Exam 7: Flexible Budgets, Direct-Cost Variances, and Management Control

The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results. The flexible budget will report ________ for the fixed costs.

Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container. During June, Heavy Products produced and sold 15,000 containers using 2,400 pounds of direct materials at an average cost per pound of $92 and 3,750 direct manufacturing labor-hours at an average wage of $91.25 per hour. The direct manufacturing labor efficiency variance during June is ________.

When benchmarking it is best when management accountants simply analyze the costs and allow management to provide the insight as to why the revenues and costs differ between companies.

What is benchmarking, and how is it useful to a company?

Variances are used for evaluating performance and for motivating managers.

An unfavorable variance is conclusive evidence of poor performance.

Which of the following statements is true of benchmarking?

During February the Lungren Manufacturing Company's costing system reported several variances that the production manager was surprised to see. Most of the company's monthly variances are under $125, even though they may be either favorable or unfavorable. The following information is for the manufacture of garden gates, its only product: 1.Direct materials price variance, $800 unfavorable. 2.Direct materials efficiency variance, $1,800 favorable. 3.Direct manufacturing labor price variance, $4,000 favorable. 4.Direct manufacturing labor efficiency variance, $600 unfavorable. Required: a.Provide the manager with some ideas as to what may have caused the price variances. b.What may have caused the efficiency variances?

Classic Products Company manufactures colonial style desks. Some of the company's data was misplaced. Use the following information to replace the lost data: What is the total flexible-budget variance (D)?

A favorable variance indicates that budgeted costs are less than actual costs.

Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2017, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container. During July, GII produced and sold 4,000 containers using 1,350 pounds of direct materials at an average cost per pound of $48 and 2,450 direct manufacturing labor hours at an average wage of $12.25 per hour. July's direct material flexible-budget variance is ________.

Efficiency is the relative amount of inputs used to achieve a given output level.

Standard labor rate is $7.50 per hour. Standard labor allowed per unit is 0.7 hours. Actual cost per labor hour is $7.00 and actual labour hour per unit is 1 hours. What is the standard labor cost per output unit?

A variance is the difference between the actual cost for the current and expected (or budgeted) performance.

In variance analysis, if any single performance measure is underemphasized, managers will tend to make decisions that will cause the particular performance measure to look good.

A standard is attainable through efficient operations but allows for normal disruptions such as machine breakdowns and defective production.

Classic Products Company manufactures colonial style desks. Some of the company's data was misplaced. Use the following information to replace the lost data: What is the total sales-volume variance (E)?

Static-budget variance for operating income is calculated by taking a difference between static-budget operating income and actual operating income.

Lincoln Corporation used the following data to evaluate their current operating system. The company sells items for $19 each and used a budgeted selling price of $19 per unit. What is the static-budget variance of revenues?

Standard cost per output unit for each variable direct cost input is calculated by multiplying ________.