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

Dynamo Building Supply Company's operational management is calculating the variable overhead efficiency variance for 2011.The machine hour cost per unit was calculated to be 0.40 hours and the company budgeted for 20,000 units.However,the actual quantity of variable overhead hours amounted to 8,500 after computation.The budgeted overhead cost per unit has been determined to be $40 per hour. Required Compute the variable overhead efficiency variance and identify whether the variance if favorable,F,or unfavorable,U.

The static-budget variance is the difference between the actual result and the corresponding budgeted amount in the static budget.

The planning of fixed overhead costs differs from the planning of variable overhead costs in one important respect: timing.

What period do managers make the most of the decisions that determine levels of fixed overhead costs to be incurred?

Little World Clothing Company has an actual result of $52,000 and a static budget of $122,000.Required Compute the static-budget variance for operating income at Little World Clothing Company.and identify whether the variance is favorable,F,or unfavorable,U.

How can managers use variance analysis to create a virtuous cycle of continuous improvement?

How are efficiency variances of direct cost items interpreted differently from the variable overhead efficiency variances?

The variable overhead efficiency variance is computed the same way as the efficiency variance for direct cost items,nevertheless,the interpretation of the variance is very different.

In a standard costing system,managers use standards that are attainable through efficient operations but that allow for normal disruptions.

Ring Corporation used the following data to evaluate their current operating system.The company sells items for $25 each and used a budgeted selling price of $25 per unit. Required: Compute the static-budget variance of revenues,the static-budget variance of variable costs,and the static-budget variance of operating income.

What are some of the causes of variances?

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

A manager should not always view a favorable variable overhead spending variance as desirable.

The static-budget is based on the level of output planned at the end of the budget period.

The sales-volume variance is the difference between a flexible-budget amount and the corresponding static-budget amount.

The static-budget operating income per unit multiplied by the difference between the budgeted and actual level of output equals:

When there is no efficiency variance,the fixed overhead spending variance is ________ the overhead flexible budget variance.

The production-volume variance is also referred to as the ________.

How does technology help managers improve their performance?

The following data was compiled for Busy Brains Text Company: Required Compute the variable manufacturing overhead cost and the flexible-budget total cost.