Additional Topics in Variance Analysis: True / False Questions

Chapter 17
Additional Topics in Variance Analysis

True / False Questions

1. The variable production cost variances are computed using the units produced instead of the units sold.

True False

2. If variances are not prorated at the end of the accounting period, they are closed to the Cost of Goods Sold.

True False

3. 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.

True False

4. The direct material price variance is based on the quantity of materials purchased when the quantity
purchased is different from the quantity used.

True False

5. The market share variance is more controllable by the marketing department than the industry volume
variance.

True False

6. 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.

True False

7. 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.

True False

8. The general approach in variance analysis is to separate the variance into components based on a budgeting
formula.

True False

17-1
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McGraw-Hill Education.
9. If a company sells two products, it is possible for both products to have a favorable sales mix variance.

True False

10. The sales quantity variance is the same as the sales activity variance on a flexible budget performance
report.

True False

11. If a company sells two products, it is possible for both products to have an unfavorable sales quantity
variance.

True False

12. The production cost yield variance is conceptually the same as the sales quantity variance.

True False

13. The production mix variance measures the impact of substituting one material for another material during
the production process.

True False

14. 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.

True False

15. The basic variance analysis framework used for manufacturing companies can also be used in service
organizations.

True False

16. Labor variances are more important than material variances in service organizations.

True False

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

True False

18. Output is usually defined as sales units in merchandising, but service organizations use measures of activity
units, like patient days.

True False

17-2
19. Two important characteristics to consider when deciding how many variances to review are how large the
variance is and the extent to which the variance can be managed.

True False

20. The only variances that should be investigated are those for which the expected benefits of correction
exceed the costs of investigating and correcting.

True False

21. Some variances are the result of accounting errors and omissions, including timing differences.

True False

22. Some variances are the result of standards that are inaccurate or do not reflect the current production
process.

True False

Multiple Choice Questions

23. Which of the following statements is(are) true?
(A) If variances are prorated at the end of the accounting period, an unfavorable direct materials price
variance will, when prorated, increase the value of the Finished Goods Inventory.
(B) Insignificant variances are not generally prorated at the end of the accounting period and are closed to
the Cost of Goods Sold.

A. Only A is true.
B. Only B is true.
C. Both A and B are true.
D. Neither A nor B is true.

24. Standard costs should be based on:

A. perfect performance.
B. an average of past costs.
C. most likely level of performance.
D. reasonably attainable levels of efficiency.

17-3
25. In a standard cost system, overhead is applied to production on a basis of:

A. the denominator hours chosen for the period.

B. the budgeted hours for the normal production level of activity.
C. the actual hours required to complete the output of the period.
D. the standard hours allowed to complete the output of the period.

26. One feature of a standard cost system is that it:

A. makes the record keeping process more complex and difficult.

B. never requires updating if standard costs have been carefully determined.
C. reduces the amount of information available to a manager.
D. simplifies the record keeping process by allowing amounts to be carried at standard cost rather than
actual cost in the accounting records.

27. 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.

A. Only A is false.
B. Only B is false.
C. Both A and B are false.
D. Neither A nor B is false.

28. If raw materials are carried in the Direct Materials Inventory at standard cost, then it is reasonable to
assume that the:

A. price variance is recognized when materials are purchased.

B. price variance is recognized when materials are placed into production.
C. company does not follow generally accepted accounting principles.
D. efficiency variance is recognized when the materials are purchased.

17-4
29. Ingredient A12H is a raw material used to make Calvin Corporation's major product. The standard cost of
Ingredient A12H 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:
Cost of material purchased in October, per ounce $23.10

Material purchased in October, ounces 2,300
Material used in production in October, ounces 2,120
Actual output in October, units 600
The raw material was purchased on account.
The debit to the Raw Materials account for October would total:

A. $52,900.
B. $52,440.
C. $48,760.
D. $53,130.


The credit to the Raw Materials account for October would total:

A. $52,440.
B. $48,760.
C. $52,900.
D. $53,130.

17-5

The Materials Price Variance for October would be recorded as a:

A. debit of $230.
B. credit of $212.
C. debit of $212.
D. credit of $230.


The Materials Quantity Variance for October would be recorded as a:

A. credit of $3,680.
B. debit of $4,140.
C. credit of $4,140.
D. debit of $3,680.

17-6
33. Ingredient B4376 is used to make Razor Corporation's major product. The standard cost of Ingredient
B4376 is $24.50 per ounce and the standard quantity is 6.1 ounces per unit of output. In the most recent
month, 5,030 ounces of the compound were used to make 700 units of the output. When recording the use
of materials in production, Raw Materials would be:

A. credited for $123,235.

B. debited for $123,235.
C. debited for $104,615.
D. credited for $104,615.

34. Barium Corporation has provided the following data concerning its most important raw material,
Compound XYY2:
Standard cost, per liter $23.80

Standard quantity, liters per unit of output 5.7
Material used in production in August, liters 2,350
Actual output in August, units 400
When recording the use of materials in production, Raw Materials would be:

A. debited for $55,930.

C. credited for $55,930.

35. When the actual amount of a raw material used in production is greater than the standard amount allowed
for the actual output, the journal entry would include:

A. debit to Raw Materials; credit to Materials Quantity Variance.

B. debit to Work-In-Process; credit to Materials Quantity Variance.
C. debit to Raw Materials; debit to Materials Quantity Variance.
D. debit to Work-In-Process; debit to Materials Quantity Variance.

17-7
36. The Fantasy 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:
Materials Purchased 20,000 units

Materials Used 15,000 units
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:
Materials price variance $200 F

Materials efficiency (quantity) variance $600 F
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.



What was the total standard cost of direct materials purchased during May?

A. $9,150.
B. $11,800.
C. $12,000.
D. $12,200.

17-8


What was the total standard cost of direct materials allowed during May?

A. $8,260.
B. $8,400.
C. $9,440.
D. $9,600.

39. Which of the following sales variances is further analyzed into the market size and industry volume
variances?

A. Quantity.
B. Efficiency.
C. Mix
.
D. Activity
.

(A) The market share variance is more controllable by the marketing department than the industry volume
variance.
(B) 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.

A. Only A is true.
B. Only B is true.

17-9
41. The sales activity variance is equal to the sum of the market share variance and the:

A. selling price variance.

B. industry volume variance.
C. sales quantity variance.
D. sales mix variance.

42. Using the abbreviations listed below, what is the formula for the industry volume variance?
AMS = actual market share

BMS = budgeted market share
BCM = budgeted contribution margin per unit
ACM = actual contribution margin per unit
ATM = actual total market
BTM = budgeted total market

A. (ATM - BTM) (BMS)

(ACM)
B. (ATM - BTM) (BMS) (BCM)
C. (AMS - BMS) (ATM)
(ACM)
D. (AMS - BMS) (ATM) (BCM)

43. Using the abbreviations listed below, what is the market share variance?



(ACM)
C. (AMS - BMS) (ATM)
(ACM)

17-10
44. The budget for a given cost during a given period was $80,000. The actual cost for the period was $72,000.
Considering these facts, the plant manager has done a better-than-expected job in controlling the cost if:
(CPA adapted)

A. the cost is variable and actual production was 90% of budgeted production.
B. the cost is variable and actual production equals budgeted production.
C. the cost is variable and actual production was 80% of budgeted production.
D. the cost is a discretionary fixed cost and actual production equals budgeted production.

45. The exhibit below reflects a summary of performance for a single item of a retail store's inventory for the
month ended April 30: (CIA adapted)
Flexible
Static
Budget
Actual Flexible (Master)
Variance
Results Budget Budget
s
Sales (units) 11,000 — 11,000 12,000
Revenue
$208,000 $12,000 U $220,000 $240,000
(sales)
Variable
121,000 11,000 U 110,000 120,000
costs
Contributio
$87,000 $23,000 U $110,000 $120,000
n margin
Fixed costs 72,000 — 72,000 72,000
Operating
$15,000 $23,000 U $38,000 $48,000
Income
The sales volume variance is:

A. $20,000 favorable.
B. $20,000 unfavorable.
C. $11,000 favorable.
D. $12,000 unfavorable.

17-11
46. Danner Fashions sells a line of women's dresses. Danner's performance report for November is shown
below: (CMA adapted)
The company uses a flexible budget to analyze its performance and to measure the effect on operating
income of the various factors affecting the difference between budgeted and actual operating income.
Actual Budget
Dresses sold 5,000 6,000
Sales $235,000 $300,000
Variable costs (145,000) (180,000)
Contribution margin $90,000 120,000
Fixed Costs (84,000) (80,000)
Operating income $6,000 $40,000
The effect of the sales quantity variance on the contribution margin for November is:

A. $30,000 unfavorable.
C. $20,000 unfavorable.

Actual Budget
Sales $235,000 $300,000
Variable costs (145,000) (180,000)
Fixed Costs (84,000) (80,000)
The sales price variance for November is:


17-12
Actual Budget
Sales $235,000 $300,000
Variable costs (145,000) (180,000)
Fixed Costs (84,000) (80,000)
The variable cost flexible budget variance for November is:


Actual Budget
Sales $235,000 $300,000
Variable costs (145,000) (180,000)
Fixed Costs (84,000) (80,000)
What additional information is needed for Danner to calculate the dollar impact of a change in market
share on operating income for November? (CMA adapted)

A. Danner's budgeted market share and the budgeted total market size.
B. Danner's budgeted market share, the budgeted total market size, and average market selling price.
C. Danner's budgeted market share and the actual total market size.
D. Danner's actual market share and the actual total market size.

17-13
50. For a company that produces more than one product, the sales volume variance can be divided into which
two of the following additional variances? (CMA adapted)

A. Sales price variance and flexible budget variance.

B. Sales mix variance and sales price variance.
C. Sales efficiency variance and sales price variance.
D. Sales quantity variance and sales mix variance.

51. Actual and budgeted information about the sales of a product are presented below for June: (CIA adapted)
Actual Budget
Units 8,000 10,000
Sales Revenue $92,000 $105,000
The sales price variance for June was:


52. Which of the following income statement items is analyzed using the sales mix and the sales quantity
variances?

A. Operating expenses.
B. Cost of goods sold.
C. Gross margin.
D. Contribution margin.

53. The sales mix variance would be:

A. favorable when a company sells relatively fewer of the products that have contribution margins lower
than average.
B. favorable when a company sells relatively more of the products that have contribution margins higher
than average.
C. unfavorable when a company sells relatively fewer of the products that have selling prices higher than
average.
D. unfavorable when a company sells more of the products that have selling prices lower than average.

17-14
54. The sales quantity variance would be favorable when a company sells:

A. relatively fewer of the products bearing contribution margins lower than average.
B. relatively more of the products bearing contribution margins higher than average.
C. more total units than budgeted, holding the sales mix constant.
D. less total units than budgeted, holding the sales mix constant.

55. The Morton Company gathered the following information for the year.
Product Product
Total
K R
Budgeted sales mix
40% 60% 100%
(units)
Budgeted and actual sales
$48 $36
price
Budgeted variable cost per
$32 $24
unit
Actual sales (units) 126,000
Actual sales mix 60% 40% 100%
Fixed costs $80,000
What is the total sales mix variance?

A. $705,600.
B. $403,200.
C. $302,400.
D. $100,800.

17-15
56. A machine distributor sells two models, basic and deluxe. The following information relates to its master
budget.
Basic Deluxe
Sales (units) 8,000 2,000
Sales price per unit $8,000 $12,000
Variable costs per unit $6,400 $9,000
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 basic model?

A. $1,280,000.
B. $1,600,000.
C. $11,200,000.
D. $12,800,000.

budget.
Basic Deluxe
Is the sales activity variance for the basic model favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-16
budget.
Basic Deluxe
What is the sales activity variance for the deluxe model?

A. $400,000.
B. $800,000.
C. $1,600,000.
D. $2,400,000.

budget.
Basic Deluxe
Is the sales activity variance for the deluxe model favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-17
budget.
Basic Deluxe
What is the sales mix variance for the basic model?

A. $256,000.
B. $1,344,000.
C. $1,600,000.
D. $2,520,000.

budget.
Basic Deluxe
Is the sales mix variance for the basic model favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-18
budget.
Basic Deluxe
What is the sales quantity variance for the basic model?

A. $120,000.
B. $256,000.
C. $1,344,000.
D. $1,600,000.

budget.
Basic Deluxe
Is the sales quantity variance for the basic model favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-19
budget.
Basic Deluxe
What is the sales mix variance for the deluxe model based?

A. $1,176,000.
B. $1,344,000.
C. $2,400,000.
D. $2,520,000.

budget.
Basic Deluxe
Is the sales mix variance for the deluxe model favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-20
budget.
Basic Deluxe
What is the sales quantity variance for the deluxe model?

A. $120,000.
B. $256,000.
C. $1,344,000.
D. $1,600,000.

budget.
Basic Deluxe

A. Favorable.
B. Unfavorable.

17-21
68. The Vargas Company had the following expectations for the year:
Total market for the product 175,000 units

XYZ’s budgeted sales $1,763,125
Variable costs per unit $18.75
Selling price per unit $32.50
Actual results for the year were:
XYZ’s actual sales 56,525
Total Variable costs $1,073,975
Total sales $1,752,275
What is Vargas' market share variance?

A. $37,296.88.
B. $40,906.25.
C. $35,700.00.
D. $32,550.00.


Is the market share variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-22
70. The next year's budget for Trend, Inc., a multi-product company, is given below:
Product A Product B
Sales $1,890,000 $1,377,000
Variable costs 926,100 596,700
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000
At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but the
following units per product line were sold. Trend, Inc. analyzes the effects its sales variances have on the
profitability of the company.
Product Lines Units Sales

A 253,230 $1,848,579
B 113,770 $1,479,010
What is the total sales price variance?

A. $22,203.50.
B. $28,442.50.
C. $50,646.50.
D. $79,088.50.

17-23
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000

A 253,230 $1,848,579
B 113,770 $1,479,010
Is the total sales price variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-24
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000

A 253,230 $1,848,579
B 113,770 $1,479,010

A. $12,478.00.
B. $20,815.00.
C. $33,915.00.
D. $40,553.50.

17-25
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000

A 253,230 $1,848,579
B 113,770 $1,479,010
Is the total sales mix variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-26
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000

A 253,230 $1,848,579
B 113,770 $1,479,010
What is the total sales quantity variance?

A. $3,570.00.
B. $20,815.00.
C. $33,915.00.
D. $40,553.50.

17-27
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000

A 253,230 $1,848,579
B 113,770 $1,479,010
Is the total sales quantity variance favorable or unfavorable?

A. Favorable
B. Unfavorable

17-28
76. 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:
Level of activity 2,500 DLHs

Overhead costs at the denominator

activity level:
Variable overhead cost $8,500
Fixed overhead cost $34,625
The following data pertain to operations for the most recent period:
Actual hours 2,600 DLHs

Standard hours allowed for the actual
2,592 DLHs
output
Actual total variable manufacturing
$9,100
overhead cost
Actual total fixed manufacturing
$35,025
overhead cost
What is the predetermined overhead rate to the nearest cent?

A. $16.97.
B. $17.25.
C. $16.59.
D. $17.65.

17-29
77. 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:


activity level:

2,592 DLHs
output
$9,100
overhead cost
$35,025
overhead cost
How much overhead was applied to products during the period to the nearest dollar?

A. $44,712.
B. $44,125.
C. $43,125.
D. $44,850.

78. The labor yield variance is actual total hours at:

A. actual mix times actual labor rates less actual total hours at actual mix times standard labor rates.
B. actual mix times standard labor rates less standard total hours at standard mix times standard labor rates.
C. actual mix times standard labor rates less actual total hours at standard mix times standard labor rates.
D. standard mix times standard labor rates less standard total hours at standard mix times standard labor
rates.

79. The labor mix variance is actual total hours at:

B. actual mix times standard labor rates less standard total hours at standard mix times standard labor rates.
C. actual mix times standard labor rates less actual total hours at standard mix times standard labor rates.
D. standard mix times standard labor rates less standard total hours at standard mix times standard labor
rates.

17-30
80. The computation of the material yield variance does not require the:

A. standard material mix.

B. standard material price.
C. standard output units.
D. total material actually acquired.

81. A credit balance in the labor yield variance implies:

A. the total units produced was greater than the expected number of units given the total labor hours
actually used.
B. the total units produced was less than the expected number of units given the total labor hours actually
used.
C. the total units produced was greater than the expected number of units given the total standard hours
allowed.
D. the total units produced was less than the expected number of units given the total standard hours
allowed.

17-31
82. What is the correct journal entry to record a favorable materials mix variance assuming all material
variances are recognized when the direct materials are issued to production?

A. Work in
XX
Process
X
Inventory
Direct
Materials XX

Mix X
Variance
Direct
XX
material
X
inventory
B. Work in
XX
Process
X
Inventory
Direct
Materials XX

Mix X
Variance
Direct
XX
material
X
inventory
C. Finished
XX
Goods
X
Inventory
Direct
Materials XX

Mix X
Variance
Work
in XX

Process X
Inventory
D. Finished
XX
Goods
X
Inventory
Direct
Materials XX

Mix X
Variance
Work
in XX

Process X
Inventory

17-32
83. What is the correct journal entry to record direct labor when the actual labor mix is favorable and the total
standard hours allowed is greater than the total actual hours worked?

