# Chapter 7 Guided Practice

Back to Chapter 7 in Textbook

## 7GP.1 Sales Variances

To be added at a future time.

## 7GP.2 Direct Labor Variances

### 7GP.2.E1

Young Company has actual direct labor wages of \$5,000 (at an actual rate of \$16 per hour). The firm’s standard quantity, given actual finished goods output, is 300 direct labor hours. The firm’s standard price is \$14 per hour.

Required

What is the direct labor price variance?

### 7GP.2.E2

Young Company has actual direct labor wages of \$5,000 (at an actual rate of \$16 per hour). The firm’s standard quantity, given actual finished goods output, is 300 direct labor hours. The firm’s standard price is \$14 per hour.

Required

What is the direct labor quantity variance?

### 7GP.2.M1

Olde Company’s standard quantity is 2.5 direct labor hours per unit. Last year the company budgeted 12,000 finished goods units. The actual finished goods units produced were 10,000. The firm uses the standard price of \$25 per direct labor hour. Actual direct labor was 30,000 units at \$23.50 per direct labor hour.

Required

What is Olde Company’s direct labor price variance?

### 7GP.2.M2

Olde Company’s standard quantity is 2.5 direct labor hours per unit. Last year the company budgeted 12,000 finished goods units. The actual finished goods units produced were 10,000. The firm uses the standard price of \$25 per direct labor hour. Actual direct labor was 30,000 units at \$23.50 per direct labor hour.

Required

A) What is Olde Company’s direct labor quantity variance?

B) What is the journal entry to record Olde Company’s direct labor costs and variances?

## 7GP.3 Direct Materials Variances

### 7GP.3.E1

The High Company purchases and uses 100,000 liters of a direct material at a price of \$0.16 per liter. The company’s standard quantity for this direct material is 2 liters per finished goods unit (both budgeted and actual finished goods units are 52,000). The standard price for this direct material is \$0.14 per liter.

Required

(A) What is High Company’s direct materials quantity variance?

(B) What is High Company’s direct materials price variance?

### 7GP.3.E2

Low, Inc.’s actual cost for 1,000,000 units of direct material is \$90,000,000. It’s direct materials price variance is a \$150,000 unfavorable variance.

Required

What is Low, Inc.’s standard price for direct materials?

### 7GP.3.M1

This period, Left, LLC purchases 1,000 pounds of direct materials at \$15 per pound. The firm’s standard for this direct material is \$13 per pound and 0.5 pounds per finished goods unit. During the period Left, LLC uses 900 pounds of direct materials in production to produce 1,600 finished goods units. In the firm’s budget, Left, LLC budgeted that it would produce 2,000 finished goods this period.

Required

(A) What is Left, LLC’s direct materials quantity variance?

(B) What is Left, LLC’s direct materials price variance?

### 7GP.3.M2

This period, Right, Inc. purchases 2,000 pounds of direct materials at \$30 per pound. The firm’s standard for this direct material is \$32 per pound and 0.5 pounds per finished goods unit. During the period Right, Inc. uses 1,800 pounds of direct materials in production to produce 3,800 finished goods units. In the firm’s budget, Right, Inc. budgeted that it would produce 3,500 finished goods this period.

Required

What are the journal entries Right, Inc. uses to record direct materials purchases and usage?

### 7GP.4.E1

A firm applies variable overhead using a standard rate of \$2 per machine hour. The firm expects 1,000 machine hours to be consumed per 100,000 finished goods units. The firm’s actual finished goods volume was 300,000 units.

The firm’s actual machine hour usage was 3,200 machine hours, for a total actual variable overhead cost of \$6,100.

Required

What are the firm’s variable overhead price variance and variable overhead quantity variance?

### 7GP.4.M1

Last year a firm budgeted \$100,000 in fixed overhead costs. The firm’s PDOH rate is \$10 per direct labor hour, half of which is due to variable overhead. The firm’s actual direct labor hours were 18,000. The firm’s actual fixed overhead costs were \$98,000.

Required

What are the firm’s fixed overhead volume variance and fixed overhead spending variance?

## 7GP.5 Mix and Yield Variances

### 7GP.5.M1

A firm has two direct material inputs: input alpha and input beta. These two inputs are substitutable. The firm generally expects each batch of 100 finished goods units to require 30 pounds of input alpha and 20 pound of input beta. Input alpha costs \$4 per pound and input beta costs \$3 per pound (these two are the actual and standard prices for the inputs).

The firm actually produces 10,000 finished goods units and uses 3,500 pounds of input alpha and 1,500 pounds of input beta.

Required

What is the firm’s mix variance for direct materials?

### 7GP.5.M2

A firm uses two substitutable inputs: input zeta and input omega.

• The standard mix is 1 units of input zeta for every 2 units of input omega
• This, mix (i.e. 1 input zeta and 2 input omega units), is the standard per batch, which produces three finished goods units.
• Input zeta costs \$40 per unit and input omega costs \$100 per unit.
• To produce 300 finished goods units, the firm actually uses 150 units of input zeta and 100 units of input omega.

Required

What is the firm’s yield variance for these inputs?