Exam 13: Management Accounting for Cost Control and Performance Evaluation Flexible Budgets and Variance Analysis

Which of the following statements is true regarding 'management by exception'?

Jackie makes and sells handmade beaded jewellery.She anticipates selling 100 necklaces in March and prepared the following static budget as a result: Sales revenue \3 500 Variable costs: Direct materials 500 Direct labour 800 Overhead 300 Fixed costs Net income During March,Jackie actually produced and sold 120 necklaces. Required: Prepare a flexible budget for the month of March.

Martin Corp.had an unfavourable sales price variance of $4800 for 2009.Martin had budgeted for sales of 10 000 units at a sales price of $5 each.Actual sales in 2009 totalled 12 000 units.What was the actual sales price per unit?

Rogers Rods & Reels Ltd. US-based Rogers Rods & Reels Ltd. manufactures and sells various types of fishing equipment. At the end of 2008, Rogers had estimated for the production and sale of 15 000 bass fishing rods. Each rod has a standard calling for 1.5 pounds of direct material at a standard cost of $8.00 per pound and 15 minutes of direct labour time at a standard cost of $.18 per minute. During 2009, Rogers actually produced and sold 16 000 rods. These 16 000 rods had an actual direct materials cost of $179 200 (25 600 pounds at $7.00 per pound) and an actual direct labour cost of $44 800 (224 000 minutes at $.20 per minute). Each rod sells for $50. -What is Rogers' net income (loss)based on a flexible budget?

What is 'management by exception'? Do you think it represents an efficient use of management time? Why or why not?

As a manager,how might you determine the standard price and quantity of materials,labour,and overhead for a particular product?

Lancaster Ltd.produces a unique item.Lancaster's management team wishes to perform a variance analysis on its fixed overhead.Fixed overhead is applied to units produced using direct labour hours as its cost driver.The company's managerial accountant has compiled the following information: Estimated direct labour hours 40000 hour Estimated fixed overhead \ 90000 Actual production 300000 units Actual direct labour hours used 50000 hours Actual fixed nverhead \1 00000 Required: A. Compute the fixed overhead spending variance B. Compute the fixed overhead volume variance.

True or false: Indicate whether each of the following statements is true (T)or false (F).

Holt Products manufactures desk-top computers.Management has determined that each computer has a standard labour cost of $48.00 when 4 hours of labour at a cost of $12.00 per hour are used.The static budget for the month of April showed an estimated production of 3900 computers.During April,4200 computers were actually produced.The actual direct labour cost for each computer was $57.60 when 4.5 hours of labour at a cost of $12.80 per hour was used.What should be the total direct labour cost according to Holt's flexible budget for April?

The difference between operating income on a flexible budget and actual operating income is called the:

Summerlin Law Offices applies overhead to clients based on direct labour hours.The office manager determined that overhead will be applied at a rate of $25 per direct labour hour.The static budget for the month of November showed an estimated 2500 direct labour hours would be incurred.During November,2800 direct labour hours were actually incurred and actual overhead costs were $58 800.What should be the total overhead cost according to the firm's flexible budget for November?

Henninger's Nursery sells a variety of plants.Henninger sells most of its plants to local landscapers in the community.These plants come in 'flats' containing 12 plants each.In May of the current year,Henninger had expected to sell 900 flats of petunias but produced and sold 940 flats instead.The company expects each flat to require 25 minutes of labour at a cost of $.15 per minute.In addition,variable overhead is applied at a rate of $.05 per minute. Actual costs incurred during May for the production and sale of 940 flats was as follows: Direct labour \ 3416 (24 400 minutes at \ .14 per minute) Variable overhead. 1200 Required: Compute each of the following variances.Indicate whether the variance is favourable (F)or unfavourable (U). A. Direct labour rate variance B. Direct labour efficiency variance C. Variable overhead spending variance D. Variable overhead efficiency variance

At the end of the year,your company had the following variances: Direct material price variance \3 000 F Direct material usage variance \3 500 U Direct labour rate variance \5 200 U Direct labour efficiency variance \7 000 U Give at least one possible cause for each of the variances and discuss the possible relationships between them.

Bukowitz Inc.has a favourable direct labour rate variance.Which of the following would be the most likely reason for this variance?

Chapman Products has a favourable materials usage variance.Which of the following would be the most likely reason for this variance?

Sampson Apparel Inc. Sampson Apparel Inc. incurred actual variable overhead expenses of $62 000 in the current year for the production of 10 000 units. Variable overhead was applied at a rate of $2.00 per direct labour hour and 3 direct labour hours were budgeted for each unit. The company used 29 000 direct labour hours for production. -What was Sampson's variable overhead spending variance?

Mystic Falls Inc. Mystic Falls Inc. bottles and sells a popular soft drink. In 2009, the company had expected to sell 1 000 000 bottles but actually bottled and sold 900 000 bottles. The standard direct materials cost for each bottle is $.40 comprised of 10 grams at a cost of $.04 per gram. During 2009, 10 000 000 grams of material were purchased out of which 9 200 000 grams were used at a cost of $.05 per gram. -The direct materials usage variance for 2009 was:

Chilé Products Ltd. US-based Chilé Products Ltd. bottles and sells hot pepper sauce. In 2009, the company had expected to sell 60 000 bottles but actually bottled and sold 70 000 bottles. The standard direct materials cost for each bottle is $.28 comprised of .80 ounces at a cost of $.35 per ounce. During 2009, 68 000 ounces of material were purchased out of which 55 000 ounces were used at a cost of $.32 per ounce. -The direct materials usage variance for 2009 was:

Lukey Products has an unfavourable materials usage variance.Which of the following would be the most likely reason for this variance?

Byron Products has a favourable materials price variance.Which of the following would be the least likely reason for this variance?