PRACTICE TEST

EXERCISE 1
ABC Company produced 25,000 units of Product XP-1 during 2000. Each product required 6 pounds of
material at $11 per pound and 2 hours of direct labor at $15 per hour. During 2003, 160,000 pounds of material
were purchased and used for $1,750,000; payroll totaled $743,900 for 49,000 hours.
Required:
Calculate the direct materials price and usage variances and the direct labor rate and efficiency variances.

EXERCISE 2
Acme Corp. applies overhead to production using a rate of $75 per machine hour ($35 variable, $40 fixed).
Acme produced 15,000 units and incurred overhead of $3,710,000 (of which $1,495,000 was variable
overhead) while using 43,500 machine hours. The overhead standards assumed each product would use 3
machine hours. The practical capacity of 18,000 units was used as the denominator activity.
Required:
Calculate the overhead variances using a four-variance analysis.

EXERCISE 3
XYZ Company produces a compound by mixing 3 gallons of AB-5 (costing $2.25 per gallon) and 4 gallons
of CR-3 (costing $7.50 per gallon). The output is 5 gallons of the compound. During August, 21,000
gallons of AB-5, costing $46,500, were purchased and used; 26,000 gallons of
CR-3, costing $198,000, were purchased and used. A total of 37,000 gallons of output were obtained.
Required:
1. Calculate the direct materials price and usage variances.
2. Calculate the direct materials mix and yield variances.

EXERCISE 4
Scooter Company has the following standard cost sheet using an expected capacity of 120,000 units:
Direct materials..........................
25 pounds@$1.20
$30.00
Direct labor................................
2 hours@12.50
25.00
Overhead:
Variable..................................
3 machine hours@8.00
24.00
Fixed......................................
3 machine hours@12.00
36.00
Total...........................................
$115.00
During the year, 125,000 units were produced. Actual costs included the following:
Direct materials..........................
Direct labor................................
Overhead....................................
Machine hours............................

3,200,000 pounds purchased for $3,725,000.

3,110,000 pounds were used in production.
260,000 hours worked; payroll totaled $3,320,000.
Variable:$3,025,000
Fixed:$4,275,000
378,000 actually used

Required:
Calculate as many variances as possible.

Chapter9

PRACTICE TEST
EXERCISE 1 (ABC Company)
MPV: $1,750,000 (160,000 $11) = $1,750,000 $1,760,000 = $10,000 Favorable
MUV: (160,000 $11) (25,000 6 $11) = $1,760,000 $1,650,000 = $110,000 Unfavorable
LRV: $743,900 (49,000 $15) = $743,900 $735,000 = $8,900 Unfavorable
LEV: (49,000 $15) (25,000 2 $15) = $735,000 $750,000 = $15,000 Favorable

EXERCISE 2(Acme Corp.)

VOH spending:

Actual VOH Budgeted VOH

$1,495,000 (43,500 $35) = $1,495,000 $1,522,500 = $27,500 Favorable

VOH efficiency:

Budgeted VOH Applied VOH

(43,500 $35) (15,000 3 $35) = $1,522,500 $1,575,000 = $52,500 Favorable

FOH spending:

Actual FOH Budgeted FOH

$2,215,000 (18,000 3 $40) = $2,215,000 $2,160,000 = $55,000 Unfavorable

FOH volume:

Budgeted FOH Applied FOH

$2,160,000 (15,000 3 $40) = $2,160,000 $1,800,000 = $360,000 Unfavorable

EXERCISE 3(XYZ Company)

1. MPV:

AB-5: $46,500 (21,000 $2.25) = $46,500 $47,250 = $750 Favorable

CR-3: $198,000 (26,000 $7.50) = $198,000 $195,000 = $3,000 Unfavorable
MUV: Total standard input = Actual yield / Yield ratio = 37,000 / [5/(3 + 4)] = 37,000 / .714 = 51,800*
SQ(AB-5) = 51,800 3/7 = 22,200
SQ(CR-3) = 51,800 4/7 = 29,600
*rounded
AQ
SQ
AQ SQ
(AQ SQ)SP
21,000
22,200
1,200
$2,700
26,000
29,600
3,600
27,000
$29,700 Favorable

2. Mix variance
AQ
21,000
26,000
a
b

SQ
20,143 a
26,857 b

AQ SQ
857
857

SP
$2.25
$7.50

(AQ SQ)SP
$1,928.25
6,427.50
$4,499.25 Favorable

(21,000 + 26,000) 3/(3 + 4) = 20,143

(21,000 + 26,000) 4/(3 + 4) = 26,857

Yield variance = (Standard yield Actual yield) SP y

= (33,571 37,000) $7.35 = 3,429 $7.35 = $25,203.15 Favorable
where Standard yield = (21,000 + 26,000) 5/7 = 33,571
SPy = [(3 $2.25) + (4 $7.50)] / 5 gallons = $36.75 / 5 = $7.35

EXERCISE 4 (Scooter Company)

MPV:

$3,725,000 (3,200,000 $1.20) = $3,725,000 $3,840,000 = $115,000 Favorable

MUV:

[3,110,000 (125,000 25)] $1.20 = (3,110,000 3,125,000) $1.20 = 15,000 $1.20 = $18,000 Favorable

LRV:

$3,320,000 (260,000 $12.50) = $3,320,000 $3,250,000 = $70,000 Unfavorable

LEV:

[260,000 (125,000 2)] $12.50 = (260,000 250,000) $12.50 = 10,000 $12.50 = $125,000 Unfavorable

VOSV: $3,025,000 (378,000 $8) = $3,025,000 $3,024,000 = $1,000 Unfavorable

VOEV: [378,000 (125,000 3)] $8 = (378,000 375,000) $8 = 3,000 $8 = $24,000 Unfavorable
FOSV: $4,275,000 (120,000 $36) = $4,275,000 $4,320,000 = $45,000 Favorable
FOVV: $4,320,000 (125,000 $36) = $4,320,000 $4,500,000 = $180,000 Favorable