Asaki Company accumulates the following data concerning raw materials in making one gallon of finished product:

(1) Price-net purchase price $2.20, freight-in $0.20 and receiving and handling $0.10. (2) Quantity-required
materials 2.6 pounds, allowance for waste and spoilage 0.4 pounds. Compute the following. (Round (a) & (c) to 2
decimal places, e.g. 2.25.)

a. Standard direct materials price per gallon.

b. Standard direct materials quantity per gallon.
c. Total standard materials cost per gallon.
(a) $ 2.5

(b) 3 pounds

(c) $ 7.5

(a) Standard materials price per gallon = $2.50 ($2.20 + $.20 + $.10).
(b) Standard materials quantity per gallon = 3 pounds (2.6 + .4).
(c) Standard materials cost per gallon = $7.50 ($2.50 × 3).

Journalize the following transactions for Rogler Manufacturing. (List multiple debit/credit entries from largest to
smallest amount, e.g. 10, 5, 2.)

a. Incurred direct labor costs of $24,000 for 3,000 hours. The standard labor cost was $25,200.
b. Assigned 3,000 direct labor hours costing $24,000 to production. Standard hours were 3,100.
  Account/Description Debit Credit

a. Factory labor 25200  

         Wages payable   24000

         Labor price variance   1200

b. Work in process inventory 26040  

         Factory labor   25200

         Labor quantity variance   840

  Account/Description Debit Credit

a. Factory Labor 25,200  

          Wages payable   24,000

          Labor price variance   1,200

b. Work in process inventory (3,100 × $8.40*) 26,040  

          Factory labor(3,000 × $8.40*)   25,200

          Labor quantity variance   840

*$25,200 ÷ 3,000

The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at
$5.00 per unit. During June, 28,000 units of direct materials are purchased at a cost of $4.70 per unit, and
28,000 units of direct materials are used to produce 9,000 units of Product B.

Correct.

   

Compute the total materials variance and the price and quantity variances.

Total materials variance $ 3400 Favorable

Materials price variance $ 8400 Favorable

Materials quantity variance $ 5000 Unfavorable

Total materials variance:(AQ × AP)-(SQ × SP)  (28,000 × $4.70)-(27,000* × $5.00)  $131,600-$135,000=$3,400

F     *9,000 × 3         

Materials price variance:

(AQ × AP)-(AQ × SP)  (28,000 × $4.70)-(28,000 × $5.00)  $131,600-$140,000=$8,400 F     
Materials quantity variance:
(AQ × SP)-(SQ × SP)  (28,000 × $5.00)-(27,000 × $5.00)  $140,000-$135,000=$5,000 U

Repeat the question above, assuming the purchase price is $5.20 and the quantity purchased and used is 26,200
units.
Total materials variance $1,240 Unfavorable

Materials price variance $5,240 Unfavorable

Materials quantity variance $4,000 Favorable

Total materials variance:(AQ × AP)-(SQ × SP)  (26,200 × $5.20)-(27,000 × $5.00)  $136,240-$135,000=$1,240

U     

Materials price variance:

(AQ × AP)-(AQ × SP)  (26,200 × $5.20)-(26,200 × $5.00)  $136,240-$131,000=$5,240 U     
Materials quantity variance:
(AQ × SP)-(SQ × SP)  (26,200 × $5.00)-(27,000 × $5.00)  $131,000-$135,000=$4,000 F

Haslett Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the
product.

  Direct materials (8 pounds at $2.50 per pound) $20

  Direct labor (3 hours at $12.00 per hour) $36

During the month of April, the company manufactures 230 units and incurs the following actual costs.
  Direct materials purchased and used (1,900 pounds) $4,940

  Direct labor (700 hours) $8,120

Journalize the entries to record the materials and labor variances. (List multiple debit/credit entries from largest to
smallest amount, e.g. 10, 5, 2.)
Account/Description Debit Credit

Raw materials inventory 4,750  

Materials price variance 190  

     Accounts payable   4,940

(To record materials price variance)    

Work in process inventory 4,600  

Materials quantity variance 150  

     Raw materials inventory   4,750

(To record materials quantity variance)    

Factory labor 8,400  

     Wages payable   8,120

     Labor price variance   280

(To record labor price variance)    

Work in process inventory 8,280  

Labor quantity variance 120  

     Factory labor   8,400

(To record labor quantity variance)    

