Acct Quiz week 7

1. Which of the following might cause a materials variance?
Failing to take purchase discounts. Using a better grade of raw material. Changes in the market supply for the raw materials. All of the above.

2. What is the term that describes the rate companies frequently use to apply fixed overhead costs to units produced?
Predetermined overhead rate.

3. Activity-based costing is commonly used with standard costing. Using more activity drivers increases the potential for managers to get much more information from activity-based costing than from the traditional approach.

4. What is the result of substituting computerized equipment for direct labor?
Less direct labor and more manufacturing overhead.

5. Java Gourmet Coffee reports the following data for April 2010 where 200,000 pounds of roasted gourmet coffee beans were actually produced (note: standard costs do not allow for any wastage),

Actual: Direct Materials: Quantity of coffee beans: 210,000 pounds Cost per pound: $0.55 per pound Direct Labor: Direct labor rate: $19.00 per hour Labor hours used: 11,000 hours Variable Overhead: Actual costs: $21,000 Standard: Direct Materials: Quantity of coffee beans: 200,000 pounds Cost per pound: $0.50 per pound Direct Labor: Direct labor rate: $20.00 per hour Labor hours to be used: 0.05 hours per pound Variable overhead: $.10 per pound Refer to Java Gourmet Coffee. Calculate the total direct materials variance.

 15,500

SP ́ SQ $0.50 ́ 200,000 = $100,000
SP ́ SQ $0.50 ́ 200,000 = $100,000
$0.55 ́ 210,000 = $115,500
$0.50 ́ 210,000
= $105,000 |_____$10,500 U _____|________ $5,000 U_____|
Direct materials price variance = $10,500 U Direct materials efficiency variance = $5,000 U Total direct materials