Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
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Textbook Question
Chapter 10, Problem 47E
Refer to the information for Cinturon Corporation on the previous page.
Required:
- 1. Break down the total variance for labor into a rate variance and an efficiency variance using the columnar and formula approaches.
- 2. CONCEPTUAL CONNECTION As part of the investigation of the unfavorable variances, the plant manager interviews the production manager. The production manager complains strongly about the quality of the leather strips. He indicates that the strips are of lower quality than usual and that workers have to be more careful to avoid a belt with cracks and more time is required. Also, even with extra care, many belts have to be discarded and new ones produced to replace the rejects. This replacement work has also produced some overtime demands. What corrective action should the plant manager take?
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Which of the following statements are true?
a. The standard price of materials should include delivery charges and any discounts.
b. In general, the production manager is responsible for the materials price variance.
C. An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity
allowed for the actual output of the period.
d. If skilled workers with high hourly rates of pay are given duties that require little skill and call for lower hourly rates of pay, this will
result in a favorable labor rate variance.
e. If variable manufacturing overhead is applied based on direct labor-hours, it is impossible to have a favorable labor efficiency
variance and unfavorable variable overhead efficiency variance for the same period.
O Statements b. and d.
Statement c.
O Statements a. and e.
O None of the statements
Statements d. and e.
Which of the following statement(s) is/are true regarding standard costs and cost variances?
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            i. they can be used in performance evaluation of managers and divisions.
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            ii. management by exception is used by managers in deciding whether to investigate cost variances.
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           iii. variance investigation involves looking at only unfavourable variances.
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           iv. a shorter product life cycle means that standard cost data are only relevant for a shorter time period.
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           v. using unskilled workers may result in a favourable labour efficiency variance.
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Multiple Choice
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i, ii, iii, iv and v
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i and ii
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i only
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i, iii and v
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i, ii and iv
Which of the following is a value-added
activity?
a.waiting
b.inspection
c.processing
d.moving
Which of the following statements is
characteristic of overhead?
a.The adjusted cost of goods sold is equal to
the normal cost of goods manufactured plus
or minus the overhead variance.
b.Variances in overhead are expected every
other month.
c.lf the overhead variance shows overapplied
overhead, then that amount would be
subtracted from normal cost of goods sold.
d.lf the overhead variance shows
underapplied overhead, then that amount
would be subtracted from normal cost of
goods sold.
Which accounting method is used for external
reporting?
a.absorption costing
b.transfer price costing
c.variable costing
d.responsibility costing
Chapter 10 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 10 - Discuss the dirrerence between budgets and...Ch. 10 - Describe the relationship that unit standards have...Ch. 10 - Why is historical experience often a poor basis...Ch. 10 - Prob. 4DQCh. 10 - Explain why standard costing systems adopted.Ch. 10 - How does standard costing improve the control...Ch. 10 - Discuss the differences among actual costing,...Ch. 10 - Prob. 8DQCh. 10 - The budget variance for variable production costs...Ch. 10 - When should a standard cost variance be...
Ch. 10 - What are control limits, and how are they set?Ch. 10 - Explain why the materials price variance is often...Ch. 10 - The materials usage variance is always the...Ch. 10 - The labor rate variance is never controllable. Do...Ch. 10 - Prob. 15DQCh. 10 - What is kaizen costing? On which part of the value...Ch. 10 - What is target costing? Describe how costs are...Ch. 10 - Prob. 18DQCh. 10 - The variable overhead efficiency variance has...Ch. 10 - Describe the difference between the variable...Ch. 10 - What is the cause of an unfavorable volume...Ch. 10 - Does the volume variance convey any meaningful...Ch. 10 - Which do you think is more important for control...Ch. 10 - Prob. 1MCQCh. 10 - A currently attainable standard is one that a....Ch. 10 - An ideal standard is one that a. uses only...Ch. 10 - The underlying details for the standard cost per...Ch. 10 - The standard quantity of materials allowed is...Ch. 10 - The standard direct labor hours allowed is...Ch. 10 - Investigating variances from standard is a. always...Ch. 10 - Prob. 8MCQCh. 10 - The materials price variance is usually computed...Ch. 10 - Responsibility for the materials usage variance is...Ch. 10 - Responsibility for the labor rate variance...Ch. 10 - Responsibility for the labor efficiency variance...Ch. 10 - (Appendix 10A) Which of the following items...Ch. 10 - (Appendix 10A) Which of the following is true...Ch. 10 - The total variable overhead variance is the...Ch. 10 - A variable overhead spending variance can occur...Ch. 10 - The total variable overhead variance can be...Ch. 10 - The total fixed overhead variance is a. the...Ch. 10 - The total fixed overhead variance can be expressed...Ch. 10 - An unfavorable volume variance can occur because...Ch. 10 - Prob. 21BEACh. 10 - Control Limits During the last 6 weeks, the actual...Ch. 10 - Use the following information to complete Brief...Ch. 10 - Use the following information to complete Brief...Ch. 10 - Use the following information to complete Brief...Ch. 10 - Use the following information to complete Brief...Ch. 10 - Rath Company showed the following information for...Ch. 10 - Variable Overhead Spending and Efficiency...Ch. 10 - Performance Report for Variable Variances Humo...Ch. 10 - Total Fixed Overhead Variance Bradshaw Company...Ch. 10 - Fixed Overhead Spending and Volume Variances,...Ch. 10 - Prob. 32BEBCh. 10 - Control Limits During the last 6 weeks, the actual...Ch. 10 - Prob. 34BEBCh. 10 - Use the following information to complete Brief...Ch. 10 - Use the following information to complete Brief...Ch. 10 - Use the following information to complete Brief...Ch. 10 - Mulliner Company showed the following information...Ch. 10 - Variable Overhead Spending and Efficiency...Ch. 10 - Performance Report for Variable Variances Potter...Ch. 10 - Bulger Company provided the following data:...Ch. 10 - Fixed Overhead Spending and Volume Variances,...Ch. 10 - Standard Quantities of Labor and Materials...Ch. 10 - Sommers Company uses the following rule to...Ch. 10 - Use the following information for Exercises 10-45...Ch. 10 - Refer to the information for Cinturon Corporation...Ch. 10 - Refer to the information for Cinturon Corporation...Ch. 10 - Materials Variances Manzana Company produces apple...Ch. 10 - Labor Variances Verde Company produces wheels for...Ch. 10 - At the beginning of the year, Craig Company had...Ch. 10 - Jackie Iverson was furious. She was about ready to...Ch. 10 - 10-52 Materials and Labor Variances Refer to the...Ch. 10 - Refer to the information for Deporte Company...Ch. 10 - Esteban Products produces instructional aids,...Ch. 10 - Escuchar Products, a producer of DVD players, has...Ch. 10 - Use the following information for Exercises 10-56...Ch. 10 - Refer to the information for Rostand Inc. above....Ch. 10 - At the beginning of the year, Lopez Company had...Ch. 10 - Zepol Company is planning to produce 600,000 power...Ch. 10 - Last year, Gladner Company had planned to produce...Ch. 10 - Anker Company had the data below for its most...Ch. 10 - Cabanarama Inc. designs and manufactures...Ch. 10 - Basuras Waste Disposal Company has a long-term...Ch. 10 - Tom Belford and Tony Sorrentino own a small...Ch. 10 - Mantenga Company provides routine maintenance...Ch. 10 - Buenolorl Company produces a well-known cologne....Ch. 10 - The management of Golding Company has determined...Ch. 10 - Phono Company manufactures a plastic toy cell...Ch. 10 - Botella Company produces plastic bottles. The unit...Ch. 10 - The Lubbock plant of Morrils Small Motor Division...Ch. 10 - Moleno Company produces a single product and uses...Ch. 10 - The Lubbock plant of Morrils Small Motor Division...Ch. 10 - Extrim Company produces monitors. Extrims plant in...Ch. 10 - Lynwood Company produces surge protectors. To help...Ch. 10 - Shumaker Company manufactures a line of high-top...Ch. 10 - Paul Golding and his wife, Nancy, established...Ch. 10 - Prob. 79CCh. 10 - Prob. 1MTCCh. 10 - The Two Cost Systems Sacred Heart Hospital (SHH)...Ch. 10 - Prob. 3MTCCh. 10 - Prob. 4MTCCh. 10 - The Two Cost Systems Sacred Heart Hospital (SHH)...Ch. 10 - Prob. 6MTCCh. 10 - Prob. 7MTCCh. 10 - Prob. 8MTCCh. 10 - Prob. 9MTCCh. 10 - Sacred Heart Hospital (SHH) faces skyrocketing...