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Answers Homework # 9 Performance Management III Variances

Rashmi received an evaluation for her participation in an assignment on performance management variances. She answered 80% of the questions correctly. The feedback congratulated Rashmi on her patience and commitment over the prior 20 days, and encouraged her to escalate her commitment over the next 15 days by revising materials and completing assignments to help her do well on the upcoming exam. The instructor wished Rashmi and her family a happy new year.

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173 views6 pages

Answers Homework # 9 Performance Management III Variances

Rashmi received an evaluation for her participation in an assignment on performance management variances. She answered 80% of the questions correctly. The feedback congratulated Rashmi on her patience and commitment over the prior 20 days, and encouraged her to escalate her commitment over the next 15 days by revising materials and completing assignments to help her do well on the upcoming exam. The instructor wished Rashmi and her family a happy new year.

Uploaded by

Raman A
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Dear RASHMI ,

Thank you for your participation in this assignment. Here is your evaluation.

IPFC Academy Pvt Ltd


Homework # 9 : CMA P1- Performance Management III-Variances

1. 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?

a. Inadequate training of the direct labor employees.


b. Poor performance of the shipping employees.
c. Poor design of the production process or product.
d. Poor quality of the raw materials.

You have answered B which is Correct!

Correct answer b. Employees in the Shipping Department have nothing to do with the amount of
material used in the production process. All of the other answers could affect the quantity of material
used.

2. A company had a total labor variance of $15,000 favorable and a labor efficiency variance of
$18,000 unfavorable. The labor price variance was

a. $3,000 favorable.
b. $3,000 unfavorable.
c. $33,000 favorable.
d. $33,000 unfavorable.

You have answered D which is Wrong

Correct answer c. The company had a favorable labor price of $33,000 as shown below. X - $18,000 =
$15,000 X = $33,000 F

3. Cordell Company uses a standard cost system. On January 1 of the current year, Cordell
budgeted fixed manufacturing overhead cost of $600,000 and production at 200,000 units.
During the year, the firm produced 190,000 units and incurred fixed manufacturing overhead of
$595,000. The production volume variance for the year was

a. $5,000 unfavorable.
b. $10,000 unfavorable.
c. $25,000 unfavorable.
d. $30,000 unfavorable.

You have answered D which is Correct!

Correct answer d. Cordell’s production volume variance is $30,000 U as shown below.


Standard fixed cost per unit = $600,000 ÷ 200,000
= $3 per unit
Product volume variance = (190,000 – 200,000) x $3
= $30,000 U

4. Highlight Inc. uses a standard cost system and applies factory overhead to products on the
basis of direct labor hours. If the firm recently reported a favorable direct labor efficiency
variance, then the

a. variable overhead spending variance must be favorable.


b. variable overhead efficiency variance must be favorable.
c. fixed overhead volume variance must be unfavorable.
d. direct labor rate variance must be unfavorable.

You have answered B which is Correct!

Correct answer b. If variable overhead is applied on the basis of direct labor hours and the number of
direct labor hours used is favorable, then the variable overhead efficiency (usage) variance must also be
favorable.

5. Harper Company’s performance report indicated the following information for the past month.

Actual total overhead $1,600,000


Budgeted fixed overhead 1,500,000
Applied fixed overhead at $3 per labor hour 1,200,000
Applied variable overhead at $.50 per labor hour 200,000

Actual labor hours 430,000

Harper’s total overhead spending variance for the month was

a. $100,000 favorable.
b. $115,000 favorable.
c. $185,000 unfavorable.
d $200,000 unfavorable.
You have answered D which is Wrong

Correct answer b. Harper’s total overhead spending variance is $115,000 favorable calculated as
follows.

Variable overhead = Actual total overhead – Fixed overhead


= $1,600,000 - $1,500,000
= $100,000

Spending variance = (Input x Standard rate) – Actual variable overhead


= (430,000 x $.50) - $100,000
= $115,000 F

6. The JoyT Company manufactures Maxi Dolls for sale in toy stores. In planning for this year,
JoyT estimated variable factory overhead of $600,000 and fixed factory overhead of $400,000.
JoyT uses a standard costing system, and factory overhead is allocated to units produced on
the basis of standard direct labor hours. The denominator level of activity budgeted for this year
was 10,000 direct labor hours, and JoyT used 10,300 actual direct labor hours.

