TRUE/FALSE.

1) Variances are computed by taking the difference between the product cost and standard cost.

2) A manager is more likely to investigate the variance for a cost that is controllable by someone in the organization than one that is not.

3) The Purchasing Department would normally begin an investigation regarding an unfavorable materials quantity variance.

4) Interactions among variances often occur, making it even more difficult to determine the responsibility for a particular variance.

5) Most companies close their variance accounts directly into Cost of Goods Sold.

16) Enrique Industries purchased and consumed 50,000 gallons of direct material that was used in the production of 11,000 finished units of product. According to engineering specifications, each finished unit had a manufacturing standard of five gallons. If a review of Enrique's accounting records at the end of the period disclosed a material price variance of $5,000U and a material quantity variance of $3,000F, what is the actual price paid for a gallon of direct material?

A) $0.60.

B) $0.50.

C) $0.70

. D) None of the answers is correct.

17) Use the the following data for the next two problems. Relate to product no. 33 of Volusia Corporation:

Direct labor standard: 5 hours at $14 per hour

Direct labor used in production: 45,000 hours at a cost of $639,000

Manufacturing activity: 8,900 units completed The direct-labor rate variance is:

A) $8,900U.

B) $9,000F.

C) $9,000U.

D) $8,900F.

18) The direct-labor efficiency variance is:

A) $7,100F. B) $7,100U. C) $7,000F. D) $7,000U

19) The following events occurred at Eureka Manufacturing (EM), an assembler of engine parts, during March:

For each scenario, identify whether there was a material price variance, material quantity variance, labor rate variance, labor efficiency variance, or none. Be sure to indicate favorable or unfavorable.

1. Because of a stock shortage at its regular supplier, EM had to rely on a new vendor for two purchases of raw material parts. The vendor required EM to pay air-freight charges; however, upon arrival, the company found the goods to be above-average in quality.

2. The local municipality raised its property tax rates by 2%.

3. A flu outbreak on the assembly line forced management to use more experienced, senior personnel to complete production orders on a timely basis. These workers more than made up for lost time.

4. A shoddy maintenance program resulted in an abnormally high number of breakdowns on machine no. 76 and slowed production.

5. The implementation of a new program had positive effects for the company with respect to material usage and worker productivity