Julys direct manufacturing labor efficiency variance

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Entrepreneurial Finance
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Chapter 5 / Exercise 15
Entrepreneurial Finance
Leach/Melicher
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106.July’s direct manufacturing labor efficiency variance is:a.$750.00 unfavorableb.$262.50 favorablec.$487.50 favorabled.None of these answers are correct.Answer:aDifficulty:2Objective:4Terms to Learn:efficiency variance[1,050 dlh – (10,000 x 0.10)] x $15 = $750 UTHE FOLLOWING INFORMATION APPLIES TO QUESTIONS 107 THROUGH 110:These questions refer to flexible-budget variance formulas with the following descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity.7-17
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Chapter 5 / Exercise 15
Entrepreneurial Finance
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Expert Verified
107.The best label for the formula (AQ – BQ) BP is the:
Difficulty:2Objective:4Terms to Learn:efficiency variance108.The best label for the formula (AP – BP) AQ is the:
Difficulty:2Objective:4Terms to Learn:price variance109.The best label for the formula [(AP)(AQ)– (BP)(AQ)] is the:
Difficulty:2Objective:4Terms to Learn:price variance110.The best label for the formula [(AP)(AQ)– (BP)(BQ)] is the:a.efficiency variance.b.price variancec.total flexible-budget varianced.spending varianceAnswer:c
Difficulty:2Objective:4Terms to Learn:flexible-budget varianceTHE FOLLOWING INFORMATION APPLIES TO QUESTIONS 111 THROUGH 113:Ruben’s Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. Fdenotes a favorable variance and Udenotes anunfavorable variance.Flexible------------Variances-------------BudgetPriceEfficiencyMaterial A$20,000$1,000F$3,000UMaterial B30,000500U1,500FDirect manufacturing labor40,000500U2,500F7-18
111.The MOST likely explanation of the above variances for Material A is that:
Difficulty:3Objective:4Terms to Learn:price variance112.The actual amount spent for Material B was:
Difficulty:2Objective:4Terms to Learn:price variance$30,000 + $500 U – $1,500 F = $29,000113.The MOST likely explanation of the above direct manufacturing labor variances is that: a.the average wage rate paid to employees was less than expectedb.employees did not work as efficiently as expected to accomplish the job c.the company may have assigned more experienced employees this month thanoriginally plannedd.management may have a problem with budget slack and might be using lax standards for both labor-wage rates and expected efficiencyAnswer:cDifficulty:3Objective:4Terms to Learn:efficiency varianceTHE FOLLOWING INFORMATION APPLIES TO QUESTIONS 114 THROUGH 116:Hector’s Camera Shop has prepared the following flexible budget for September and is inthe process of interpreting the variances. Fdenotes a favorable variance and Udenotes anunfavorable variance.

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