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Exam 17: Additional Topics in Variance Analysis

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Question 1

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The Kinetic Modification Group (KMG) produces a gasoline additive,Gas Gain.This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process.Careful controls are required during the production process to insure that the proper mix of input chemicals is achieved and that evaporation is controlled.Loss of output and efficiency may result if the controls are not effective.The standard cost of producing a 500-liter batch of Gas Gain is $135.The standard materials mix and related standard cost of each chemical used in a 500-liter batch are: The quantities of chemicals purchased and used during the current production period are shown in the schedule below.A total of 140 batches of Gas Gain were manufactured during the current production period.The controller of KMG has determined its costs and chemical usage variations at the end of the production period. What is the total materials yield variance?

A) $388.50.
B) $294.50.
C) $280.00.
D) $94.50.

E) None of the above
F) C) and D)

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Question 2

Multiple Choice

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The Heavenly Gifts Company,a maker of Holiday novelties,needs your help immediately.The company's accountant resigned without leaving adequate records or explanations for what she did.In reviewing the records,you find the following information for May: You find a copy of the budget which shows that materials were budgeted at $0.60/unit.You know that the materials price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers,which indicate the following: What was the total actual cost of the direct materials purchased during May?

A) $9,000.
B) $11,800.
C) $12,000.
D) $12,200.

E) A) and B)
F) B) and C)

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Question 3

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A machine distributor sells two models,basic and deluxe.The following information relates to its master budget. Actual sales were 7,000 basic models and 2,800 deluxe models.The actual sales prices were the same as the budgeted sales prices for both models.What is the sales activity variance for the deluxe model?

The Genes Company makes a product,Z,from two materials: X and Y.The standard prices and quantities are as follows: In May,21,000 units of Z were produced by Genes Company,with the following actual prices and quantities of materials used: What is the total direct material yield variance for May?

Compound Q11H is a raw material used to make Grater Corporation's major product.The standard cost of compound Q11H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output.Data concerning the compound for October appear below: The raw material was purchased on account.The Materials Price Variance for October would be recorded as a:

Sample Inc.has the following information: What was Sample's actual direct labor rate?

The Heavenly Gifts Company,a maker of Holiday novelties,needs your help immediately.The company's accountant resigned without leaving adequate records or explanations for what she did.In reviewing the records,you find the following information for May: You find a copy of the budget which shows that materials were budgeted at $0.60/unit.You know that the materials price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers,which indicate the following: What was the total standard cost of direct materials allowed during May?

The industry volume variance is the portion of the sales activity variance due to a change in the company's proportion of sales in the markets in which they operate.This is the market share variance.Industry volume is due to changes in the overall size of the market.

Professional accounting firms could not compute a labor mix and labor yield variance for their auditors because labor in accounting is not substitutable.The labor is substitutable.

A manufacturer of industrial equipment has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity.Data from the company's flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: How much overhead was applied to products during the period to the nearest dollar?

Which of the following statements is (are) false? (A) All variances should be prorated to inventories and cost of goods sold at the end of the accounting period.(B) If the number of units produced exceeds the number of units sold,the full-absorption operating profit will be lower than variable costing operating profit.

The Trey Company experienced a $100,000 shortfall in sales revenues for the year.Top management is quite disturbed about this and has decided to use variance analysis in assigning the responsibility for the decline.Which of the following variances would be most within the control of the marketing department?

One feature of a standard cost system is that it:

An increase in an industry's volume and a decrease in a company's market share implies that the company's sales price variance is unfavorable.There is no relation between market size and the price.The relationship is between market size and sales quantity.

The computation of the material yield variance does not require the:

In a standard cost system,overhead is applied to production on a basis of:

If a company sells two products,it is possible for both products to have a favorable sales mix variance.The mix variance measures the impact of substitution-if you sell more of one,you must have sold less of another.

The production mix variance measures the impact of substituting one material for another material during the production process.The production mix can be either materials or labor.

The direct labor yield variance is unfavorable when the total hours worked during a period are less than the total standard hours allowed for the actual number of units produced.If less hours are worked it would be a favorable variance.

The only variances that should be investigated are those for which the expected benefits of correction exceed the costs of investigating and correcting.This is a basic principle of cost-benefit.