1. Standards that do not allow for machine breakdowns or other work interruptions and that require peak efficiency at all times are known as:

ideal standards

	2. If a company isolates variances at the earliest point in time, the appropriate time to recognize a direct material price variance would be when:

the material is purchased

3. A favorable materials price variance indicates that

standard price exceeded the actual price

	4. Montpellier Company reported a favorable materials price variance of $380 and an unfavorable materials quantity variance of $120. Based on these variances, you can conclude that:

the actual cost per pound for materials was less than the standard cost per pound

		5. The "standard quantity allowed" or "standard hours allowed" is computed by multiplying the:

actual output in units by the standard input allowed

6. Marseille Company, a clothing manufacturer, uses a standard costing system. Each unit of a finished product contains 2 yards of cloth. However, there is unavoidable waste of 25%, calculated on input quantities, when the cloth is cut for assembly. The cost of the cloth is $6 per yard. The standard direct material cost for cloth per unit of finished product is:

15.00 or 2 yards+.5yards=2.5 yards = 2.5 yards *6 dollars per yard = 15

	7. Venezia Company employs a standard cost system in which direct materials inventory is carried at standard cost. Venezia has established the following standards for the prime costs of one unit of product:

Standard	Standard	Standard
 	Quantity	Price	Cost
Direct materials	6.0 pounds	$ 7.00/pound	$42.00
Direct labor	1.3 hours	$22.00/hour	28.60
 	 	 	$70.60

During June, Venezia purchased 165,000 pounds of direct material at a total cost of $1,171,500. The total factory wages for June were $800,000, 90 percent of which were for direct labor. Venezia manufactured 25,000 units of product during June using 151,000 pounds of direct material and 32,000 direct labor hours. The price variance for the direct material acquired by the company during June is:

16,500 unfavorable

	8. Venezia Company employs a standard cost system in which direct materials inventory is carried at standard cost. Venezia has established the following standards for the prime costs of one unit of product:

Standard	Standard	Standard
 	Quantity	Price	Cost
Direct materials	6.0 pounds	$ 7.00/pound	$42.00
Direct labor	1.3 hours	$22.00/hour	28.60
 	 	 	$70.60

During June, Venezia purchased 165,000 pounds of direct material at a total cost of $1,171,500. The total factory wages for June were $800,000, 90 percent of which were for direct labor. Venezia manufactured 25,000 units of product during June using 151,000 pounds of direct material and 32,000 direct labor hours. (Note that this is the same data that was provided for the previous question.) The direct material quantity variance for June is:

7,000 unfavorable

	Feedback: First, calculate the standard quantity as follows:
25,000 units x 6.0 pounds per unit = 150,000 pounds
Then calculate the material quantity variance as follows:
Materials quantity variance = Standard price x (Actual quantity - Standard quantity)
Materials quantity variance = SP x (AQ - SQ)
Materials quantity variance = $7.00 x (151,000 - 150,000) = $7,000 Unfavorable (U)

9. Venezia Company employs a standard cost system in which direct materials inventory is carried at standard cost. Venezia has established the following standards for the prime costs of one unit of product:

Standard	Standard	Standard
 	Quantity	Price	Cost
Direct materials	6.0 pounds	$ 7.00/pound	$42.00
Direct labor	1.3 hours	$22.00/hour	28.60
 	 	 	$70.60

During June, Venezia purchased 165,000 pounds of direct material at a total cost of $1,171,500. The total factory wages for June were $800,000, 90 percent of which were for direct labor. Venezia manufactured 25,000 units of product during June using 151,000 pounds of direct material and 32,000 direct labor hours. (Note that this is the same data that was provided for the previous question.) The direct labor rate variance for June is:

16,000 unfavorable

10. 	Venezia Company employs a standard cost system in which direct materials inventory is carried at standard cost. Venezia has established the following standards for the prime costs of one unit of product:
 	Standard	Standard	Standard
 	Quantity	Price	Cost
Direct materials	6.0 pounds	$ 7.00/pound	$42.00
Direct labor	1.3 hours	$22.00/hour	28.60
 	 	 	$70.60
During June, Venezia purchased 165,000 pounds of direct material at a total cost of $1,171,500. The total factory wages for June were $800,000, 90 percent of which were for direct labor. Venezia manufactured 25,000 units of product during June using 151,000 pounds of direct material and 32,000 direct labor hours. (Note that this is the same data that was provided for the previous question.) The direct labor efficiency variance for June is:

11,000 favorable


	Feedback: First, calculate the standard hours as follows:
25,000 units x 1.3 hours per unit = 32,500 hours
Then calculate the direct labor efficiency variance as follows:
Direct labor efficiency variance = Standard rate x (Actual hours - Standard hours)
Direct labor efficiency variance = SR x (AH - SH)
Direct labor efficiency variance = $22.00 x (32,000 - 32,500) = $11,000 Favorable (F)