Exam 23: Flexible Budgets and Standard Cost Systems

The static budget,at the beginning of the month,for Steak Frites Company follows: Static budget: Sales volume: 1,100 units;Sales price: $70.00 per unit Variable costs: $32.00 per unit;Fixed costs: $38,500 per month Operating income: $3,300 Actual results,at the end of the month,follows: Actual results: Sales volume: 995 units;Sales price: $74.00 per unit Variable costs: $36.00 per unit;Fixed costs: $35,000 per month Operating income: $2,810 Calculate the sales volume variance for revenue.

What do cost variances measure?

Only unfavorable variances should be investigated,if substantial,to determine their causes.

Zenith Fashions uses standard costs for their manufacturing division.From the following data,calculate the fixed overhead cost variance.

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

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 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 higher wastage of direct materials during production,which in turn lowered operating income.This would have led to a(n)________.

Mermaid Outfitters projected sales of 76,000 units for the year at a unit sales price of $15.00.Actual sales for the year were 73,000 units at $15.00 per unit.Variable costs were budgeted at $4.25 per unit,and the actual variable cost was $4.80 per unit.Budgeted fixed costs totaled $377,000,while actual fixed costs amounted to $400,000.What is the sales volume variance for operating income?

A standard is a sales price,cost,or quantity that is expected under normal conditions.

The efficiency variance measures ________.

When evaluating variances,exceptions can be expressed as a percentage of a budgeted amount or a dollar amount.

The following information relates to Welty Manufacturing's overhead costs for the month: Welty allocates manufacturing overhead to production based on standard direct labor hours. Welty 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 fixed overhead volume variance.

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

McGrath's produces and sells two types of t-shirts-Fancy and Plain.The company provides the following data: Compute the flexible budget variance for Fancy t-shirts for sales revenue.

In a standard costing system,each input of direct materials,direct labor,and manufacturing overhead has a cost standard and an efficiency standard.

For each of the following cost standards,indicate which manager is responsible for the standard,and list one factor that should be used in setting the standard.

Accurate Tax Returns budgets two direct labor hours for every tax return that it prepares,at a standard cost of $34 an hour.During the most recent year,540 returns were completed with the labor cost totaling $26,000.The actual labor cost was $48.15 per hour during that period.The actual number of labor hours was 1,000.What is the direct labor cost variance?

The total production cost flexible budget variance is obtained by adding direct labor efficiency variance and fixed overhead volume variance.

The static budget,at the beginning of the month,for Redwyne Company follows: Static budget: Sales volume: 2,000 units;Sales price: $50.00 per unit Variable costs: $13.00 per unit;Fixed costs: $25,200 per month Operating income: $48,800 Actual results,at the end of the month,follows: Actual results: Sales volume: 1,800 units;Sales price: $58.00 per unit Variable costs: $16.00 per unit;Fixed costs: $33,600 per month Operating income: $42,000 Calculate the flexible budget variance for variable costs.

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