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

Which of the following statements is TRUE?

During February the Lungren Manufacturing Company's costing system reported several variances that the production manager was surprised to see.The following information is for the manufacture of garden gates,its only product: 1.Direct materials rate variance,$800 unfavourable. 2.Direct materials efficiency variance,$1,800 favourable. 3.Direct manufacturing labour rate variance,$4,000 favourable. 4.Direct manufacturing labour efficiency variance,$600 unfavourable. Required: a.Provide the manager with some ideas as to what may have caused the rate variances. b.What may have caused the efficiency variances?

Standards differ from budget amounts because standards change from onetime period to the next.

Use the following data to prepare a flexible budget for possible sales/production levels of 10,000;11,000;and,12,000 units.Show the contribution margin at each activity level.

Give at least three good reasons why a favourable rate variance for direct materials might be reported.

General Insurance Company had a static budgeted operating income of $4.6 million;however,actual income was $3.0 million.What is the static budget variance of operating income?

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 efficiency variance?

A budget that is adjusted in accordance with changes in actual output is called

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?

Describe the purpose of variance analysis.

It's year-end and you have the task of clearing up the final accounting entries for management accounting.There is an unfavourable direct materials rate variance of $25,000 which needs to be closed.The company uses the proration approach in this situation,and it has been determined that half of the variance should be charged to finished goods and half to cost of goods sold. Required: Prepare the necessary entry for the end of period adjustment.

Use the information below to answer the following question(s). Robb Industries Inc.(RII),developed standard costs for direct material and direct labour.In 2016,RII estimated the following standard costs for one of their major products,the 10-litre plastic container. During June 2017,RII produced and sold 5,000 containers using 490 kilograms of direct materials at an average actual cost per kilogram of $32 and 250 direct manufacturing labour-hours at an average actual wage of $15.25 per hour. -June's direct manufacturing labour rate variance is

Answer the following question(s)using the information below. Apple Valley Orchards,Inc.(AVO),developed standard costs for direct material and direct labour.In 2016,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 2017,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 labour efficiency variance is

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.

When benchmarking

The sales-volume variance of operating income is a measure of efficiency.

Decreasing demand for a product may create a favourable sales-volume variance.

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?

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.

More insight into the efficiency variance for direct materials can be gained by subdividing it into the direct materials