Exam 23: Flexible Budgets and Standard Costs

Sweet Baby Diaper Company sells disposable diapers for $.20 each. Variable costs are $.05 per diaper, while fixed costs are $75,000 per month. At a volume of 700,000 diapers per month, what operating income would be shown in the flexible budget?

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 - How much is the standard price per hour for variable overhead?

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 efficiency variance for their variable overhead costs. Which of the following scenarios would be a reasonable explanation for that variance?

In a flexible budget, which of the following amounts does NOT stay the same as the volume changes?

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 materials price standard (per -board foot)?

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 materials records showed that the company used 7,000 pounds of materials and actual total material costs were $29,750. Using the format below, please prepare an analysis of the direct materials variances.

The actual cost of direct labor per hour is $12.50 and the standard cost of direct labor per hour is $12.00. Two budgeted direct labor hours are allowed per finished good. During the current period, 250 finished goods were produced using 475 direct labor hours. How much is the direct labor price variance?

A favorable variance reflects an increase in operating income.

A favorable sales volume variance in variable expenses suggests a(n):

The following information describes a company's usage of direct labor in a recent period: Actual direct labor hours used 44,000 Actual rate per hour \ 20 Standard rate per hour \ 18 Standard hours for units produced 42,000 - How much is the direct labor price variance?

An unfavorable flexible budget variance in variable expenses suggests a(n):

The production manager of a company, in an effort to gain a promotion, negotiated a new labor contract with her factory employees that required them to bear a greater percentage of benefit costs than before, thus bringing down the cost of direct labor to the company. Shortly afterward, several experienced and highly skilled workers resigned, and were replaced by new employees whose work was very slow during their training period. At the end of the quarter, the company's profits fell 10%. This situation could have produced which of the following variances?

Quick Tax Returns budgets 1.5 direct labor hours for every tax return that it prepares, at a standard cost of $20 an hour. During the most recent year, 500 returns were completed with the labor cost totaling $17,600. The actual labor cost was $22 per hour during that period. What was the direct labor price variance?

What do price variances measure?

Zennick Fashion Products uses standard costs for their manufacturing division. Standards specify 3.0 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: 1,000 units Estimated variable overhead costs: \ 120,000 Estimated direct labor hours: 3,000 hours At the end of the year, actual data were as follows: Production volume: 1,500 units Actual variable overhead costs: \ 174,300 Actual direct labor hours: 4,200 hours - How much is the efficiency variance for variable overhead?

Which of the following is one of the reasons why companies use standard costs?

When a manufacturing company uses standard costing accounting, the Manufacturing wages account records actual wages and NOT standard wages.

The procurement manager was able to bring down the cost of direct materials by purchasing materials of a slightly lower grade quality than the company had used previously. The lower grade of materials, however, meant a higher defect rate on the assembly line, and higher wastage of materials during production, which in turn lowered operating income. This situation could have produced which of the following variances?

An unfavorable flexible budget variance in operating income might be due to a(n):

When a company is using standard costs, a favorable variance is a definite indication that a manager is doing a good job.