Online Tutorial Quiz

Please answer all questions

1		If budgeted materials cost is $15,000 for 10,000 units of materials, the standard cost of material is $1.50.
			A)	True
			B)	False
2		A standard cost system uses only standard costs to record debits and credits to direct materials, direct labor, work-in-process, and manufacturing overhead accounts.
			A)	True
			B)	False
3		When the amount of actual cost charged to manufacturing overhead is greater than the standard cost of manufacturing overhead applied to the work in process account, the difference is called a favorable variance.
			A)	True
			B)	False
4		If management establishes ideal expectations when preparing budgets from which standard costs are determined, there would be no favorable or unfavorable variances.
			A)	True
			B)	False
5		Quality and price are often traded-off in establishing a material standard.
			A)	True
			B)	False
6		Manufacturing overhead cost includes both fixed and variable costs.
			A)	True
			B)	False
7		The materials price variance is computed by multiplying the difference between the standard quantity of material and the actual quantity of material by the actual price paid per unit of material.
			A)	True
			B)	False
8		The materials quantity variance is computed by multiplying the difference between the standard quantity and the actual quantity by the standard price per unit of material.
			A)	True
			B)	False
9		A materials quantity variance computed as $5.00 (35,000 - 36,000) = ($5,000) indicates the variance was negative or unfavorable.
			A)	True
			B)	False
10		The labor rate variance is computed by multiplying actual hours of labor by the difference between the standard rate for labor and the actual rate for labor.
			A)	True
			B)	False
11		The labor usage variance is computed by multiplying the standard hourly rate by the difference between the standard hours and the actual hours.
			A)	True
			B)	False
12		A debit to the Labor Rate Variance account is made for a favorable labor rate variance.
			A)	True
			B)	False
13		The manufacturing overhead spending variance is the difference between the budgeted overhead for the level of production achieved and the actual amount of overhead incurred.
			A)	True
			B)	False
14		Manufacturing overhead volume variances are simply the natural result of fluctuations in the level of production from month to month.
			A)	True
			B)	False
15		When the manufacturing cost variances are an immaterial amount, the individual variance accounts are closed to the Cost of Goods Sold account.
			A)	True
			B)	False
16		A favorable price variance might be related to an unfavorable quantity variance.
			A)	True
			B)	False
17		Every effort should be made to ensure that all variances are favorable.
			A)	True
			B)	False
18		The production manager is responsible for the variances related to materials, labor, and variable overhead.
			A)	True
			B)	False
19		JIT systems can reduce or eliminate the need to maintain large amounts of inventories and reduce or eliminate price variances, but it has very little effect on efficiency variances.
			A)	True
			B)	False

Consider the following budgeted amounts:
Item Usage Cost
Direct materials 10,000 units $45,000
Direct labor 4,000 hours $28,000
Variable overhead 4,000 hours $32,000
Mixed overhead 10,000 units $40,000

20		What is the standard cost of direct materials?
			A)	$45,000
			B)	$4.50 per unit
			C)	$14.50 per unit
			D)	Cannot be determined from information provided
			E)	None of the above

21		Standard costs should correspond to costs at which level of production activity?
			A)	Normal operating conditions
			B)	Ideal operating conditions
			C)	Greater than idea operating conditions
			D)	Less than normal operating conditions
			E)	None of the above

Ajax Furniture Manufacturing produces oak desks. It has established standards for one oak desk at the following:
Direct materials: 36 square feet of oak lumber at $4.50 per square foot
Direct labor: 10 hours of skilled labor at $24 per hour
Variable overhead: 10 hours at $15 per hour
Fixed overhead: $40,000 at a normal operating level of 2,000 desks

22		Ajax produced 1,500 desks at a total materials price of $250,700 for 54,500 square feet of oak lumber. What is the materials price variance?
			A)	$5,450 unfavorable
			B)	$5,400 unfavorable
			C)	$5,450 favorable
			D)	$5,400 favorable
			E)	$2,300 unfavorable
23		Ajax produced 1,500 desks at a total materials price of $250,700 for 54,500 square feet of oak lumber. What is the materials quantity variance?
			A)	$2,250 favorable
			B)	$2,300 favorable
			C)	$2,300 unfavorable
			D)	$5,700 unfavorable
			E)	$2,250 unfavorable
24		Ajax produced 1,800 desks at a total labor cost of $271,250 for 17,500 hours of direct labor. What is the labor rate variance?
			A)	$7,000 unfavorable
			B)	$8,500 unfavorable
			C)	$7,000 favorable
			D)	$8,750 unfavorable
			E)	$1,250 unfavorable
25		Ajax produced 1,800 desks at a total labor cost of $271,250 for 17,500 hours of direct labor. What is the labor efficiency variance?
			A)	$7,500 unfavorable
			B)	$7,500 favorable
			C)	$7,750 favorable
			D)	$1,250 unfavorable
			E)	$7,750 unfavorable
26		Ajax produced 1,600 desks and had an unfavorable labor rate variance of $4,950 for 16,500 hours of labor. What was the actual labor rate?
			A)	$15.00
			B)	$15.30
			C)	$14.70
			D)	$13.30
			E)	None of the above
27		Ajax produced 1,600 desks and had an unfavorable labor efficiency variance of $7,500. What were the actual labor hours?
			A)	16,500 unfavorable
			B)	15,500 unfavorable
			C)	17,000 favorable
			D)	Cannot be determined from information provided
			E)	None of the above
28		Ajax produced 1,900 desks and had an unfavorable materials price variance of $7,600 for 76,000 square feet of oak lumber. What was the actual per-unit price of materials?
			A)	$4.60
			B)	$4.40
			C)	$4.50
			D)	$5.20
			E)	None of the above
29		Ajax produced 1,900 desks and had an unfavorable materials quantity variance of $34,200. What was the actual quantity of materials?
			A)	76,400 square feet
			B)	68,400 square feet
			C)	76,000 square feet
			D)	60,400 square feet
			E)	82,250 square feet
30		Ajax Furniture Manufacturing produces oak desks. It has established material standards for one oak desk at 40 square feet of oak lumber at $4.50 per square foot. Ajax produced 1,700 desks that required 71,400 square feet of oak lumber at a total cost of $314,160. Which of the following would be included in the journal entry to recognize material variances when material is charged to the Work in Process Inventory account?
			A)	Materials Price Variance, debit, $7,140
			B)	Materials Quantity Variance, debit, $8,160
			C)	Materials Quantity Variance, credit, $7,140
			D)	Materials Quantity Variance, debit, $15,300
			E)	Materials Price Variance, credit, $8,160
31		Ajax Furniture Manufacturing produces oak desks. It has established labor standards for one oak desk at 10 hours of labor at $24 per hour. Ajax produced 1,800 desks that required 18,900 hours of labor at a cost of $434,700. Which of the following would be included in the journal entry to recognize labor variances when direct labor is charged to the Work in Process Inventory account?
			A)	Work in Process Inventory, debit, $434,400
			B)	Work in Process Inventory, debit, $432,000
			C)	Labor Rate Variance, credit, $18,900
			D)	Labor Efficiency Variance, credit, $2,700
			E)	B and C

32		You pay a monthly rent of $5,000 for 5,000-gallon tank in which you manufacture a synthetic fuel that you invented. The standard variable overhead cost to mix the fuel is $.30 per gallon. At the end of the month you have produced 4,000 gallons of fuel at a total overhead cost of $6,240. What is the overhead spending variance?
			A)	$40 unfavorable
			B)	$240 unfavorable
			C)	$208 unfavorable
			D)	$204 favorable
			E)	$40 favorable
33		You pay a monthly rent of $5,000 for 5,000-gallon tank in which you manufacture a synthetic fuel that you invented. The standard variable overhead cost to mix the fuel is $.30 per gallon. At the end of the month you have produced 4,000 gallons of fuel at a total overhead cost of $6,280. What is the overhead volume variance?
			A)	$1,280 favorable
			B)	$280 favorable
			C)	$1,000 unfavorable
			D)	$1,280 unfavorable
			E)	None of the above

Consider the following:
Actual Overhead Budgeted Overhead
For 600 units For 600 units
Fixed $ 6,200 $ 6,000
Variable 5,300 5,600
------ ------
Total $11,500 $11,600

34		The standard cost of overhead, computed at 800 units of product, is $17 per unit. Which of the following would be included in the journal entry to recognize overhead variances when manufacturing overhead is charged to the Work in Process Inventory account?
			A)	Work in Process Inventory, debit, $10,200
			B)	Work in Process Inventory, debit, $11,500
			C)	Manufacturing Overhead, credit, $11,600
			D)	Manufacturing Overhead, credit, $11,500
			E)	A and D

At the end of the year, selected ledger accounts have the following balances:
Materials Price Variance $4,500 credit balance
Materials Quantity Variance $3,200 debit balance
Labor Rate Variance $1,500 credit balance
Labor Efficiency Variance $1,100 credit balance
Overhead Spending Variance $2,100 credit balance
Overhead Volume Variance $4,000 debit balance

35		Assume the variances are considered to be immaterial in amount. By how much will the Cost of Goods Sold account be increased or decreased as a result of closing the variance accounts?
			A)	Increased by $2,000
			B)	Decreased by $2,000
			C)	Increased by $3,100
			D)	Decreased by $6,100
			E)	Decreased by $3,900