5. Cost Acct and Performance Measurement Flashcards
After using standard cost variance analysis there is an unfavorable labor efficiency variance of $8,000. Which of the following is the cause?
- The new labor contract increased wages.
- The maintenance of machinery has been inadequate for the last few months.
- The department manager has chosen to use highly skilled workers.
- The quality of raw materials has improved greatly.
The maintenance of machinery has been inadequate for the last few months.
An unfavorable labor efficiency variance reflects the use of a greater quantity of labor hours than planned. This can be caused by inadequate machine maintenance, which results in equipment not running as fast or as smoothly, increasing labor time. This can also cause machines to create defective units in some cases, which may require additional time for rework.
What is the standard direct labor cost per unit?
Time to make one unit: 2 DL hrs
# Direct workers: 50
# hours per week, per worker: 40
Weekly wages per worker: $500
Workers’ benefits (as DL cost): 20% of wages
$30/unit
The stnd DL cost per unit is the product of the standard wage rate per hour used for DL computations, and the standard quantity of hours per unit. This firm includes benefits in the wage rate used for DL application:
Stnd DL cost per unit = ($500)(1.2)/40 hours) = $30
The 1.2 factor above is the effect of including the employee benefits (at 20% of wages) in DL.
For the current period production levels, A Co, budgeted 8,500 board feet of production and used 9,000 board feet for actual production. Material cost was budgeted at $2 per foot. The actual cost for the period was $3 per foot. What was the material efficiency variance?
- $1,000 favorable.
- $1,000 unfavorable.
- $1,500 favorable.
- $1,500 unfavorable.
-$1,000 unfavorable
A direct efficiency variance is the difference between the actual quantity and the standard quantity allowed multiplied by the standard price. [(AQ - SQ) x SP]
[9000-8500) x 2]. The variance is unfavorable because the actual quantity is greater than expected based on the standard.
Est demand for prod A= 10,000 bottles, B= 30,000 bottles
Est sales price per bottle A= $6.00, B = $8.00
Actual demand for prod A= 8,000 bottles, B= 33,000 bottles.
Actual price per bottle A= $6.20, B = $7.70
What amount would be the total selling price variance for the winery? ($/fav\unfav)
$8,300 unfavorable.
The total selling price variance is determined by taking the difference between the actual and est selling prices for each product and multiplying the diff by the actual sales vol for the product.
Product A price variance = ($6.20 – $6.00) * 8,000 = $1,600 Favorable
Product B price variance = ($7.70 – $8.00) & 33,000 = $9,900 Unfavorable
Total price variance = $1,600 Favorable + $9,900 Unfavorable = $8,300 Unfavorable
Actual quantity purchased= 6,500 lbs. Stnd quantity allowed= 6,000 lbs. Actual price= $3.80 Stnd price= $4.00 Whats the direct material quantity variance for the product? $2,000 favorable. $1,900 favorable. $1,900 unfavorable. $2,000 unfavorable.
$2,000 unfavorable.
Quantity variances are calculated as the actual quantity less standard quantity, multiplied by standard price: (AQ – SQ) SP. Thus, (6,500 lbs. – 6,000 lbs.) $4.00 = $2,000. The variance is unfavorable since actual quantity required of 6,500 lbs. was more than the planned level of 6,000 lbs.
FOH Manufacturing Costs
4+3=SEVen
Actual, FBE @ Actual, FBE @ std, Applied (4)
break down to Spend, Efficient, Volume (3)
SEV:
Spending: fixed, variable
Efficiency: var
Volume: fixed
Variance Analysis: SAD
SAD: Standard - Actual = Difference (+ good)
DM Variance Analysis EQs, use SAD
1) DMPriceV: AQ(SP - AP) [can control Q so AQ], [purchasing] 2) DMUse\QuantityVar: SP(SQ- SA) [factory can't control price ppl pay] or [$=S] and remember QU so Quantity is same as Usage, [production] S is standard, A is actual
DL Variance Analysis EQs, use SAD
1) DLRateV: AH(SR - AR)
[can control hours worked so AH), [personnel]
2) DLEfficV: SR(SH-AH)
[can’t control pay rate as a factory mngr], [production]
SQ x SH
SQ x SH is standard allowed for actual production
Ex) Budget: 50k units x 2 hrs = 100k DL hrs
Actual: 48k units x 2.02 hrs = 97k DL hrs
So looks like you saved time but in reality you produced less units in that time, this is what SAFAP shows.
SAFAP: 48k x 2 hrs = 96k DL hrs (so you’re less efficient)
DM/DL Var Analysis EQ hints
1) DMPriceV: AQ(SP - AP)
2) DMUse\QuantityVar: SP(SQ- SA)
3) DLRateV: AH(SR - AR)
4) DLEfficV: SR(SH-AH)
For multiplication variable:
USE = Usage, Efficiency Variances use Standard Allowed
Also use Std Allowed if you can’t control
PAR = Price, Rate Variances use Actual
Also use Actual for things you can control
A Co had an unfavorable materials usage variance of $900. What dept should this be allocated to?
- Manufacturing
- Purchasing
- Warehousing
- All 3 evenly
-Manufacturing
SP(SQ-AQ), used too much material in production
Standard= 4 meters/unit, $2.50/meter
Actual = 4,200 meters at $10,080 for 1,000 units produced
What is the material price variance? ($, fav/unfav)
$420 favorable
Std Allowed = 4000m (4x1000)
AP = $10,080 / 4200 = $2.40/m
AQ(SP-AP) = 4200(2.5-2.4)
Which of the following standard cost variances is least controllable by a production supervisor?
- Overhead volume
- Overhead efficiency
- Labor efficiency
- Material usage
-Overhead volume
Least controllable because fixed OH costs, can’t control
Under the 2-variance method, which variances consists of both variable and fixed OH elements?
- Budget Variance
- Budget Variance and Volume Variance
- Volume Variance
- Neither
-Budget Variance
Budget has fixed and variable. Volume has all fixed
Std DManuf Labor hrs/unit = 2 Actual Dmanuf labor hrs= 10,500 # of units = 5,000 Std var OH per std DManuf labor hour= $3 Actual Var OH= $28,000 Unfavorable Var OH efficiency was? ($)
($1500) Start with actual: 28k / 10,500 = $2.66 Then FBE@Std: (3 x [5000 x 2]) = $30k After do FBE@actual: (3 x 10500) = 31500 The FBE vs FBE is our efficiency variance: $30000-31500 = (1500)
Job Order vs Process Costing
Job order- heterogeneous, expensive goods
Process Costing- homogeneous, similar/inexpensive goods
Process Costing: Valuing: Weighted Avg vs FIFO
Weighted: for continuous production (beg + started)
FIFO: more for batches (beginning first, then started)
Process Costing: Weighted Avg
WA cost per unit = total cost of output / equiv # of units of output
(basically beg + started)
Process Costing: FIFO
FIFO cost per unit= Costs incurred this period / Units worked on this period
(beginning first, then started)
Process Costing - Weighted Avg
Beg Units (x % complete) = Cost
+Started in period
=Units accounted for
Completed (x 100%= Equiv Units) \+Spoilage \+End (x % complete= Equiv Units) =Units to account for Both end unit things should be equal. Do the math as units and then as costs (with % multiply calc)
In a process costing system, the application of FOH usually would be recorded as an increase in:
- Finished goods inv control
- FOH control
- COGS
- WIP inv control
-WIP inv control
In computing the current period manuf costs per equiv unit, the FIFO method considers current period costs:
- Only
- Plus beg WIP inv
- Less beg WIP inv
- Plus ending WIP inv
Current period only
For cost per unit! so this is the numerator of your division for cost per unit
W/A uses current plus beg
Joint Cost allocation - Relative sales value at split off
You can sell for $8 if you add $3 past split off, back in its worth $5 at split off (sales val @ split off). Then sum all SV@SO numbers and divide the SV@SO over the summed amount. Multiply that fraction times joint costs for the amt of joint costs allocated to the prod
K, 1000 units, $50k mkt value, $10k cost after split
W, 1500 units, $40k mkt value, $5k cost after split
Z, 500 units, $7k mkt value, $3k cost after split
$54,000 is the total joint cost. NRV of Z (byproduct) is subtracted from joint prod cost If NRV method is used for allocating joint cost how much should go to K?
$26,666
Z: 7-3=4 = 54-4 = 50
K: 50-10=40 /75 = 53.33% x 50k = $26,667
W: 40-5=35 /75 = 46.66% x 50k = $23,333
You are allocating joint costs of P and Q. If the mkt value of P at split off increases and all other costs and selling prices remain equal, the gross margins:
- GM P up, GM Q down
- GM P down, GM Q up
- GM P down, GM Q down
- GM P up, GM Q up
-GM P down, GM Q up
ex) if both were $40 at split, it’d be 50% each (40 / 80)
But P goes up to $60, so it raises total to 100 from 80. This makes 60/100 (P) and 40/100 (Q). So P goes up in COST! this reduces Gross margin!
