Assignment

Part 1

Question 1

Perform an Internet search using the phrase "reducing overhead costs". Select and read a case study or article from the results of your search. (Make sure that you do not select an instructor's lecture notes or a class assignment from the results of your search.) Summarize the case study or article, and relate the ideas of the article to what you have learned this week in this course.

Question 2

There are several potential problems that can occur from the improper use of standard costs. Labor quantity standards and efficiency variances assume that production is labor-paced. However, output in many companies is determined by the processing speed of machines. Also, too much emphasis on meeting the standards may overshadow other important objectives. Discuss other potential problems that can occur from the improper use of standard costs.

Part 2

Question 1. Lion Company's direct labor costs for the month of January were as follows:

What was Lion's direct labor efficiency variance?
$6,000 favorable
$6,150 favorable
$6,300 favorable
$6,450 favorable

Question 2. Information on Rex Co.'s direct material costs for May follows:

For the month of May, what was Rex's direct materials price variance?
$2,800 favorable
$2,800 unfavorable
$6,000 unfavorable
$6,000 favorable

Question 3. Buckler Company manufactures desks with vinyl tops. The standard material cost for the vinyl used per Model S desk is $27.00 based on 12 square feet of vinyl at a cost of $2.25 per square foot. A production run of 1,000 desks in March resulted in usage of 12,600 square feet of vinyl at a cost of $2.00 per square foot, a total cost of $25,200. The materials quantity variance resulting from the above production run was:
$1,200 unfavorable
$1,350 unfavorable
$1,800 favorable
$3,150 favorable

Question 4. The following standards for variable manufacturing overhead have been established for a company that makes only one product:

The following data pertain to operations for the last month:

What is the variable overhead efficiency variance for the month?
$1,680 F
$2,040 U
$2,110 U
$3,790 U

Question 5. Santoyo Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below:

The delivery cycle time was:
8.3 hours
3.2 hours
37.7 hours
36.3 hours

Question 6. Tanouye Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below:

The throughput time was:
4.1 hours
12.9 hours
25.6 hours
21.5 hours

Question 7. Kingcade Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below:

The manufacturing cycle efficiency (MCE) was closest to:
0.09
0.12
0.67
0.04

Question 8. Ravena Labs., Inc. makes a single product which has the following standards:

Variable manufacturing overhead is applied on the basis of direct labor hours. The following data are available for October:
• 3,750 units of compound were produced during the month.
• There was no beginning direct materials inventory.
• The ending direct materials inventory was 2,000 ounces.
• Direct materials purchased: 12,000 ounces for $225,000.
• Direct labor hours worked: 5,600 hours at a cost of $67,200.
• Variable manufacturing overhead costs incurred amounted to $18,200.
• Variable manufacturing overhead applied to products: $18,375.
The direct materials price variance for October is:
$15,000 unfavorable
$15,000 favorable
$25,000 unfavorable
$25,000 favorable

Question 9. Longview Hospital performs blood tests in its laboratory. The following standards have been set for each blood test performed:

During May, the laboratory performed 1,500 blood tests. On May 1 there were no direct materials (plates) on hand; after a plate is used for a blood test it is discarded. Variable overhead is assigned to blood tests on the basis of direct labor hours. The following events occurred during May:
• 3,600 plates were purchased for $9,540
• 3,200 plates were used for blood tests
• 340 actual direct labor hours were worked at a cost of $5,550
The materials price variance for May is:
$360 F
$360 U
$740 F
$740 U

Question 10. Chmielewski Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,560 patient-visits and the actual level of activity was 1,530 patient-visits. The clinic's director budgets for variable overhead costs of $1.10 per patient-visit and fixed overhead costs of $19,900 per month. The actual variable overhead cost last month was $1,400 and the actual fixed overhead cost was $21,720. In the clinic's flexible budget performance report for last month, what would have been the variance for the total overhead cost?
$33 F
$1,504 U
$1,537 U
$283 F

Question 11. Rodriques Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,630 square feet and the actual level of activity was 1,720 square feet. The company's owner budgets for supply costs, a variable overhead cost, at $3.40 per square foot. The actual supply cost last month was $6,750. In the company's flexible budget performance report for last month, what would have been the variance for supply costs?
$353 U
$306 U
$902 U
$1,208 U

Question 12. Teall Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month:

What was the fixed overhead budget variance for the month?
$4,000 unfavorable
$4,000 favorable
$570 favorable
$570 unfavorable

Question 13. Kerekes Manufacturing Corporation has prepared the following overhead budget for next month.

The company's variable overhead costs are driven by machine-hours.
What would be the total budgeted overhead cost for next month if the activity level is 2,400 machine-hours rather than 2,500 machine-hours? Assume that the activity levels of 2,500 machine-hours and 2,400 machine-hours are within the same relevant range.
$59,830.00
$59,280.00
$60,380.00
$61,750.00

Question 14. Riggs Enterprise's flexible budget cost formula for indirect materials, a variable cost, is $0.45 per unit of output. If the company's performance report for last month shows a $90 favorable variance for indirect materials and if 8,700 units of output were produced last month, then the actual costs incurred for indirect materials for the month must have been:
$4,005
$3,915
$3,825
$3,735

Question 15. Bartoletti Fabrication Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company's cost formula for variable manufacturing overhead is $4.60 per MH. The company had budgeted its fixed manufacturing overhead cost at $65,000 for the month. During the month, the actual total variable manufacturing overhead was $22,080 and the actual total fixed manufacturing overhead was $63,000. The actual level of activity for the period was 4,600 MHs. What was the total of the variable overhead spending and fixed overhead budget variances for the month?
$1,080 unfavorable
$1,080 favorable
$920 unfavorable
$920 favorable.