Smith Manufacturing Uses a Standard Costing System What Are Smith's Material and Conversion Variances for the Month

question 17

Multiple Choice

Smith Manufacturing uses a standard costing system.For the current period, Smith allocated the following costs using a predetermined overhead rate: $$\begin{array} { l r r r } & \text { Material } & \text { Conversion } & \text { Total } \\\text { Allocated Costs: } & & & \\\text { Units completed } & \$ 40,000 & \$ 20,000 & \$ 60,000 \\\text { Units in process end of period } & \$ 5,000 & \$ 3,000 & \$ 8,000 \\& \$ 45,000 & \$ 23,000 & \$ 68,000 \\& & & \\\text { Actual Costs: } & \$ 50,000 & \$ 22,000 & \$ 72,000\end{array}$$ What are Smith's material and conversion variances for the month?

• A)$10,000 Unfavorable materials variance/$2,000 Unfavorable conversion variance.
• B)$20,000 Unfavorable materials variance/$2,000 Favorable conversion variance.
• C)$5,000 Unfavorable materials variance/$1,000 Favorable conversion variance.
• D)$12,000 materials variance/$50,000 conversion variance.
• E)None of the above.

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Definitions:

Experimentation

The process of conducting tests or trials in a controlled environment to discover, prove, or examine the validity of hypotheses or the effect of variables.

Procedure

A series of actions or steps taken to achieve a specific purpose.

Reliability

The scientific requirement that when the same behavior is measured on two or more occasions by the same or different observers, the measurements must be consistent with each other.

Observers

Individuals who watch or monitor a situation or a set of events without directly participating in them.