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

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 price variance for 2009 was:

Answer the following questions: A. How do ideal and practical standards differ? B. As an employee who is evaluated based upon standards, which would you prefer and why?

Which of the following statements regarding the standard cost for direct materials is true?

Gantt Textiles Inc.incurred actual variable overhead expenses of $50 000 in the current year for the production of 6000 units.Variable overhead was applied at a rate of $3.25 per direct labour hour and 2 direct labour hours were budgeted for each unit.The company used 16 000 direct labour hours for production. Required: Compute each of the following variances.Indicate whether the variance is favourable (F)or unfavourable (U). A. Variable cverhead 5pencing variance B. Variable averhead efficiency variance

Carlton Corporation Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for the production and sale of 1000 handbags; however, 900 handbags were actually produced and sold. Each bag has a standard requiring 2 metres of material at a cost of $4.00 per metre and 1 hour of assembly time at a cost of $9.50 per hour. Actual costs for the production of 900 bags were $7215 for materials (1850 metres purchased and used @ $3.90 per metre) and $10 125 for labour (1125 hours @ $9.00 per hour). -Carlton's direct materials usage variance is:

Tulley Manufacturing has an unfavourable direct labour rate variance.Which of the following would be the most likely reason for this variance?

GEO Inc.has an unfavourable direct materials price variance. A. Give two possible reasons for this variance. B. Using one of the above reasons, how could this particular variance affect one of the other variances (ex. direct materials usage, direct labour rate, direct labour efficiency)?

Fox Manufacturing At the beginning of the year, Fox Manufacturing had budgeted for the production and sale of 84 000 units. The standard sales price and variable cost per unit were budgeted to be $25.00 and $10.00, respectively. Actual sales for the year totalled 81 000 units, and the actual sales price and variable cost per unit were $24.00 and $10.00, respectively. Both budgeted and actual fixed costs were $75 000. -What was Fox's sales price variance for the year?

Meow Products Ltd. Meow Products Ltd. in the US produces and sells scratching posts for cats. In the current year, the company had expected to sell 12 000 posts but actually produced and sold 10 000 posts. The following information is available regarding the standard cost to produce a single post: Direct materials: 3 feet @1.75 per foot Direct labour: 15 minutes @\ .30 per minute In the current year, 38 000 feet of material were purchased out of which 35 000 feet were used at a cost of $1.55 per foot, and 160 000 direct labour minutes were incurred at a cost of $.32 per minute. -The company's direct materials usage variance for the current year was:

Moreland Manufacturing Inc. US-based Moreland Manufacturing Inc. produces and sells stainless steel faucets. In the current year, the company had budgeted for the production and sale of 6000 faucets but, due to unexpected demand, 7000 faucets were actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40 per ounce and 15 minutes of assembly time at a cost of $.20 per minute. Actual costs for the production of 7000 faucets were $41 359.50 for materials (106 050 ounces purchased and used @ $.39 per ounce) and $21 560 for labour (98 000 minutes @ $.22 per minute). -Moreland's direct labour efficiency variance is:

Moreland Manufacturing Inc. US-based Moreland Manufacturing Inc. produces and sells stainless steel faucets. In the current year, the company had budgeted for the production and sale of 6000 faucets but, due to unexpected demand, 7000 faucets were actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40 per ounce and 15 minutes of assembly time at a cost of $.20 per minute. Actual costs for the production of 7000 faucets were $41 359.50 for materials (106 050 ounces purchased and used @ $.39 per ounce) and $21 560 for labour (98 000 minutes @ $.22 per minute). -Moreland's direct labour rate variance is:

Task analysis:

Violetta Inc.in the US manufactures plastic storage boxes.Management has determined that each medium-sized box has a standard materials cost of $1.20 when 4 pounds of raw material at a cost of $.30 per pound are used.The static budget for the month of March showed an estimated production of 15 000 boxes in March.During March,17 000 boxes were actually produced.The actual cost for each box was $1.56 when 3.9 pounds of raw material at a cost of $.40 per pound were purchased and used.What should be the total direct materials cost according to Violetta's flexible budget for March?

US company Kincaid Ltd.produces and sells leather wallets.In the current year,the company budgeted for the production and sale of 18 000 wallets;however,21 000 wallets were actually produced and sold.Each wallet has a standard requiring eight square inches of material at a cost of .20 per inch and 10 minutes of assembly time at a cost of $.15 per minute.Actual costs for the production of 21 000 wallets were $36 080 for materials (164 000 inches purchased and used @ $.22 per inch)and $36 000 for labour (225 000 minutes @ $.16 per minute). Required: Compute each of the following variances.Indicate whether the variance is favourable (F)or unfavourable (U). A. Direct materials price variance B. Direct materials usage variance Direct labour rate variance D. Direct labour efficiency variance

Prevo Products Inc.has a $15 000 unfavourable flexible budget variance for July.If July's actual net income was $300 000,which of the following statements is true?

JAX Inc. In early 2009, US company JAX Inc. had budgeted for the production and sales of 6000 units at a sales price of $20 per unit. The following information is available regarding the standard cost for each unit: Number of units produced and sold: 6800 units Sales revenue: \ 149600(\ 22 per unit) Direct materials cost: \ 43384(14960 lbs purchased and used at \ 2.90 per lb) Direct labour cost: \ 59024(210800 minutes at \ .28 per minute ) -What was JAX Inc.'s sales price variance for 2009?

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 efficiency variance?

Atkinson Landscaping Atkinson Landscaping applies variable overhead based on direct labour hours. At the beginning of the current year, Atkinson had estimated the following: Estimated variable overhead \ 56000 Estimated units of production 10000 units Standard direct labour hours per unit 2.5 hours During the year, 11 000 units were produced using a total of 27 200 direct labour hours and actual overhead costs were $60 000. -Atkinson's variable overhead spending variance for the year was:

Hayward Inc. Hayward Inc. produces a unique item. Hayward’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 50000 hours Estimated fixed overhead \ 75000 Actual production 104000 units Actual direct labour hours used 52000 hours Actual fixed overhead \ 80000 -Hayward's fixed overhead volume variance is:

JAX Inc. In early 2009, US company JAX Inc. had budgeted for the production and sales of 6000 units at a sales price of $20 per unit. The following information is available regarding the standard cost for each unit: Number of units produced and sold: 6800 units Sales revenue: \ 149600(\ 22 per unit) Direct materials cost: \ 43384(14960 lbs purchased and used at \ 2.90 per lb) Direct labour cost: \ 59024(210800 minutes at \ .28 per minute ) -What was JAX Inc.'s direct materials usage variance for 2009?