29) The goal of variance analysis is for managers to understand why variances arise, to learn, and to improve future performance.
30) Employees logging in to production floor terminals and other modern technologies greatly facilitate the use of a standard costing system.
31) Possible operational causes of an unfavorable direct materials efficiency variance include poor design of products or processes.
32) Effectiveness is the relative amount of inputs used to achieve a given output level.
33) Coffey Company maintains a very large direct materials inventory because of critical demands placed upon it for rush orders from large hospitals. Item A contains hard-to-get material Y. Currently, the standard cost of material Y is $4.00 per gram. During February, 22,000 grams were purchased for $4.10 per gram, while only 20,000 grams were used in production. There was no beginning inventory of material Y.
Required:
a.Determine the direct materials price variance, assuming that all materials costs are the responsibility of the materials purchasing manager.
b.Determine the direct materials price variance, assuming that all materials costs are the responsibility of the production manager.
c.Discuss the issues involved in determining the price variance at the point of purchase versus the point of consumption.
34) During February the Lungren Manufacturing Company’s costing system reported several variances that the production manager was surprised to see. Most of the company’s monthly variances are under $125, even though they may be either favorable or unfavorable. The following information is for the manufacture of garden gates, its only product:
1.Direct materials price variance, $800 unfavorable.
2.Direct materials efficiency variance, $1,800 favorable.
3.Direct manufacturing labor price variance, $4,000 favorable.
4.Direct manufacturing labor efficiency variance, $600 unfavorable.
Required:
a.Provide the manager with some ideas as to what may have caused the price variances.
b.What may have caused the efficiency variances?
35) Mayberry Company had the following journal entries recorded for the end of June. Unfortunately, the company’s only accountant quit on July 10 and the president is at a loss as to the company’s performance for the month of June.
Materials Control300,000
Direct Materials Price Variance10,000
Accounts Payable Control290,000
Work-in-Process Control120,000
Direct Materials Efficiency Variance8,000
Materials Control128,000
Work-in-Process Control850,000
Direct Manufacturing Labor Price Variance15,000
Direct Manufacturing Labor Efficiency Variance18,000
Wages Payable Control847,000
Required:
a.What kind of performance did the company have for June? Explain each variance.
b.Why is Direct Materials given in two entries?
36) Waddell Productions makes separate journal entries for all cost accounting-related activities. It uses a standard cost system for all manufacturing items. For the month of June, the following activities have taken place:
Direct Manufacturing Materials Purchased$300,000
Direct Manufacturing Materials Used250,000
Direct Materials Price Variance10,000unfavorable
(at time of purchase)
Direct Materials Efficiency Variance15,000favorable
Direct Manufacturing Labor Price Variance6,000favorable
Direct Manufacturing Labor Efficiency Variance 4,000favorable
Direct Manufacturing Labor Payable170,000
Required:
Record the necessary journal entries to close the accounts for the month.
37) Describe the purpose of variance analysis.
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