Recording Variances
Hard Practice Test
Cost Accounting
Hard Practice Test
Click the “Check Your Answer” box below each question to reveal the correct answer and explanation.
Problems only. No other multiple-choice questions are helpful.
1. The following data was provided from the records of the company that uses a standard cost system:
| Accounts payable | $120,875 |
| Materials price variance | $ 23,076 unfavorable |
| Total material variance | $ 6,239 favorable |
| Material standard quantity allowed | $115,220 |
| Wages payable | $139,000 |
| Labor rate variance | $ 3,296 favorable |
| Total labor variance | $ 15,023 unfavorable |
| Variable overhead spending variance | $12,405 favorable |
| Fixed overhead volume variance | $16,239 favorable |
| Variable overhead overapplied | $ 8,903 |
| Fixed overhead underapplied | $14,320 |
| Variable overhead added to product | $125,900 |
| Fixed overhead added to product | $167,349 |
A. Make all entries required to record all variances.
B. Close out the variance accounts given the following account balances
| Raw materials | $ 17,800 |
| Work in process | $ 1,645 |
| Finished Goods | $ 74,350 |
| Cost of Goods Sold | $184,590 |
Answer
| Raw Materials Inventory 97,794 plug RM purchase price variance 23,076 A/P 120,870 |
| WIP 115,220 Material quantity variance 29,315 Raw Materials Inventory 85,905 |
| WIP 123,977 Labor Efficiency Variance 18,319 Labor Rate Variance 3,296 Wages Payable 139,000 |
| WIP 125,900 Efficiency Variance 3,502 plug Spending Variance 12,405 Manufacturing Overhead 116,997 plug |
| WIP 167,349 Budget Variance 30,559 plug Volume Variance 16,239 Manufacturing Overhead 181,669 plug |
B. Close out the variance accounts given the following account balances
1st total all accounts and find the % of each of the total:
| Raw materials | $ 17,800 | .064 |
| Work in process | $ 1,645 | .006 |
| Finished Goods | $ 74,350 | .267 |
| Cost of Goods Sold | $184,590 | .663 |
| Total | $278,385 | 1.00 |
2nd – Close out the raw material price variance using the % for all 4 accounts above. Credit the debit balance to make it go to 0 and the other accounts will be the debits to balance the journal entry:
| Raw materials | $ 1,477 |
| Work in process | $ 138 |
| Finished Goods | $ 6,161 |
| Cost of Goods Sold | $15,300 |
| RM purchase price variance | $23,076 |
3rd – Take the WIP, FG, CGS account balances and find the % of the total:
| Work in process | $ 1,645 | .006 |
| Finished Goods | $ 74,350 | .285 |
| Cost of Goods Sold | $184,590 | .709 |
| Total | $260,585 | 1.00 |
4th – Take the journal entries from above and record the opposite debit or credit for each variance account (except material price) to make the account go to 0.
| Material quantity variance | 29,315 |
| Labor Rate Variance | 3,296 |
| Spending Variance | 12,405 |
| Volume Variance | 16,239 |
| Labor Efficiency Variance | 18,319 |
| Efficiency Variance | 3,502 |
| Budget Variance | 30,559 |
| Work in Process | 53 |
| Finished Goods | 2,529 |
| Cost of Goods Sold | 6,293 |
The entry is out of balance and needs $8,875 credit to balance.
The credit for $8,875 will be allocated to WIP, FG, and CGS based on the % computed above.
2. The following data was gathered from a company using a standard cost system:
| Direct Materials |
Direct Labor |
Total Manufact. Overhead |
|
| Actual cost incurred | $132,035 | $ 97,328 | $239,045 |
| Actual purchases at standard price | $129,034 | $102,563 | |
| Actual used at standard price | $109,236 | ||
| Standard allowed for actual output | $119,024 | $ 94,200 | $244,230 |
| Budget | $250,000 |
A. Make all entries required to record all variances
B. Close out the variance accounts given the following account balances
| Raw materials | $ 27,500 |
| Work in process | $ 2,050 |
| Finished Goods | $ 84,360 |
| Cost of Goods Sold | $184,459 |
Answer
| Raw Materials Inventory 129,034 RM purchase price variance 3,001 A/P 132,035 |
| WIP 119,024 Material quantity variance 9,788 Raw Materials Inventory 109,236 |
| WIP 94,200 Labor Efficiency Variance 8,363 Labor Rate Variance 5,235 Wages Payable 97,328 |
| WIP 244,230 Volume Variance 5,770 Spending Variance 10,955 Manufacturing Overhead 239,045 |
B. Close out the variance accounts given the following account balances
1st total all accounts and find the % of each of the total:
| Raw materials | $ 27,500 | .092 |
| Work in process | $ 2,050 | .007 |
| Finished Goods | $ 84,360 | .283 |
| Cost of Goods Sold | $184,459 | .618 |
| Total | $298,369 | 1.00 |
2nd – Close out the raw material price variance using the % for all 4 accounts above. Credit the debit balance to make it go to 0 and the other accounts will be the debits to balance the journal entry:
| Raw materials | $ 276 | |
| Work in process | $ 21 | |
| Finished Goods | $ 849 | |
| Cost of Goods Sold | $1,855 | |
| RM purchase price variance | $3,001 | |
3rd – Take the WIP, FG, CGS account balances and find the % of the total:
| Work in process | $ 2,050 | .008 |
| Finished Goods | $ 84,360 | .311 |
| Cost of Goods Sold | $184,459 | .681 |
| Total | $270,869 | 1.00 |
4th – Take the journal entries from above and record the opposite debit or credit for each variance account (except material price) to make the account go to 0.
| Material quantity variance | 9,788 |
| Labor Rate Variance | 5,235 |
| Spending Variance | 10,955 |
| Labor Efficiency Variance | 8,363 |
| Volume Variance | 5,770 |
| Work In Process | 95 |
| Finished Goods | 3,684 |
| Cost of Goods Sold | 8,066 |
The entry is out of balance and needs $11,845 credit to balance.
The credit for $11,845 will be allocated to WIP, FG, and CGS based on the % computed above.
3. The following data was gathered from a company using a standard cost system:
| Direct Materials |
Direct Labor |
Manufacturing Overhead |
|
| Actual dollars spent | $97,023 | $112,040 | |
| Expected to spend at standard | |||
| cost for each | $102,302 | $115,239 | $203,065 |
| Used at standard cost | |||
| for each | $105,236 | ||
| Estimated for units made | $108,340 | $119,345 | $200,453 |
| Applied | $154,230 | ||
| Budgeted | $150,000 | ||
| Actual fixed manufacturing overhead | $169,256 | ||
| Actual variable manufacturing overhead | $208,045 |
A. Record all variance accounts
B. Close out the variance accounts given the following account balances
| Raw materials | $67,300 |
| Work in process | $12,054 |
| Finished Goods | $104,360 |
| Cost of Goods Sold | $389,456 |
Answer
| Raw Materials Inventory 102,302 RM purchase price variance 5,279 A/P 97,023 |
| WIP 108,340 Material quantity variance 3,104 Raw Materials Inventory 105,236 |
| WIP 119,345 Labor Efficiency Variance 4,106 Labor Rate Variance 3,199 Wages Payable 112,040 |
| WIP 200,453 Spending Variance 4,980 Efficiency Variance 2,612 Manufacturing Overhead 208,045 |
| WIP 154,230 Budget Variance 19,256 Volume Variance 4,230 Manufacturing Overhead 169,256 |
B. Close out the variance accounts given the following account balances
1st total all accounts and find the % of each of the total:
| Raw materials | $ 67,300 | .117 |
| Work in process | $ 12,054 | .021 |
| Finished Goods | $104,360 | .182 |
| Cost of Goods Sold | $389,456 | .680 |
| Total | $573,170 | 1.00 |
2nd – Close out the raw material price variance using the % for all 4 accounts above. Credit the debit balance to make it go to 0 and the other accounts will be the debits to balance the journal entry:
| RM purchase price variance | $5,279 |
| Raw materials | $ 618 |
| Work in process | $ 111 |
| Finished Goods | $ 961 |
| Cost of Goods Sold | $3,589 |
3rd – Take the WIP, FG, CGS account balances and find the % of the total:
| Work in process | $ 12,054 | .024 |
| Finished Goods | $ 104,360 | .206 |
| Cost of Goods Sold | $ 389,456 | .770 |
| Total | $ 505,870 | 1.00 |
4th – Take the journal entries from above and record the opposite debit or credit for each variance account (except material price) to make the account go to 0.
| Work In Process | 293 |
| Finished Goods | 2,515 |
| Cost of Goods Sold | 9,401 |
| Material quantity variance | 3,104 |
| Labor Efficiency Variance | 4,106 |
| Labor Rate Variance | 3,199 |
| Volume Variance | 4,230 |
| Spending Variance | 4,980 |
| Efficiency Variance | 2,612 |
| Budget Variance | 19,256 |
The entry is out of balance and needs $12,209 debit to balance.
The debit for $12,209 will be allocated to WIP, FG, and CGS based on the % computed above.