Exam 23: Flexible Budgets and Standard Cost Systems

Underwater Sports Equipment Company projected sales of 78,000 units at a unit sales price of $12 for the year.Actual sales for the year were 76,000 units at $15 per unit.Variable costs were budgeted at $3 per unit,and the actual amount was $6 per unit.Budgeted fixed costs totaled $385,000,while actual fixed costs amounted to $446,000.What is the flexible budget variance for variable costs?

What does the variable overhead cost variance measure?

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

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

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

Which of the following will result in an unfavorable direct materials efficiency variance?

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

The Kentucky Foam Products Company completed the flexible budget analysis for the second quarter,which is given below. Which of the following would be a correct analysis of the sales volume variance for variable costs?

Unfavorable variances are subtracted from each other to arrive at a favorable variance.

Alpine Productions uses a standard cost system for recording transactions.Alpine reported the following data for the year ended December 31: Sales revenues: $550,000 Cost of goods sold (standard costing): $382,000 Selling & admin expenses: $90,000 Variances: What is the standard net operating income?

Complete the following table:

A new factory manager was hired for a company that was experiencing slow production rates and lower production volumes than demanded by management.Upon investigation,the manager found that the workers were poorly motivated and not closely supervised.Midway through the quarter,an incentive program was initiated,and cash bonuses were given when workers hit their production targets.Within a short time,production output increased,but the bonuses had to be charged to the direct labor budget,and the manager was worried about the impact of these costs on operating income.This could produce a(n)________.

Which of the following is a reason companies use standard costs?

The Maine Oyster Company completed the flexible budget analysis for the second quarter,which is given below. Which of the following statements would be a correct analysis of the flexible budget variance for sales revenue?

A direct labor efficiency variance is favorable if laborers actually work more hours than the flexible budget calls for to produce the actual quantity of output .

Cheapo Sales Company uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Cheapo Sales had a favorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

An unfavorable sales volume variance in operating income suggests a(n)________.

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing wastage of valuable direct materials.The production manager decided to purchase a higher grade of materials that would be more reliable,but he was worried that the cost of the new materials might negatively affect operating income.This would produce a(n)________.

A cost variance measures the difference in quantities of actual inputs used and the standard quantity of inputs allowed for the actual number of units produced.

Austin Brands Company uses standard costs for its manufacturing division.Standards specify 0.1 direct labor hours per unit of product.At the beginning of the year,the static budget for variable overhead costs included the following data: At the end of the year,actual data were as follows: What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )