Exam 23: Flexible Budgets and Standard Costs

The following information comes from the records of Barney Co. for the current period. a. Compute the direct materials price and quantity variances, direct labor rate and efficiency variances and state whether the variance is favorable or unfavorable. b. Prepare the journal entries to charge direct materials and direct labor costs to work in process and the materials and labor variances to their proper accounts. Actual costs and quantities: Direct materials used \ldots\ldots\ldots\ldots\ldots\ldots\ldots 37,000 feet @ \6 .20 per foot Direct labor hours used \ldots\ldots\ldots\ldots\ldots\ldots 50,660 hours Direct labor rate per hour \ldots\ldots\ldots\ldots\ldots\ldots \ 16.50 25,000 units were produced during the period. Standard costs and quantities per unit: Direct materials ……………………… 1.5 ft. @ $6.10 per ft. Direct labor …………………………... 2 hours @ $17 per hour

Levelor Company's flexible budget shows $10,710 of overhead at 75% of capacity, which was the operating level achieved during May. However, the company applied overhead to production during May at a rate of $2.00 per direct labor hour based on a budgeted operating level of 6,120 direct labor hours (90% of capacity). If overhead actually incurred was $11,183 during May, the controllable variance for the month was:

Standard costs can be used by management to assess the reasonableness of actual costs incurred.

A volume variance occurs when the company operates at a different capacity level than was expected.

Within the same flexible budget performance report, it is impossible to have both favorable and unfavorable variances.

A company provided the following direct materials cost information. Compute the direct materials quantity variance. $\text {Standard costs assigned:}$ Direct materials standard cost (405,000 units @ \2 .00/unit) \ 810,000 Actual costs: Direct Materials costs incurred ( 403,750 units @ \2 .20/unit) \ 888,250

Georgia, Inc. has collected the following data on one of its products. The actual cost of the direct materials used is: Direct materials standard (4 lbs. @ $1/lb.) $ 4 per finished unit Total direct materials cost variance-unfavorable $ 13,750 Actual direct materials used 150,000 lbs. ^{Actual finished units produced 30,000} units

Use the following data to find the total direct labor cost variance if the company produced 3,500 units during the period. Direct labor standard (4 hrs. @ $7/hr.) $ 28 per unit Actual hours worked 12,250 Actual rate per hour $ 7.50

A company's flexible budget for the range of 35,000 units to 45,000 units of production showed variable overhead costs of $2 per unit and fixed overhead costs of $72,000. The company incurred total overhead costs of $148,800 while operating at a volume of 40,000 units. The total controllable cost variance is:

A favorable variance for a cost means that when compared to the budget, the actual cost is ________ than the budgeted cost.

When computing a price variance, the price is held constant.

Identify the situation below that will result in a favorable variance.

Which department is often responsible for the direct materials price variance?

Standard material costs, standard labor costs, and standard overhead costs can be obtained from standard cost tables published by the Institute of Management Accountants.

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. - Based on this information, the budgeted amount of fixed costs for 20,000 units would be:

The difference between the actual cost incurred and the standard cost is called the:

The following company information is available for March. The direct materials price variance is: Direct materials purchased and used 2,500 feet @ $55 per foot Standard costs for direct materials for March production 2,600 feet @ $53 per foot

Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead spending variance. Direct labor stendard (2 hrs. @ \ 12.75/ .) \ 25.50 per finished unit Actual direct labor hours 81,500 hrs Budgeted units 42,000 units Actual finished units produced 40,000 units Standad variable OH rate (2 hrs. @ \1 4.30/hr) \2 8.60 per finished unit Standard fixed OH rate (\ 336,000 / 42,000 units) \8 .00 per unit Actual cost of variable overhead costs incurred \1 ,140,000 Actual cost of fixed overhead costs incurred \ 338,000

Companies promoting continuous improvement strive to achieve ________ standards by eliminating inefficiencies and waste.

A cost variance is the difference between actual cost and standard cost.