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Chapter 23: Q9RQ (page 1305)
Question:Explain the difference between a cost standard and an efficiency standard. Give an example of each.
Answer
A cost standard is related to estimating the total cost used, whereas an efficiency standard is related to the direct material and direct labor hours.
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List the eight product variances and the manager most likely responsible for each.
Journalizing materials entries
The following direct materials variance analysis was performed for Moore.
Requirements
1. Record Moore鈥檚 direct materials journal entries. Assume purchases were made on the account.
2. Explain what management will do with this variance information
The May 2018 revenue and cost information for McDonald Outfitters, Inc. follows:
Sales Revenue (at standard) $ 610,000
Cost of Goods Sold (at standard) 348,000
Direct Materials Cost Variance 1,500 F
Direct Materials Efficiency Variance 6,600 F
Direct Labor Cost Variance 4,200 U
Direct Labor Efficiency Variance 2,700 F
Variable Overhead Cost Variance 2,800 U
Variable Overhead Efficiency Variance 1,100
Fixed Overhead Cost Variance 2,300 U
Fixed Overhead Volume Variance 8,300 F
Prepare a standard cost income statement for management through gross profit. Report all standard cost variances for management鈥檚 use. Has management done a good or poor job of controlling costs? Explain.
Question:What is a standard cost income statement?
Murphy Company managers received the following incomplete performance report:
Units Actual Results Flexible Budget Variance Static Budget Flexible Budget Sales Volume Variance Sales Revenue Contribution Margin Fixed Expenses Operating Income 35,000 (a) (b) 5,000 F \( 29,000 \) 14,000 105,000 0 \( 219,000 \) 27,000 F 85,000 13,000 MURPHY COMPANY Flexible Budget Performance Report For the Year Ended July 31, 2018 134,000 14,000 35,000 \( 35,000 100,000 \) 219,000 84,000 135,000 (c) (d) (e) (f) (h) (g) (i) (j) (k) (l)
Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning.
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