Exam 8: Flexible Budgets and Standard Costs

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

A fixed budget is based on a single predicted amount of sales or other activity measure.

Identify the four steps in the budgetary control process.

The variable overhead spending variance, the fixed overhead spending variance, and the variable overhead efficiency variance can be combined to find the:

The fixed overhead variance can be broken down into the ________ variance and the ________ variance.

Briefly describe the procedure of management by exception.

Use the following cost information to calculate the direct labor rate and efficiency variances and indicate whether they are favorable or unfavorable. Actual costs and quantities: Direct labor cost incurred ............ \ 360,000 Direct labor hours used ........... 20,000 hours Units produced ................... 45,000 units Standard costs and quantities: Direct labor rate per hour \ldots\ldots\ldots\ldots\ldots \ 16.50 hours produce one unit .......... 0.5

Gala Enterprises reports the following information regarding the production on one of its products for the month. Compute the direct labor cost variance, the direct labor rate variance, the direct labor efficiency variance and identify each as either favorable or unfavorable.

A standard that takes into account the reality that some loss usually occurs with any process under normal application of the process is known as a ________ standard.

A direct labor cost variance can be divided into price and quantity variances, which are almost always called controllable and volume variances.

When computing a price variance, the quantity is held constant.

Identify and explain the primary differences between fixed and flexible budgets.

The difference between actual quantity of input used and the standard quantity of input used results in a:

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 sales expected if the company produces and sells 16,000 units is:

Fletcher Company collected the following data regarding production of one of its products. Compute the direct labor efficiency variance. Direct labor standard (2hrs. @, \ 12.75/.) \ 5.50 per finished unit Actual direct labor hours 81,500 hrs. Actual finished units produced 40,000 units Actual cost of direct labor \ 1,100,250

A flexible budget is also called a ________ budget.

Clevenger Co. planned to produce and sell 30,000 units with a selling price of $10 per unit. Variable costs are expected to be $4 per unit and fixed costs are expected to be $80,000. Clevenger actually produced and sold 37,000 units. Using a contribution margin format: Prepare a fixed budget income statement for the planned level of sales and production.

Joseph, Inc., provides the following results of June's operations: Direct materials price variance \ldots\ldots\ldots\ldots. \ 400 Direct materials quantity variance \ldots\ldots\ldots 2,000 Direct labor rate variance \ldots\ldots\ldots\ldots\ldots. 100 Direct labor efficiency variance \ldots\ldots\ldots\ldots 1,200 Variable overhead spending variance \ldots\ldots 400 Variable overhead efficiency variance \ldots\ldots 800 Fixed overhead spending variance \ldots\ldots\ldots. 100 Fixed overhead volume variance \ldots\ldots\ldots.. 600 Required: (a) Determine the total overhead cost variance for June. (b) Applying the management by exception approach, which of the variances shown are of greatest concern? Why?

How are unfavorable variances recorded? How are favorable variances recorded?

Zip-up Company provides the following data developed for its master budget: Sales price Costs: Direct materials Direct labor Variable overhead Factory depreciation Supervision Selling expense Administrative cost \ 11.00 per unit \ 3.00 per unit \ 4.75 per unit \ 0.50 per unit \ 12,000 per month \ 13,000 per month \ 0.25 per unit \ 9,000 per month Required: Prepare flexible budgets for sales of 20,000, 22,000 and 24,000 units. Use a contribution margin format.