Exam 9: Standard Costing and Flexible Budgeting

The Marketing Club at York University recently held an end-of-year dinner and swim party, which the treasurer noted was a financial success. "Attendance was an all-time high, 60 members, and the results were much better than expected." The treasurer presented the following performance report at the executive board's June meeting: Answer: Budget Actual Variance Revenue \ 1.575 \ 2.205 \ 630 Food \ 675 \ 870 \ 195 Beverages 315 480 165 Dise jockey 150 175 25 Facility rental 200 200 \ldots Total costs \ 1.340 \ 1.725 \ 385 Profit \ 235 \ 480 \ 245 The budget was based on the following assumptions: ▪ Forty-five members would attend at a fixed ticket price of $35. ▪ Food and beverage costs would be $15 and $7 per attendee, respectively. ▪ A disc jockey was hired via a written contract at $50 per hour. Required: A. Briefly evaluate the meaningfulness of the treasurer's performance report. B. Prepare a performance report by using flexible budgeting and determine whether the end-of-year party was as successful as originally reported. C. Based on your answer in requirement "B," present a possible explanation for the variances in revenue, food costs, beverage costs, and the disc jockey.

Which of the following is not an overhead variance?

The Cardinal Philharmonic presents a series of concerts throughout the year. Budgeted fixed costs total $450,000 for the concert season; variable costs are expected to average $6 per patron. The philharmonic uses flexible budgeting. Required: Required: A. Prepare a flexible budget that shows the expected costs of 9,000, 9,500, and 10,000 patrons. B. Construct the philharmonic's flexible budget formula. C. Assume that 9,700 patrons attended concerts during the year just ended, and actual costs were: variable, $56,700; fixed, $457,500. Evaluate the philharmonic's financial performance by computing variances for variable costs and fixed costs.

Which of the following is not a criticism of standard costing, as applied to today's manufacturing environment?

Which department would normally begin an investigation regarding an unfavourable materials quantity variance?

Oliver Corporation uses a standard cost system when accounting for its sole product. Planned production is 70,000 process hours per month, which gives rise to the following per-unit standards: Variable overhead: 15 hours at $15 per hour Fixed overhead: 15 hours at $8 per hour During March, 5,100 units were produced and Oliver incurred the following overhead costs: variable, $842,500; fixed, $329,000. Actual process hours totalled 75,000. Required: A. Calculate the spending and efficiency variances for variable overhead. B. Calculate the budget and volume variances for fixed overhead.

Which of the following variances would be useful to help control overhead spending?

When actual variable cost per unit equals standard variable cost per unit, the difference between actual and budgeted contribution margin is explained by a combination of which two variances?

Ritchie Ventura operates a commercial painting business in Ontario, which has a very tight labour market. Much of his work focuses on newly constructed apartments and townhouses. The following data relate to crew no. 5 for a recently concluded period when 85 apartment units were painted: ▪ Three new employees were assigned to crew no. 5. Wages averaged $18.80 per hour for each employee; the crew took 2,550 hours to complete the work. ▪ Based on his knowledge of the operation, articles in trade journals, and conversations with other painters, Ventura established the following standards: ▪ The paint quantity variance was $6,070F. ▪ The operation did not go as smoothly as planned, with customer complaints and problems being much higher than expected. Typical hourly wage rate of crew personnel: $15 Anticipated crew time for each unit: 34 hours Required: A. Compute Ventura's direct-labour variances. B. Is the direct-labour rate variance consistent with what you might expect in a tight labour market? Explain. C. Analyze the information given and that you calculated, and determine what likely happened that would give rise to customer complaints

Coulter Manufacturing Company had an unfavourable labour efficiency variance and an unfavourable materials quantity variance. Which department in Coulter might be held accountable for these variances?

An overhead cost performance report typically includes:

Chen Enterprises purchased 67,000 pounds (cost = $616,400) of direct material to be used in the manufacture of the company's sole product. According the production specifications, each completed unit requires four pounds of direct material at a standard cost of $9 per pound. Direct materials consumed by the end of the period totalled 65,500 pounds in the manufacture of 16,050 finished units. An examination of Chen's payroll records revealed that the company worked 42,000 labour hours (cost = $621,600) during the period, and specifications called for each completed unit requiring 2.6 hours of labour at a standard cost of $15 per hour: Required: Calculate the direct-material price and quantity variances, and the direct-labour rate and efficiency variances. Indicate whether each variance is favourable or unfavourable.

Which of the following correctly lists all the information needed to calculate a labour rate variance?

Quick Delivery operates a delivery service for local restaurants, delivering call-in, to-go meals for restaurant customers. Variable overhead costs are budgeted at $3 per hour, and the typical roundtrip takes a driver 45 minutes to complete. Actual results for March follow. Number of roundtrips run: 1,560 Hours of delivery time: 1,250 Variable overhead cost incurred: $\$ 3.450$ Quick uses flexible budgets and variance analysis to monitor performance. Required: A. Prepare a flexible-budget performance report that shows (1) actual variable overhead, (2) the amount of variable overhead that should have been incurred for the number of roundtrips taken, and (3) the variance between these amounts. B. Compute the company's variable-overhead spending and efficiency variances. C. Compare the variances that you computed in requirements "A" and "B," and comment on your findings

SpaSpring Corporation, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 12,000 Actual fixed overhead incurred: $730,000 Actual machine hours worked: 60,000 Budgeted fixed overhead: $720,000 Planned level of machine-hour activity: 50,000 If Spring estimates four hours to manufacture a completed unit, Spring's standard fixed overhead rate per machine hour would be:

Skinner Incorporated, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 13,000 Actual fixed overhead incurred: $742,000 Standard fixed overhead rate: $15 per hour Budgeted fixed overhead: $720,000 Planned level of machine-hour activity: 48,000 If Skinner estimates four hours to manufacture a completed unit, the company's fixed-overhead budget variance would be:

Sterling Cooper Manufacturing Company is expected to complete a task in 45 minutes. During a recent accounting period, 2,200 completed units were produced, resulting in the following labour variances: Labour rate variance: $1,020 favourable Labour efficiency variance: $2,800 unfavourable The standard labour rate is $18 per hour. Required: Calculate (1) the standard hours allowed for the work performed, (2) the actual hours worked, and (3) the actual wage rate.

For the quarter just ended, Sandro Company reported the following variances in one of its manufacturing departments: Material price variance, $\mathrm{U}$ Material quantity variance, $\mathrm{F}$ Labor efficiency variance, $\mathrm{F}$ Labor rate variance, negligible Machine hours efficiency, $\mathrm{F}$ The sum of the favourable variances exceeded the unfavourable materials price variance by a considerable amount. The quality of the output from the department was the same as usual. Sandro operates very close to a JIT system for materials purchases, with virtually all material acquired during the quarter being used in manufacturing activities. Required: Is there any connection among these variances? If so, explain.

Variances are computed by taking the difference between which of the following?

What will cause the variable-overhead efficiency variance?