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Doogan Corp. Standard Cost Analysis

The document contains 9 multiple choice questions about calculating variances in standard costing systems. It provides standard and actual data on materials, labor, overhead, and production for various time periods. Learners must calculate variances and other metrics based on the data given.

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24 views7 pages

Doogan Corp. Standard Cost Analysis

The document contains 9 multiple choice questions about calculating variances in standard costing systems. It provides standard and actual data on materials, labor, overhead, and production for various time periods. Learners must calculate variances and other metrics based on the data given.

Uploaded by

aey
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Pre-Assignment Practice Chapter 10

1. The following materials standards have been established for a particular product:

Standard quantity per unit of output 4.6 grams


Standard price $ 15.05 per gram

The following data pertain to operations concerning the product for the last month:

Actual materials purchased 3,100 grams


Actual cost of materials purchased $ 44,020
Actual materials used in production 2,400 grams
Actual output 300 units

What is the materials quantity variance for the month?

○ $9,940 U
○ $15,351 U
○ $14,484 U
○ $10,535 U

2. Suver Corporation has a standard costing system. The following data are available for June:

Actual quantity of direct materials purchased 24,000 pounds


Standard price of direct materials $ 6.00 per pound
Material price variance $ 6,000 Unfavorable
Material quantity variance $ 2,400 Favorable

The actual price per pound of direct materials purchased in June was:

○ $6.10 per pound


○ $5.90 per pound
○ $6.25 per pound
○ $6.30 per pound
Pre-Assignment Practice Chapter 10

3. The following materials standards have been established for a particular product:

Standard quantity per unit of output 5.3 meters


Standard price $17.20 per meter

The following data pertain to operations concerning the product for the last month:

Actual materials purchased 8,100 meters


Actual cost of materials purchased $141,345
Actual materials used in production 7,600 meters
Actual output 1,400 units

What is the materials price variance for the month?

○ $3,141 U
○ $2,025 U
○ $8,600 U
○ $8,725 U

4. The following labor standards have been established for a particular product:

Standard labor-hours per unit of output 8.7 hours


Standard labor rate $18.10 per hour

The following data pertain to operations concerning the product for the last month:

Actual hours worked 3,800 hours


Actual total labor cost $67,640
Actual output 500 units

What is the labor efficiency variance for the month?

○ $9,790 F
○ $11,095 U
○ $9,955 F
○ $11,095 F
Pre-Assignment Practice Chapter 10

5. Mr. Fix It Company is an auto repair shop that uses standards to control its labor time and labor cost.
The standard labor cost for a brake repair job is given below:

Standard Hours Standard Rate Standard Cost


Brake Repair Job 2.50 $ 27.00 $ 67.50

The record showing the time spent in the shop last week on Brake repair jobs has been misplaced.
However, the shop supervisor recalls that 52 brake repair jobs were completed during the week, and
the controller recalls the following variance data relating to tune-ups:

Labor rate variance $ 150 F


Labor spending variance $ 174 U

Fill in the amounts for the following:

a. The actual labour rate: ___________________________________________


b. Total actual labour cost: ___________________________________________
c. The actual hours used: ___________________________________________
d. The standard cost allowed: ___________________________________________
e. The labour efficiency variance: ___________________________________________
Pre-Assignment Practice Chapter 10

6. Fortes Inc. has provided the following data concerning one of the products in its standard cost
system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.

Standard Quantity or Hours per Unit Standard Price or


Inputs of Output Rate
Direct materials 8.6 ounces $ 6.70 per ounce
Direct labor 0.5 hours $19.70 per hour
Variable manufacturing overhead 0.5 hours $ 5.00 per hour

The company has reported the following actual results for the product for April:

Actual output 6,200 units


Raw materials purchased 55,050 ounces
Actual cost of raw materials purchased $ 309,640
Raw materials used in production 53,350 ounces
Actual direct labor-hours 2,910 hours
Actual direct labor cost $ 60,700
Actual variable overhead cost $ 13,681

a. Compute the materials price variance for April. _____________________________


b. Compute the materials quantity variance for April. _____________________________
c. Compute the labor rate variance for April. _____________________________
d. Compute the labor efficiency variance for April. _____________________________
e. Compute the variable overhead rate variance for April. _____________________________
f. Compute the variable overhead efficiency variance for April. _____________________________
g. Total overall variance (tally of all variances combined) _____________________________

7. Thyne Incorporated has provided the following data concerning one of the products in its standard
cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-
Standard Quantity or Hours per Unit of
Inputs Output Standard Price or Rate
Direct materials 6.9 grams $ 9.20 per gram
Direct labor 0.90 hours $ 21.20 per hour
Variable manufacturing overhead 0.90 hours $ 3.60 per hour
hours.

The actual output for the period was 3,900 units.

The standard amount of materials allowed for the actual output is closest to:

○ 24,979 grams
○ 28,980 grams
○ 26,900 grams
○ 26,910 grams
Pre-Assignment Practice Chapter 10

8. The company has a standard cost system in which it applies overhead to this product based on
the standard machine-hours allowed for the actual output of the period. Data concerning the most
recent year appear below:
Budgeted fixed manufacturing overhead $ 233,940
Budgeted production (a) 35,000 units
Standard hours per unit (b) 1.20 machine-hours
Budgeted hours (a) × (b) 42,000 machine-hours
Actual production (a) 33,000 units
Standard hours per unit (b) 1.20 machine-hours
Standard hours allowed for the actual production (a) × (b) 39,600 machine-hours
Actual fixed manufacturing overhead $ 214,940
Actual hours 40,000 machine-hours

The fixed component of the predetermined overhead rate is closest to:

○ $5.43 per machine-hour


○ $5.57 per machine-hour
○ $6.51 per machine-hour
○ $6.68 per machine-hour

9. The company has a standard cost system in which it applies overhead to this product based on the
standard machine-hours allowed for the actual output of the period. Data concerning the most
recent year appear below:

Budgeted fixed manufacturing overhead $ 294,490


Budgeted production (a) 35,000 units
Standard hours per unit (b) 1.40 machine-hours
Budgeted hours (a) × (b) 49,000 machine-hours
Actual production (a) 30,000 units
Actual fixed manufacturing overhead $ 314,490
Actual hours 40,600 machine-hours

Calculate the following:

a. Standard Hours Allowed: _____________________________


b. Fixed POHR: _____________________________
c. Applied Fixed Manufacturing Overhead: _____________________________
d. Budget Variance: _____________________________
e. Volume Variance: _____________________________
Pre-Assignment Practice Chapter 10

10. Doogan Corporation makes a product with the following standard costs:

Standard Quantity or
Hours Standard Price or Rate
Direct materials 7.7 grams $ 2.30 per gram
Direct labor 0.5 hours $ 23.00 per hour
Variable overhead 0.5 hours $ 7.30 per hour

The company produced 5,500 units in January using 39,610 grams of direct material and 2,410
direct labor-hours. During the month, the company purchased 44,700 grams of the direct material at
$2.00 per gram. The actual direct labor rate was $22.30 per hour and the actual variable overhead
rate was $7.10 per hour.

The company applies variable overhead on the basis of direct labor-hours.

The variable overhead rate variance for January is:

○ $482 U
○ $550 F
○ $482 F
○ $550 U

11. The following were the manufacturing overhead variances for Sunshine Company:

Variable MOH Rate Variance 500 F

Variable MOH Efficiency Variance 1,250 U

Fixed MOH Budget Variance 200 U

Fixed MOH Volume Variance 17,300 F

What is the overall MOH Variance for Sunshine Company? ________________________________

Was overhead over or under applied? _________________________________________________


Pre-Assignment Practice Chapter 10

ANSWERS:

1. $15,351 U
2. $6.25 per pound
3. $2,025 U
4. $9,955 F
5.
a. $25.94
b. $3,684
c. 142
d. $3,510
e. $324 U
6.
a. $59,195 F
b. $201 U
c. $3,373 U
d. $3,743 F
e. $869 F
f. $950 F
g. $61,183 F
7. 26,910 grams
8. $5.57 per machine hour
9.
a. 42,000
b. $6.01
c. $252,420
d. $20,000 U
e. $42,070 U
10. $482 F
11. $16,350 Overapplied (F)

Common questions

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Standard costing aids in decision-making by establishing cost baselines and identifying variances, which indicate discrepancies between expected and actual performance. This aids managerial strategies for cost control, resource allocation, and efficiency improvements. Informed decisions can thus be made by analyzing the magnitude and direction (favorable/unfavorable) of variances, like labor efficiency or material price variances .

A favorable labor efficiency variance indicates that the actual labor hours worked were less than the standard labor hours expected for the actual output, suggesting greater efficiency. In the data set provided, the labor efficiency variance is $9,955 Favorable, meaning that fewer labor hours were used than planned, which resulted in cost savings based on the standard labor rate .

Total variance aggregates individual variances—materials, labor, overhead—to measure comprehensive operational performance. In April, the calculated total variance was $61,183 Favorable, indicating overall better performance relative to standards despite some unfavorable components, revealing effective cost management or operational efficiencies .

To calculate the materials quantity variance, you first need the standard quantity allowed for actual output and the actual quantity used. With a standard quantity of 4.6 grams per unit and an actual output of 300 units, the standard quantity allowed is 4.6 grams/unit x 300 units = 1,380 grams. The actual quantity used is 2,400 grams. The variance is (1,380 grams - 2,400 grams) x $15.05 per gram = $15,351 Unfavorable .

To calculate the standard cost allowed for 52 brake repair jobs, multiply the standard cost per job ($67.50) by the number of jobs (52). This results in a standard cost allowed of $3,510 [Standard Rate $27 x Standard Hours 2.50].

Overall manufacturing overhead variance aggregates the fixed and variable overhead variances, providing a comprehensive efficiency measure. Sunshine Company had an overall variance of $16,350 favorable, indicating overapplied overhead (actual overhead costs were less than planned) given also the favorable fixed MOH volume variance of $17,300 .

The actual price per pound of direct materials can be determined by using the material price variance formula: (Actual price - Standard price) x Actual quantity purchased = Price variance. Given a price variance of $6,000 Unfavorable and a standard price of $6 per pound, along with an actual purchase of 24,000 pounds, the actual price per pound is calculated as follows: ($6,000 / 24,000 pounds) + $6 = $6.25 per pound .

'Fixed POHR' stands for Fixed Predetermined Overhead Rate, a rate used to allocate fixed overhead costs. It is calculated by dividing budgeted fixed overhead costs by budgeted hours, giving insight into how much overhead is expected per machine-hour. For instance, with budgeted overhead of $233,940 and 42,000 machine-hours, the Fixed POHR is $6.01 per machine-hour .

The fixed overhead budget variance compares actual and budgeted costs, with a $20,000 Unfavorable variance indicating higher actual overhead costs than planned. The volume variance, at $42,070 Unfavorable, reveals inefficiencies or underutilization relative to standard capacity usage, which signals potential production planning or capacity utilization issues .

Variable manufacturing overhead is applied based on standard hours and rates; its efficiency variance measures the deviation in overhead costs due to differences in expected and actual labor hours. The efficiency variance for April was calculated as favorable ($950), indicating less overhead used than standard allowed. This is derived using actual vs. standard hours and the overhead rate [$5 per hour].

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