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

An input-price variance is the difference between actual quantity of input used and the budgeted quantity of input that should have been used,multiplied by the budgeted price.

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?

Use the information below to answer the following question(s). The following data for a pottery company pertain to the production of 2,000 clay pots during July. Direct Materials (all materials purchased were used): Standard cost: $6.00 per kilogram of clay Total actual cost: $11,200 Standard cost allowed for units produced was $12,000 Materials efficiency variance was $240 unfavourable Direct Manufacturing Labour: Standard cost is 2 pots per hour at $24.00 per hour Actual cost per hour was $24.50 Actual labour was 972 hours -What is the direct manufacturing labour rate variance?

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

Littrell Company produces chairs and has determined the following direct cost categories and budgeted amounts: Actual performance for the company is shown below: Required: a.What is the combined total of the flexible-budget variances? b.What is the rate variance of the direct materials? c.What is the rate variance of the direct manufacturing labour and the direct marketing labour,respectively? d.What is the efficiency variance for direct materials? e.What are the efficiency variances for direct manufacturing labour and direct marketing labour,respectively?

Benchmarking is the continuous process of measuring products,services,and activities against the best possible levels of performance.

What is benchmarking,and how is it useful to a company?

To prepare budgets based on actual data from past periods is preferred since past inefficiencies are excluded.

Tyson's Hardware,a retailing company with several locations,anticipated that it would have 96,000 sales units for 664 customer shipments.Average storage bin usage for various inventories was estimated to be 200 storage bins per day.The costs and cost drivers were determined to be as follows: During the year the warehouse processed 90,000 units for 600 customer shipments.The workers used 225 storage bins on average each day to sort,store,and process goods for shipment.The actual costs for were: Required: a.Prepare a static-budget and show the static-budget variances for each cost item and the total static-budget variance. b.Prepare a flexible-budget and show the flexible-budget variances for each cost item and the total flexible-budget variance.

Which of the following is likely to be related to an unfavourable direct materials rate variance?

Rate variances can be calculated for batch-level costs as well as for output unit-level costs.

Give at least three good reasons why an unfavourable efficiency variance for direct manufacturing labour might be reported.

Glenn's Draperies manufactures curtains.A certain window requires the following: Direct materials standard is 10 square metres at $5 per metre Direct manufacturing labour standard is 5 hours at $10 During the second quarter the company made 1,500 curtains and used 14,000 square metres of fabric costing $68,600.Direct labour totaled 7,600 hours for $79,800. 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.

For any actual level of output,the difference between the input that was actually used and the input should have been used is

In a manufacturing area of an organization;poor product design,problems with the quality of materials,and scheduling conflicts could result in

The flexible budget contains

Which of the following reasons is unlikely to be related to an unfavourable variance for labour costs?

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.

The sales-volume variance is the difference between the flexible-budget amount and the static-budget amount;unit selling prices,unit variable costs,and fixed costs are held constant.

Jam Life Inc.manufactures jam products.It makes a mixed fruit and berry jam by blending strawberries,peaches,and apricots. Budgeted costs to produce 100,000 kilograms of jam in September were: Actual costs to produce 100,000 kilograms of jam in September were: Required: 1.Calculate the total direct materials rate and efficiency variances. 2.Calculate the total direct materials mix and yield variances. 3.Jam Life's largest competitor sells a 500 gram jar of mixed fruit and berry jam for $4.50 .If Jam Life's management wants to meet this price and cover monthly fixed costs of $180,000 then what will be the company's margin of safety? (Assume that Jam Life will continue to use the budgeted mix of ingredients. )