A. Work in
Process XX

Inventor X
y
Direct
labor XX

yield X
variance
Direct
labor XX

mix X
variance
Wages XX

Payable X
B. Work in
XX
Process
X
Inventory
Direct
labor XX

yield X
variance
Direct
XX
labor mix
X
variance
Wages XX

Payable X
C. Finished
XX
Goods
X
Inventory
Direct
XX
labor mix
X
variance
Direct
labor XX

yield X
variance
Work
in XX

Process X
Inventory
D. Finished
XX
Goods
X
Inventory
Direct XX
labor X
yield
17-33
variance
Direct
XX
labor mix
X
variance
Work
in XX

Process X
Inventory

84. The Shum Company makes a product, Z, from two materials: X and Y. The standard prices and quantities
are as follows:
X Y
Price per pound $6 $9
Pounds per unit of product Z 10 5
In May, 21,000 units of Z were produced by Shum Company, with the following actual prices and
quantities of materials used:
X Y
Price per pound $5.70 $8.40
Pounds used 216,000 114,000
What is the total direct materials mix variance for May?

A. $12,000.
B. $24,000.
C. $36,000.
D. $60,000.

17-34
are as follows:
X Y
X Y
Pounds used 216,000 114,000
Is the total direct materials mix variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.

are as follows:
X Y
X Y
Pounds used 216,000 114,000
What is the total direct material yield variance for May?

A. $45,000.
B. $81,000.
C. $109,800.
D. $117,000.

17-35
are as follows:
X Y
X Y
Pounds used 216,000 114,000
Is the total direct material yield variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-36
88. The Becton Enterprises (BE) produces a gasoline additive, Charger Power. 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 Charger Power is $135. The standard materials mix and
related standard cost of each chemical used in a 500-liter batch are:
Std input Std cost Total

Chemical quantity per liter cost
Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00
The quantities of chemicals purchased and used during the current production period are shown in the
schedule below. A total of 140 batches of Charger Power were manufactured during the current production
period. The controller of BE has determined its costs and chemical usage variations at the end of the
production period.
Quantity Total Quantity

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420
If BE recognizes all variances at the earliest possible moment, what is the total material price variance?

A. $160.
B. $540.
C. $890.
D. $1,270.

17-37
not effective.

Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00
production period.

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420
Is the total material price variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-38
not effective.

Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00
production period.

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420
What is the total materials yield variance?

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

17-39
not effective.

Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00
production period.

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420
Is the materials yield variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-40
not effective.

Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00
production period.

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420
What is the total materials mix variance?

A. $476.00.
B. $420.00.
C. $388.50.
D. $280.00.

17-41
not effective.

Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00
production period.

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420
Is the materials mix variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.

17-42
94. A company makes a product using two materials, one of which is interchangeable with a third material. The
standards for producing one 200-pound batch are presented below. The last 200-pound batch was produced
using 140 pounds of M and 90 pounds of O. The price of M was $0.03 per pound and the actual price of O
was $0.10.
Standard LBS Standard

Material Quantity (lbs) Cost/lb. Total Cost
O 0 $.10 $0
H 80 .08 6.40
M 120 .02 2.40
200 $8.80
What is the materials mix variance?

A. $1.68.
B. $3.00.
C. $1.32.
D. $0.84.

was $0.10.

O 0 $.10 $0
H 80 .08 6.40
M 120 .02 2.40
200 $8.80

A. Favorable.
B. Unfavorable.

17-43
was $0.10.

O 0 $.10 $0
H 80 .08 6.40
M 120 .02 2.40
200 $8.80
What is the materials yield variance?

A. $1.12.
B. $1.68.
C. $3.00.
D. $1.32.

was $0.10.

O 0 $.10 $0
H 80 .08 6.40
M 120 .02 2.40
200 $8.80

A. Favorable.
B. Unfavorable.

17-44
98. Bonner Company's direct labor cost for March was as follows:
Actual direct labor hours 30,000

Standard direct labor hours 31,500
Rate variance $4,500 U
Total payroll $189,000
Labor mix variance $4,225 U
What was Bonner's direct labor yield variance?

A. $13,450.
B. $9,675.
C. $9,225.
D. $5,000.


Is the direct labor yield variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.

100. Prince Inc. has the following information:

Labor rate variance $8,700 F
Labor mix variance $4,000 F
Labor yield variance $2,000 F
What was the standard direct labor rate?

A. $3.50.
B. $3.80.
C. $4.00.
D. $5.80.

17-45

What was Prince's actual direct labor rate?

A. $3.60.
B. $3.70.
C. $3.80.
D. $3.90.

102. The following data for April has been provided by Cowle Corporation.
machine-
Level of activity 8,800
hours
Budgeted fixed manufacturing
$178,640
overhead costs
machine-
Actual level of activity 9,200
hours
Standard machine-hours allowed machine-
9,300
for the actual output hours
Actual fixed manufacturing
$172,980
overhead costs
The budget variance for April is:

A. $5,660 U.
B. $8,120 F.
C. $8,120 U.
D. $5,660 F.

17-46
machine-
hours
$178,640
overhead costs
machine-
hours
9,300
Actual fixed manufacturing machine-
$172,980
overhead costs hours
The volume variance for April is:

A. $10,150 U.
B. $8,120 U.
C. $8,120 F.
D. $10,150 F.

104. Yellon Company uses a standard cost system in which it applies manufacturing overhead to units of
product on the basis of standard direct labor-hours (DLHs). The following data pertain to last month's
operations:
Budgeted fixed manufacturing overhead

$5,000
costs
Actual fixed manufacturing overhead
$5,500
costs
Standard hours allowed for output 2,400 DLHs
Predetermined overhead rate ($2 per
$5
variable + $3 fixed) DLH
The fixed manufacturing overhead budget variance is:

A. $500 U.
B. $500 F.
C. $2,200 U.
D. $1,700 U.

17-47
105. Which of the following statements would be false regarding application of the variance analysis model to
nonmanufacturing costs?

A. The basic framework used for manufacturing is also used for nonmanufacturing costs.
B. Merchandising and service organizations focus on marketing and administrative costs to measure
efficiency and control costs.
C. The need for analysis of price and efficiency variances in nonmanufacturing settings is increasing.
D. Service organizations are unable to substitute different types of labor.

106. The Foxmoore 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 most likely be within the control of the marketing
department?

A. Sales mix.
B. Market share.
C. Sales quantity.
D. Industry volume.

107. Which of the following factors should not be considered when deciding whether to investigate a variance?
A. Absolute or relative magnitude of the variance.

B. Trend or pattern of the variance over time.
C. Chance that an "out-of-control" situation can be corrected.
D. Whether the variance is favorable or unfavorable.

108. There are several reasons why actual results differ from standards. Which of the following does not
represent a reason why a variance might occur?

A. Inaccurate information from the accounting system.

B. Increasing the accuracy of a variance report by decreasing its timeliness.
C. Standards which do not reflect the current economic conditions.
D. Operating conditions that are consistently inefficient.

Essay Questions

17-48
109. Fremont, Inc., builds storage boxes to custom order. Materials include 20 board feet of lumber at
$1.25/board foot. Standards call for 2 hours of labor at $15/hr.
During March, 4,200 boxes were built. Materials purchased totaled $103,890 for 86,300 board feet of
lumber. Actual lumber usage in production was 82,310 board feet. The March payroll was $139,360 for
9,150 hours.
Required:
(Be sure to indicate whether the variance is favorable or unfavorable.)
a. Compute the direct material price variance.

b. Compute the direct material quantity variance.
c. Compute the direct labor rate variance.
d. Compute the direct labor efficiency variance.

17-49
110. Malloy Corporation has provided the following data concerning its most important raw material,
compound I51D:

Cost of material purchased in October, per liter $30.70
Material purchased in October, liters 4,000
Material used in production in October, liters 3,580
Required:
a. Record the purchase of the raw material in a journal entry.

b. Record the use of the raw material in production in a journal entry.

17-50
111. The data below relate to a product of Omaha Company.
Standard costs:
Materials, 3 pounds at $7 per pound $21 per unit
Labor, 4 hours at $18 per hour $72 per unit
Budgeted production for the year 2,000 units
Actual results were:
Production 1,800 units
Material purchases, 6,000 pounds $48,230
Labor, 7,420 hours $140,170
Material used in production 5,750 pounds
Required:


17-51
112. Compound Y23Z is used by Carrington Corporation to make one of its products. The standard cost of
compound Y23Z is $38.70 per ounce and the standard quantity is 4.6 per unit of output. Data concerning
the compound in the most recent month appear below:
Cost of material purchased in November, per

$39.20
ounce
Material purchased in November, ounces 2,800
Material used in production in November, ounces 2,360
Actual output in November, units 500
Required:


17-52
113. The following standards have been established for a raw material used to make product P62:
Standard quantity of the material per

6.3 pounds
unit of output
Standard price of the material $15.50 per pound
The following data pertain to a recent month's operations:
Actual material purchased 6,700 pounds

Actual cost of material
$100,500
purchased
Actual material used in
6,400 pounds
production
units of product
Actual output 920
P62
Required:
a. What is the materials price variance for the month?

b. What is the materials quantity variance for the month?

17-53
114. High Tech builds fence panels to custom order. Materials include 15 units of lumber at $2.25/unit.
Standards call for 3 hours of labor at $25/hr.
During October, 3,121 fence panels were built. Materials purchased totaled $113,650 for 51,100 units of
lumber. Actual lumber usage in production was 51,069 units. The October payroll was $248,000 for 9,500
hours.
Required:


17-54
115. The Oregon Company produces and sells a single product. Standards have been established for the product
as follows:
Direct materials: 5 pounds @ $3.50 per pound = $17.50

Direct labor: 3 hours @ $5.50 per hour = $16.50
Actual cost and usage figures for the past month follow:
Units produced 750

Direct materials used 4,000 pounds
Direct materials purchased (4,500
$14,400
pounds)
Direct labor cost (2,000 hours) $11,200
Required:
Prepare journal entries to record:
a. The purchase of raw materials.

b. The usage of raw materials in production.
c. The incurrence of direct labor cost.

17-55
116. The data below relate to a product of Bullfrog Company.
Standard costs:
Labor, 10,360 hours $160,580
Required:


17-56
117. The next year's budget for Howard, Inc., a multi-product company, is given below:
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income $470,200 283,000
Units 252,000 108,000
Market share 12.5% 20.0%
following units per product line were sold. Howard analyzes the effects its sales variances have on the
Product Line Units Sales Mkt share

A 252,230 $1,848,579 15.0%
B 113,770 $1,479,010 17.0%
Required:
a. Compute the sales activity variance for each product.

b. Compute the market share variance for each product.
c. Compute the industry volume variance for each product.

17-57
118. The Buffett Company had the following expectations:

Buffett’s budgeted sales 54,250
Contribution margin per unit $13.00
Buffett’s actual sales 56,525
Required:
a. Compute Buffett's sales activity variance.

b. Compute Buffett's market share variance.
c. Computer Buffett's industry volume variance.

17-58
119. The next year's budget for Alton, Inc., is given below:
Product 1 Product 2
Sales $945,000 $688,500
Fixed costs 300,000 300,000
Net income $185,100 $91,500
Units 126,000 54,000
Market share 12% 20.0%
following units per product line were sold:

1 126,200 $958,579 16.0%
2 56,800 $721,010 14.2%
Required:


17-59
120. The Stangle Company had the following expectations:

Stangle’s budgeted sales 108,500
Stangle’s actual sales 113,050
Required:
a. Compute Stangle's sales activity variance.

b. Compute Stangle's market share variance.
c. Computer Stangle's industry volume variance.

17-60
121. Porcini Enterprises produces two products, AR and QT. Actual and budgeted information for the year
ending April 30 is provided below:
Product AR Product QT
Budget Actual Budget Actual
Unit sales 2,000 2,800 6,000 5,600
Sales $6,000 $7,560 $12,000 $11,760
Fixed costs 1,800 1,900 2,400 2,800
Variable costs 2,400 2,800 6,000 5,880
Required:

b. Compute the sales mix variance for each product.
c. Compute the sales quantity variance for each product.

17-61
122. The next year's budget for Canfield, Inc., a multi-product company, is given below:
Product 1 Product 2
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income $470,200 $283,000
Units 252,000 108,000
following units per product line were sold. Canfield analyzes the effects its sales variances have on the
Product Line Units Sales

A 252,230 $1,848,579
B 113,770 $1,479,010
Required:


17-62
123. Virginia Enterprises produces two products, Standard and Deluxe. Actual and budgeted information for the
year is provided below:
Standard Deluxe
Unit sales 4,000 5,600 12,000 11,200
Sales $6,000 $7,560 $12,000 $11,760
Variable costs 2,400 2,800 $6,000 5,800
Required:


17-63
124. The next year's budget for Temper, Inc., is given below:
Product 1 Product 2
Sales $945,000 $688,500
Fixed costs 300,000 300,000
Net income $185,100 $91,500
Units 126,000 54,000
following units per product line were sold:

1 126,200 $958,579
2 56,800 $721,010
Required:


17-64
125. A chemical company in the Midwest produces a solvent used by manufacturers of plastics. Three basic
chemicals go into this solvent. The standards for one-liter of this product are:
Chemical A: 500 ml. @ $10 per liter
Chemical B: 100 ml. @ $50 per liter
Chemical C: 400 ml. @ $20 per liter
During the last period, 10,000 liters of the solvent were produced and the company purchased the
following amounts of each chemical:
Chemical A: 6,400 liters @ $9.00 per liter

Chemical B: 900 liters @ $75.00 per liter
Chemical C: 4,200 liters @ $20.00 per liter
Because these chemicals are volatile, the company uses them immediately upon purchase, so there are no
beginning and ending inventories.
Required:
a. Compute the direct material price variances.

b. Compute the direct material efficiency variances.
c. Compute the direct material mix variances.
d. Compute the direct material yield variances.

17-65
126. A chemical company produces a product used by manufacturers of plastics. Two basic chemicals go into
this product. The standards for one-liter of this product are:
Chemical 1: 800 ml. @ $50 per liter

During the last period, 5,000 liters of the solvent were produced and the company purchased the following
amounts of each chemical:
Chemical 1: 5,400 liters @ $59.00 per liter

Chemical 2: 900 liters @ $225.00 per liter
Because these chemicals are volatile, the company uses them immediately upon purchase, so there are no
beginning and ending inventories.
Required:


17-66
127. A company's direct labor standards for a given operation and the actual results for the current period are
provided below:
Standard rates:
Level One: $20 per hour

Level Two: $15 per hour
Time to produce one unit:
Two (2) Level One workers at 15-minutes each

Three (3) Level Two workers at 10 minutes each
Actual Results:
Units produced: 10,000

Labor used:
4,000 hours of Level One workers at $25 per hour
6,800 hours of Level Two workers at $15 per hour
Required:
a. Compute the labor price (rate) variances for each worker level.
b. Compute the labor efficiency variances for each worker level.
c. Compute the labor mix variances for each worker level.
d. Compute the labor yield variances for each worker level.

17-67

17-68
provided below:
Standard rates:
Class A: $24 per hour

Class B: $12 per hour
Three (3) Class A workers at 20 minutes each

Two (2) Class B workers at 15-minutes each
Actual Results:

Labor used:
5,800 hours of Class A workers; total payroll: $156,600
3,500 hours of Class B workers; total payroll: $49,000
Required:

17-69
129. The Foggybottom Chemicals produces a product by mixing three ingredients to make a finished product.
The standard cost of producing a 50-gallon drum of the product is $19.50. The standard materials mix and
related standard cost of each chemical used in a 50-gallon batch are:

Chemical
quantity per gal cost
A 30 $0.25 $7.50
B 20 0.45 9.00
C 10 0.30 3.00
60 $19.50
schedule below. A total of 520 batches were manufactured during the current production period. The costs
and chemical usage variations at the end of the production period are:

Chemical
purchased cost used
A 17,800 $4,365 16,600
B 13,000 6,240 11,880
C 5,500 1,520 5,140
36,300 $33,620
Required:
a. If variances are recorded at the earliest possible moment, what is the material price variance (in total
and for each ingredient)?
b. What is the material efficiency variance (in total and for each ingredient)?
c. What is the materials yield variance (in total and for each ingredient)?
d. What is the materials mix variance (in total and for each ingredient)?

17-70

provided below:
Standard rates:
Advanced: $18 per hour
Trained: $15 per hour
Novice: $10 per hour

One (1) Advanced worker at 30 minutes
30 minutes/unit
each =
Three (3) Trained workers at 20 minutes
60 minutes/unit
each =
Two (2) Novice workers at 15-minutes
30 minutes/unit
each =
120 minutes/unit
Actual Results:
Labor used:
2,200 hours of Advanced workers
4,300 hours of Trained workers
1,900 hours of Novice workers
Required:
a. Compute the labor efficiency variances for each worker level.

b. Compute the labor mix variances for each worker level.
c. Compute the labor yield variances for each worker level.

17-71
131. Washington Corporation applies overhead to products based on machine-hours. The denominator level of
activity is 8,600 machine-hours. The budgeted fixed manufacturing overhead costs are $286,380. In
October, the actual fixed manufacturing overhead costs were $274,330 and the standard machine-hours
allowed for the actual output were 8,400 machine-hours.
Required:
a. Compute the budget variance for October. Show your work!

b. Compute the volume variance for October. Show your work!

132. Delaware Corporation has provided the following data for February.
machine-
Denominator level of activity 4,400
hours
$107,360
overhead costs
4,200
$104,470
overhead costs
Required:
a. Compute the budget variance for February. Show your work!

b. Compute the volume variance for February. Show your work!

17-72
133. Vegas Manufacturing uses a standard cost system in which manufacturing overhead is applied to units of
product on the basis of standard machine-hours. At standard, each unit of product requires one machine-
hour to complete. The standard variable overhead is $1.75 per machine-hour and Budgeted Fixed
Manufacturing Costs are $300,000 per year. The level of activity is 150,000 machine-hours, or 150,000
units. Actual data for the year were as follows:
Actual variable overhead cost $211,680

Actual fixed manufacturing overhead cost $315,000
Actual machine-hours 126,000
Units produced 120,000
Required:
a. What are the predetermined variable and fixed manufacturing overhead rates for the year?
b. Compute the variable overhead rate and efficiency variances for the year.
c. Compute the fixed manufacturing overhead budget and volume variances for the year.

134. Rudy Corporation makes automotive engines. For the most recent month, budgeted production was 6,000
engines. The standard power cost is $8.80 per machine-hour. The company's standards indicate that each
engine requires 6.1 machine-hours. Actual production was 6,400 engines. Actual machine-hours were
38,730 machine-hours. Actual power cost totaled $350,628.
Required:
Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether
those variances are unfavorable or favorable. Show your work!

17-73
135. Barrymore Corporation, which makes landing gears, has provided the following data for a recent month:
Budgeted production 1,200 gears

Standard machine-hours per
5.9 machine-hours
gear
per machine-
Budgeted supplies cost $6.50
hour
Actual production 1,300 gears
Actual machine-hours 7,950 machine-hours
Actual supplies cost (total) $49,742
Required:
Determine the rate and efficiency variances for the variable overhead item supplies and indicate whether
those variables are favorable or unfavorable. Show your work!

17-74
136. The following data for November have been provided by Norton Corporation, a producer of precision drills
for oil exploration:
Budgeted production 4,000 drills

8.4 machine-hours
drill
per machine-
Standard indirect labor $9.40
hour
per machine-
Standard power $2.90
hour
Actual production 4,300 drills
Actual indirect labor $362,756
Actual power $97,693
Required:
Compute the variable overhead rate variances for indirect labor and for power for November. Indicate
whether each of the variances is favorable (F) or unfavorable (U). Show your work!

17-75
137. Tallon & Associates is a consulting firm specializing in business location studies. The results for last year,
along with the budget, are as follows:
Actual Budget
Billable hours 25,200 24,000
Revenue $2,772,000 $2,400,000
Professional salaries (variable) 1,310,000 1,200,000
Other variable costs 488,000 400,000
Fixed costs 492,000 450,000
Office management salaries (fixed) 317,000 225,000
Operating profit $165,000 $125,000
Required:
a. Prepare a flexible budget using billable hours as the measure of output.

b. Prepare a sales activity variance analysis.
c. Compute the sales price variance.

17-76
138. The standard direct labor cost for room cleaning at Texas Hotels is $2.50 per room ($10 per hour in wages
divided by 4 rooms cleaned per hour). Actual labor costs were $11,330 for the month. During the period
there were 1,100 labor hours worked; 3,920 rooms were cleaned during the month.
Required:
a. Compute the labor price variance for the period.

b. Compute the labor efficiency variance for the period.

139. What is the advantage of recognizing materials price variances at the time of purchase rather than at the
time of use?

140. Explain the difference between the market share variance and the industry volume variance.

17-77
141. Explain the difference between the sales mix variance and the sales quantity variance.

142. When deciding how many variances to calculate, what two items need to be considered? Be sure to define
your terms.

143. Explain what production mix and production yield variances measure. How do these variances relate to
efficiency variances?

17-78
144. Olsen Company uses a standard cost system for its only product. The bickering between purchasing and
production that occurs every month after the material variances are developed has the production vice
president, Mr. Becker, at his wits end. He has checked the job descriptions of the individuals involved and
notes that the purchasing department is responsible for the price at which materials and supplies are
purchased and the manufacturing department is responsible for the quantity of material used. This seems
very clear cut to him so he has gone to the cost accountant for some additional help.
Required:
As the cost accountant, explain to Mr. Becker why, or why not, this division of duties solves the conflict
between price and quantity variances.

17-79
145. The Halcion Company uses a standard cost system in which manufacturing overhead costs are applied to
units of the company's single product on the basis of standard direct labor-hours (DLHs). The standard cost
card for the product follows:

Standard Cost Card-per unit of product
Direct Materials, 4 yards at $3.50 per yard $14
Direct Labor, 1.5 DLHs at $8 per DLH 12
Variable Overhead, 1.5 DLHs at $2 per DLH 3
Fixed Overhead, 1.5 DLHs at $6 per DLH 9
Standard cost per unit $38
The following data pertain to last year's activities:

The company manufactured 18,000 units of product
during the year. A total of 70,200 yards of material was
• purchased during the year at a cost of $3.75 per yard. All
of this material was used to manufacture the 18,000
units.
The company worked 29,250 direct labor-hours during
•
the year at a cost of $7.80 per hour.
The denominator activity level was 22,500 direct labor-
•
hours.
Budgeted fixed manufacturing overhead costs were
• $135,000 while actual manufacturing overhead costs
were $133,200.
• Actual variable overhead costs were $61,425.
Required:
a. Compute the direct materials price and quantity variances for the year.
b. Compute the direct labor rate and efficiency variances for the year.
c. Compute the variable overhead rate and efficiency variances for the year.
d. Compute the fixed manufacturing overhead budget and volume variances for the year.

17-80
146. Advantage Co. sells two types of drives—standard and specialty. The budget is based on a combination of
last year's information as well as forecasted industry sales and the company's market share. The following
information is provided for June:
Budgeted Actual
Standard Specialty Standard Specialty
Selling price
$50 $70 $52 $70
per drive
Variable price
24 40 24 42
per drive
Contribution
$26 $30 $28 $28
margin
Sales (units) 5,000 1,000 4,500 1,500
Fixed costs $60,000 $63,000
Required:
1) Prepare a static budget and flexible budget for the company for June.
2) What is the revenue sales-volume variance?

17-81
147. Maxine Watters, the managerial accountant has been asked by the Coolare Ceiling Fan Company president
to prepare an analysis of the effectiveness of the new management team. They manufacture paper fans.
2016 standards:
Budget
Direct materials - 4 parts @ $2 per part
Direct labor - one half hour (0.5) @ $10 per hour
Variable overhead - 2 machine hours @ $3 per hour
Fixed overhead - $900,000
Estimated production - 100,000
Actual results 2016:

Direct materials - 585,000 parts at a total cost of $1,462,500 were purchased and used
Direct labor - 51,000 hours at a cost of $561,000
Variable overhead - 240,000 machine hours at a cost of $840,000
Actual production - 130,000 fans
Required:
Requirement 1: Compute the direct material and direct labor budget variances.
Requirement 2: Compute the variable and fixed overhead variances.

17-82
148. Algood Incorporated is trying to decide which method of analyzing its overhead variances provides the
most useful information. The following information is available from the records for April:
Budgeted units of output 4,000 for April

Budgeted fixed overhead $27,000/month
Budgeted variable overhead $6/DLH
Budgeted direct labor hours 3 hours/unit
Fixed overhead incurred $26,600
Direct labor hours used 12,000
Variable overhead incurred $71,500
Actual units produced 4,200
Required:
Compute the overhead variances using the following approaches;
(1) Four-way analysis

(2) Three-way analysis
(3) Two-way analysis

17-83
149. Compass Company uses labor hours to allocate its variable overhead costs. Mr. Dailey, the production
manager has been told that his direct labor and variable overhead variances for the past month were as
follows:
Direct labor rate variance: $3,000 F

Direct labor efficiency variance: $6,000 U
Variable overhead spending variance: $2,000 U
Variable overhead efficiency variance: $3,000 U
The production V.P. has asked Mr. Dailey to account for his overhead variances for the month.
Required:
Explain the meaning of the two variable overhead variances and Mr. Dailey's responsibility for them.

150. Harrison Company uses machine hours to allocate its fixed overhead costs. Mr. Alvarez, the production
manager has been told that his fixed overhead variances for the past month were as follows:
Fixed overhead budget variance: $2,000 F

Fixed overhead volume variance: $20,000 U
The production V.P. has asked Mr. Alvarez to account for his underutilization of capacity for the month.
Required:
Explain the meaning of the two variances and Mr. Alvarez's responsibility for them.

17-84
151. Xi Company currently uses a traditional standard costing system. During the past two years the company
has been modernizing its plant and has tried to keep the old standard costing system in place by changing
some of the features to reflect the more automated situation. It has now come to a point, however, where
the old system just isn't providing useful information for product costing, pricing, decision making, etc.
The CEO, Ms. Chang, has set up a team to look into the situation and come up with reasons why the old
system isn't working anymore.
Required:
What are the problems with traditional standard costing under the current manufacturing environment?

152. Resolution Company is meeting with the consultants it hired to help it with problems arising from its
increasing sales and increasing production to meet them. The consultants have informed the company that
they need to make price concessions in order to have their product sold over a large area. To do this, costs
need to be reduced and controlled. They recommended installation of a standard costing system and a
flexible budgeting system.
The CEO took the recommendations back to the company management, explained to all, and a team was
set up to develop the standards. The team was composed of the purchasing manager, processing manager,
production engineer, and V.P. of sales. Each member of the team, rather than working to develop
standards, came up with reasons why they wouldn't work. The team made its report to the CEO who told
them to come up with the standards or he would have the consultants set them.
Required:
(1) What are the advantages and disadvantages of standard costing?

(2) What has gone wrong in this situation and will having the outside consultant do the work change
anything?

17-85
153. In the new cost management scheme of things, what are some of the disadvantages of the traditional
standard cost system (list at least four)?

17-86
Chapter 17 Additional Topics in Variance Analysis Answer Key
True / False Questions

1. The variable production cost variances are computed using the units produced instead of the units sold.

TRUE
Production variances are based on units produced.

AACSB: Analytical Thinking
AICPA: FN Decision Making
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-01 Explain how to prorate variances to inventories and cost of goods sold.
Topic: Profit Variance Analysis When Units Produced Do Not Equal Units Sold

2. If variances are not prorated at the end of the accounting period, they are closed to the Cost of Goods
Sold.

TRUE
They are being treated as if they are period costs.

Blooms: Remember
Difficulty: 1 Easy

3. 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.

FALSE
Absorption costing operating profit will be greater since fixed production costs are going into inventory
rather than into cost of goods sold.

Blooms: Apply
17-87
Difficulty: 3 Hard

4. The direct material price variance is based on the quantity of materials purchased when the quantity
purchased is different from the quantity used.

TRUE
The price variance is due to the purchasing activity and should be related to units purchased.

Blooms: Remember
Difficulty: 1 Easy
Topic: Materials Purchased Do Not Equal Materials Used

5. The market share variance is more controllable by the marketing department than the industry volume
variance.

TRUE
The industry volume is due to external activities. Market share can be influenced more readily by the
marketing staff.

Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 Use market share variances to evaluate marketing performance.
Topic: Market Share Variance and Industry Volume Variance

6. The industry volume variance is the portion of the sales activity variance due to a change in the

FALSE
This is the market share variance. Industry volume is due to changes in the overall size of the market.

Blooms: Remember
Difficulty: 2 Medium

17-88
7. 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.

FALSE
There is no relation between market size and the price. The relationship is between market size and
sales quantity.

Blooms: Apply
Difficulty: 3 Hard

8. The general approach in variance analysis is to separate the variance into components based on a
budgeting formula.

TRUE
Separating the variance into components is the general approach for variance analysis. For example,
budget revenues can be expressed as: Budget revenues = SP × SQ

Blooms: Apply
Difficulty: 3 Hard

9. If a company sells two products, it is possible for both products to have a favorable sales mix variance.

FALSE
The mix variance measures the impact of substitution—if you sell more of one, you must have sold less
of another.

Blooms: Remember
Learning Objective: 17-03 Use sales mix and quantity variances to evaluate marketing performance.
Topic: Sales Activity Variances with Multiple Products

17-89
10. The sales quantity variance is the same as the sales activity variance on a flexible budget performance
report.

FALSE
Sales quantity + sales mix = sales activity.

Blooms: Remember

11. If a company sells two products, it is possible for both products to have an unfavorable sales quantity
variance.

TRUE
The quantity variance measures the difference between actual sales and budgeted sales. Both products
could have sold fewer units than budgeted.

Blooms: Remember

12. The production cost yield variance is conceptually the same as the sales quantity variance.

TRUE
Both measure expected output given a mix of products versus actual output.

Blooms: Remember
Learning Objective: 17-04 Evaluate production performance using production mix and yield variances.
Topic: Production Mix and Yield Variances

17-90
13. The production mix variance measures the impact of substituting one material for another material
during the production process.

TRUE
The production mix can be either materials or labor.

Blooms: Remember

14. 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.

FALSE
If less hours are worked it would be a favorable variance.

Blooms: Remember

15. The basic variance analysis framework used for manufacturing companies can also be used in service
organizations.

TRUE
The emphasis is more on labor and overhead but the same framework is used.

Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-05 Apply the variance analysis model to nonmanufacturing costs.
Topic: Variance Analysis in Nonmanufacturing Settings

17-91
16. Labor variances are more important than material variances in service organizations.

TRUE
Labor is a much greater proportion of the inputs than are materials.

Blooms: Remember
Difficulty: 1 Easy

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

FALSE
The labor is substitutable.

Blooms: Remember

18. Output is usually defined as sales units in merchandising, but service organizations use measures of
activity units, like patient days.

TRUE
Service organization use activity units, while merchandisers typically use output defined in sales units.

Blooms: Remember

17-92
19. Two important characteristics to consider when deciding how many variances to review are how large
the variance is and the extent to which the variance can be managed.

TRUE
These are also called impact and controllability.

Blooms: Remember
Learning Objective: 17-06 Determine which variances to investigate.
Topic: Keeping an Eye on Variances and Standards

20. The only variances that should be investigated are those for which the expected benefits of correction
exceed the costs of investigating and correcting.

TRUE
This is a basic principle of cost-benefit.

Blooms: Remember

21. Some variances are the result of accounting errors and omissions, including timing differences.

TRUE
This would make the information less valuable for operating managers.

Blooms: Remember
Difficulty: 1 Easy

17-93
22. Some variances are the result of standards that are inaccurate or do not reflect the current production
process.

TRUE
Variances are only as good as the standards they are based on.

Blooms: Remember
Difficulty: 1 Easy

Multiple Choice Questions

(A) If variances are prorated at the end of the accounting period, an unfavorable direct materials price
variance will, when prorated, increase the value of the Finished Goods Inventory.
(B) Insignificant variances are not generally prorated at the end of the accounting period and are closed
to the Cost of Goods Sold.

A. Only A is true.

B. Only B is true.
Unfavorable variances are like expenses and will increase inventory; small variances normally are
closed to COGS.

Blooms: Remember

17-94
24. Standard costs should be based on:

A. perfect performance.

B. an average of past costs.
C. most likely level of performance.
D. reasonably attainable levels of efficiency.
Standards should not be too tight or too loose.

Blooms: Remember

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

A. the denominator hours chosen for the period.

B. the budgeted hours for the normal production level of activity.
C. the actual hours required to complete the output of the period.
D. the standard hours allowed to complete the output of the period.
Standard costing uses standard hours, not actual or budgeted.

Blooms: Remember

26. One feature of a standard cost system is that it:

A. makes the record keeping process more complex and difficult.
B. never requires updating if standard costs have been carefully determined.
C. reduces the amount of information available to a manager.
D. simplifies the record keeping process by allowing amounts to be carried at standard cost rather than
actual cost in the accounting records.
Record keeping is easier because the details are not traced to products but are treated in aggregate.

17-95
Blooms: Remember
Difficulty: 1 Easy

27. 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.

A. Only A is false.

B. Only B is false.
C. Both A and B are false.
D. Neither A nor B is false.
It is not always necessary to prorate variances; if production is greater than sales, absorption profits are
greater than variable costing profits.

Blooms: Remember

28. If raw materials are carried in the Direct Materials Inventory at standard cost, then it is reasonable to
assume that the:

A. price variance is recognized when materials are purchased.

B. price variance is recognized when materials are placed into production.
C. company does not follow generally accepted accounting principles.
D. efficiency variance is recognized when the materials are purchased.
To be carried at standard, price variations need to be removed. Standard cost for materials inventory
means standard price × actual quantities in the inventory.

Blooms: Remember

17-96
29. Ingredient A12H is a raw material used to make Calvin Corporation's major product. The standard cost
of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output. Data
Cost of material purchased in October, per

$23.10
ounce
The debit to the Raw Materials account for October would total:

A. $52,900.
B. $52,440.
C. $48,760.
D. $53,130.
See calculation below.
= 2,300 ounces × $23 per ounce

= $52,900 debit
Raw Materials ($23 × 2,300 ounces) 52,900
Material Price Variance 2,300 ounces ×

230
($23.10 - $23)
Accounts Payable ($23.10 × 2,300

53,130
ounces)

AICPA: FN Measurement
Blooms: Apply

17-97

$23.10
ounce
The credit to the Raw Materials account for October would total:

A. $52,440.
B. $48,760.
C. $52,900.
D. $53,130.
= 2,120 ounces × $23 per ounce

= $48,760 credit
Work-In-Process ($23 × 2,280

52,440
ounces*)
Material Quantity Variance ($23 ×
3,680
[2,120 ounces – 2,280 ounces*])
*600 units × 3.8 ounces = 2,280 ounces

Blooms: Apply

17-98

$23.10
ounce
The Materials Price Variance for October would be recorded as a:

A. debit of $230.

B. credit of $212.
C. debit of $212.
D. credit of $230.
= (2,300 ounces × $23.10) - (2,300 ounces × $23.00)

= $53,130 - $52,900
= $230 debit

Material Price Variance 2,300 ounces ×
230
($23.10 - $23)
Accounts Payable ($23.10 × 2,300
53,130
ounces)

Blooms: Apply

17-99

$23.10
ounce
The Materials Quantity Variance for October would be recorded as a:

A. credit of $3,680.

B. debit of $4,140.
C. credit of $4,140.
D. debit of $3,680.
= (2,120 ounces × $23) - (600 units × 3.8 ounces × $23)

= ($48,760 - $52,440)
= $3,680 credit
Work-In-Process ($23 × 2,280

52,440
ounces*)
Material Quantity Variance ($23 ×
3,680
[2,120 ounces – 2,280 ounces])

Blooms: Apply

17-100
33. Ingredient B4376 is used to make Razor Corporation's major product. The standard cost of Ingredient
B4376 is $24.50 per ounce and the standard quantity is 6.1 ounces per unit of output. In the most recent
month, 5,030 ounces of the compound were used to make 700 units of the output. When recording the
use of materials in production, Raw Materials would be:

A. credited for $123,235.

C. debited for $104,615.
See solution below.
= 5,030 ounces × $24.50 per ounce

= $123,235 credit
Work-In-Process ($24.50 × 4,270

104,615
ounces*)
Material Quantity Variance ($24.50
18,620
× [4,270 ounces* – 5,030 ounces])
Raw Materials ($24.50 × 5,030
123,235
ounces)

Blooms: Apply
Difficulty: 1 Easy

17-101
34. Barium Corporation has provided the following data concerning its most important raw material,
Compound XYY2:

Material used in production in August, liters 2,350
Actual output in August, units 400
When recording the use of materials in production, Raw Materials would be:

A. debited for $55,930.

C. credited for $55,930.
= 2,350 liters × $23.80 per liter

= $55,930 credit
Work-In-Process ($23.80 × 2,280

54,264
liters*)
Material Quantity Variance ($23.80 ×
1,666
[2,350 liters – 2,280 liters*])
Raw Materials ($23.80 × 2,350
55,930
liters)
*400 units × 5.7 liters = 2,280 liters

Blooms: Apply
Difficulty: 1 Easy

17-102
35. When the actual amount of a raw material used in production is greater than the standard amount
allowed for the actual output, the journal entry would include:

A. debit to Raw Materials; credit to Materials Quantity Variance.

B. debit to Work-In-Process; credit to Materials Quantity Variance.
C. debit to Raw Materials; debit to Materials Quantity Variance.
D. debit to Work-In-Process; debit to Materials Quantity Variance.
Work-In-Process X
Materials Quantity Variance X
Raw Materials X

AACSB: Reflective Thinking
Blooms: Remember

17-103
36. The Fantasy 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.
(AP - $0.60) × 20,000 = $200 F; AP = $0.59; $0.59 × 20,000 = $11,800

Blooms: Analyze

17-104


What was the total standard cost of direct materials purchased during May?

A. $9,150.
B. $11,800.
C. $12,000.
D. $12,200.
20,000 × $0.60 = $12,000

Blooms: Analyze
Difficulty: 1 Easy

17-105


What was the total standard cost of direct materials allowed during May?

A. $8,260.
B. $8,400.
C. $9,440.
D. $9,600.
(15,000 - SQA) × $0.60 = $600 F; SQA = 16,000; 16,000 × $0.60 = $9,600

Blooms: Analyze

39. Which of the following sales variances is further analyzed into the market size and industry volume
variances?

A. Quantity.
B. Efficiency.
C. Mix
.
D. Activity
.
Quantity and mix variances are an alternative breakdown of the activity variance.

17-106
Blooms: Remember
Difficulty: 1 Easy

(A) The market share variance is more controllable by the marketing department than the industry
volume variance.
(B) The industry volume variance is the portion of the sales activity variance due to a change in the

A. Only A is true.

B. Only B is true.
Market share is more controllable than the industry volume; the market share variance is related to the
proportion of sales in markets.

Blooms: Remember

41. The sales activity variance is equal to the sum of the market share variance and the:

A. selling price variance.

B. industry volume variance.
C. sales quantity variance.
D. sales mix variance.
Share + industry volume = activity

Blooms: Remember
Difficulty: 1 Easy

17-107
42. Using the abbreviations listed below, what is the formula for the industry volume variance?



(ACM)
C. (AMS - BMS) (ATM) (ACM)
This is the definition of the industry volume variance.

Blooms: Remember

43. Using the abbreviations listed below, what is the market share variance?



(ACM)
C. (AMS - BMS) (ATM) (ACM)
This is the definition of the market share variance.

Blooms: Remember
17-108

44. The budget for a given cost during a given period was $80,000. The actual cost for the period was
$72,000. Considering these facts, the plant manager has done a better-than-expected job in controlling
the cost if: (CPA adapted)

A. the cost is variable and actual production was 90% of budgeted production.
B. the cost is variable and actual production equals budgeted production.
C. the cost is variable and actual production was 80% of budgeted production.
D. the cost is a discretionary fixed cost and actual production equals budgeted production.
Since $72,000/$80,000 is 90%, the production would have to be greater than 90% for it to be better than
expected. A reduction in discretionary fixed cost may be either good or bad.

Blooms: Analyze

17-109
45. The exhibit below reflects a summary of performance for a single item of a retail store's inventory for
the month ended April 30: (CIA adapted)
Flexible
Static
Budget
Actual Flexible (Master)
Variance
Results Budget Budget
s
Sales
11,000 — 11,000 12,000
(units)
Revenue
$208,000 $12,000 U $220,000 $240,000
(sales)
Variable
121,000 11,000 U 110,000 120,000
costs
Contributio
$87,000 $23,000 U $110,000 $120,000
n margin
Fixed costs 72,000 — 72,000 72,000
Operating
$15,000 $23,000 U $38,000 $48,000
Income
The sales volume variance is:


$240,000 - $220,000 = $20,000 U

Blooms: Analyze

17-110
Actual Budget
Sales $235,000 $300,000
Variable costs (145,000) (180,000)
Fixed Costs (84,000) (80,000)
The effect of the sales quantity variance on the contribution margin for November is:


(5,000 - 6,000) × ($120,000/6,000) = $20,000 U

Blooms: Analyze

17-111
Actual Budget
Sales $235,000 $300,000
Variable costs (145,000) (180,000)
Fixed Costs (84,000) (80,000)
The sales price variance for November is:


($50 - $47) × 5,000 = $15,000 U

Blooms: Analyze

17-112
Actual Budget
Sales $235,000 $300,000
Variable costs (145,000) (180,000)
Fixed Costs (84,000) (80,000)
The variable cost flexible budget variance for November is:


$145,000 - [($180,000/6,000) × 5,000] = $5,000 F

Blooms: Analyze

17-113
Actual Budget
Sales $235,000 $300,000
Variable costs (145,000) (180,000)
Fixed Costs (84,000) (80,000)
What additional information is needed for Danner to calculate the dollar impact of a change in market
share on operating income for November? (CMA adapted)

A. Danner's budgeted market share and the budgeted total market size.
B. Danner's budgeted market share, the budgeted total market size, and average market selling price.
C. Danner's budgeted market share and the actual total market size.
D. Danner's actual market share and the actual total market size.
Market share variance = Actual sales - (Budgeted share × actual market). We already know actual sales.

Blooms: Apply

50. For a company that produces more than one product, the sales volume variance can be divided into
which two of the following additional variances? (CMA adapted)

A. Sales price variance and flexible budget variance.

B. Sales mix variance and sales price variance.
C. Sales efficiency variance and sales price variance.
D. Sales quantity variance and sales mix variance.
Volume variance = sales quantity + sales mix

Blooms: Apply
Difficulty: 3 Hard
17-114

51. Actual and budgeted information about the sales of a product are presented below for June: (CIA
adapted)
Actual Budget
Units 8,000 10,000
Sales Revenue $92,000 $105,000
The sales price variance for June was:


[($92,000/8,000) - ($105,000/10,000)] × 8,000 = $8,000 F

Blooms: Analyze

52. Which of the following income statement items is analyzed using the sales mix and the sales quantity
variances?

A. Operating expenses.

B. Cost of goods sold.
C. Gross margin.
D. Contribution margin.
When sales change, variable costs will also change, so contribution margin is the appropriate focus.

Blooms: Remember
Difficulty: 1 Easy

17-115
53. The sales mix variance would be:

A. favorable when a company sells relatively fewer of the products that have contribution margins
lower than average.
B. favorable when a company sells relatively more of the products that have contribution margins
higher than average.
C. unfavorable when a company sells relatively fewer of the products that have selling prices higher
than average.
D. unfavorable when a company sells more of the products that have selling prices lower than average.
The mix is shifting toward higher profit products.

Blooms: Apply

54. The sales quantity variance would be favorable when a company sells:

A. relatively fewer of the products bearing contribution margins lower than average.
B. relatively more of the products bearing contribution margins higher than average.
C. more total units than budgeted, holding the sales mix constant.
D. less total units than budgeted, holding the sales mix constant.
Profits will be higher with greater sales than budgeted.

Blooms: Apply

17-116
55. The Morton Company gathered the following information for the year.
Product Product
Total
K R
Budgeted sales mix
40% 60% 100%
(units)
Budgeted and actual
$48 $36
sales price
Budgeted variable cost
$32 $24
per unit
Actual sales (units) 126,000
Actual sales mix 60% 40% 100%
Fixed costs $80,000

A. $705,600.
B. $403,200.
C. $302,400.
D. $100,800.
[(50,400 - 75,600) × $16] + [(75,600 - 50,400) × $12] = ($403,200 F) + ($302,400 U) = $100,800

Blooms: Analyze

17-117
56. A machine distributor sells two models, basic and deluxe. The following information relates to its
master budget.
Basic Deluxe
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 basic model?

A. $1,280,000.
B. $1,600,000.
C. $11,200,000.
D. $12,800,000.
(7,000 - 8,000) × ($8,000 - $6,400) = $1,600,000

Blooms: Analyze
Difficulty: 1 Easy

17-118
master budget.
Basic Deluxe
Is the sales activity variance for the basic model favorable or unfavorable?

A. Favorable.
B. Unfavorable.
Unfavorable since sales are less than budgeted.

Blooms: Analyze
Difficulty: 1 Easy

17-119
master budget.
Basic Deluxe
What is the sales activity variance for the deluxe model?

A. $400,000.
B. $800,000.
C. $1,600,000.
D. $2,400,000.
(2,800 - 2,000) × ($12,000 - $9,000) = $2,400,000

Blooms: Analyze

17-120
master budget.
Basic Deluxe
Is the sales activity variance for the deluxe model favorable or unfavorable?

A. Favorable.
B. Unfavorable.
Favorable since sales are greater than budgeted.

Blooms: Analyze
Difficulty: 1 Easy

17-121
master budget.
Basic Deluxe
What is the sales mix variance for the basic model?

A. $256,000.
B. $1,344,000.
C. $1,600,000.
D. $2,520,000.
[7,000 - 80% × (7,000 + 2,800)] × ($8,000 - $6,400) = $1,344,000

Blooms: Analyze

17-122
master budget.
Basic Deluxe
Is the sales mix variance for the basic model favorable or unfavorable?

A. Favorable.
B. Unfavorable.
Unfavorable since actual sales were 7,000 units while a constant mix would have been 7,840.

Blooms: Analyze
Difficulty: 1 Easy

17-123
master budget.
Basic Deluxe
What is the sales quantity variance for the basic model?

A. $120,000.
B. $256,000.
C. $1,344,000.
D. $1,600,000.
(9,800 - 10,000) × (8,000/10,000) × ($8,000 - $6,400) = $256,000

Blooms: Analyze

17-124
master budget.
Basic Deluxe

A. Favorable.
B. Unfavorable.
Unfavorable since overall sales were less than budgeted.

Blooms: Analyze

17-125
master budget.
Basic Deluxe
What is the sales mix variance for the deluxe model based?

A. $1,176,000.
B. $1,344,000.
C. $2,400,000.
D. $2,520,000.
[2,800 - 20% × (7,000 + 2,800)] × ($12,000 - $9,000) = $2,520,000

Blooms: Analyze

17-126
master budget.
Basic Deluxe
Is the sales mix variance for the deluxe model favorable or unfavorable?

A. Favorable.
B. Unfavorable.
Favorable since actual sales were 2,800 units while a constant mix would have been 1,960.

Blooms: Analyze
Difficulty: 1 Easy

17-127
master budget.
Basic Deluxe
What is the sales quantity variance for the deluxe model?

A. $120,000.
B. $256,000.
C. $1,344,000.
D. $1,600,000.
(9,800 - 10,000) × (2,000/10,000) × ($12,000 - $9,000) = $120,000

Blooms: Analyze

17-128
master budget.
Basic Deluxe

A. Favorable.
B. Unfavorable.
Unfavorable since overall sales were less than budgeted.

Blooms: Analyze

17-129

What is Vargas' market share variance?

A. $37,296.88.
B. $40,906.25.
C. $35,700.00.
D. $32,550.00.
(166,250 - 175,000) × [($1,763,125/$32.50)/175,000] × ($32.50 - $18.75) = $37,296.88

Blooms: Analyze

17-130

Is the market share variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.
Favorable since market share was greater.

Blooms: Analyze
Difficulty: 1 Easy

17-131
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000
At the end of the year, the total fixed costs and the variable costs per unit were exactly as budgeted, but
the following units per product line were sold. Trend, Inc. analyzes the effects its sales variances have
on the profitability of the company.

A 253,230 $1,848,579
B 113,770 $1,479,010
What is the total sales price variance?

A. $22,203.50.
B. $28,442.50.
C. $50,646.50.
D. $79,088.50.
A: $1,890,000/252,000 = $7.50; $1,848,579/253,230 = $7.30

B: $1,377,000/108,000 = $12.75; $1,479,010/113,770 = $13.00
[($7.30 - $7.50) × 253,230] + [($13.00 - $12.75) × 113,770] = $22,203.50 U

Blooms: Analyze
Difficulty: 3 Hard

17-132
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000

A 253,230 $1,848,579
B 113,770 $1,479,010
Is the total sales price variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.
Unfavorable since actual sales are less than what the budgeted price × actual volume is.

Blooms: Analyze
Difficulty: 1 Easy

17-133
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000

A 253,230 $1,848,579
B 113,770 $1,479,010

A. $12,478.00.
B. $20,815.00.
C. $33,915.00.
D. $40,553.50.
A: 252,000/360,000 = .70; 253,230/367,000 = .69

B: 108,000/360,000 = .30; 113,770/367,000 = .31
[(.69 - .70) × 367,000 × $3.825] + [(.31 - .30) × 367,000 × $7.225] = $12,478.00 F

Blooms: Analyze
Difficulty: 3 Hard

17-134
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000

A 253,230 $1,848,579
B 113,770 $1,479,010
Is the total sales mix variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.
Favorable since a larger proportion of higher profit products were sold.

Blooms: Analyze
Difficulty: 1 Easy

17-135
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000

A 253,230 $1,848,579
B 113,770 $1,479,010
What is the total sales quantity variance?

A. $3,570.00.
B. $20,815.00.
C. $33,915.00.
D. $40,553.50.
[(367,000 - 360,000) × .70 × $3.825] + [(367,000 - 360,000) × .30 × $7.225] = $33,915 F

Blooms: Analyze
Difficulty: 3 Hard

17-136
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income 463,900 280,300
Units 252,000 108,000

A 253,230 $1,848,579
B 113,770 $1,479,010
Is the total sales quantity variance favorable or unfavorable?

A. Favorable
B. Unfavorable
Favorable since more units were sold.

Blooms: Analyze
Difficulty: 1 Easy

17-137
76. 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:


activity level:

2,592 DLHs
output
$9,100
overhead cost
$35,025
overhead cost
What is the predetermined overhead rate to the nearest cent?

A. $16.97.
B. $17.25.
C. $16.59.
D. $17.65.
Overhead ÷ Denominator level of activity

= ($8,500 + $34,625) ÷ 2,500 DLH
= $43,125 ÷ 2,500 hours
= $17.25

Blooms: Apply

17-138
77. 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:


activity level:

2,592 DLHs
output
$9,100
overhead cost
$35,025
overhead cost
How much overhead was applied to products during the period to the nearest dollar?

A. $44,712.
B. $44,125.
C. $43,125.
D. $44,850.
Predetermined overheard rate × actual hours

= $17.25 × 2,592 DLH
= $44,712

Blooms: Apply

17-139
78. The labor yield variance is actual total hours at:

B. actual mix times standard labor rates less standard total hours at standard mix times standard labor
rates.
C. actual mix times standard labor rates less actual total hours at standard mix times standard labor
rates.
D. standard mix times standard labor rates less standard total hours at standard mix times standard
labor rates.
This is the definition of the labor yield variance.

Blooms: Remember

79. The labor mix variance is actual total hours at:

B. actual mix times standard labor rates less standard total hours at standard mix times standard labor
rates.
C. actual mix times standard labor rates less actual total hours at standard mix times standard labor
rates.
D. standard mix times standard labor rates less standard total hours at standard mix times standard
labor rates.
This is the definition of the labor mix variance.

Blooms: Remember

17-140
80. The computation of the material yield variance does not require the:

A. standard material mix.

B. standard material price.
C. standard output units.
D. total material actually acquired.
Yield compares actual usage with budgeted usage.

Blooms: Remember

81. A credit balance in the labor yield variance implies:

A. the total units produced was greater than the expected number of units given the total labor hours
actually used.
B. the total units produced was less than the expected number of units given the total labor hours
actually used.
C. the total units produced was greater than the expected number of units given the total standard hours
allowed.
D. the total units produced was less than the expected number of units given the total standard hours
allowed.
This would be a favorable variance.

Blooms: Apply
Difficulty: 3 Hard

17-141
82. What is the correct journal entry to record a favorable materials mix variance assuming all material
variances are recognized when the direct materials are issued to production?

A. Work in
XX
Process
X
Inventory
Direct
Materials XX

Mix X
Variance
Direct
XX
material
X
inventory
B. Work in
XX
Process
X
Inventory
Direct
Materials XX

Mix X
Variance
Direct
XX
material
X
inventory
C. Finished
XX
Goods
X
Inventory
Direct
Materials XX

Mix X
Variance
Work
in XX

Process X
Inventory
D. Finished
XX
Goods
X
Inventory
Direct
Materials XX

Mix X
Variance
Work
in XX

Process X
Inventory
Favorable variance = credit. Since materials are being issued, the direct material inventory is being
reduced.
17-142

Blooms: Apply

17-143
17-144
83. What is the correct journal entry to record direct labor when the actual labor mix is favorable and the
total standard hours allowed is greater than the total actual hours worked?

A. Work in
Process XX

Inventor X
y
Direct
labor XX

yield X
variance
Direct
labor XX

mix X
variance
Wages XX

Payable X
B. Work in
XX
Process
X
Inventory
Direct
labor XX

yield X
variance
Direct
XX
labor mix
X
variance
Wages XX

Payable X
C. Finished
XX
Goods
X
Inventory
Direct
XX
labor mix
X
variance
Direct
labor XX

yield X
variance
Work
in XX

Process X
Inventory
D. Finished
XX
Goods
X
Inventory
Direct XX
labor X
yield
17-145
variance
Direct
XX
labor mix
X
variance
Work
in XX

Process X
Inventory
Favorable variance = credit. Since actual hours are less than standard, the yield variance will also be
favorable. Direct labor is being paid so the credit is to wages payable.

Blooms: Apply

17-146
84. The Shum Company makes a product, Z, from two materials: X and Y. The standard prices and
quantities are as follows:
X Y
X Y
Pounds used 216,000 114,000
What is the total direct materials mix variance for May?

A. $12,000.
B. $24,000.
C. $36,000.
D. $60,000.
X: {216,000 - [(10/15) × (216,000 + 114,000)]} × $6 = $24,000 F;

Y: {114,000 - [(5/15) × (216,000 + 114,000)]} × $9 = $36,000 U;
Total mix variance = $12,000 U

Blooms: Analyze

17-147
X Y
X Y
Pounds used 216,000 114,000
Is the total direct materials mix variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.
Unfavorable since the mix shifted to higher cost materials.

Blooms: Analyze
Difficulty: 1 Easy

17-148
X Y
X Y
Pounds used 216,000 114,000
What is the total direct material yield variance for May?

A. $45,000.
B. $81,000.
C. $109,800.
D. $117,000.
[(216,000 - 210,000) × $6] + [(114,000 - 105,000) × $9] = $117,000 U

Blooms: Analyze

17-149
X Y
X Y
Pounds used 216,000 114,000
Is the total direct material yield variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.
Unfavorable since it took more materials to achieve the same output.

Blooms: Analyze
Difficulty: 1 Easy

17-150
88. The Becton Enterprises (BE) produces a gasoline additive, Charger Power. 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 Charger Power is $135. The standard materials mix
and related standard cost of each chemical used in a 500-liter batch are:

Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00
schedule below. A total of 140 batches of Charger Power were manufactured during the current
production period. The controller of BE has determined its costs and chemical usage variations at the
end of the production period.

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420
If BE recognizes all variances at the earliest possible moment, what is the total material price variance?
A. $160.
B. $540.
C. $890.
D. $1,270.
($5,365 + $6,240 + $5,840 + $2,220) - [(25,000 × $0.200) + (13,000 × $0.425) + (40,000 × $0.150) +
(7,500 × $0.300)] = $19,665 - $18,775 = $890 U

Blooms: Analyze
17-151


Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420
Is the total material price variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.
Unfavorable since prices were higher.

Blooms: Analyze
Difficulty: 1 Easy

17-152

Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420
What is the total materials yield variance?

A. $388.50.
B. $294.50.
C. $280.00.
D. $94.50.
Average cost per liter = $135/600 = $0.225; Used 84,420 × $0.225 = $18,994.50; Standard input: 600
liter × 140 batches × $0.225 = $18,900; Yield variance = $18,994.50 - $18,900 = $94.50 U

Blooms: Analyze
Difficulty: 3 Hard
17-153


Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420

A. Favorable.
B. Unfavorable.
Unfavorable since more inputs were used.

Blooms: Analyze
Difficulty: 1 Easy

17-154

Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420
What is the total materials mix variance?

A. $476.00.
B. $420.00.
C. $388.50.
D. $280.00.
Cost of used: [(26,600 × $0.200) + (12,880 × $0.425) + (37,800 × $0.150) + (7,140 × $0.300)] =
$18,606; Average cost per liter = $135/600 = $0.225; Used 84,420 × $0.225 = $18,994.50; $18,606 -
$18,994.50 = $388.50 F

Blooms: Analyze
17-155
Difficulty: 3 Hard


Echol 200 $0.200 $40.00
Protex 100 0.425 42.50
Benz 250 0.150 37.50
CT-40 50 0.300 15.00
600 $135.00

Chemical
Purchased Cost Used
Echol 25,000 $5,365 26,600
Protex 13,000 6,240 12,880
Benz 40,000 5,840 37,800
CT-40 7,500 2,220 7,140
85,500 84,420

A. Favorable.
B. Unfavorable.
Favorable since shift of materials was to lower cost materials.

Blooms: Analyze
Difficulty: 1 Easy

17-156
94. A company makes a product using two materials, one of which is interchangeable with a third material.
The standards for producing one 200-pound batch are presented below. The last 200-pound batch was
produced using 140 pounds of M and 90 pounds of O. The price of M was $0.03 per pound and the
actual price of O was $0.10.

O 0 $.10 $0
H 80 .08 6.40
M 120 .02 2.40
200 $8.80
What is the materials mix variance?

A. $1.68.
B. $3.00.
C. $1.32.
D. $0.84.
O: [(90/230) × 230 × $0.10)] - [(0/200 × 200 × $0.10] = $9.00 U

M: [(140/230) × 230 × $0.02] - [(120/200) × 200 × $0.02] = $.40 U
H: [(0/230) × 230 × $0.08] - [(80/200) × 200 × $0.08] = $6.40 F
Total mix variance = $9.00 U + $0.40 U + $6.40 F = $3.00 U

Blooms: Analyze
Difficulty: 3 Hard

17-157

O 0 $.10 $0
H 80 .08 6.40
M 120 .02 2.40
200 $8.80

A. Favorable.
B. Unfavorable.
Unfavorable since materials shifted to more costly materials.

Blooms: Analyze
Difficulty: 1 Easy

17-158

O 0 $.10 $0
H 80 .08 6.40
M 120 .02 2.40
200 $8.80
What is the materials yield variance?

A. $1.12.
B. $1.68.
C. $3.00.
D. $1.32.
(230 - 200) × ($8.80/200) = $1.32 U

Blooms: Analyze

17-159

O 0 $.10 $0
H 80 .08 6.40
M 120 .02 2.40
200 $8.80

A. Favorable.
B. Unfavorable.
Unfavorable since more inputs were needed.

Blooms: Analyze
Difficulty: 1 Easy

17-160

What was Bonner's direct labor yield variance?

A. $13,450.
B. $9,675.
C. $9,225.
D. $5,000.
$4,500 = $189,000 - (30,000 × SR); SR = $6.15; Efficiency variance = (30,000 - 31,500) × $6.15; EV =
$9,225 F; $9,225 F = $4,225 U + Yield variance; Yield variance = $13,450 F

Blooms: Analyze
Difficulty: 3 Hard


Is the direct labor yield variance favorable or unfavorable?

A. Favorable.
B. Unfavorable.
Favorable since less labor was needed.

17-161
Blooms: Analyze


What was the standard direct labor rate?

A. $3.50.
B. $3.80.
C. $4.00.
D. $5.80.
Efficiency variance = $4,000 F + $2,000 F = $6,000 F; (AH - 45,000) × SR = $6,000; $165,300 - (AH ×
SR) = $8,700; SR = $4.00

Blooms: Analyze
Difficulty: 3 Hard

17-162

What was Prince's actual direct labor rate?

A. $3.60.
B. $3.70.
C. $3.80.
D. $3.90.
$165,300 - (AH × $4.00) = $8,700; AH = 43,500; (AR - $4.00) × 43,500 = $8,700 F; AR = $3.80

Blooms: Analyze
Difficulty: 3 Hard

17-163
machine-
hours
$178,640
overhead costs
machine-
hours
Standard machine-hours machine-
9,300
allowed for the actual output hours
$172,980
overhead costs
The budget variance for April is:

A. $5,660 U.
B. $8,120 F.
C. $8,120 U.
D. $5,660 F.
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost

= $172,980 - $178,640
= $5,660 F

Blooms: Apply
Difficulty: 1 Easy

17-164
machine-
hours
$178,640
overhead costs
machine-
hours
9,300
Actual fixed manufacturing machine-
$172,980
overhead costs hours
The volume variance for April is:

A. $10,150 U.
B. $8,120 U.
C. $8,120 F.
D. $10,150 F.
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $178,640 - (9,300 MH × $20.30 per hour*)
= $178,640 - $188,790
= $10,150 F
*$178,640 ÷ 8,800 hours = $20.30 per hour

Blooms: Apply
Difficulty: 1 Easy

17-165
104. Yellon Company uses a standard cost system in which it applies manufacturing overhead to units of
product on the basis of standard direct labor-hours (DLHs). The following data pertain to last month's
operations:

$5,000
overhead costs
Actual fixed manufacturing overhead
$5,500
costs
Standard hours allowed for output 2,400 DLHs
Predetermined overhead rate ($2 per
$5
variable + $3 fixed) DLH
The fixed manufacturing overhead budget variance is:

A. $500 U.
B. $500 F.
C. $2,200 U.
D. $1,700 U.

= $5,500 - $5,000
= $500 U

Blooms: Apply

105. Which of the following statements would be false regarding application of the variance analysis model
to nonmanufacturing costs?

A. The basic framework used for manufacturing is also used for nonmanufacturing costs.
B. Merchandising and service organizations focus on marketing and administrative costs to measure
efficiency and control costs.
C. The need for analysis of price and efficiency variances in nonmanufacturing settings is increasing.
D. Service organizations are unable to substitute different types of labor.
This statement is false, because labor is substitutable in service organizations.

17-166
Blooms: Remember

106. The Foxmoore 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 most likely be within the control
of the marketing department?

A. Sales mix.

B. Market share.
C. Sales quantity.
D. Industry volume.
The share and industry volume would be the logical variances to look at in explaining a revenue
shortfall. Of these two, market share is more controllable.

Blooms: Remember

107. Which of the following factors should not be considered when deciding whether to investigate a
variance?

A. Absolute or relative magnitude of the variance.

B. Trend or pattern of the variance over time.
C. Chance that an "out-of-control" situation can be corrected.
D. Whether the variance is favorable or unfavorable.
Favorable variances should also be considered, not just unfavorable.

Blooms: Remember

17-167
108. There are several reasons why actual results differ from standards. Which of the following does not
represent a reason why a variance might occur?

A. Inaccurate information from the accounting system.

B. Increasing the accuracy of a variance report by decreasing its timeliness.
C. Standards which do not reflect the current economic conditions.
D. Operating conditions that are consistently inefficient.
Reporting does not affect the underlying circumstances that cause a variance.

Blooms: Remember
Difficulty: 3 Hard

Essay Questions

17-168
109. Fremont, Inc., builds storage boxes to custom order. Materials include 20 board feet of lumber at
$1.25/board foot. Standards call for 2 hours of labor at $15/hr.
During March, 4,200 boxes were built. Materials purchased totaled $103,890 for 86,300 board feet of
lumber. Actual lumber usage in production was 82,310 board feet. The March payroll was $139,360 for
9,150 hours.
Required:


a. $3,985 F
b. $2,112.50 F
c. $2,110 U
d. $11,250 U
Feedback: a. $103,890 - (86,300 × $1.25) = $3,985 F

b. (82,310 × $1.25) - (4,200 × 20 × $1.25) = $2,112.50 F
c. $139,360 - (9,150 × $15) = $2,110 U
d. (9,150 × $15) - (4,200 × 2 × $15) = $11,250 U

Blooms: Analyze

17-169
110. Malloy Corporation has provided the following data concerning its most important raw material,
compound I51D:

Cost of material purchased in October, per liter $30.70
Material purchased in October, liters 4,000
Material used in production in October, liters 3,580
Required:


a. Entry to record purchase of materials:
Raw materials
($30.50 × 4,000 122,000
liters)
Materials price
variance (4,000
800
liters × ($30.70 -
$30.50))
Accounts payable
($30.70 × 4,000 122,800
liters)
b. Entry to record use of materials:
Work-in-process
($30.50 × 3,680 112,240
liters*)
Materials quantity
variance ($30.50
3,050
× [3,580 liters –
3,680 liters*])
Raw materials
($30.50 × 3,580 109,190
liters)
*800 units × 4.6 liters = 3,680
17-170

Blooms: Apply
Difficulty: 1 Easy

111. The data below relate to a product of Omaha Company.
Standard costs:
Labor, 7,420 hours $140,170
Required:


a. $6,230 U
b. $2,450 U
c. $6,610 U
d. $3,960 U
Feedback: a. $48,230 - (6,000 × $7) = $6,230 U

b. (5,750 × $7) - (1,800 × 3 × $7) = $2,450 U
c. $140,170 - (7,420 × $18) = $6,610 U
d. (7,420 × $18) - (1,800 × 4 × $18) = $3,960 U

Blooms: Analyze

17-171
17-172
112. Compound Y23Z is used by Carrington Corporation to make one of its products. The standard cost of
compound Y23Z is $38.70 per ounce and the standard quantity is 4.6 per unit of output. Data
concerning the compound in the most recent month appear below:
Cost of material purchased in November, per

$39.20
ounce
Material purchased in November, ounces 2,800
Material used in production in November,
2,360
ounces
Actual output in November, units 500
Required:


a. Entry to record purchase of materials:
Raw materials
($38.70 × 2,800 108,360
ounces)
Materials price
variance (2,800
1,400
ounces × [$39.20 -
$38.70])
Accounts payable
($39.20 × 2,800 109,760
ounces)
b. Entry to record use of materials:
Work-in-process
($38.70 × 2,300 89,010
ounces*)
Materials quantity
variance ($38.70
2,322
× [2,360 ounces –
2,300 ounces*])
Raw
materials($38.70 91,332
× 2,360 ounces)
17-173
*500 units at 4.6 ounces = 2,300 ounces

Blooms: Apply
Difficulty: 1 Easy

113. The following standards have been established for a raw material used to make product P62:
Standard quantity of the material per

6.3 pounds
unit of output
Standard price of the material $15.50 per pound
The following data pertain to a recent month's operations:
Actual material purchased 6,700 pounds

Actual cost of material
$100,500
purchased
Actual material used in
6,400 pounds
production
units of product
Actual output 920
P62
Required:
a. What is the materials price variance for the month?

b. What is the materials quantity variance for the month?

a. Materials price variance = (AQ × AP) - (AQ × SP)

= $100,500 - (6,700 pounds × $15.50 per pound)
= $100,500 - $103,850
= $3,350 F
b. Materials quantity variance = SP(AQ - SQ)

= $15.50 per pound (6,400 pounds - 5,796 pounds*)
= $99,200 - $89,838
= $9,362 U
*920 units × 6.3 pounds = 5,796 pounds

Blooms: Apply
Difficulty: 1 Easy

17-174
114. High Tech builds fence panels to custom order. Materials include 15 units of lumber at $2.25/unit.
Standards call for 3 hours of labor at $25/hr.
During October, 3,121 fence panels were built. Materials purchased totaled $113,650 for 51,100 units
of lumber. Actual lumber usage in production was 51,069 units. The October payroll was $248,000 for
9,500 hours.
Required:


a. $1,325 F
b. $9,571.50 U
c. $10,500 U
d. $3,425 U
Feedback: a. $113,650 - (51,100 × $2.25) = $1,325 F

b. (51,069 × $2.25) - (3,121 × 15 × $2.25) = $9,571.50 U
c. $248,000 - (9,500 × $25) = $10,500 U
d. (9,500 × $25) - (3,121 × 3 × $25) = $3,425 U

Blooms: Analyze

17-175
17-176
115. The Oregon Company produces and sells a single product. Standards have been established for the
product as follows:
Direct materials: 5 pounds @ $3.50 per pound = $17.50

Direct labor: 3 hours @ $5.50 per hour = $16.50
Actual cost and usage figures for the past month follow:
Units produced 750

Direct materials used 4,000 pounds
Direct materials purchased (4,500
$14,400
pounds)
Direct labor cost (2,000 hours) $11,200
Required:
Prepare journal entries to record:
a. The purchase of raw materials.

b. The usage of raw materials in production.
c. The incurrence of direct labor cost.

a.
Raw materials
($3.50 × 4,500 15,750
pounds)
Material Price
variance ($14,400
1,350
– [4,500 pounds ×
$3.50])
Accounts Payable 14,400
b.
Work-in-Process
($3.50 × 3,750 13,125
pounds*)
Materials
quantity variance
($3.50 × [4,000 875
pounds - 3,750
pounds*])
Raw material 14,000
17-177
($3.50 × 4,000
pounds)
*750 units × 5 pounds = 3,750 pounds
c.
Work-in-Process
($5.50 × 2,250 12,375
hours*)
Labor rate
variance (2,000
200
hours × [$5.60 -
$5.50])
Labor efficiency
variance $5.50 ×
1,375
[2,000 hours –
2,250 hours*]
Wages Payable 11,200
*750 units × 3 hours = 2,250 hours

Blooms: Apply

17-178
116. The data below relate to a product of Bullfrog Company.
Standard costs:
Labor, 10,360 hours $160,580
Required:


a. $1,600 F
b. $600 U
c. $5,180 U
d. $6,600 F
Feedback: a. $46,400 - (8,000 × $6) = $1,600 F

b. (7,300 × $6) - (3,600 × 2 × $6) = $600 U
c. $160,580 - (10,360 × $15) = $5,180 U
d. (10,360 × $15) - (3,600 × 3 × $15) = $6,600 F

Blooms: Analyze

17-179
117. The next year's budget for Howard, Inc., a multi-product company, is given below:
Product A Product B
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income $470,200 283,000
Units 252,000 108,000
Market share 12.5% 20.0%
the following units per product line were sold. Howard analyzes the effects its sales variances have on
the profitability of the company.

A 252,230 $1,848,579 15.0%
B 113,770 $1,479,010 17.0%
Required:


a. A: $885.50 F; B: $41,832.50 F
b. A: $161,847.74 F; B: $145,558.25 U
c. A: $160,962.24 U; B: $187,390.75 F
Feedback: Contribution margins: A: ($1,890,000 - 919,800)/252,000 = $3.85; B: ($1,377,000 -

$594,000)/108,000 = $7.25
Budgeted industry: A: 252,000/12.5% = 2,016,000; B: 108,000/20% = 540,000
Actual industry: A: 252,230/15% = 1,681,533; B: 113,770/17% = 669,235
a. A: (252,230 × $3.85) - (252,000 × $3.85) = $885.50 F

B: (113,770 × $7.25) - (108,000 × $7.25) = $41,832.50 F
b. A: (252,230 × $3.85) - [(1,681,533 × 12.5%) × $3.85] = $161,847.74 F
B: (113,770 × $7.25) - [(669,235 × 20%) × $7.25] = $145,558.25 U
c. A: [(1,681,533 × 12.5%) × $3.85] - (252,000 × $3.85) = $160,962.24 U
B: [(669,235 × 20%) × $7.25] - (108,000 × $7.25) = $187,390.75 F

Blooms: Analyze
17-180
Difficulty: 3 Hard

118. The Buffett Company had the following expectations:

Buffett’s budgeted sales 54,250
Buffett’s actual sales 56,525
Required:
a. Compute Buffett's sales activity variance.

b. Compute Buffett's market share variance.
c. Computer Buffett's industry volume variance.

a. $29,575 F
b. $64,837.50 F
c. $35,262.50 U
Feedback: Budgeted market share: 54,250/175,000 = 31%

a. (56,525 × $13) - (54,250 × $13) = $29,575 F
b. (56,525 × $13) - [(166,250 × 31%) × $13] = $64,837.50 F
c. [(166,250 × 31%) × $13] - (54,250 × $13) = $35,262.50 U

Blooms: Analyze

17-181
119. The next year's budget for Alton, Inc., is given below:
Product 1 Product 2
Sales $945,000 $688,500
Fixed costs 300,000 300,000
Net income $185,100 $91,500
Units 126,000 54,000
Market share 12% 20.0%
the following units per product line were sold:

1 126,200 $958,579 16.0%
2 56,800 $721,010 14.2%
Required:


a. 1: $770 F; 2: $20,300 F
b. A: $121,467.50 F; B: $168,200 U
c. A: $120,967.50 U; B: $188,500 F
Feedback: Contribution margins: 1: ($945,000 - 459,900)/126,000 = $3.85; 2: ($688,500 -

$297,000)/54,000 = $7.25
Budgeted industry: A: 126,000/12% = 1,050,000; B: 54,000/20% = 270,000
Actual industry: A: 126,200/16% = 788,750; B: 56,800/14.2% = 400,000
a. 1: (126,200 × $3.85) - (126,000 × $3.85) = $770 F
2: (56,800 × $7.25) - (54,000 × $7.25) = $20,300 F
b. A: (126,200 × $3.85) - [(788,750 × 12%) × $3.85] = $121,467.50 F
B: (56,800 × $7.25) - [(400,000 × 20%) × $7.25] = $168,200 U
c. A: [(788,750 × 12%) × $3.85] - (126,000 × $3.85) = $120,697.50 U
B: [(400,000 × 20%) × $7.25] - (54,000 × $7.25) = $188,500 F

Blooms: Analyze
Difficulty: 3 Hard
17-182

120. The Stangle Company had the following expectations:

Stangle’s budgeted sales 108,500
Stangle’s actual sales 113,050
Required:
a. Compute Stangle's sales activity variance.

b. Compute Stangle's market share variance.
c. Computer Stangle's industry volume variance.

a. $54,600 F
b. $119,700 F
c. $65,100 U
Feedback: Budgeted market share: 108,500/350,000 = 31%
b.
a. (113,050 × $12) - (108,500 × $12) = $54,600 F
b. (113,050 × $12) - [(332,500 × 31%) × $12] = $119,700 F
c. [(332,500 × 31%) × $12] - (108,500 × $12) = $65,100 U

Blooms: Analyze

17-183
121. Porcini Enterprises produces two products, AR and QT. Actual and budgeted information for the year
ending April 30 is provided below:
Product AR Product QT
Unit sales 2,000 2,800 6,000 5,600
Sales $6,000 $7,560 $12,000 $11,760
Fixed costs 1,800 1,900 2,400 2,800
Variable costs 2,400 2,800 6,000 5,880
Required:


a. AR: $1,440 F; QT: $400 U

b. AR: $1,260 F; QT: $700 U
c. AR: $180 F; QT: $300 F
Feedback: Contribution margins: AR: ($6,000 - $2,400)/2,000 = $1.80; QT: ($12,000 - $6,000)/6,000 =
$1.00
a. AR: (2,800 × $1.80) - (2,000 × $1.80) = $1,440 F

QT: (5,600 × $1) - (6,000 × $1) = $400 U
b. AR: (2,800 × $1.80) - [(2,800 + 5,600) × 25% × $1.80] = $1,260 F
QT: (5,600 × $1) - [(2,800 + 5,600) × 75% × $1] = $700 U
c. AR: [(2,800 + 5,600) × 25% × $1.80] - (2,000 × $1.80) = $180 F
QT: [(2,800 + 5,600) × 75% × $1] - (6,000 × $1) = $300 F

Blooms: Analyze

17-184
122. The next year's budget for Canfield, Inc., a multi-product company, is given below:
Product 1 Product 2
Sales $1,890,000 $1,377,000
Fixed costs 500,000 500,000
Net income $470,200 $283,000
Units 252,000 108,000
the following units per product line were sold. Canfield analyzes the effects its sales variances have on
the profitability of the company.

A 252,230 $1,848,579
B 113,770 $1,479,010
Required:


a. A: $885.50 F; B: $41,832.50 F
b. A: $15,284.50 U; B: $28,782.50 F
c. A: $16,170.00 F; B: $13,050.00 F
Feedback: Contribution margins: A: ($1,890,000 - 919,800)/252,000 = $3.85; B: ($1,377,000 -

$594,000)/108,000 = $7.25
Budgeted mix: A: 252,000/(252,000 + 108,000) = 70%; B: 30%
a. A: (252,230 × $3.85) - (252,000 × $3.85) = $885.50 F

B: (113,770 × $7.25) - (108,000 × $7.25) = $41,832.50 F
b. A: (252,230 × $3.85) - [(252,230 + 113,770) × 70% × $3.85] = $15,284.50 U
B: (113,770 × $7.25) - [(252,230 + 113,770) × 30% × $7.25] = $28,782.50 F
c. A: [(252,230 + 113,770) × 70% × $3.85] - (252,000 × $3.85) = $16,170.00 F
B: [(252,230 + 113,770) × 30% × $7.25] - (108,000 × $7.25) = $13,050.00 F

Blooms: Analyze
17-185

123. Virginia Enterprises produces two products, Standard and Deluxe. Actual and budgeted information for
the year is provided below:
Standard Deluxe
Unit sales 4,000 5,600 12,000 11,200
Sales $6,000 $7,560 $12,000 $11,760
Variable costs 2,400 2,800 $6,000 5,800
Required:


a. Standard: $1,440 F; Deluxe: $400 U

b. Standard: $1,260 F; Deluxe: $700 U
c. Standard: $180 F; Deluxe: $300 F
Feedback: Contribution margins: Standard: ($6,000 - $2,400)/4,000 = $0.90; Deluxe: ($12,000 -

$6,000)/12,000 = $0.50
a. Standard: (5,600 × $0.90) - (4,000 × $0.90) = $1,440 F

Deluxe: (11,200 × $0.50) - (12,000 × $0.50) = $400 U
b. Standard: (5,600 × $0.90) - [(5,600 + 11,200) × 25% × $0.90] = $1,260 F
Deluxe: (11,200 × $0.50) - [(5,600 + 11,200) × 75% × $0.50] = $700 U
c. Standard: [(5,600 + 11,200) × 25% × $0.90] - (4,000 × $0.90) = $180 F
Deluxe: [(5,600 + 11,200) × 75% × $0.50] - (12,000 × $0.50) = $300 F

Blooms: Analyze

17-186
124. The next year's budget for Temper, Inc., is given below:
Product 1 Product 2
Sales $945,000 $688,500
Fixed costs 300,000 300,000
Net income $185,100 $91,500
Units 126,000 54,000
the following units per product line were sold:

1 126,200 $958,579
2 56,800 $721,010
Required:


a. 1: $770 F; 2: $20,300 F
b. 1: $7,315 U; 2: $13,775 F
c. 1: $8,085 F; 2: $6,525 F
Feedback: Contribution margins: 1: ($945,000 - 459,900)/126,000 = $3.85; 2: ($688,500 -

$297,000)/54,000 = $7.25
Budgeted mix: 1: 126,000/(126,000 + 54,000) = 70%; 2: 30%

a. 1: (126,200 × $3.85) - (126,000 × $3.85) = $770 F
2: (56,800 × $7.25) - (54,000 × $7.25) = $20,300 F
b. 1: (126,200 × $3.85) - [(126,200 + 56,800) × 70% × $3.85] = $7,315 U
2: (56,800 × $7.25) - [(126,200 + 56,800) × 30% × $7.25] = $13,775 F
c. 1: [(126,200 + 56,800) × 70% × $3.85] - (126,000 × $3.85) = $8,085 F
2: [(126,200 + 56,800) × 30% × $7.25] - (54,000 × $7.25) = $6,525 F

Blooms: Analyze

17-187
17-188
125. A chemical company in the Midwest produces a solvent used by manufacturers of plastics. Three basic
chemicals go into this solvent. The standards for one-liter of this product are:
Chemical A: 500 ml. @ $10 per liter
Chemical B: 100 ml. @ $50 per liter
Chemical C: 400 ml. @ $20 per liter
Chemical A: 6,400 liters @ $9.00 per liter

Chemical B: 900 liters @ $75.00 per liter
Chemical C: 4,200 liters @ $20.00 per liter
Because these chemicals are volatile, the company uses them immediately upon purchase, so there are
no beginning and ending inventories.
Required:


a. A: $6,400 F; B: $22,500 U; C: 0
b. A: $14,000 U; B: $5,000 F; C: $4,000 U
c. A: $6,500 U; B: $12,500 F: C:$8,000 F
d. A: $7,500 U; B: $7,500 U; C: $12,000 U
Feedback: a. A: 6,400 × ($9.00 - $10.00) = $6,400 F

B: 900 × ($75 - $50) = $22,500 U
C: 4,200 × ($20 - $20) = 0
b. A: [6,400 - (10,000 × .5)] × $10 = $14,000 U

B: [900 - (10,000 × .1)] × $50 = $5,000 F
C: [4,200 - (10,000 × .4)] × $20 = $4,000 U
Actual
c. Cost Std. Mix Cost Variance
inputs
50% ×
A 6,400 $64,000 11,500 × $57,500 $6,500 U
$10
B 900 45,000 10% × 57,500 12,500 F
17-189
11,500 ×
$50
40% ×
C 4,200 84,000 11,500 × 92,000 8,000 F
$20
$193,000 $207,000 $14,000 F
Std mix Std mix

d. @ act Cost @ std Cost Variance
inputs inputs
50% × 50% ×
A 11,500 $57,500 10,000 $50,000 $7,500 U
× $10 × $10
10% × 10% ×
B 11,500 57,500 10,000 50,000 50,000 U
× $50 × $10
40% × 40% ×
C 11,500 92,000 10,000 80,000 12,000 U
× $20 × $10
$207,000 $180,000 $27,000 U

Blooms: Analyze
Difficulty: 3 Hard

17-190
17-191
126. A chemical company produces a product used by manufacturers of plastics. Two basic chemicals go
into this product. The standards for one-liter of this product are:

Chemical 1: 5,400 liters @ $59.00 per liter

Chemical 2: 900 liters @ $225.00 per liter
Because these chemicals are volatile, the company uses them immediately upon purchase, so there are
no beginning and ending inventories.
Required:


a. Chem 1: $48,600 U; Chem 2: $22,500 U

b. Chem 1: $70,000 U; Chem 2: $20,000 F
c. Chem 1: $18,000 U; Chem 2: $72,000 F
d. Chem 1: $52,000 U; Chem 2: $52,000 U
Feedback: a. 1: 5,400 × ($59.00 - $50.00) = $48,600 U

2: 900 × ($225 - $200) = $22,500 U
b. 1: [5,400 - (5,000 × .8)] × $50 = $70,000 U
2: [900 - (5,000 × .2)] × $200 = $20,000 F
Actual Std. Varianc

c. Cost Cost
inputs Mix e
80%
5,400 × ×
1 $270,000 $252,000 $18,000 U
$50 6,300
× $50
2 900 × 180,000 20% 252,000 72,000 F
$200 ×
6,300
×
17-192
$200
6,300 $450,000 $504,000 $54,000 F
Std Std
mix mix
d. Cost Cost Variance
@ act @ std
inputs inputs
80% × 80% ×
1 6,300 $252,000 5,000 $200,000 $52,000 U
× $50 × $50
20% × 20% ×
6,300 5,000
2 $252,000 200,000 52,000 U
× ×
$200 $200
$504,000 $400,000 $104,000 U

Blooms: Analyze
Difficulty: 3 Hard

17-193
17-194
provided below:
Standard rates:
Level One: $20 per hour

Level Two: $15 per hour
Two (2) Level One workers at 15-minutes each

Three (3) Level Two workers at 10 minutes each
Actual Results:

Labor used:
4,000 hours of Level One workers at $25 per hour
6,800 hours of Level Two workers at $15 per hour
Required:

a. L1: $20,000 U; L2: 0

b. L1: $20,000 F; L2: $27,000 U
c. L1: $28,000 F; L2: $21,000 U
d. L1: $8,000 U; L2: $6,000 U
Feedback: a. L1: (4,000 × $25) - (4,000 × $20) = $20,000 U

L2: (6,800 × $15) - (6,800 × $15) = 0
b. L1: (4,000 × $20) - [(10,000 × 2 × 15/60) × $20] = $20,000 F
L2: (6,800 × $15) - [(10,000 × 3 × 10/60) × $15] = $27,000 U
c.
Actual Std. Varianc

Cost Cost
inputs Mix e
1 4,000 × $80,000 50% × $108,000 $28,000 F
17-195
10,800
$20
× $20
50% ×
6,800 ×
2 102,000 10,800 81,000 21,000 U
$15
× $15
10,800 $182,000 $189,000 $7,000 F
d.
Std Std
mix @ mix @
Cost Cost Variance
act std
inputs inputs
50% × 50% ×
1 10,800 $108,000 10,000 $100,000 $8,000 U
× $20 × $20
50% × 50% ×
2 10,800 81,000 10,000 75,000 6,000 U
× $15 × $15
$189,000 $175,000 $14,000 U

Blooms: Analyze
Difficulty: 3 Hard

17-196
17-197
provided below:
Standard rates:
Class A: $24 per hour

Class B: $12 per hour
Three (3) Class A workers at 20 minutes each

Two (2) Class B workers at 15-minutes each
Actual Results:

Labor used:
5,800 hours of Class A workers; total payroll: $156,600
3,500 hours of Class B workers; total payroll: $49,000
Required:

a. A: $17,400 U; B: $7,000 U
b. A: $4,800 F; B: $6,000 U
c. A: $9,600 F; B: $4,800 U
d. A: $4,800 U; B: $1,200 U
Feedback: a. A: $156,600 - (5,800 × $24) = $17,400 U

B: $49,000 - (3,500 × $12) = $7,000 U
b. A: (5,800 × $24) - [(6,000 × 3 × 20/60) × $24] = $4,800 F
B: (3,500 × $12) - [(6,000 × 2 × 15/60) × $12] = $6,000 U
c.
Actual Std.
Cost Cost Variance
inputs Mix
A 5,800 × $139,200 2/3 × $148,800 $9,600 F
17-198
9,300
$24
× $24
1/3 ×
3,500 ×
B 42,000 9,300 37,200 4,800 U
$12
× $12
9,300 $181,200 $186,000 $4,800 F
d.
Std Std
mix mix
Cost Cost Variance
@ act @ std
inputs inputs
2/3 × 2/3 ×
1 9,300 $148,800 9,000 $144,000 $4,800 U
× $24 × $24
1/3 × 1/3 ×
2 9,300 37,200 9,000 36,000 1,200 U
× $12 × $12
$186,000 $180,000 $6,000 U

Blooms: Analyze
Difficulty: 3 Hard

17-199
17-200
129. The Foggybottom Chemicals produces a product by mixing three ingredients to make a finished
product. The standard cost of producing a 50-gallon drum of the product is $19.50. The standard
materials mix and related standard cost of each chemical used in a 50-gallon batch are:

Chemical
quantity per gal cost
A 30 $0.25 $7.50
B 20 0.45 9.00
C 10 0.30 3.00
60 $19.50
schedule below. A total of 520 batches were manufactured during the current production period. The
costs and chemical usage variations at the end of the production period are:

Chemical
purchased cost used
A 17,800 $4,365 16,600
B 13,000 6,240 11,880
C 5,500 1,520 5,140
36,300 $33,620
Required:
a. If variances are recorded at the earliest possible moment, what is the material price variance (in total
and for each ingredient)?
b. What is the material efficiency variance (in total and for each ingredient)?
c. What is the materials yield variance (in total and for each ingredient)?
d. What is the materials mix variance (in total and for each ingredient)?

a. Total: $175 U; A: $85 F; B: $390 U; C: $130 F

b. Total: $898 U; A: $250 U; B: $666 U; C: $18 F
c. Total: $786.50 U; A: $302.50 U; B: $363 U; C: $121 U
d. Total: $111.50 U; A: $52.50 F; B: $303 U; C: $139 F
Feedback: a.
Quantity Price
Actual Total
purchase Varian
Chemic Cost cost
d ce
al
17-201
×
A $4,365 17,800 $0.2 $4,450 $85 F
5
×
U
B 6,240 13,000 $0.4 5,850 390
n
5
×
C 1,520 5,500 $0.3 1,650 130 F
0
$12,12 $11,95 U
36,300 $175
5 0 n
b.
Quan Stand Stand

Eff
tity ard ard
Cost Va
used usage Cost
r
× ×
16,60 $4,15 520 × 15,6 $25
A $0.2 $0.2 $3,900 U
0 0 30 00 0
5 5
× ×
11,88 520 × 10,4
B $0.4 5,346 $0.4 4,680 666 U
0 20 00
5 5
× ×
520 × 5,20 1,56 1
C 5,140 $0.3 1,542 $0.3 F
10 0 0 8
0 0
33,62 $11,0 31,2 $10,14 $89
U
0 38 00 0 8
c.
std std
mix @ mix @
cost Variance
act std
inputs inputs
3/6 × 15,600
A 33,620 $4,202.50 × $3,900 $302.50 Un
× $.25 $0.25
2/6 × 10,400
B 33,620 5,043.00 × 4,680 363.00 Un
× $.45 $0.45
1/6 × 5,200
C 33,620 1,681.00 × 1,560 121.00 Un
× $.30 $0.30
$10,926.50 $10,140 $786.50 Un
d.
17-202
actual std Varianc
cost cost
inputs mix e
3/6 ×
×
16,60 33,62
A 0.2 $4,150 $4,202.50 $52.50 F
0 0×
5
$.25
2/6 ×
×
11,88 33,62 U
B 0.4 5,346 5,043.00 303.00
0 0× n
5
$.45
1/6 ×
×
33,62
C 5,140 0.3 1,542 1,681.00 139.00 F
0×
0
$.30
33,62 $11,03 $10,926.5 U
$111.50
0 8 0 n

Blooms: Analyze
Difficulty: 3 Hard

17-203
17-204
provided below:
Standard rates:
Advanced: $18 per hour
Trained: $15 per hour
Novice: $10 per hour

One (1) Advanced worker at 30
30 minutes/unit
minutes each =
Three (3) Trained workers at 20
60 minutes/unit
minutes each =
Two (2) Novice workers at 15-minutes
30 minutes/unit
each =
120

minutes/unit
Actual Results:
Labor used:
2,200 hours of Advanced workers
4,300 hours of Trained workers
1,900 hours of Novice workers
Required:
a. Compute the labor efficiency variances for each worker level.

b. Compute the labor mix variances for each worker level.
c. Compute the labor yield variances for each worker level.

a. Adv: $3,600 U; Train: $4,500 U; Nov: $1,000 F

b. Adv: $1,800 U; Train: $1,500 U; Nov: $2,000 F
c. Adv: $1,800 U; Train: $3,000 U; Nov: $1,000 U
Feedback: a. Adv: (2,200 × $18) - [(4,000 × 1 × 30/60) × $18] = $3,600 U

Train: (4,300 × $15) - [(4,000 × 3 × 20/60) × $15] = $4,500 U
Nov: (1,900 × $10) - [(4,000 × 2 × 15/60) × $10] = $1,000 F
actual Std Varianc

b. Cost Cost
inputs mix e
Adv 2,200 × $39,600 1/4 × $37,800 $1,800 U
17-205
8,400
$18 ×
$18
1/2 ×
Trai × 8,400
4,300 64,500 63,000 1,500 U
n $15 ×
$15
1/4 ×
× 8,400
Nov 1,900 19,000 21,000 2,000 F
$10 ×
$10
8,400 $123,100 $121,800 $1,300 U
std std
mix mix
c. @ act Cost @ std Variance
input input
s s
1/4 × 1/4 ×
Adv 8,400 $37,800 8,000 $36,000 $1,800 U
× $18 × $18
1/2 × 1/2 ×
Train 8,400 63,000 8,000 60,000 3,000 U
× $15 × $15
1/4 × 1/4 ×
Nov 8,400 21,000 8,000 20,000 1,000 U
× $10 × $10
$121,800 $116,000 $5,800 U

Blooms: Analyze
Difficulty: 3 Hard

17-206
131. Washington Corporation applies overhead to products based on machine-hours. The denominator level
of activity is 8,600 machine-hours. The budgeted fixed manufacturing overhead costs are $286,380. In
October, the actual fixed manufacturing overhead costs were $274,330 and the standard machine-hours
allowed for the actual output were 8,400 machine-hours.
Required:
a. Compute the budget variance for October. Show your work!

b. Compute the volume variance for October. Show your work!

a. Budget variance = Actual fixed overhead - Budgeted fixed overhead cost

= $274,330 - $286,380
= $12,050 F
b. Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $33.30 per hour* × (8,600 MH - 8,400 MH)
= $286,380 - $279,720
= $6,660 U
*286,380 ÷ 8,600 hours = $33.30 per MH

Blooms: Apply
Difficulty: 1 Easy

17-207
132. Delaware Corporation has provided the following data for February.
machine-
Denominator level of activity 4,400
hours
$107,360
overhead costs
4,200
$104,470
overhead costs
Required:
a. Compute the budget variance for February. Show your work!

b. Compute the volume variance for February. Show your work!

a. Budget variance = Actual fixed overhead - Budgeted fixed overhead cost

= $104,470 - $107,360
= $2,890 F
b. Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $24.40 per hour* × (4,400 MH - 4,200 MH)
= $107,360 - $102,480
= $4,880 U
*107,360 ÷ 4,400 hours = $24.40 per MH

Blooms: Apply
Difficulty: 1 Easy

17-208
133. Vegas Manufacturing uses a standard cost system in which manufacturing overhead is applied to units
of product on the basis of standard machine-hours. At standard, each unit of product requires one
machine-hour to complete. The standard variable overhead is $1.75 per machine-hour and Budgeted
Fixed Manufacturing Costs are $300,000 per year. The level of activity is 150,000 machine-hours, or
150,000 units. Actual data for the year were as follows:
Actual variable overhead cost $211,680

Actual fixed manufacturing overhead cost $315,000
Actual machine-hours 126,000
Units produced 120,000
Required:
a. What are the predetermined variable and fixed manufacturing overhead rates for the year?
b. Compute the variable overhead rate and efficiency variances for the year.
c. Compute the fixed manufacturing overhead budget and volume variances for the year.

a. Predetermined variable overhead rate = $1.75 MH (given)

Predetermined fixed overhead rate = $300,000 ÷ 150,000 MH
= $2 hour
b. Variable overhead rate variance = AH(AR - SR)

= 126,000 ($1.68 per hour* - $1.75 per hour)
= $211,680 - $220,500
= $8,820 F
*$211,680 ÷ 126,000 machine hours = $1.68 per hour
Variable overhead efficiency variance = SR(AH - SH)

= $1.75 per hour (126,000 hours - 120,000 hours*)
= $220,500 - $210,000
= $10,500 U
*120,000 units × 1 hour = 120,000 hours
c. Budget variance = Actual fixed overhead - Budgeted fixed overhead cost

= $315,000 - $300,000
= $15,000 F
= $2 per hour (150,000 hours - 120,000 hours)
= $300,000 - $240,000
= $60,000 U

17-209
Blooms: Apply

134. Rudy Corporation makes automotive engines. For the most recent month, budgeted production was
6,000 engines. The standard power cost is $8.80 per machine-hour. The company's standards indicate
that each engine requires 6.1 machine-hours. Actual production was 6,400 engines. Actual machine-
hours were 38,730 machine-hours. Actual power cost totaled $350,628.
Required:
Determine the rate and efficiency variances for the variable overhead item power cost and indicate
whether those variances are unfavorable or favorable. Show your work!

Variable overhead rate variance = (AH × AR) - (AH × SR)

= $350,628 - (38,730 hours × $8.80 per hour)
= $350,628 - $340,824
= $9,804 U

= $340,824 - $343,552
= $2,728 F
*6,400 units × 6.1 hours = 39,040 hours

Blooms: Apply
Difficulty: 1 Easy

17-210
135. Barrymore Corporation, which makes landing gears, has provided the following data for a recent month:
Budgeted production 1,200 gears

5.9 machine-hours
gear
per machine-
Budgeted supplies cost $6.50
hour
Actual production 1,300 gears
Actual supplies cost (total) $49,742
Required:
Determine the rate and efficiency variances for the variable overhead item supplies and indicate
whether those variables are favorable or unfavorable. Show your work!


= $49,742 - (7,950 hours × $6.50 per hour)
= $49,742 - $51,675
= $1,933 F

= $51,675 - $49,855
= $1,820 U

Blooms: Apply
Difficulty: 1 Easy

17-211
136. The following data for November have been provided by Norton Corporation, a producer of precision
drills for oil exploration:
Budgeted production 4,000 drills

8.4 machine-hours
drill
per machine-
Standard indirect labor $9.40
hour
per machine-
Standard power $2.90
hour
Actual production 4,300 drills
Actual indirect labor $362,756
Actual power $97,693
Required:
Compute the variable overhead rate variances for indirect labor and for power for November. Indicate
whether each of the variances is favorable (F) or unfavorable (U). Show your work!

Indirect labor:

= $362,756 - (36,530 hours × $9.40 per hour)
= $362,756 - $343,382
= $19,374 U
Power:

= $97,693 - (36,530 hours × $2.90 per hour)
= $97,693 - $105,937
= $8,244 F

Blooms: Apply

17-212
17-213
137. Tallon & Associates is a consulting firm specializing in business location studies. The results for last
year, along with the budget, are as follows:
Actual Budget
Billable hours 25,200 24,000
Revenue $2,772,000 $2,400,000
Professional salaries (variable) 1,310,000 1,200,000
Other variable costs 488,000 400,000
Fixed costs 492,000 450,000
Office management salaries (fixed) 317,000 225,000
Operating profit $165,000 $125,000
Required:
a. Prepare a flexible budget using billable hours as the measure of output.

b. Prepare a sales activity variance analysis.
c. Compute the sales price variance.

a.
Flexible Master

Actual Budget Budget
Billable hours 25,200 25,200 24,000
Revenue $2,772,000 $2,520,000 $2,400,000
Professional salaries (variable) 1,310,000 1,260,000 1,200,000
Other variable costs 488,000 420,000 400,000
Contribution margin $974,000 $840,000 $800,000
Fixed costs 492,000 450,000 450,000
Office management salaries (fixed) 317,000 225,000 225,000
Operating profit $165,000 $165,000 $125,000
b.
Sales
Flexible Master
Activity
Budget Budget
Variance
Billable hours 25,200 1,200 24,000
Revenue $2,520,000 $120,000 F $2,400,000
Professional 1,260,000 60,000 U 1,200,000
salaries
17-214
(variable)
Other variable
420,000 20,000 U 400,000
costs
Contribution
$840,000 $40,000 F $800,000
margin
Fixed costs 450,000 0F 450,000
Office
management 225,000 0 225,000
salaries (fixed)
Operating
$165,000 $40,000 F $125,000
profit
c. $252,000 F
Feedback: a. Sales: $2,400,000/24,000 = $100/hr; Prof Sal: $1,200,000/24,000 = $50/hr; other var:
$400,000/24,000 = $16.667/hr
c. $2,772,000 - $2,520,000 = $252,000 F

Blooms: Analyze

138. The standard direct labor cost for room cleaning at Texas Hotels is $2.50 per room ($10 per hour in
wages divided by 4 rooms cleaned per hour). Actual labor costs were $11,330 for the month. During the
period there were 1,100 labor hours worked; 3,920 rooms were cleaned during the month.
Required:
a. Compute the labor price variance for the period.

b. Compute the labor efficiency variance for the period.

a. $330 U
b. $1,200 U
Feedback: a. $11,330 - (1,100 × $10) = $330 U

b. (1,100 × $10) - [(3,920/4) × $10] = $1,200 U

Blooms: Analyze

17-215
139. What is the advantage of recognizing materials price variances at the time of purchase rather than at the
time of use?

Recording the materials price variance at the time of purchase provides better and more timely
information for the purchasing function sooner (when the goods are purchased) rather than delaying
until the goods are used.

Blooms: Remember

140. Explain the difference between the market share variance and the industry volume variance.

The market share variance tells how much of the sales activity is due to changes in the market share
using the actual industry volume. The industry volume variance tells how much of the sales activity is
due to changes in the overall size of the market. The industry volume variance uses the budgeted market
share in its calculations.

Blooms: Remember

141. Explain the difference between the sales mix variance and the sales quantity variance.

The sales mix variance measures the impact of customers substituting one product for another. This is
calculated using actual sales volume. The sales quantity variance measures the impact of selling more or
less, in total, holding the sales mix constant.

Blooms: Remember

17-216
142. When deciding how many variances to calculate, what two items need to be considered? Be sure to
define your terms.

The two considerations are the impact of the variance and its controllability. Impact means the likely
monetary effect from an activity. Does the variance matter or is it too small? Controllability means the
extent to which an item can be managed. If a variance is not controllable, computing it makes little
sense even if it has a large impact.

Blooms: Remember

143. Explain what production mix and production yield variances measure. How do these variances relate to
efficiency variances?

The production mix and yield variances break an efficiency variance down into the impact of a change
in material or labor mix and yield. The mix variance arises from changes in the relative proportions of
inputs. The yield variance is the difference between expected output from a given level of inputs
(holding the mix constant) and the actual outputs obtained.

Blooms: Remember

17-217
144. Olsen Company uses a standard cost system for its only product. The bickering between purchasing and
production that occurs every month after the material variances are developed has the production vice
president, Mr. Becker, at his wits end. He has checked the job descriptions of the individuals involved
and notes that the purchasing department is responsible for the price at which materials and supplies are
purchased and the manufacturing department is responsible for the quantity of material used. This seems
very clear cut to him so he has gone to the cost accountant for some additional help.
Required:
As the cost accountant, explain to Mr. Becker why, or why not, this division of duties solves the
conflict between price and quantity variances.

