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Exam 8: Flexible Budgets and Standard Costs

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Question 21

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Engineworks Co. provides the following fixed budget data for the year: $\begin{array}{llcc} \text { Sales (20,000 units)......................... } &&\$600,000\\ \text { Cost of sales:} &\\ \text { Direct materials............................... } &\$200,000\\ \text { Direct labor......................................} &160,000\\ \text { Variable overhead............................} &60,000\\ \text {Fixed overhead.................................. } &\underline{80,000}&\underline{500,000}\\ \text {Gross profit....................................... } &&\$100,000\\ \text {Operating expenses: } &\\ \text { Fixed...............................................} &\$12,000\\ \text { Variable.......................................... } &\underline{40,000}&\underline{\$52,000}\\ \text { Income from operations.................. } &&\underline{\$48,000}\\\\\end{array}$ $\begin{array}{llcc} \text { The company's actual activity for the year follows:} &\\ \text { Sales (21,000 units)....................... } &&\$651,000\\ \text { Cost of goods sold: } &\\ \text { Direct materials............................ } &\$231,000\\ \text { Direct labor.................................. } &168,000\\ \text { Variable overhead......................... } &73,500\\ \text { Fixed overhead............................. } &\underline{77,500}&\underline{550,000}\\ \text { Gross profit.................................. } &&\$101,000\\ \text { Operating expenses:} &\\ \text { Fixed............................................. } &12,000\\\\ \text { Variable......................................... } &\underline{39,500}&\underline{51,500}\\ \text { Income from operations.................. } &&\underline{\$49,500}\\\end{array}$ Required: Prepare a flexible budget performance report for the year using the contribution margin format.

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Question 22

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A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z. The company has just produced 1,000 units of this product, using 5,200 pounds of Material J that cost $9,880.The direct materials price variance is:

A) $520 unfavorable.
B) $400 unfavorable.
C) $120 favorable.
D) $520 favorable.
E) $400 favorable.

F) B) and E)
G) A) and C)

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Question 23

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A product has a sales price of $20. Based on a 15,000-unit production level, the variable costs are $12 per unit and the fixed costs are $6 per unit. Using a flexible budget for an actual production and sales level of 18,000 units, what is the budgeted operating income?

Claremont Company specializes in selling refurbished copiers. During the month, the company sold 180 copiers for total sales of $540,000. The budget for the month was to sell 175 copiers at an average price of $3,200. The sales price variance for the month was:

The difference between the flexible budget sales and the fixed budget sales is called the ________ variance.

Sanchez Company's output for the current period was assigned a $400,000 standard direct labor cost. The direct labor variances included a $10,000 unfavorable direct labor rate variance and a $4,000 favorable direct labor efficiency variance. What is the actual total direct labor cost for the current period?

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of fixed costs for 20,000 units would be:

________ are preset costs for delivering a product or service under normal conditions.

Differences between actual costs and standard costs are known as ________. These differences may be subdivided into ________ and ________.

A cost variance can be further separated into the quantity variance and the price variance.

A company uses the following standard costs to produce a single unit of output. $\begin{array} { l l l } \text { Direct materials } & 6 \text { pounds at } \$ 0.90 \text { per pound } & = \$ 5.40 \\\text { Direct labor } & 0.5 \text { hour at } \$ 12.00 \text { per hour } & = \$ 6.00 \\\text { Marnfacturing overhead } & 0.5 \text { hour at } \$ 4.80 \text { per hour } & = \$ 2.40\end{array}$ During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct materials price variance for the month was:

Gala Enterprises collected the following data regarding production of one of its products. Compute the variable overhead cost variance, the variable overhead spending variance, the variable overhead efficiency variance, the fixed overhead cost variance, the fixed overhead spending variance, and the fixed overhead volume variance.

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:

Claremont Company specializes in selling refurbished copiers. During the month, the company sold 180 copiers at an average price of $3,000 each. The budget for the month was to sell 175 copiers at an average price of $3,200. The expected total sales for 180 copiers were:

Regarding overhead costs, as volume increases:

Direct materials variances are called price and quantity variances. However, when referring to direct labor, these variances are usually called ________ and ________ variances.

Seafarer Company established a standard direct materials cost of 1.5 gallons at $2 per gallon for one unit of its product. During the past month, actual production was 6,500 units. The material quantity variance was $700 favorable and the material price variance was $470 unfavorable. The entry to charge Work in Process Inventory for the standard material costs during the month and to record the direct material variances in the accounts would include all of the following except:

Define standard costs. How do they assist management?

Fletcher Company collected the following data regarding production of one of its products. Compute the total direct materials cost variance. $\begin{array} { l rl} \text { Direct materlals stardard (6lbs. @ \$2/16.) } & \$ 12 & \text { per finished unit } \\\text { Actual direct materials used } & 243,000 & \text { lbs. } \\\text { Actual finished units produced } & 40,000 & \text { units }\\\text { Actual cost of direct materials used}&\$483,570\\\end{array}$

Static budget is another name for: