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Exam 29: Controlling Manufacturing Costs: Standard Costs

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Question 31

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The purchasing department can determine the standard quantity per unit of each type of raw material required to manufacture a product.

A) True
B) False

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Question 32

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Kenwood Company's manufacturing overhead costs for the assembly department are given below. $\begin{array} { l r c } & \begin{array} { c } \text { Fixed Costs } \\\text { Per Month }\end{array} & \begin{array} { c } \text { Variable Costs } \\\text { Per Hour }\end{array} \\\text { Indirect Labor } & \$ 1,400 & \$ .95 \\\text { Payroll Taxes } & 90 & 1.05 \\\text { Indirect Materials } & 220 & .20 \\\text { Power and Water } & 340 & .35 \\\text { Depreciation } & 1,020 & - \\\text { Taxes and Insurance } & 450 & - \\\text { Repairs } & 175 & .15\end{array}$ -Using the information provided, prepare a flexible budget for the department for the month of May 2013, assuming that the expected production is for 2,000 direct labor hours. The flexible budget should show costs for production levels of 90 percent and 110 percent of the expected production level of 2,000 hours.

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Question 33

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Direct materials and direct labor are examples of costs that tend to vary directly with the volume of output.

Use the high-low point method to determine total fixed cost:

Canine Cottage Industries makes several specially designed doghouses. The Standard Cost Card for The Gables model is shown. A customer ordered three of this model for their Labrador retrievers. The Job Cost Sheet is shown. -From the information given for Canine Cottage Industries, compute the materials, quantity and price variances.

The standard costs for a unit of product are shown below. $\begin{array}{llcc} \text { Materials: } & \text { 2 pounds at \$ 1.00 per pound } &\$2.00 \\ \text { Labor:} & \text { 1 hours at \( \$ 10.00 \) per hour }&10.00 \\ \text {Overhead: } & \text { \( 60\%\) of direct labor } &6.0\\\end{array}$ During June, Job N-5 for 100 units was completed. The actual costs of the job are shown below. $\begin{array}{llcc} \text { Materials: } & \text { 300 pounds at \$ 1.45 per pound } &\$435.00 \\ \text { Labor:} & \text { 200 hours at \( \$ 9.50 \) per hour }&1,900 \\ \text {Overhead Applied: } & \text { \( 60\%\) of direct labor } &1,140\\\end{array}$ 1. What is the total cost variance between actual cost and standard cost? 2. What is the total material variance? 3. What is the material quantity variance? 4. What is the material price variance?

The cost of utilities consumed in the factory is a good example of

As the level of activity increases, the fixed cost per unit of activity

The materials price variance for an item is the difference between its actual price and its standard cost

In a factory, the total variable costs are $600 if 500 units are produced. If 400 units are produced, the total variable costs would be

The standard costs for a unit of product are shown below. $\begin{array}{llcc} \text { Materials: } & \text { 2 pounds at \$ 1.50 per pound } &\$3.00 \\ \text { Labor:} & \text { \( 3 / 4 \) hours at \( \$ 10.00 \) per hour }&7.50 \\ \text {Overhead: } & \text { \( 60\%\) of direct labor } &4.50\\\end{array}$ During July, Job N-5 for 200 units was completed. The actual costs of the job are shown below. $\begin{array}{llcc} \text { Materials: } & \text { 408 pounds at \$ 1.45 per pound } &\$591.60 \\ \text { Labor:} & \text { 142 hours at \( \$ 10.15 \) per hour }&1,441.30 \\ \text {Overhead Applied: } & \text { \( 60\%\) of direct labor } &864.78\\\end{array}$ 1. What is the total cost variance between actual cost and standard cost? 2. What is the total material variance? 3. What is the material quantity variance? 4. What is the material price variance?

Canine Cottage Industries makes several specially designed doghouses. The Standard Cost Card for The Gables model is shown. A customer ordered three of this model for their Labrador retrievers. The Job Cost Sheet is shown. -From the information given for Canine Cottage Industries, compute the labor total, time and rate variances.

One element that is NOT part of the standard cost is

Prepare a budget for manufacturing costs for Nacelle Manufacturing for the month of July 2013 from the following information. Direct materials are estimated to be $480,000 for the year and direct labor is estimated to be $96,000. The direct labor per hour average is $13 and the budgeted level of activity for the month is 1,200 hours. $\begin{array}{c}\begin{array}{lll}\\\\ \text {Factory Supervisor salary}\\ \text {Janitorial/Maintenance labor }\\ \text {Payroll taxes and fringe benefits}\\ \text {Insurance}\\ \text {Supplies}\\ \text {Equipment Depreciation}\\ \text {Property Taxes}\\ \text {Total} \end{array}\begin{array}{c} \text {Fixed Costs}\\ \text {per Month}\\\$ 4,500 \\ 500 \\ 1,000 \\ 300 \\ 125 \\ 2,500 \\ \underline{750} \\ \underline{ 9,675} \end{array}\begin{array}{c} \text {Variable Costs per}\\ \text {Direct Labor Hour}\\\$ 0.00 \\ 1.50 \\ 2.00 \\ 0.00 \\ 0.25 \\ 0.00 \\ \underline{0.00 }\\\underline{ 3.75 }\end{array}\end{array}$

If the standard cost for an item exceeds the actual cost, the variance is favorable.

Standard quantity is usually determined by the

In a factory, the fixed costs per unit are $45 when 400 units are produced. If 450 units are produced, the fixed costs per unit would be

Topic: Cost Behavior and the Budget $\begin{array}{c}\text {Soville Manufacturing Company}\\\text {Budget Performance Report}\\\text {Month Ended June 30, 2013}\\\begin{array}{lr}&\text { Budget}\\&\text { 1000 hours}\\\text { Direct materials } & \$ 42,000 \\\text { Direct labor } & 16,000 \\\text { Manufacturing overhead } & \\\quad \text { Payroll taxes and fringe benefits } & 4,500 \\ \text { Factory supplies } & 360 \\\text { Machine repairs \& maintenance } & 800 \\\text { Factory supervisor salary } & 4,000 \\\text { Janitorial services } & 1,600 \\\text { Depreciation } & 2,800 \\\text { Insurance } & 400 \\\text { Property taxes } & \underline{780} \\\quad \text { Total manufacturing overhead } &\underline{15,240}\\\text { Total manufacturing cost } &\underline{73,240}\end{array}\begin{array}{rr}\text { Actual}&\text { (Over)}\\\text { 1020 hours}&\text { Under}\\\$ 43,600 & \\16,200 & \\\\4,620 & \\345 & \\575 & \\4,000 & \\1,580 & \\2,800 & \\400 & \\\underline{780} & \\\underline{15.100} & \\\underline{74.900} &\\\end{array} \end{array}$ -Complete the Budget Performance Report for Soville Manufacturing. Create a flexible budget by adding a budget column at the actual number of labor hours. Compare the actual to the flexible budget numbers you calculated.

Semi-variable costs are sometimes called mixed costs.

The three classifications for manufacturing costs are fixed, variable, and semivariable. Explain what each is and how they relate to production.