Exam 23: Flexible Budgets and Standard Cost Systems

What does a cost variance measure?

The flexible budget variance is the difference between the actual results and the expected results in the flexible budget for the actual units sold.

Which of the following should be considered when analyzing manufacturing overhead variances?

If both favorable and unfavorable variances exist,the variances are subtracted from each other.The variance is determined to be favorable or unfavorable based on which one is the larger amount.

The standard cost income statement doesn't alter the actual operating income-it simply emphasizes the variances from standard.

The static budget,at the beginning of the month,for Vintage Wine Company follows: Static budget: Sales volume: 2000 units; Sales price: $50.00 per unit Variable costs: $13.00 per unit; Fixed costs: $25,500 per month Operating income: $48,500 Actual results,at the end of the month,follows: Actual results: Sales volume: 1900 units; Sales price: $58.50 per unit Variable costs: $16.00 per unit; Fixed costs: $34,300 per month Operating income: $46,450 Calculate the flexible budget variance for variable costs.

Palmer Productions uses a standard cost system.On December 31,the account balances include the following: Sales Revenues: $750,000 Cost of Goods Sold (standard costing): $400,500 Selling & Administrative expenses: $150,000 Variances: Sales revenue variance \ 6,000 F Direct materials cost variance 400 U Direct materials efficiency variance 375 F Direct labor cost variance 675 U Direct labor efficiency variance 150 F Variable overhead cost variance 250 U Variable overhead efficiency variance 800 F Fixed overhead cost variance 420 U Fixed overhead volume variance 100 F Prepare a multi-step,standard cost income statement.

Meridian Fashions uses standard costs for their manufacturing division.The allocation base for overhead costs is direct labor hours.From the following data,calculate the fixed overhead cost variance. Actual fixed overhead \ 32,000 Budgeted fixed overhead \ 24,000 Standard overhead allocation rate \ 8 Standard direct labor hours per unit 3 DLHr Actual output 2500 units

Akao Products uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Akao had an unfavorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

The term management by exception refers to investigating ________.

Top managers of Marshall Industries predicted annual sales of 23,600 units of its product at a unit price of $5.00.Actual sales for the year were 22,800 units at $5.50 each.Variable costs were budgeted at $2.45 per unit,and actual variable costs were $2.40 per unit.Actual fixed costs of $45,000 exceeded budgeted fixed costs by $2,000.Prepare Marshall's flexible budget performance report.

Myers Manufacturing uses a standard cost system.The allocation base for overhead costs is direct labor hours.Standard and actual data for manufacturing overhead are as follows: Variable overhead allocation rate: $30 per direct labor hour Fixed overhead allocation rate: $10 per direct labor hour Actual overhead incurred (variable and fixed): $45,600 Standards for direct labor are as follows: Hours per unit 0.5,Direct labor cost per hour $18.00 Actual direct labor for the month: 1,200 hours for a total cost of $24,000 Actual and planned production for the month: 3,000 units Prepare the journal entry to allocate overhead cost (both variable and fixed)to production.

Match the variance to the correct definition. -Flexible budget variance

The fixed overhead cost variance measures the difference between actual fixed overhead and budgeted fixed overhead to determine the controllable portion of total fixed overhead variance.

The management of Cleancut Lawnmowers has calculated the following variances: Direct materials cost variance \ 8000 Direct materials efficiency variance 38,000 Direct labor cost variance 17,000 Direct labor efficiency variance 13,000 Variable overhead cost variance 3500 Variable overhead efficiency variance 5000 Fixed overhead cost variance 3000 When determining the total product cost flexible budget variance,what is the total manufacturing overhead variance of the company?

When recording direct materials purchased,what does an unfavorable direct materials cost variance represent? Will this variance have a debit or credit balance?

Firelight Company manufactures candles.The standard direct materials quantity required to produce one large candle is one pound at a cost of $5 per pound.During November,7,200 large candles were produced using 7,500 pounds of direct materials that cost $45,000. Using the format below,prepare an analysis of the direct materials variances.

Setting standard costs is a function of the company's production department and does not require input from other departments.

Argosy Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Argosy uses standard costs to prepare its flexible budget.For the first quarter of the year,direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 4 pounds per unit; $4 per pound Direct labor: 4 hours per unit; $17 per hour Argosy produced 5000 units during the quarter.At the end of the quarter,an examination of the labor costs records showed that the company used 23,000 direct labor hours and actual total direct labor costs were $390,000.The direct labor efficiency variance was $51,000 U.Which of the following is a logical explanation for this variance?

Which of the following will result in an unfavorable direct labor cost variance?