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Think It Through: Don't "Skirt" the Issue E open You run a fabric store and order materials through a supplier. At the end of the month, you review your materials cost and discover that your direct materials price and quantity variances produced unfavorable results. What could be attributed to these unfavorable outcomes? How would these unfavorable outcomes impact the total direct materials variance?arrow_forwardA company uses a standard cost system. The ending balance In the Manufacturing Overhead account Is a debit balance. Which of the following statements is true? Multiple Choice Manufacturing overhead vwas underapplied and the total of the overhead variances was favorable, Manufacturing overhead was overapplied and the total of the overhead variances was unfavorable. Manufacturing overhead was underapplied and the total of the overhead variances was unfavorable. EGO Manufacturing overhead was overapplied and the total of the overhead variances was favorable. EGO wEGO EGOarrow_forwardAll standard costing methods use the predetermined overhead rate to apply factory overhead. This is based on an estimated amount that is calculated during the budgeting process at the beginning of the year. Therefore, there will almost always be a variance between the factory overhead that is applied and the actual factory overhead that is accumulated. These variances should be a minimal amount, but may sometimes be material. Therefore, it is important that an accountant find the cause of the variance, so as not to repeat it. Determining the reasons for variances is an important part of the overall process of variance analysis. Certain causes are commonly attributed to specific variances. Match each reason with the variance(s) it commonly creates. Each numbered item has one or more correct answer(s). Each lettered item may be used once, more than once, or not at all. A change in the quality of materials purchased A new supplier contract Error in the accounting records Change in…arrow_forward
- (d)  Post the manufacturing overhead transactions to the Manufacturing Overhead T-account, clearly showing the balance before closing the account. State the journal entries necessary to dispose of the variance. Assume that the manufacturing overhead variance is immaterial. (e)  What is the balance in the Cost of Goods Sold account after the adjustment? (f)  Compute Elite’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead variance (g)  Post the appropriate entries to Work in Process Inventory account & determine the account balance on March 31, the end of the quarter.arrow_forwardWhich of the following would produce a materials price variance? Select one: a. An excess number of direct labor-hours worked in completing a job. b. Shipping materials to the plant by air freight rather than by truck. c. Breakage of materials in production. d. An excess quantity of materials used.arrow_forwardIf there is an unfavorable direct material usage variance due to the substandard quality of the raw material, who will be held responsible? Select one: a. Purchase manager b. Production manager c. Factory floor staff d. Human resources managerarrow_forward
- Which of the following would produce a materials price variance? A. an excess quantity of materials used.B. an excess number of direct labor-hours worked in completing a job.C. shipping materials to the plant by air freight rather than by truck.D. breakage of materials in production.arrow_forward(d) Post the manufacturing overhead transactions to the Manufacturing Overhead T-account, clearly showing the balance before closing the account. State the journal entries necessary to dispose ofthe variance. Assume that the manufacturing overhead variance is immaterial. (e) What is the balance in the Cost of Goods Sold account after the adjustment?(f) Compute Elite’s gross profit earned on the jobs sold, after adjusting for the manufacturing overheadvariancearrow_forwardRefer to the information for Cinturon Corporation on the previous page. Required: 1. Break down the total variance for materials into a price variance and a usage variance using the columnar and formula approaches. 2. CONCEPTUAL CONNECTION Suppose the Boise plant manager investigates the materials variances and is told by the purchasing manager that a cheaper source of leather strips had been discovered and that this is the reason for the favorable materials price variance. Quite pleased, the purchasing manager suggests that the materials price standard be updated to reflect this new, less expensive source of leather strips. Should the plant manager update the materials price standard as suggested? Why or why not?arrow_forward
- Which of the following is the most likely explanation for an unfavorable materials usage variance and a favorable labor wage variance? a. The new labor contract increased wages. b. Higher quality materials were purchased, resulting in less waste. c. The company experience labor turnover and newer, less experienced workers were hired. d. A new supplier offered a lower price for materials.arrow_forwardWhich of the following is a possible cause of an unfavorable labor rate variance? A. hiring too many workers B. hiring higher-quality workers at a higher wage C. making too many units D. purchasing too much materialarrow_forwardThe president of McGrade Industries wants an analysis prepared to help explain why the variances computed in requirement 1 occurred. Using the worksheet called PRIMEVAR that follows these requirements, calculate the material and labor variances for McGrade Industries. The problem requires you to enter the input in the Data Section as well as formulas in the Answer Section.arrow_forward
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY