Exam 23: Flexible Budgets and Standard Cost Systems

Alpine Productions uses a standard costing system for recording transactions. Alpine reported the following data for the year ended December 31, 2015: Sales revenues: $500,000 Cost of goods sold (standard costing): $382,500 Marketing & admin expenses: $105,000 Variances: Calculate standard net operating income.

Mountain Sports Equipment Company projected sales of 78,000 units at a unit sale price of $12 for the year 2015. Actual sales of 2015 were 75,000 units at $14 per unit. Variable costs were budgeted at $3 per unit; actual amount was $4 per unit. Budgeted fixed costs totaled $375,000, while actual fixed costs amounted to $400,000. What is the flexible budget variance for variable expenses?

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

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

Delicious Food Products is famous for their specialty fruit cake. The main ingredient of the cake is dried fruit, which Delicious purchases by the pound. In addition, the production requires a certain amount of direct labor. Delicious 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?

Favorable and unfavorable variances are netted together in the same way debits and credits are.

A company is analyzing its month-end results by comparing it to both static and flexible budgets. During the previous month, the actual sales volume was lower than the expected sales volume as per the static budget. This difference results in an unfavorable:

Which of the following best describes standard costs?

City Golf Center reported actual operating income for the current year of $65,000. The flexible budget operating income for actual volume is $55,000, while the static budget operating income is $58,000. What is the flexible budget variance for operating income?

The flexible budget variance is the difference between the actual results and the expected results in the flexible budget for the actual units sold.

The Carolina Products Company has completed the flexible budget analysis for the 2^nd quarter, which is as given below. Which of the following statements would be a correct interpretation of the sales volume variance for operating income?

Managers who follow the management by exception principle investigate only those variances that are unfavorable.

Companies use techniques like time-and-motion studies, and consult industry "best practices" when developing standards. This is referred to as benchmarking.

The aggregate of direct materials cost and efficiency variances results in total direct materials variance.

Unfavorable variances are subtracted from each other to arrive at a favorable variance.

The exceptions under management by exception can be expressed as a percentage of a budgeted amount or a dollar amount.

A favorable variance reflects a decrease in operating income.

A static budget presents financial data at multiple levels of sales volume.

A manufacturer using standard costing system has purchased raw material of 250 units at the actual cost of $2 per unit. The standard cost per unit of raw material is $1.85. Give journal entry to record the material cost variance at the time of purchase.

The management of Alpha Company has calculated the following variances: When determining the total production cost flexible budget variance, calculate the total manufacturing overhead variance of Alpha Company.