Question

Checking to see if my highlighted answers are correct????

__d__ 1. What is a standard cost?

a.   The total number of units times the budgeted amount expected

b.   Any amount that appears on a budget

c.   The total amount that appears on the budget for product costs

d.   The amount management thinks should be incurred to produce a good or service

__c__ 2. A standard cost is

a.   a cost which is paid for a group of similar products.

b.   the average cost in an industry.

c.   a predetermined cost.

d.   the historical cost of producing a product last year.

__c__ 3. The difference between a budget and a standard is that

a.   a budget expresses what costs were, while a standard expresses what costs should be.

b.   a budget expresses management's plans, while a standard reflects what actually happened.

c.   a budget expresses a total amount, while a standard expresses a unit amount.

d.   standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system.

PART II — Direct Labor Standard (20 points)

Engines Done Right Co. is trying to establish the standard labor cost of a typical engine tune-up. The following data have been collected from time and motion studies conducted over the past month.

                     Actual time spent on the tune-up                 1.0 hour

                     Hourly wage rate                                          $16

                     Payroll taxes                                                10% of wage rate

                     Setup and downtime                                    10% of actual labor time

                     Cleanup and rest periods                            20% of actual labor time

                     Fringe benefits                                             25% of wage rate

Instructions

(a)     Determine the standard direct labor hours per tune-up

standard direct labor hours per tune-up = Actual time spent + Setup and downtime +          Cleanup and rest periods

standard direct labor hours per tune-up = 1 + 1*10% + 1*20%

standard direct labor hours per tune-up = 1.3 Hours

(b)     Determine the standard direct labor hourly rate.

         standard direct labor hourly rate = Hourly wage rate + Payroll taxes + Fringe benefits

         standard direct labor hourly rate = 16 + 10%*16 + 25%*16

         standard direct labor hourly rate = 21.60

(c)     Determine the standard direct labor cost per tune-up.

         standard direct labor cost per tune-up = standard direct labor hours per tune-up*standard     direct labor hourly rate

         standard direct labor cost per tune-up = 1.3*21.6

         standard direct labor cost per tune-up = $ 28.08

  (d)     If a tune-up took 1.5 hours at the standard hourly rate, what was the direct labor quantity variance?

        Direct labor quantity variance = (Actual Hour - Standard Hour) * Standard Rate

        Direct labor quantity variance = (1.50 - 1.30)*21.60

        Direct labor quantity variance = $ 4.32 Unfavorable

Answer 1

As per HOMEWORKLIB RULES we can answer only one question and if there are sub-parts of that question then maximum four sub-parts can be answered. Here I am answering all three question of part 1 question:

1. What is a standard cost?

The Answer is (d). The amount management thinks should be incurred to produce a good or service.

2. A standard cost is

The Answer is (c) a predetermined cost

A predetermined cost for the production of goods and services that serves as a benchmark against which to compare the actual cost.

3. The difference between a budget and a standard is that

The Answer is (c) a budget expresses a total amount, while a standard expresses a unit amount.