D. Factory Overhead Costs Incurred Were Less Than Overhead Costs Charged To Production
D. Factory Overhead Costs Incurred Were Less Than Overhead Costs Charged To Production
D. Factory Overhead Costs Incurred Were Less Than Overhead Costs Charged To Production
The Johns Company budgeted overhead at $125,000 for the period for Department A
based on a budgeted volume of 50,000 direct labor hours. At the end of the period, the
factory overhead control account for Department A had a balance of $126,000. The
actual (and allowed) direct labor hours were 52,000. What was the overapplied
(underapplied) overhead for the period?
A. $(4,000) B. $4,000 C. $(6,500) D. $6,500
12. Ben’s Climbing Gear, Inc. has direct material costs as follows:
Actual units of direct materials used 20,000
Standard price per unit of direct materials $2.50
Direct material quantity variance—favorable $5,000
What was Ben’s standard quantity of material?
A. $18,000 B. $20,000 C. $22,000 D. $24,000
* 5,000 F/ 2.50
** 20,000 + 2,000 (note that the favorable variance is added to the actual quantity to arrive
at the standard quantity because by definition, a favorable variance occurs when standard
quantities exceed actual quantities.)
Labor efficiency variance = (actual number of labor hours worked - standard number of
labor hours allowed) x standard labor rate per hour
15. Elgin Company’s budgeted fixed factory overhead costs are $50,000 per month, plus
a variable factory overhead rate of $4.00 per direct labor hour. The standard direct labor
hours allowed for October production were 20,000. An analysis of the factory overhead
indicates that in October, Elgin had an unfavorable budget (controllable) variance of
$1,500 and a favorable volume variance of $500. Elgin uses a two-variance
analysis of overhead variances.
The actual factory overhead that Elgin incurred in October is
A. $126,500. B. $128,000. C. $128,500. D. $131,500.
Controllable variance = Actual factory overhead - Standard overhead budgeted for actual
activity level*
16. Thomas Company uses a standard cost system. Information for raw materials for
product RBI for the month of October follows:
Standard unit price $1.75
Actual purchase price per unit $1.60
Actual quantity purchased 4,000 units
Actual quantity used 3,900 units
Standard quantity allowed for actual production 3,800 units
What is the materials purchase price variance for Thomas Company?
A. $15 favorable B. $15 unfavorable C. $600 favorable D. $600 unfavorable
Materials purchase price variance = (actual unit price of materials - standard unit price of
materials) x actual quantity of materials purchased
17. What type of standard cost is the absolute minimum cost possible under the best
conceivable operating conditions?
A. Practical B. Ideal C. Attainable D. Normal
18. The fixed overhead application rate is a function of a predetermined normal activity
level. If standard hours allowed for good output equal this normal activity level for a
given period, the volume variance will be
A. zero.
B. favorable.
C. unfavorable.
D. either favorable or unfavorable depending on the budgeted overhead.
19. Alyisa Corporation uses a standard cost system. Direct labor information for product
CER for the month of May is as follows:
Standard rate $8.00 per hour
Actual rate paid $8.20 per hour
Standard hours allowed for actual production 1,200 hours
Labor efficiency variance $800 unfavorable
What are actual hours worked?
A. 1,100 B. 1,300 C. 1,330 D. 1,400
Labor efficiency variance = (actual number of labor hours worked - standard number of
labor hours allowed) x standard labor rate per hour
$10,400
X= = 1,300 hours
$8
20. A company experienced $21,000 in actual factory overhead incurred. During the
same period, budgeted factory overhead based on actual hours worked was $19,300. The
difference between these two amounts, $1,700, is called the _______ variance.