Exam 7: Flexible Budgets, Variances, and Management Control: I

Use the information below to answer the following question(s).Ames Golf Company used the following data to evaluate their current operating system.The company sells 1 pack of golf balls for $10 per pack.The $10 selling price is also the budgeted selling price. -What is the total static budget variance for Ames Golf Company?

Variances can be expected to vary within some normal limits, so not all variances require further investigation.

The direct materials mix variance will be favourable when

A standard cost method is based on

A continuous improvement budgeted cost, in terms of variances and standard costs

The direct materials mix variance is the difference between: 1)the actual cost of direct materials based on the actual total quantity of all direct material inputs used, and 2)the flexible-budget cost of direct materials based on the budgeted total quantity of direct material inputs for the actual output.

Cayman Designs makes chair cushions.The standard direct materials quantity is 1 kilogram per cushion at a cost of $2.50 per kilogram.The actual results for the production of 20,000 cushions was 1.25 kilograms per cushion, at a cost of $2.40 per kilogram.Calculate the direct materials input rate variance and the direct materials efficiency variance.

The direct manufacturing labour rate variance is likely to be favourable if higher-skilled workers are put on a job.

Depending on the level of the cost hierarchy of an activity, cutting a volume of input to the benefit of one business function may increase costs throughout the entire value chain.

Bach Table Company manufactures tables for schools.The current year operating budget is based on sales of 40,000 units at $50 per table.Operating income is anticipated to be $300,000.Budgeted variable costs are $30 per unit, while fixed costs total $500,000.Actual income for the year was a surprising $2,268,000 on actual sales of 42,000 units.Actual variable costs were $33 per unit and fixed costs totaled $550,000.Required: Prepare a Level 2 variance analysis report with both flexible-budget and sales-volume variances.

The direct materials yield variance is the difference between: 1)the budgeted cost for the actual mix of the total quantity of direct materials used, and 2)the budgeted cost of the budgeted mix of the actual total quantity of direct materials used.

Wilson's Winter Woolens manufactures jackets and other wool clothing.A certain designed ski parka requires the following: During the third quarter, the company made 1,500 parkas and used 3,150 square metres of fabric costing $39,375.Direct labour totaled 2,100 hours for $45,150.Required: a.Compute the direct materials price and efficiency variances for the quarter. b.Compute the direct manufacturing labour rate and efficiency variances for the quarter.

A standard is

Use the information below to answer the following question(s).Ames Golf Company used the following data to evaluate their current operating system.The company sells 1 pack of golf balls for $10 per pack.The $10 selling price is also the budgeted selling price. -What is the budgeted operating income for Ames Golf Company?

A packaging company produces a variety of cardboard boxes in an automated process.Expected production per month is 160,000 units.The required direct materials costs $0.30 per unit.Variable manufacturing overhead costs are $24,000 per month and are allocated based on units of production.Direct labour is budgeted to be $6,400.The company only produces based on customer orders, so all production is considered sold as it is produced.Revenue for the month will be $240,000.What is the budgeted contribution margin per unit?

Use the information below to answer the following question(s).All Good Things Ltd.planned on producing 600 units for the year.However, actual production was 400 units.Information concerning the direct labour cost for All Good Things Ltd.is as follows: actual results 1,000 hours at $25 per hour; static budget amounts were 1,200 hours at $21 per hour. -What is the All Good Things Ltd.flexible-budget variance?

The flexible-budget variance pertaining to revenues is also called the variance of operating income.

Explain the difference between a static budget and a flexible budget.Explain what is meant by a static budget variance and a flexible budget variance.

Use the information below to answer the following question(s).All Good Things Ltd.planned on producing 600 units for the year.However, actual production was 400 units.Information concerning the direct labour cost for All Good Things Ltd.is as follows: actual results 1,000 hours at $25 per hour; static budget amounts were 1,200 hours at $21 per hour. -What is the All Good Things Ltd.direct labour input-efficiency variance?

A flexible budget is a budget that is developed using budgeted revenue or cost amounts and is not adjusted at the end of the budgeted period.