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

Video Producers manufactures two types of videos: regular and CD.The regular tapes require 5 units of direct material X at a standard price of $2 per unit.The CDs require 2 units of direct material Y at a standard price of $3.During January the company purchased 9,000 units of X for $2.10 each and 3,600 units of Y at $3.20 each.January production used 8,800 units of X and 3,400 units of Y.Outputs of finished tapes was 1,750 of each type.Required: Compute the price and efficiency variances for each material.For the rate variances use two different responsibility assumptions.First assume that rate variances are isolated at the time of purchase; second assume that the rate variances are isolated as materials are placed into production.The efficiency variances for each material are determined during production.

The most important task in variance analysis is to understand why variances occur, and then to use that knowledge to promote learning and continual improvement.

Answer the following question(s)using the information below.Apple Valley Orchards, Inc.(AVO), developed standard costs for direct material and direct labour.In 2019, AVO estimated the following standard costs for one of their most well loved products, the AVO classic Grandma's large apple pie which had a brown sugar coating on the top of the crust as well as including cranberry and mince ingredients in addition to the apples. During September 2020, AVO produced and sold 1,200 pies using 1,875 kilograms of direct materials at an average cost per kilogram of $7.00 and 280 direct labour hours at an average wage of $14.25 per hour. -September's direct material flexible-budget variance is

Your company hired a summer student as an accounting intern to prepare variance analysis for the plant manager (the student's father), so that the entire organization could become more effective and efficient.Up to this time, the company used a budget but only one that specified sales and production in units, and each department gauged and reported on its own performance based on historical rules of thumb developed over the years.The plant manager instructed every department manager to assist the new accountant as achieving favourable results would ensure he got a good bonus.For the month of May, the student met with the department heads of each functional area, obtaining from them the data and estimates to come up with: standard costs and prices; and, standard direct material usage and standard direct labour usage.Then in June, July and August the student collected; and, analyzed the variance results, and prepared a report for the plant manager.The report indicated favourable variances in virtually every functional area, allowing the plant manager to receive a larger bonus than usual.Required: Comment on the above process, in terms of variance analysis.

Use the information below to answer the following question(s).Tractor Corporation produces toy tractors.The company uses the following direct cost categories: Actual performance for the company is shown below: Actual output: 5,000 units Direct Materials: Direct Manufacturing Labour: Direct Marketing Labour: -What is the rate variance of the direct manufacturing labour, and the direct marketing labour, respectively?

Brussels Chocolate Company produces chocolates in large batches.One batch of chocolate has the following standard costs and amounts: Brussels Chocolate Company produced 600 batches of chocolates in the most recent month.Actual input costs and per batch usage levels were as follows: Required: a.Calculate the total material input rate variance. b.Calculate the total material efficiency variance. c.Calculate the total labour rate variance. d.Calculate the total labour efficiency variance.

For any actual level of output, the efficiency variance is the difference between actual quantity of input used and the budgeted quantity of input allowed to produce actual output, multiplied by the budgeted price.

Universal Dive Products Ltd.makes high quality gear for scuba diving.Their top quality mask is called Super Mask and is produced in batches.The two batch activities are setup (cost driver = setup hours)and quality inspection (cost driver = inspection hours).The company budgeted to produce 40,000 masks; however, actual production was 50,000.The pertinent ABC data for the upcoming period is as follows: Static Budget: Actual Result: Required: Calculate the flexible-budget rate and efficiency variances for the setup activity.

Compute the total standard cost per book for Publisher's Company using the following information: 1.Direct Materials: 1 ream of paper allowed per output unit manufactured, at $5.00 per ream.2.Direct Mfg.Labour: 0.35 labour-hours of input allowed per output unit finished, at $17.50 standard cost per hour.3.Variable Manufacturing Overhead: assigned on the basis of 0.25 per hour at $25 standard cost per hour per output unit finished.

The flexible-budget variance is the difference between the actual results and the flexible-budget amount for the actual levels of the revenue and cost drivers.

The relative amount of inputs used to reach a given level output is a measure of which of the following?

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 actual operating income for Ames Golf Company using the actual results?

Answer the following question(s)using the information below.Apple Valley Orchards, Inc.(AVO), developed standard costs for direct material and direct labour.In 2019, AVO estimated the following standard costs for one of their most well loved products, the AVO classic Grandma's large apple pie which had a brown sugar coating on the top of the crust as well as including cranberry and mince ingredients in addition to the apples. During September 2020, AVO produced and sold 1,200 pies using 1,875 kilograms of direct materials at an average cost per kilogram of $7.00 and 280 direct labour hours at an average wage of $14.25 per hour. -September's direct material efficiency variance is

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.sales-volume variance?

When benchmarking, the best levels of performance are typically found in companies that are totally different.

A static budget is a budget that can be changed or altered after it is developed.

The use of high-quality raw materials is likely to result in a favourable efficiency variance and an unfavourable rate variance.

Use the information below to answer the following question(s).Bates Corporation used the following data to evaluate their current operating system.The company sells items for $10 each and used a budgeted selling price of $10 per unit. -What is the static-budget variance of revenues?

Answer the following question(s)using the information below.Abernathy Corporation used the following data to evaluate their current operating system.The company sells items for $10 each and used a budgeted selling price of $10 per unit. -What is the static-budget variance of revenues?

The process in which a company's products or services are measured relative to the best possible levels of performance is known as