Chapter 23: Q9RQ (page 1305)
Question:Explain the difference between a cost standard and an efficiency standard. Give an example of each.
Answer
A cost standard is related to estimating the total cost used, whereas an efficiency standard is related to the direct material and direct labor hours.
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Journalizing materials entries
The following direct materials variance analysis was performed for Moore.
Requirements
1. Record Moore’s direct materials journal entries. Assume purchases were made on the account.
2. Explain what management will do with this variance information
Interpreting material and labor variances
Refer to your results from Short Exercises S236 and S237.
Requirements
1. For each variance, who in Martin’s organization is most likely responsible?
2. Interpret the direct materials and direct labor variances for Martin’s management.
Computing overhead variances
Refer to the Morgan, Inc. data in Short Exercise S239. Last month, Morgan reported the following actual results: actual variable overhead,
Requirements
1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
2. Explain why the variances are favorable or unfavorable.
Question:What is a flexible budget performance report?
Computing standard cost variances and reporting to management
Hear Smart manufactures headphone cases. During September 2018, the company produced and sold 105,000 cases and recorded the following cost data:
Standard Cost Information
Quantity | Cost | |
Direct Materials | 2 parts | \( 0.15 per part |
Direct Labor | 0.02 hours | 8.00 per hour |
Variable Manufacturing Overhead | 0.02 hours | 10.00 per hour |
Fixed Manufacturing Overhead (\)28,500 for static budget volume of 95,000 units and 1,900 hours, or \(15 per hour) |
Actual Cost Information
Direct Materials (209,000 parts @ \)0.20 per part) \( 41,800 Direct Labor (1,600 hours @ \)8.15 per hour) 13,040 Variable Manufacturing Overhead 9,000 Fixed Manufacturing Overhead 26,000 |
Requirements
1. Compute the cost and efficiency variances for direct materials and labor.
2. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.
3. Hear Smart’s management used better quality materials during September. Discuss the tradeoff between the two direct material variances.
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