production for that period,both direct material price and direct material quantity variances may be calculated for the period.

Dodge Company produces a single product.The company has set the following standards for materials and labour:

The overhead spending variance and the overhead efficiency variance are useful only if variable overhead really should be proportional to the activity measure that is being used in the flexible budget.

Last month 75,000 grams of direct material were purchased and 71,000 grams were used.If the actual purchase price per gram was $0.50 more than the standard purchase price per gram,then the material price variance was?

The following labour standards have been established for a particular product:

Purchase of poor quality materials will generally result in a favourable materials price variance and an unfavourable labour rate variance.

Warner Manufacturing has established the following master flexible budget for the current year:

If a company follows a practice of isolating variances at the earliest point in time,what would be the appropriate time to isolate and recognize a direct material price variance?

The labour efficiency variance for November was:

Beryl and Ethlyn applies fixed and variable overhead on the basis of machine hours.The following is the results for the month just ended:

Information on Kennedy Company's direct material costs follows: What was the actual purchase price per unit,rounded to the nearest penny?

The Adlake Company makes and sells a single product and uses a standard cost system.During October,the company budgeted $300,000 in fixed manufacturing overhead cost at a denominator activity of 20,000 machine-hours.At standard,each unit of finished product requires 5 machine-hours.The following cost and activity were recorded during October: The amount of fixed overhead cost that the company applied to work in process for October was:

Patridge Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct labour-hours.The information below is taken from the company's flexible budget for manufacturing overhead: During the year,the company operated at exactly 80% of capacity,but applied manufacturing overhead to products based on the 90% level.The company's fixed overhead volume variance for the year was:

What is the variable overhead efficiency variance for the month?

The following standards for variable manufacturing overhead have been established for a company that makes only one product: The following data pertain to operations for the last month: What is the variable overhead efficiency variance for the month?

Cox Company's direct material costs for the month of January were as follows: For January there was a favourable direct material quantity variance of?

The supervisor of the cost department has just conferred with you concerning the variance analysis of direct labour for the month just ended.As she talked,you wrote feverishly,but you weren't able to record all the information she gave you before she dashed off muttering something about "another brush fire to put out." Your efforts are shown below:A.

Which department is usually held responsible for an unfavourable materials quantity variance?