The stated responsibilities reduce the conflict but do not eliminate it. Purchasing is adversely affected
when manufacturing puts through rush orders that cannot be obtained at the normal price—this is the
responsibility of manufacturing. If purchasing acquires materials of a lower quality than normal,
perhaps at a lower price, manufacturing might have higher quantity variances due to excess waste—this
is the responsibility of the purchasing department.
Even in the best of situations, a part of the quantity variance could be assigned to purchasing—thereby
creating a joint variance.
So, how can Mr. Becker resolve the problem? Try to investigate the cause of the variance carefully in
order to charge it to the correct party and where it is a joint variance, explain the situation to both
parties. The conflicts have arisen because, as the parties involved have surmised, the variances have
been charged incorrectly.

AACSB: Ethics
Blooms: Apply

17-218
17-219
145. The Halcion Company uses a standard cost system in which manufacturing overhead costs are applied
to units of the company's single product on the basis of standard direct labor-hours (DLHs). The
standard cost card for the product follows:

Standard Cost Card-per unit of product
Direct Materials, 4 yards at $3.50 per yard $14
Direct Labor, 1.5 DLHs at $8 per DLH 12
Variable Overhead, 1.5 DLHs at $2 per DLH 3
Fixed Overhead, 1.5 DLHs at $6 per DLH 9
Standard cost per unit $38
The following data pertain to last year's activities:

The company manufactured 18,000 units of product
during the year. A total of 70,200 yards of material
• was purchased during the year at a cost of $3.75 per
yard. All of this material was used to manufacture the
18,000 units.
The company worked 29,250 direct labor-hours during
•
the year at a cost of $7.80 per hour.
The denominator activity level was 22,500 direct
•
labor-hours.
Budgeted fixed manufacturing overhead costs were
• $135,000 while actual manufacturing overhead costs
were $133,200.
• Actual variable overhead costs were $61,425.
Required:
a. Compute the direct materials price and quantity variances for the year.
b. Compute the direct labor rate and efficiency variances for the year.
c. Compute the variable overhead rate and efficiency variances for the year.
d. Compute the fixed manufacturing overhead budget and volume variances for the year.

a. Direct materials price and quantity variances:
Materials price variance = AQ(AP - SP)

= 70,200 yards ($3.75 per yard - $3.50 per yard)
= $263,250 - $245,700
= $17,550 U
Materials quantity variance = SP(AQ - SQ)

= $3.50 per yard (70,200 yards - 72,000 yards*)
= $245,700 - $252,000
= $6,300 F
17-220
*18,000 units × 4 yards = 72,000 yards
b. Direct labor rate and efficiency variances:
Labor rate variance = AH(AR - SR)

= 29,250 hours ($7.80 per hour - $8 per hour)
= $228,150 - $234,000
= $5,850 F
Labor efficiency variance = SR(AH - SH)

= $8 per hour (29,250 hours - 27,000 hours*)
= $234,000 - $216,000
= $18,000 U
*18,000 units × 1.5 hours = 27,000 DLH
c. Computation of variable overhead variances:

= $61,425 - (29,250 hours × $2 per hour)
= $61,425 - $58,500
= $2,925 U

= $2 per hour (29,250 hours - 27,000 hours)
= $58,500 - $54,000 = $4,500 U
*18,000 units × 1.5 hours = 27,000 direct-labor hours
d. Computation of the fixed manufacturing overhead variances:

= $133,200 - $135,000
= $1,800 F
= $135,000 - (27,000 hours × $6 per MH*)
= $135,000 - $162,000
= $27,000 F

Blooms: Apply
17-221

146. Advantage Co. sells two types of drives—standard and specialty. The budget is based on a combination
of last year's information as well as forecasted industry sales and the company's market share. The
following information is provided for June:
Budgeted Actual
Standard Specialty Standard Specialty
Selling price
$50 $70 $52 $70
per drive
Variable
price per 24 40 24 42
drive
Contribution
$26 $30 $28 $28
margin
Sales (units) 5,000 1,000 4,500 1,500
Fixed costs $60,000 $63,000
Required:
1) Prepare a static budget and flexible budget for the company for June.
2) What is the revenue sales-volume variance?

(1)
Flexible Static

Budget Budget
Sales revenue $330,000 $320,000
Variable cost 168,000 160,000
Contribution margin $162,000 $160,000
Fixed cost 60,000 60,000
Income $102,000 $100,000
(2) Revenue sales-volume variance = $50(4,500 - 5,000) + $70(1,500 - 1,000) = ($25,000) + $35,000 =
$10,000 favorable

AICPA: FN Reporting
Blooms: Apply

17-222
17-223
147. Maxine Watters, the managerial accountant has been asked by the Coolare Ceiling Fan Company
president to prepare an analysis of the effectiveness of the new management team. They manufacture
paper fans.
2016 standards:
Budget
Direct materials - 4 parts @ $2 per part
Direct labor - one half hour (0.5) @ $10 per hour
Variable overhead - 2 machine hours @ $3 per hour
Estimated production - 100,000
Actual results 2016:

Direct materials - 585,000 parts at a total cost of $1,462,500 were purchased and used
Direct labor - 51,000 hours at a cost of $561,000
Variable overhead - 240,000 machine hours at a cost of $840,000
Actual production - 130,000 fans
Required:
Requirement 1: Compute the direct material and direct labor budget variances.
Requirement 2: Compute the variable and fixed overhead variances.

It is helpful to begin by computing the standard cost of one fan:
Direct Materials $8.00 (4 × $2.00)

Direct Labor $5.00 (0.5 × $10.00)
Variable Overhead $6.00 (2 × $3.00)
Fixed Overhead $9.00
$28.00
Fixed overhead $900,000 $9.00 per unit
per unit 100,000
Requirement 1
Direct-material variances
Direct-material price variance

PQ(AP - SP)
AP = $1,462,500/585,000 = $2.50 per part
585,000 (2.50 - 2.00) = $292,500 unfavorable
17-224
Direct-material quantity variance
SP(AQ - SQ)
SQ = 130,000 * 4 = 520,000
$2(585,000 - 520,000) = $130,000 unfavorable
Direct-labor variances
Direct-labor rate variance
AH(AR - SR)
AR = $561,000/51,000 = $11 per hour
51,000($11 - 10) = $51,000 unfavorable
Direct-labor efficiency variance

SR(AH - SH)
SH = .5 hours * 130,000
$10(51,000 - 65,000) = $140,000 favorable
Requirement 2
Variable-overhead spending variance

AH(AVR - SVR)
AVR = $840,000/240,000 = $3.50
240,000($3.50 - $3.00) = $120,000 unfavorable
Variable-overhead efficiency variance

SVR(AH - SH)
SH = 130,000 * 2 = 260,000 machine hours
$3(240,000 - 260,000) = $60,000 favorable
Fixed-overhead budget variance

Actual Fixed Overhead - Budgeted Fixed Overhead
$870,000 - $900,000 = $30,000 Favorable
Fixed-overhead volume variance

Fixed Overhead Applied = 130,000 * $9 per fan = $1,170,000
Budgeted fixed overhead - Fixed Overhead Applied = $(270,000) or $270,000 Favorable

AICPA: FN Reporting
Blooms: Apply

17-225
17-226
148. Algood Incorporated is trying to decide which method of analyzing its overhead variances provides the
most useful information. The following information is available from the records for April:
Budgeted units of output 4,000 for April

Budgeted fixed overhead $27,000/month
Budgeted variable overhead $6/DLH
Budgeted direct labor hours 3 hours/unit
Fixed overhead incurred $26,600
Direct labor hours used 12,000
Variable overhead incurred $71,500
Actual units produced 4,200
Required:
Compute the overhead variances using the following approaches;
(1) Four-way analysis

(2) Three-way analysis
(3) Two-way analysis

Four-way analysis:
Variable

overhead
Actual Flexible budget Flexible budget
Standard hours
Amount Actual hours
allowed
12,000 × $6 3(4,200) × $6
$71,500 $72,000 $75,600
Spending Variance =
Efficiency Variance = $3,600 F
$500 F
Fixed

Overhead
Actual Budget Applied
3(4,200) ×

($27,000/4,000/3)
12,600 × $2.25
$26,600 $27,000 $28,350
Budget Variance =
Volume Variance = $1,350 F
$400 F
Three-Way Analysis
Variable overhead spending variance = $500 F
17-227
Fixed overhead budget variance = $400 F
$900 F combined spending variance
$3,600 F Variable overhead efficiency variance
$1,350 F Fixed overhead volume variance
Two-Way Analysis
Combined spending variance $900 F
Variable overhead efficiency variance 3,600 F
$4,500 F combined budget variance
$1,350 F Fixed Overhead volume variance

AICPA: FN Reporting
Blooms: Apply
Difficulty: 3 Hard

149. Compass Company uses labor hours to allocate its variable overhead costs. Mr. Dailey, the production
manager has been told that his direct labor and variable overhead variances for the past month were as
follows:
Direct labor rate variance: $3,000 F

Direct labor efficiency variance: $6,000 U
Variable overhead spending variance: $2,000 U
Variable overhead efficiency variance: $3,000 U
The production V.P. has asked Mr. Dailey to account for his overhead variances for the month.
Required:
Explain the meaning of the two variable overhead variances and Mr. Dailey's responsibility for them.

The variable overhead spending variance is the comparison of the actual amount spent for variable
overhead and the amount that should have been spent had the company budgeted for the actual activity
used. It is the variance most useful for cost control purposes.
The variable overhead efficiency variance is tied to the activity measure used. If direct labor hours were
used, then the variance will move in the same direction as the labor efficiency variance, but it does not
measure how efficiently the company has or has not used the items within variable overhead. All it says
is that the company has used more or less of the activity measure used to apply overhead to products.
Mr. Dailey is responsible for both of the variances but in different ways. For cost control of variable
overhead, he would look to the spending variance. He has already dealt with the efficiency issue with
the unfavorable direct labor efficiency variance.

17-228
AICPA: FN Reporting
Blooms: Apply

150. Harrison Company uses machine hours to allocate its fixed overhead costs. Mr. Alvarez, the production
manager has been told that his fixed overhead variances for the past month were as follows:
Fixed overhead budget variance: $2,000 F

Fixed overhead volume variance: $20,000 U
The production V.P. has asked Mr. Alvarez to account for his underutilization of capacity for the
month.
Required:
Explain the meaning of the two variances and Mr. Alvarez's responsibility for them.

The fixed overhead budget variance compares the amount of overhead spent to the budget for the
period. It is not tied to any activity level. Since the monthly budget amount typically is developed as the
annual budget divided by 12, slight variations should be expected from month to month since some
fixed items are incurred at longer intervals than one month. This is the variance that is used for cost
control purposes.
The fixed overhead volume variance arises basically because we have used one level of activity to set
the fixed overhead application rate and have then applied that rate to a different level of activity. It does
not relate to capacity utilization even though we do say that using a higher level of activity than planned
leads to a favorable variance and a lower level to an unfavorable variance.
Mr. Alvarez is responsible for the budget variance only if he has control over the cost items included in
it. He generally would not be responsible for the volume variance, especially since it can be caused by
factors outside of his control sphere, e.g., production did not meet expectations because sales did not
materialize as planned.

AICPA: FN Reporting
Blooms: Apply

17-229
151. Xi Company currently uses a traditional standard costing system. During the past two years the
company has been modernizing its plant and has tried to keep the old standard costing system in place
by changing some of the features to reflect the more automated situation. It has now come to a point,
however, where the old system just isn't providing useful information for product costing, pricing,
decision making, etc. The CEO, Ms. Chang, has set up a team to look into the situation and come up
with reasons why the old system isn't working anymore.
Required:
What are the problems with traditional standard costing under the current manufacturing environment?
(1) The variances are at too aggregate a level and are not timely enough to be useful.
(2) The variances are too aggregated in that they are not tied to specific product lines, production
batches, or flexible manufacturing system cells.
(3) There is too much focus on the cost and efficiency of direct labor which is becoming a relatively
insignificant factor of production.
(4) Successful standard cost systems rely on stable production processes, under flexible manufacturing
systems this stability is reduced because of frequent switching among a variety of products on the same
production line.
(5) The standards are relevant for only a short time because of shorter product life cycles.
(6) Traditional standard costing systems tend to focus too much on cost minimization, rather than on
increasing product quality or customer service.
(7) Variances from standard tend to be small or nonexistent under automated manufacturing processes.
(8) Traditional standard costs are not defined broadly enough to capture various important aspects of
performance, e.g., the costs of ownership for direct materials.

Blooms: Apply
Difficulty: 3 Hard

17-230
152. Resolution Company is meeting with the consultants it hired to help it with problems arising from its
increasing sales and increasing production to meet them. The consultants have informed the company
that they need to make price concessions in order to have their product sold over a large area. To do
this, costs need to be reduced and controlled. They recommended installation of a standard costing
system and a flexible budgeting system.
The CEO took the recommendations back to the company management, explained to all, and a team
was set up to develop the standards. The team was composed of the purchasing manager, processing
manager, production engineer, and V.P. of sales. Each member of the team, rather than working to
develop standards, came up with reasons why they wouldn't work. The team made its report to the CEO
who told them to come up with the standards or he would have the consultants set them.
Required:
(1) What are the advantages and disadvantages of standard costing?

(2) What has gone wrong in this situation and will having the outside consultant do the work change
anything?

(1) Traditional advantages:

(1) Standard costs and variances save management time by allowing the use of management by
exception.
(2) Standard costs provide a basis for sensible cost comparisons.
(3) Variances provide a means of performance evaluation and rewards for employees.
(4) Variances provide motivation for employees to adhere to standards through performance evaluation.
(5) Standard costs as product costs result in more stable product costs than if actual costs were used.
(6) Standard costing systems are less expensive to operate than actual- and normal-costing systems.
Traditional disadvantages:
(1) Traditional Standard Costing is not as useful as activity based management.

(2) Focus is on the cost and efficiency of direct labor.
(3) Shorter product life cycles mean that standard costs must be adjusted often to remain relevant.
(2) The decision was imposed on the group by the CEO directly and the consultants indirectly, but top
management's whole hearted acceptance does not seem apparent. The team, while involved in the areas
that will be affected by the standards did not include other key personnel such as someone from
accounting and an industrial engineer. Having the consultant set the standards will exacerbate the
problem even more since no one will accept the imposed standards. There will be a feeling that the
consultants have set the standards too high, they know nothing about the details of the business, etc.

Blooms: Apply
Difficulty: 3 Hard
17-231

153. In the new cost management scheme of things, what are some of the disadvantages of the traditional
standard cost system (list at least four)?

(1) The variances are at too aggregate a level and are not timely enough to be useful.
(2) The variances are too aggregated in that they are not tied to specific product lines, production
batches, or flexible manufacturing system cells.
(3) There is too much focus on the cost and efficiency of direct labor which is becoming a relatively
insignificant factor of production.
(4) Successful standard cost systems rely on stable production processes, under flexible manufacturing
systems this stability is reduced because of frequent switching among a variety of products on the same
production line.
(5) The standards are relevant for only a short time because of shorter product life cycles.
(6) Traditional standard costing systems tend to focus too much on cost minimization, rather than on
increasing product quality or customer service.
(7) Variances from standards tend to be small or nonexistent under automated manufacturing processes.
(8) Traditional standard costs are not defined broadly enough to capture various important aspects of
performance, e.g., the costs of ownership for direct materials.

Blooms: Apply
Difficulty: 3 Hard

17-232

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Chapter 17

Additional Topics in Variance Analysis

True / False Questions

Multiple Choice Questions

23. Which of the following statements is(are) true?

A. the denominator hours chosen for the period.

A. makes the record keeping process more complex and difficult.

A. price variance is recognized when materials are purchased.

Cost of material purchased in October, per ounce $23.10

The raw material was purchased on account.

Cost of material purchased in October, per ounce $23.10

The raw material was purchased on account.

Cost of material purchased in October, per ounce $23.10

The raw material was purchased on account.

The Materials Price Variance for October would be recorded as a:

Cost of material purchased in October, per ounce $23.10

The raw material was purchased on account.

The Materials Quantity Variance for October would be recorded as a:

A. credited for $123,235.

Standard cost, per liter $23.80

A. debited for $55,930.

A. debit to Raw Materials; credit to Materials Quantity Variance.

Materials Purchased 20,000 units

Materials price variance $200 F

Materials Purchased 20,000 units

Materials price variance $200 F

Materials Purchased 20,000 units

Materials price variance $200 F

A. selling price variance.

AMS = actual market share

A. (ATM - BTM) (BMS)

AMS = actual market share

A. (ATM - BTM) (BMS)

The sales volume variance is:

The sales price variance for November is:

The variable cost flexible budget variance for November is:

A. Sales price variance and flexible budget variance.

The sales price variance for June was:

What is the total sales mix variance?

What is the sales activity variance for the basic model?

What is the sales activity variance for the deluxe model?

What is the sales mix variance for the basic model?

What is the sales quantity variance for the basic model?

What is the sales quantity variance for the deluxe model?

Total market for the product 175,000 units

What is Vargas' market share variance?

Total market for the product 175,000 units

Is the market share variance favorable or unfavorable?

Product Lines Units Sales

What is the total sales price variance?

Product Lines Units Sales

Is the total sales price variance favorable or unfavorable?

What is the total sales mix variance?

Product Lines Units Sales

Is the total sales mix variance favorable or unfavorable?

Product Lines Units Sales

What is the total sales quantity variance?

Product Lines Units Sales