Exam 23: Flexible Budgets and Standard Costs

Tiger's Golf Center reported actual operating income for the current year of $60,000. The flexible budget operating income for actual volume achieved is $55,000, while the static budget operating income is $58,000. What is the flexible budget variance for operating income?

Alpine Productions uses a standard costing system for recording transactions; they also prepare an internal-use income statement using standard cost methodology. At the end of 2011, Alpine reported the following data: Sales revenues: $500,000 Cost of goods sold (standard costing) $382,500 Marketing & admin expenses $105,000 Variances: Sales revenue \ 4,000 F Direct materials price variance 20 Direct materials efficiency variance 300 Direct labor price variance 75 Direct labor efficiency variance 10 Variable overhead spendling variance 225 Variable overhead efficiency variance 80 Fixed overhead spending variance 420 Fixed overhead volume variance 110 Using standard costing methodology, the net operating income is:

Which of the following will result in an unfavorable direct labor price variance?

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 materials price variance. Which of the following would be a logical explanation for that variance?

In a standard costing system, each item has a price standard and a quantity standard.

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 efficiency variance for variable overhead?

Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts. They are ready to close out their Manufacturing overhead account for the month. The T-account for overhead is shown below: Manufacturing overhead 95,000 93,000 In addition to the above, Atlantic calculated the following overhead variances: Variable overhead: Spending (price) variance: $5,000 F Efficiency variance: $4,850 U Fixed overhead: Spending (price) variance: $1,200 F Volume variance: $3,350 U The journal entry to close out the overhead account and record the overhead variances would be:

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. The direct materials efficiency variance was $2,000 F. Which of the following would be a logical explanation for this variance?

When a manufacturing company uses standard costing methodology in their journal entries and accounts, an unfavorable variance has the effect of being a contra expense.

Setting standard costs is a function done within a company's production department and does NOT require any input from other departments.

Ibis Company prepared the following static budget for the coming month: Static Budget Units/volume 12,000 Per Unit Sales revenue \ 20.00 \ 240,000 Variable expenses \ 9.00 108,000 Contribution margin 132,000 Fixed expenses 130,000 Operating income/(1oss) \ 2,000 - If a flexible budget was prepared at a volume of 14,000 units, how much would the operating income be?

A company's flexible budget for 40,000 units of production showed sales of $110,000, variable costs of $60,000, and fixed costs of $41,000. What net operating income would you expect the company to earn if it produces and sells 43,000 units?

Atlas Manufacturing is closing the year 2012. Atlas uses standard costing methodology in its accounting system and for internal performance reporting. Atlas's ending balances are shown here: Using the standard costing system, how much is Net operating income?

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 flexible budget variance for operating income?

When recording direct labor incurred in the production process, which of the following shows the effect on Work in process inventory?

Which one of the following is NOT a reason for using standard costs?

Which of the following is an example of a labor price standard?

Efficiency Variance = (Standard Price x Actual Quantity) - (Standard Price x Standard Quantity).

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

Artscapes Company is setting its direct materials and direct labor standards for its leading product. Materials cost from the supplier are $4.50 per square foot, net of purchase discount. Freight-in amounts to $0.10 per square foot. Basic wages of the assembly line personnel are $12.00 per hour. Payroll taxes are approximately 20% of wages. Benefits amount to $3.00 per hour. How much is the direct material price standard (per square foot)?