Exam 13: Flexible Budgets, cost Variances, and Management Control

Delicious Dishes Company is developing the budgeted variable overhead cost-allocation rates for the next twelve months.DDC's operating managers select machine-hours as the cost-allocation base.Based on past performance,the operating managers estimate that it takes 0.70 machine hours per actual output unit.For 2013,the budgeted output is 167,000 dish sets,DDC budgets 60,000(0.70 × 167,000)machine hours.All of DDCs variable overhead costs are budgeted in a pool and estimated to be $1,950,000 for 2013. Required Compute the budgeted variable overhead cost rate per output unit.

Match the following terms with their definitions: 1.Standard price A.A carefully determined cost of a unit of output. 2.Standard cost B.A carefully determined quantity of input. 3.Standard input C.A carefully determined price a company pays per Unit of input.

Which of the following does not result in a favorable direct materials price variance?

The bottom line is that managers should automatically interpret a favorable variance as "good news."

Standard Manufacturing Clothing Curtain reported the following information: Required Compute the standard direct material cost per curtain.

A flexible budget allows management to highlight the differences between actual costs and ________;and,management uses budgeted costs;and,________ for the actual output level.

Managers use variances to evaluate performance after decisions are implemented,to trigger organizational learning,to make continuous improvements.

Variance analysis is not subject to the same cost-benefit test as all other phases of a management control system.

To effectively plan variable overhead costs for a product or service,managers must focus attention on the activities that make a superior product and ________.

The managerial accountant at Northern Shoe Factory,a work boot manufacturer,needs to calculate the actual selling price of their product.The direct material cost is $836,000.The company produced 20,000 pairs of work boots in the cycle.Actual revenues amount to $1,670,000. Required Compute the actual selling price of the product and compute the direct material cost per pair of work boots.Assume that sales equal $20,000.

Flexible-budget variances are a better measure of operating performance than static-budget variances because they compare actual revenues to budgeted revenues and actual costs to budgeted costs for the same units of output.

Managers use detailed variance analysis for which of the following reasons?

A flexible budget calculates budgeted revenues and budgeted costs based on ________.

The price variance is also called a rate variance when managers refer price variances for direct manufacturing labor.

Core Technology Company's operational management team is assessing a production-volume variance.A budgeted fixed overhead cost had been calculated to be $390,000.Using past data,one unit of output is computed to take 2.0 machine hours and 1.0 machine hour is calculated to cost $20.The actual output units needed for the actual output are 10,000 units. Required Compute the production-volume variance for this period and indicate whether the value indicates a favorable,F,or an unfavorable,U,variance.

Why is the flexible-budget variance for revenues referred to as the selling-price variance?

A favorable variance indicates which of the following outcomes?

________ is the degree to which a predetermined objective or target is met,such as sales,market shares and customer satisfaction rating of a specific product.

Managers determine the cause of flexible-budget variances when they subdivide the flexible-budget variance for direct-cost inputs into two or more detailed variances.What are two detailed variances of the flexible-budget variance for direct-cost inputs?

Variances are also used in performance evaluation and to motivate managers.