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Exam 21: Flexible Budgets and Standard Costs

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Question 81

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How are unfavorable variances recorded?

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Unfavorable variance...

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Question 82

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If Blue Jay Enterprises actual overhead incurred during a period was $49,050 and the company reported an unfavorable overhead controllable variance of $1,800 and a favorable overhead volume variance of $1,350,how much standard overhead cost was assigned to the products produced during the period?

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Question 83

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Selected information from Michaels Company's flexible budget follows: Michaels Company applies overhead to production at a rate of $31.25 per unit based on a normal operating level of 80% of capacity.For the current period,Michaels Company produced 5,400 units and incurred $62,000 of fixed overhead costs and $96,000 of variable overhead costs.The company used 11,000 labor hours to produce the 5,400 units.Calculate the variable overhead spending and efficiency variances and the fixed overhead spending and volume variances.Indicate whether each variance is favorable or unfavorable.

An internal report that helps management analyze the difference between actual performance and budgeted performance based on the actual sales volume (or other level of activity) and that presents the differences between actual and budgeted amounts as variances is called a(n) :

What are sales variances? How are they used?

Reference: 21_06 The following information describes a company's use of direct labor in a recent period: $\begin{array}{llr} \text { Actual hours used} &45,000\\ \text { Actual rate per hour} &\$15\\ \text { Standard rate per hour} &\$14\\ \text { Standard hours for units produced} &47,000\\\end{array}$ -The direct labor rate variance is:

A cost variance equals the sum of the quantity variance and the price variance.

A company had a $56,000 unfavorable direct material quantity variance during a time period when the standard price per pound of direct material was $7 and the actual price per pound of direct material was $7.50.If the standard quantity of direct material allowed for production was 52,000 pounds,how many pounds of direct material were actually used during this period?

Which of the following variances is not used in a standard cost system?

A company's flexible budget for 48,000 units of production showed variable overhead costs of $72,000 and fixed overhead costs of $64,000.The company incurred overhead costs of $122,800 while operating at a volume of 40,000 units.The total controllable cost variance is:

Flexible budgets may be prepared before or after an actual period of activity.Why would management prepare such budgets at differing time frames?

Big Bend Co.fixed budget for the year is shown below: Prepare a flexible budget for Big Bend Co.that shows a detailed budget for its actual sales volume of 42,000 units.Use the contribution margin format.

Assume Martin Guitar Company has a standard of 3 hours of direct labor per unit produced and $20 per hour for the labor rate.During last period,the company used 24,000 hours of direct labor at a $456,000 total cost to produce 6,000 units.Compute the direct labor rate and efficiency variances.

A company's budget for 60,000 units of production showed sales of $96,000,variable costs of $36,000,and fixed costs of $26,000.What operating income would be expected if the company produces and sells 70,000 units?

A favorable variance for a cost means that when compared to the budget,the actual cost is ____________________ than the budgeted cost.

Cheshire,Inc.,allocates fixed overhead at a rate of $18 per direct labor hour.This amount is based on 90% of capacity or 3,600 direct labor hours for 6,000 units.During May,Cheshire produced 5,500 units.Budgeted fixed overhead is $66,000,and overhead incurred was $67,000. Required: Determine the volume variance for May.

The amounts in a flexible budget are based on one expected level of sales or production.

An analytical technique used by management to focus on the most significant variances and give less attention to the areas where performance is satisfactory is known as:

Reference: 21_02 Kermit Enterprises has collected the following data on one of its products: $\begin{array}{ll}\text { Direct materials standard (4 lbs. @ \$1/lb.) } & \$ 4 \text { per finished unit } \\\text { Total direct materials cost variance-unfavorable } & \$ 7,500 \\\text { Actual direct materials used } & 150,000 \mathrm{lbs} . \\\text { Actual finished units produced } & 30,000 \text { units }\end{array}$ -The direct materials price variance is:

The costs that should be incurred under normal conditions to produce a specific product or component or to perform a specific service are: