Exam 23: Flexible Budgets and Standard Cost Systems

A favorable variance reflects a decrease in operating income.

Companies conduct time-and-motion studies and use benchmarks from other companies when developing standards.

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing a higher waste of valuable direct materials.The production manager decided to purchase a higher grade of materials that would be more reliable.This would produce a(n)________.

The management technique whereby managers concentrate on results that are outside the accepted parameters is called management by ________.

Favorable variances are contra expenses and therefore decrease Cost of Goods Sold.

The difference between the actual allocation base (actual quantity)and the amount of the allocation base that should have been used (standard quantity)times the standard cost is called the ________.

An unfavorable flexible budget variance in variable costs suggests a(n)________.

Fixed overhead volume variance is a flexible budget variance.

When using management by exception,the purchasing manager should be questioned for which of the following variances?

Alpine Productions uses a standard cost system for recording transactions.Alpine reported the following data for the year ended December 31: Sales revenues: $800,000 Cost of goods sold (standard costing): $382,000 Selling & administrative expenses: $105,000 Variances: Sales revenue variance \ 4100 Direct materials cost variance 30 Direct materials efficiency variance 300 Direct labor cost variance 65 Direct labor efficiency variance 10 Variable overhead cost variance 300 Variable overhead efficiency variance 80 Fixed overhead cost variance 430 Fixed overhead volume variance 100 What is the net operating income on a standard cost income statement?

Atoka Manufacturing uses a standard cost system.Standards for direct materials are as follows: Direct materials (pounds per unit of output) 2 Cost per pound of direct materials \ 5 Actual purchases of direct materials for the current month are 10,000 pounds for $48,000.Planned and actual production for the month is 3000 units.Atoka has issued 10,000 pounds of direct materials to production.The journal entry to record this transaction is ________.

The direct materials cost and efficiency variances make up the total direct materials variance.

Because it is a volume variance,the fixed overhead volume variance explains why fixed overhead is underallocated or overallocated.

Hercules Sports Equipment Company projected sales of 79,000 units at a unit sales price of $12 for the year.Actual sales for the year were 75,000 units at $14 per unit.Variable costs were budgeted at $3 per unit,and the actual amount was $5 per unit.Budgeted fixed costs totaled $387,000,while actual fixed costs amounted to $450,000.What is the flexible budget variance for variable costs?

The following information relates to Tablerock Manufacturing's overhead costs for the month: Static budget variable overhead \ 14,200 Static budget fixed overhead \ 5,600 Static budget direct labor hours 1,000 hours Static budget number of units 5,000 units Tablerock allocates variable manufacturing overhead to production based on standard direct labor hours. Tablerock reported the following actual results for last month: actual variable overhead,$14,500; actual fixed overhead,$5,400; actual production of 4,700 units at 0.22 direct labor hours per unit.The standard direct labor time is 0.20 direct labor hours per unit. Compute the variable overhead cost variance.(Round intermediate calculations to two decimal places and the answer to the nearest dollar.)

Aquatic Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Aquatic 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; $6 per pound Direct labor: 2 hours per unit; $17 per hour During the first quarter,Aquatic produced 4000 units of this product.Actual direct materials and direct labor costs were $65,000 and $329,000,respectively. For the purpose of preparing the flexible budget,calculate the total standard direct materials cost at a production volume of 4000 units.

An efficiency variance measures how well a company keeps unit costs of material and labor inputs within standards.

The purchasing manager was able to bring down the cost of direct materials by purchasing direct materials of a slightly lower grade quality than the company had used previously.The lower grade of direct materials,however,meant a higher defect rate on the assembly line and a higher waste of direct materials during production,which in turn lowered operating income.This situation would lead to a(n)________.

A manufacturer,using a standard cost system,purchased 250 units of direct materials at a cost of $2 per unit.The standard cost per unit of direct materials is $1.85.Prepare the journal entry to record the direct materials cost variance at the time of purchase.Omit explanation.

What does the variable overhead efficiency variance measure?