Based on the output accomplished during this year, 9,900 standard direct labor hours should
have been used. Actual variable factory overhead was $596,000, and actual fixed factory
overhead was $410,000 for the year. Based on this information, the variable overhead spending
variance for JoyT for this year was

a. $24,000 unfavorable.
b. $2,000 unfavorable.
c. $4,000 favorable.
d. $22,000 favorable.

You have answered D which is Correct!

Correct answer d. JoyT’s variable overhead spending variance is $22,000 favorable calculated as
follows.

Spending variance = (Input x Standard rate) – Actual variable overhead


= (10,300 x $60*) - $596,000
= $22,000 F

*$600,000 ÷ 10,000
7. A company has a fixed overhead volume variance that is $10,000 unfavorable. The most
likely cause for this variance is that

a. the production supervisory salaries were greater than planned.


b. the production supervisory salaries were less than planned.
c. more was produced than planned.
d. less was produced than planned.
You have answered D which is Correct!

Correct answer d. A fixed overhead volume variance is dependent on quantity, above or below the
planned quantity. An unfavorable volume variance means that production was less than planned.

8. When using a flexible budgeting system, the computation for the variable overhead spending
variance is the difference between

a. actual variable overhead and the previously budgeted amount.


b. the previously budgeted amount and actual inputs times the budgeted rate.
c. the amount applied to work-in-process and actual variable overhead.
d. actual variable overhead and actual inputs times the budgeted rate.

You have answered D which is Correct!

Correct answer d. The spending variance is the difference between actual and budgeted rates times
the actual base input.

9.Johnson Inc. has established per unit standards for material and labor for its production
department based on 900 units normal production capacity as shown below.

3 lbs. of direct materials @ $4 per lb. $12


1 direct labor hour @ $15 per hour 15
Standard cost per unit $27

During the year 1,000 units were produced. The accounting department has charged the
production department supervisor with the following unfavorable variances.

Materials Quantity Variance Material Price Variance


Actual usage 3,300 lbs. Actual cost $12,600
Standard usage 3,000 lbs. Standard cost 12,000
Unfavorable 300 lbs. Unfavorable $600
Bob Sterling, the production supervisor, has received a memorandum from his boss stating that
he did not meet the established standards for material prices and quantity and corrective action
should be taken. Sterling is very unhappy about the situation and is preparing to reply to the
memorandum explaining the reasons for his dissatisfaction. All of the following are valid reasons
for Sterling’s dissatisfaction except that the

a. material price variance is the responsibility of the purchasing department.


b. cause of the unfavorable material usage variance was the acquisition of substandard
material.
c. standards have not been adjusted to the engineering changes.
d. variance calculations fail to properly reflect that actual production exceeded normal
production capacity.

You have answered D which is Correct!

Correct answer d. The materials quantity variance does reflect the fact that 1,000 units were produced
rather that the planned 900 units. By indicating the standard usage is 3,000 (3 per unit), the standard
usage for the actual output is compared with the actual material usage.

10.. 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 be least likely to explain why the unfavorable variance arose?

a. Inferior materials were purchased.


b. Actual production was lower than planned production.
c. Workers used were less-skilled than expected.
d. Replacement production equipment had just been installed.

You have answered B which is Correct!

Correct answer b. Unfavorable material usage variances are generally caused by inferior materials or lower-skilled
workers. Unfavorable usage variances shown that more material than the standard quantity was used; this is not
likely to be caused by lower-than-planned production.

Summary of Performance in this Homework

Percentage score: 80
Remarks :Very Good, Keep this up
I congratulate you for the patience demonstrated by being with me for nearly 20 days. We are about to finish 90% of
the syllabus this week. Hold your breath and escalate your commitment for next 15 days. Take any pending
assignment. Revise the Whiteboard/Excel and solved assignment/mocks in quick succession. You will do wonders
in the examination.

Happy New Year to you and family!

Regards,

Sushanta Bala
 

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