Exam 23: Flexible Budgets and Standard Costs

Boxes Company has collected the following data for one of its products: Direct materials standard (3 pounds @ \ 1/1.) \ 3 per finished good Direct materials flexible budget variance-unfavorable \ 14,000 Actual direct materials used 100,000 pounds Actual finished goods produced 25,000 units How much is the direct materials efficiency variance?

When a company is using standard costs, favorable variances are good news, and so the reasons for them do not need to be explained or investigated.

Portobello Company prepared the following static budget for the coming month: Static Budget Units/volume 5,000 Per Unit Sales revenue \ 3.00 \ 15,000 Variable expenses \ 1.80 9,000 Contribution margin 6,000 Fixed expenses 5,000 Operating income/(1oss) \ 1,000 - If a flexible budget was prepared at a volume of 4,000, how much would the operating income be?

Western Outfitters Mountain Sports projected 2011 sales of 75,000 units at a unit sale price of $12.00. Actual 2011 sales were 72,000 units at $14.00 per unit. Variable costs were budgeted at $4.00 per unit; actual amount was $4.75 per unit. Budgeted fixed costs totaled $375,000, while actual fixed costs amounted to $400,000. What is the sales volume variance for total revenue?

Standard cost is a budget for a single unit of materials, labor or overhead.

Which of the following is NOT a reason that companies use standard costs?

The production manager of a company was experiencing high defect rate on the assembly line, which was slowing production and causing wastage of valuable materials. He decided recruit some highly skilled production workers from another company to bring down the defect rate, but he was worried that the higher wages of these workers might negatively impact operating income. This situation could have produced which of the following variances?

Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly skilled labor, and special metallic materials. Faas uses standard costs to prepare its flexible budget. For the first quarter of 2011, direct material and direct labor standards for one of their popular products were as follows: Materials: 1.5 pounds per unit; \ 4.00 per pound Labor: 2.0 hours per unit; \ 18.00 per hour During the first quarter, Faas produced 5,000 units of this product. - At the end of the quarter, an examination of the labor cost records showed that the company used 11,000 hours of direct labor time and actual direct labor costs were $184,800. Using the format below, please prepare an analysis of the direct labor cost variances.

Quality Brand Products uses standard costing to manage their direct costs and their overhead costs. Overhead costs are allocated based on direct labor hours. In the first quarter, Quality Brand had an unfavorable price variance for their variable overhead costs. Which of the following scenarios would be a reasonable explanation for that variance?

Onyx Company prepared a static budget at the beginning of the month. At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows: Static budget: Sales volume: 1,000 units Price: $70 per unit Variable expense: $32 per unit Fixed expenses: $37,500 per month Operating income: $500 Actual results: Sales volume: 990 units Price: $74 per unit Variable expense: $35 per unit Fixed expenses: $33,000 per month Operating income: $5,610 - Based on the above data, how much was the sales volume variance for revenues?

Standard costs are developed by the cooperative effort of procurement, production, human resources, and accounting personnel.

Raymie Food Products is famous for their specialty fruit cake. The main ingredient of the cake is dried fruit, which Raymie purchases by the pound. In addition, the production requires a certain amount of direct labor. Raymie uses a standard cost system, and at the end of the first quarter, there was a favorable labor efficiency variance. Which of the following would be a logical explanation for that variance?

Allbrand Company uses standard costs for their manufacturing division. Standards specify 0.1 direct labor hours per unit of product. At the beginning of the year, the static budget for variable overhead costs included the following data: Production volume: 5,000 units Estimated variable overhead costs: \ 12,500 Estimated direct labor hours: 500 hours At the end of the year, actual data were as follows: Production volume: 4,000 units Actual variable overhead costs: \ 11,760 Actual direct labor hours: 480 hours -At the end of the year, the efficiency variance for variable overhead costs was unfavorable.

Onyx Company prepared a static budget at the beginning of the month. At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows: Static budget: Sales volume: 1,000 units Price: $70 per unit Variable expense: $32 per unit Fixed expenses: $37,500 per month Operating income: $500 Actual results: Sales volume: 990 units Price: $74 per unit Variable expense: $35 per unit Fixed expenses: $33,000 per month Operating income: $5,610 - Based on the above data, how much was the flexible budget variance for variable expenses?

Shirt Fantasy produces and sells two types of tee shirts Fancy and Plain. Shirt Fantasy provides the following data: Budget Actual Unit sales price- Fancy \ 24 \ 25 Unit sales price-Plain \ 18 \ 17 Unit sales-Fancy 1,300 1,250 Unit sales-Plain 900 875 - Using the format below, compute the flexible budget variance for Plain tee shirts for sales revenue only. Actual Flexible Budget Flexible Sales Volume Static Results Variance Budget Variance Budget Units/volume 875 900 Sales revenue

Onyx Company prepared a static budget at the beginning of the month. At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows: Static budget: Sales volume: 1,000 units Price: $70 per unit Variable expense: $32 per unit Fixed expenses: $37,500 per month Operating income: $500 Actual results: Sales volume: 990 units Price: $74 per unit Variable expense: $35 per unit Fixed expenses: $33,000 per month Operating income: $5,610 - Based on the above data, how much was the sales volume variance for variable expenses?

Western Outfitters Mountain Sports projected 2011 sales of 75,000 units at a unit sale price of $12.00. Actual 2011 sales were 72,000 units at $14.00 per unit. Variable costs were budgeted at $4.00 per unit; actual amount was $4.75 per unit. Budgeted fixed costs totaled $375,000 while actual fixed costs amounted to $400,000. What is the sales volume variance for operating income?

Shirt Fantasy produces and sells two types of tee shirts Fancy and Plain. Shirt Fantasy provides the following data: Budpgt Actual Unit sales price-Fancy \ 24 \ 25 Unit sales price-Plain \ 18 \ 17 Unit siles-Fancy 1,300 1,250 Unit sales-Plain 900 \ 75 - Using the format below, compute the flexible budget variance for Fancy tee shirts for sales revenue only.

Georgia Custom Cabinet Company is setting standard costs for one of its products. The main material is cedar wood, sold by the board foot. The current cost of cedar wood is $2.00 per board foot from the supplier. Delivery costs are $0.25 per board foot. Carpenters' wages are $22.00 per hour. Payroll costs are $3.60 per hour and benefits are $3.00 per hour. How much is the direct labor price standard (per hour)?

Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly skilled labor, and special metallic materials. Faas uses standard costs to prepare its flexible budget. For the first quarter of 2011, direct material and direct labor standards for one of their popular products were as follows: Materials: 1.5 pounds per unit; \ 4.00 per pound Labor: 2.0 hours per unit; \ 18.00 per hour - During the first quarter, Faas produced 5,000 units of this product. At the end of the quarter, an examination of the labor cost records showed that the company used 11,000 direct labor hours and actual total direct labor costs were $184,800. How much is the direct labor price variance?