Exam 23: Flexible Budgets and Standard Cost Systems

A direct labor cost variance is unfavorable if the employer pays workers more per hour than budgeted.

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 recruit some highly skilled production workers from another company to bring down the defect rate.This would produce a(n)________.

Based on the following,what is the total direct labor variance?

Which of the following statements about management by exception is incorrect?

Managers should look at any variance that is significant.

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 would have led to a(n)________.

Golden Glow Company manufactures candles.The standard direct materials quantity required to produce one large candle is 1 pound at a cost of $5 per pound.Every candle requires 2 direct labor hours at a standard cost of $3 per direct labor hour.During November,7,200 large candles were produced using 7,500 pounds costing $45,000.At the end of November,an examination of the labor cost records showed that the company used 15,000 direct labor hours (DLHr)at a cost of $4 per hour. Using the format below,prepare an analysis of the direct labor cost variances.

When favorable variances are added to unfavorable variances,the result is always a total favorable variance.

A favorable direct materials cost variance occurs when the actual direct materials cost incurred is greater than the standard direct materials cost.

A static budget presents financial data at multiple levels of sales volume.

Which of the following is an example of a direct labor cost standard?

Under a standard cost system,when recording the use of direct materials in the production process,the debit to Work-in-Process Inventory is ________.

The sales volume variance is the difference between the ________.

Wave Fashions uses standard costs for its manufacturing division.The allocation base for overhead costs is direct labor hours.From the following data,calculate the total fixed overhead variance. Actual fixed overhead \ 40,000 Budgeted fixed overhead \ 27,000 Allocated fixed overhead \ 27,000 Standard overhead allocation rate \ 6.75 Standard direct labor hours per unit 2.00 Actual output 2000 units

Beacon Novelties manufactures frisbees that it sells to other companies for customizing with their own logos.Beacon prepares flexible budgets and uses a standard cost system to control manufacturing costs.The standard unit cost of a frisbee is based on static budget volume of 60,000 frisbees per month: Direct Materials (.2@\ .30 per lb.) .06 Direct Labor (4 mins. @ 5 per min.) .60 Manufacturing Overhead: Variable (4 mins. @ 7 per min.) .28 Fixed (4 mins. @ 6 per min.) .64 .92 Total cost per unit \ 1.58 Actual cost and production information for June 2019 follows: a.There were no beginning or ending inventory balances.All expenditures were on account. b.Actual production and sales were 62,000 frisbees. c.Actual direct materials usage was 10,000 lbs.at an actual cost of $0.24 per lb. d.Actual direct labor usage was 208,000 minutes at a total cost of $37,440. e.Actual overhead cost was $8,000 variable and $30,000 fixed. f.Selling and administrative costs were $130,000 Requirements 1.Compute the cost and efficiency variances for direct materials and direct labor. 2.Journalize the purchase and usage of direct materials and the assignment of direct labor,including the related variances.

Sharp Company manufacturers jeans.In June,Sharp made 1200 pairs of jeans,but had budgeted production at 1400 pairs of jeans.The allocation base for overhead costs is direct labor hours.The following additional data is available for the month: Variable overhead cost standard \ 0.60 per DLHr Direct labor efficiency standard 2.00 DLHr per jean Actual amount of direct labor hours 2,520 DLHr Actual cost of variable overhead \ 1,512 Fixed overhead cost standard \ 0.25 per DLHr Budgeted fixed overhead \ 700 Actual cost of fixed overhead \ 750 Calculate the following variances: a.Variable overhead cost variance b.Variable overhead efficiency variance c.Total variable overhead variance d.Fixed overhead cost variance e.Fixed overhead volume variance f.Total fixed overhead variance

A flexible budget summarizes revenues and costs for various levels of sales volume within a relevant range.

Andrea,a production manager for Akim Manufacturing,is investigating variances that are greater than 10% of the budgeted amounts.Andrea is engaging in ________.

Ibis Paper Company prepared the following static budget for November: Static Budget Units/Volume 12,000 Per Unit Sales Revenue \ 21,00 \ 252,000 Variable Costs 3.00 Contribution Margin 156,000 Fixed Costs Operating Income/(Loss) If a flexible budget is prepared at a volume of 13,300 units,calculate the operating income.The production level is within the relevant range.

Ramos Manufacturing uses a standard cost system.The T-account for manufacturing overhead is shown below: In addition to the above,Ramos calculated the following overhead variances: Variable overhead cost variance: $5,000 F Variable overhead efficiency variance: $4,850 U Fixed overhead cost variance: $1,200 F Fixed overhead volume variance: $3,350 U Prepare the journal entry to close the manufacturing overhead account and record the overhead variances.Omit explanation.