Exam 23: Flexible Budgets and Standard Costs

Fletcher Company collected the following data regarding production of one of its products. Compute the total direct materials cost variance. Direct materrals standard (6 lbs. @ \2 /1b.) \1 2 per finished unit Actual direct materials used 243,000 Ibs. Actual finished units produced 40,000 units Actual cost of direct materials used \4 83,570

The anticipated costs incurred under normal conditions to produce a specific product or to perform a specific service are:

What is the overhead volume variance? What would be the cause of a favorable volume variance?

A company uses the following standard costs to produce a single unit of output. Direct materials 6 pounds at \ 0.90 per pound =\ 5.40 Direct labor 0.5 hour at \ 12.00 per hour =\ 6.00 Manufactuning overhead 0.5 hour at \ 4.80 per hour =\ 2.40 During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. -Based on this information, the total direct materials cost variance for the month was:

In producing 700 units of product last period, Azure Company used 5,000 pounds of Material K, costing $34,250. The company has established the standard of using 7.2 pounds of Material K per unit of product, at a price of $7.50 per pound. Calculate the materials price and quantity variances associated with producing the 700 units, and indicate whether they are favorable or unfavorable:

The difference between the actual sales and the flexible budget sales is called the ________ variance.

Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards.

Maxwell Co. collected the following information about its production activities for the current year. a. Compute the direct materials price and quantity variances and indicate whether each is favorable or unfavorable. b. Prepare the journal entry to record the issuance of direct materials into production. Actual costs and quantities: Direct materials used 95,000 lbs. @ $6.30 per lb. Units completed during the year, 50,000 units Standard costs and quantities: Price per lb. of direct material, $6.05 Two lbs. of direct material per unit

Hassock Corp. produces woven wall hangings. It takes 2 hours of direct labor to produce a single wall hanging. Hassock's standard labor cost is $12 per hour. During August, Hassock produced 10,000 units and used 21,040 hours of direct labor at a total cost of $250,376. What is Hassock's labor rate variance for August?

Should both favorable and unfavorable variances be investigated, or only the unfavorable ones? Explain.

A company uses the following standard costs to produce a single unit of output. Direct materials 6 pounds at \ 0.90 per pound =\ 5.40 Direct labor 0.5 hour at \ 12.00 per hour =\ 6.00 Manufactuning overhead 0.5 hour at \ 4.80 per hour =\ 2.40 During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. -Based on this information, the direct materials quantity variance for the month was:

In this type of control system, the master budget is based on a single prediction for sales volume, and the budgeted amount for each cost essentially assumes that a specific amount of sales will occur:

Standard costs are:

Use the following cost information to calculate the direct labor rate and efficiency variances and indicate whether they are favorable or unfavorable. Actual costs and quantities: Direct labor cost incurred \ldots\ldots\ldots\ldots\ldots \ 360,000 Direct labor hours used \ldots\ldots\ldots\ldots\ldots\ldots 20,000 hours Units produced \ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots 45,000 units Standard costs and quantities Direct labor rate per hour \ldots\ldots\ldots\ldots\ldots \ 16.50 Hours to produce one unit \ldots\ldots\ldots\ldots\ldots 0.5 hours

A company provided the following direct materials cost information. Compute the total direct materials cost 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

The difference between actual quantity of input used and the standard quantity of input used results in a:

Standard costs are preset costs for delivering a product or service under normal conditions.

A variable or flexible budget is so named because it only focuses on variable costs.

Seafarer Company established a standard direct materials cost of 1.5 gallons at $2 per gallon for one unit of its product. During the past month, actual production was 6,500 units. The material quantity variance was $700 favorable and the material price variance was $470 unfavorable. The entry to charge Work in Process Inventory for the standard material costs during the month and to record the direct material variances in the accounts would include all of the following except:

When recording variances in a standard cost system: