Wasteful usage of variable overhead costs such as indirect materials and utilitiesi.e., misplacing or spilling indirect materials or leaving machines running and doors to refrigerated areas open will show up as part of the variable overhead Efficiency variance.

a. Trueb. False

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If the labor mix at a company is changed by placing highly trained personnel in positions formerly held by assistants, the expected impact on the labor variances would be:

a.The labor rate variance would be more favorable, but the labor efficiency variance would be less favorable.

b.The labor rate variance would be less favorable, but the labor efficiency variance would be more favorable.

c.Both the labor rate and labor efficiency variances would be more favorable.

d.Both the labor rate and labor efficiency variances would be less favorable.

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Questions 6 - 10 refer to the following:

Cox Engineering performs cement core tests in its laboratory. The following standards have been set for each core test performed:

Direct materials 3 pounds of sand $.75 per pound

Direct labor0.4 hours $12 per hour

Variable overhead 0.4 hours $9 per hour

During March, the laboratory performed 2,000 core tests. On March 1, there were no direct materials (sand) on hand. After sand is used for a core test, it is discarded. Variable overhead is assigned to core tests on the basis of direct labor hours. The following events occurred during March:

I.8,600 pounds of sand were purchased at a cost of $7,310.

II.7,200 pounds of sand were used for core tests.

III. 840 actual direct labor hours were worked at a cost of $8,610.

IV. Actual variable overhead incurred was $3,200.

7.The material quantity variance for March is:

a.$ 900 favorable. c. $1,950 unfavorable.

b. $1,950 favorable. d. $900 unfavorable.

9.The labor efficiency variance for March is:

a. $480 favorable.c. $192 favorable.

b. $480 unfavorable.d. $192 unfavorable.

Ex: Actual Hours Worked - Standard Hours per Unit * # of units made) * standard rate for labor

(840 hrs worked - (0.4 hours * 2,000 units)) * $12 standard rate = 480 unfavorable

40 hrs overage * 12 = 480 unfavorable