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Exam 23: Flexible Budgets and Standard Costs

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Question 1

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A flexible budget expresses all costs on a per unit basis, regardless of cost behavior.

A) True
B) False

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verified

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Question 2

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Management by exception means that managers focus on the most significant differences between actual costs and standard costs.

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B) False

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Question 3

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A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the company produces and sells 16,000 units is:

Lavoie Company planned to use 18,500 pounds of material costing $2.50 per pound to make 4,000 units of its product. In actually making 4,000 units, the company used 18,800 pounds that cost $2.54 per pound. Calculate the direct materials price variance.

The following information describes a company's usage of direct labor in a recent period. The direct labor rate variance is: $\begin{array}{llr} \text { Actual hours used } &45,000\\ \text { Actual rate per hour} &\$15.00\\ \text {Standard rate per hour } &\$14.50\\ \text {Standard hours for units produced } &47,000\\\end{array}$

If actual price per unit of materials is greater than the standard price per unit of materials, the direct materials price variance is____________ .

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 sales for 20,000 units would be:

Fletcher Company collected the following data regarding production of one of its products. Compute the fixed overhead cost variance. $\begin{array}{lll}\text { Direct labor stendard (2 hrs. @ } \$ 12.75 / \mathrm{hr} \text {.) } & \$ 25.50 &\text {per finished unit}\\\text { Actual direct labor hours } & 81,500&\text { hrs}\\\text { Budgeted units } & 42,000&\text {units}\\\text {Actual finished units produced}&40,000&\text {units}\\\text {Standad variable OH rate (2 hrs. @ \$14.30/hr) }&\$28.60&\text {per finished unit}\\\text {Standard fixed OH rate (\$ 336,000 / 42,000 units) }&\$8.00 &\text {per unit}\\\text {Actual cost of variable overhead costs incurred}&\$1,140,000\\\text {Actual cost of fixed overhead costs incurred} &\$ 338,000 \end{array}$

Milltown Company specializes in selling used cars. During the month, the dealership sold 22 cars at an average price of $15,000 each. The budget for the month was to sell 20 cars at an average price of $16,000. - Compute the dealership's sales volume variance for the month.

A company uses the following standard costs to produce a single unit of output. $\begin{array} { l l l } \text { Direct materials } & 6 \text { pounds at } \$ 0.90 \text { per pound } & = \$ 5.40 \\\text { Direct labor } & 0.5 \text { hour at } \$ 12.00 \text { per hour } & = \$ 6.00 \\\text { Manufactuning overhead } & 0.5 \text { hour at } \$ 4.80 \text { per hour } & = \$ 2.40\end{array}$ 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 labor efficiency variance for the month was:

The following information describes a company's usage of direct labor in a recent period. The total direct labor cost variance is: $\begin{array}{llr} \text { Actual hours used } &45,000\\ \text { Actual rate per hour} &\$15.00\\ \text {Standard rate per hour } &\$14.50\\ \text {Standard hours for units produced } &47,000\\\end{array}$

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 contribution margin for 20,000 units would be:

Which of the following is not part of the flow of events in variance analysis:

The total sales variance can be divided into the sales price variance and the sales volume variance.

Overhead cost variance is:

The following information comes from the flexible budget performance report of Jackal Corp. for the current period. Prepare the journal entries to charge direct materials and direct labor costs to work in process and the materials and labor variances to their proper accounts. Direct materials actual cost………………………… $237,400 Direct materials standard cost …………………… $238,750 Materials price variance…………………………. $11,700 U Materials quantity variance………………………… $13,050 F

When standard costs are used, factory overhead is assigned to products with a predetermined standard overhead rate.

Gala Enterprises reports the following information regarding the production of one of its products for the month. Compute the direct materials cost variance, the direct materials price variance, the direct materials quantity variance and identify each as either favorable or unfavorable. $\begin{array} { l l } \text { Direct materials standard (6 lbs. @ \$3/lb.) } & \$ 18 \text { per finished unit } \\\text { Actual direct materials used } & 179,000 \mathrm { lbs } . \\\text { Actual finished units produced } & 30,000 \text { units } \\\text { Actual cost of direct materials used } & \$ 554,900\end{array}$

A budget performance report shows budgeted amounts, actual amounts, and differences between budgeted and actual amounts.

Regarding overhead costs, as volume increases: