Short Answer Questions
Serene Sound produces a high quality audio tape used in the recording industry. Serene allocates variable overhead to production at a rate of $12 per batch manufactured. The company’s monthly fixed overhead costs average $72,000. An average of 500 batches per month is considered normal. During June, Serene produced 450 batches of audio tape and incurred actual overhead costs of $79,500.
123. Compute the following amounts:
a Total overhead applied to production in June amounted to $__________.
b Total overhead budgeted in June for the 450 batches manufactured amounted to $__________.
c Serene’s overhead spending variance was $___________ (favorable/unfavorable).
d Serene’s overhead volume variance was $___________ (favorable/unfavorable).
124. In the space provided, prepare the journal entry to dispose of any over- or under-applied overhead directly to cost of goods sold.
Job no. 007 involved the production of 100 units of product JR. The total standard and actual costs for materials and direct labor on this job are shown below:
125. Compute the following cost variances for job no. 007. Indicate whether each variance is favorable (F) or unfavorable (U).
a. Materials price variance: $___________
b. Materials quantity variance: $___________
c. Labor rate variance: $___________
d. Labor efficiency variance: $___________
126. In the space below, provide the journal entry to record the cost of direct materials used on job no. 007.
Multiple Choice Questions
127. The labor rate variance is determined by multiplying the difference between the actual labor rate and the standard labor rate by:
A. The standard labor hours allowed for a given level of output.
B. The standard labor rate.
C. The actual hours worked during the period.
D. The actual labor rate.
128. Which of the following is not a possible cause of an unfavorable direct labor efficiency variance?
A. Lack of motivation.
B. Low quality materials.
C. Poor supervision.
D. All of the above could be considered possible causes of an unfavorable labor efficiency variance.
129. An unfavorable overhead volume variance indicates that:
A. Total fixed overhead has exceeded the standard amount budgeted.
B. Variance overhead per unit has exceeded the standard amount budgeted.
C. Actual production was less than the normal volume of output.
D. Actual production was more than the normal volume of output.
130. A favorable overhead spending variance means that:
A. Overhead has been overapplied.
B. Overhead has been underapplied.
C. Actual production was less than the normal volume of output.
D. None of the above.
131. Modern Art, Inc., produces handpainted mouse pads. The following budgeted and actual results are for a recent month in which actual production was equal to budgeted production:
Which of the following is true? (There may be more than one response.)
A. The materials price variance is favorable.
B. The direct labor rate variance is favorable.
C. The materials quantity variance is unfavorable.
D. The direct labor efficiency variance is unfavorable.
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