Account/Description Debit Credit

Raw materials inventory (1,900 × $2.50) 4,750  

Materials price variance (1,900 × $0.10) 190  

      Accounts payable (1,900 × $2.60)   4,940

Work in process inventory (1,840* × $2.50) 4,600  

Materials quantity variance (60 × $2.50) 150  

      Raw materials inventory (1,900 × $2.50)   4,750

Factory labor (700 × $12) 8,400  

      Wages payable (700 × $11.60)   8,120

      Labor price variance(700 × $0.40)   280

Work in process inventory (690* × $12) 8,280  

Labor quantity variance (10 × $12) 120  

      Factory labor (700 × $12)   8,400

* 230 × 8
** 230 × 3

Farm Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies.
Because the company's customers are governmental agencies, prices are strictly regulated. Therefore, Farm Labs
must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test.

  Direct materials (2 test tubes @ $1.50 per tube) $3

  Direct labor (1 hour @ $25 per hour) 25

  Variable overhead (1 hour @ $5 per hour) 5

  Fixed overhead (1 hour @ $10 per hour) 10

       Total standard cost per test $43
The lab does not maintain an inventory of test tubes. Therefore, the tubes purchased each month are used that
month. Actual activity for the month of November 2010, when 1,500 tests were conducted, resulted in the following:
  Direct materials (3,050 test tubes) $ 4,270

  Direct labor (1,600 hours) 36,800

  Variable overhead 7,400

  Fixed overhead 14,000

Monthly budgeted fixed overhead is $14,000. Revenues for the month were $75,000, and selling and administrative
expenses were $4,000.
Compute the overhead controllable variance and the overhead volume variance.
Overhead controllable variance $100 Favorable

Overhead volume variance $1,000 Favorable

Overhead controllable variance:

Actual Overhead - Overhead Budgeted    
$21,400 - $21,500 = $100 F
($7,400 + $14,000) - [(1,500 × $5) + $14,000]    
Overhead volume variance:
Normal Capacity Hours - Standard Hours
Fixed Overhead Rate ×    
Allowed
$10 × (1,400* - 1,500) = $1,000 F
         
*$14,000 ÷ $10        

In developing a standard cost for direct materials, a price factor and a quantity factor must be considered.
False

True

The overhead volume variance relates only to fixed overhead costs.

False

True

Standard costs may be used by

universities.
 governmental agencies.

charitable organizations.

all of these.

The cost of freight-in

should have a separate standard apart from direct materials.

should not be included in a standard cost system.

is to be included in the standard cost of direct materials.

is considered a selling expense.

Ideal standards
will always motivate employees to achieve the maximum output.

are rigorous but attainable.

are the standards generally used in a master budget.

reflect optimal performance under perfect operating conditions.

ToolTime has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, ToolTime
used 3,100 pounds of materials at a total cost of $12,090.
ToolTime’s materials price variance is
$700 F.

$310 F.

$400 F.
 $90 U.

If actual costs are greater than standard costs, there is a(n)

error in the accounting system.

normal variance.

unfavorable variance.

favorable variance.

   

During March 2010, Hinton Tool & Die Company worked on four jobs. A review of direct labor costs reveals the
following summary data.

Job Actual Standard

  Total
Number Hours Costs   Hours Costs Variance
A257 220  $4,400    225  $4,500  $100 F
A258 450  9,900    430  8,600  1,300 U
A259 300  6,150    300  6,000  150 U
A260 115  2,070    110  2,200  130 F
Total variance              $1,220 U
Analysis reveals that Job A257 was a repeat job. Job A258 was a rush order that required overtime work at premium
rates of pay. Job A259 required a more experienced replacement worker on one shift. Work on Job A260 was done
for one day by a new trainee when a regular worker was absent.
Complete the report for the plant supervisor on direct labor cost variances for March. (If answer is zero please enter
0, do not leave any fields blank. For quantity and price variance, determine whether the amounts are Favorable
(F), Unfavorable (U), or Neither (N).)
HINTON TOOL & DIE COMPANY

Direct Labor Variance Report

For the Month Ended March 31, 2010

Job Actual Standard Quantity Actual Standard Price
No. Hours Hours Variance   Rate Rate Variance   Explanation
220 225 100 F 20 20 0 N
Repeat job
A257

A258 450 430 400 U 22 20 900 U Rush job

 300 300 0 N 20.5 20 150 U Replacement
A259 worker

115 110 100 U 18 20 230 F

New trainee
A260

$ 400 U $ 820 U
   Totals