Exam 23: Flexible Budgets and Standard Cost Systems

SeaKist Marine Stores Company manufactures decorative fittings for luxury yachts,which require highly skilled labor,and special metallic materials.SeaKist uses standard costs to prepare its flexible budget.For the first quarter of 2016,direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 1.5 pounds per unit;$4 per pound Labor: 2 hours per unit;$18 per hour During the first quarter,SeaKist produced 5,000 units of this product.At the end of the quarter,an examination of the direct materials records revealed that the company used 7,000 pounds of direct materials.The direct materials efficiency variance was $2,000 F.Which of the following is a logical explanation for this variance?

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

Global Engineering's actual operating income for the current year is $57,000.The flexible budget operating income for actual sales volume is $32,000,while the static budget operating income is $56,000.What is the sales volume variance for operating income?

Developing efficiency standards based on best practices is called benchmarking.

Mountain Sports Equipment Company projected sales of 82,000 units at a unit sales price of $12 for the year.Actual sales for the year were 76,000 units at $14.00 per unit.Variable costs were budgeted at $3 per unit,and the actual amount was $6 per unit.Budgeted fixed costs totaled $376,000,while actual fixed costs amounted to $410,000.What is the sales volume variance for total revenue?

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)________.

The fixed overhead cost variance measures the difference between actual fixed overhead and allocated fixed overhead.

The sales volume variance is a result of the difference between the actual sales price and the budgeted sales price.

Cedar Designs Company,a custom cabinet manufacturing company,is setting standard costs for one of its products.The main material is cedar wood,sold by the square foot.The current cost of cedar wood is $8.00 per square foot from the supplier.Delivery costs are $0.20 per square foot.Carpenters' wages are $20.00 per hour.Payroll costs are $3.00 per hour,and benefits are $6.00 per hour.How much is the direct labor standard cost per hour?

A static budget is prepared for only one level of sales volume.

Managers should look at any variance that is significant.

A favorable variance has a debit balance and is a contra revenue.

Carlson Fashions uses standard costs for its manufacturing division.From the following data,calculate the fixed overhead volume variance.

Western Outfitters projected sales of 79,000 units for the year at a unit sales price of $12.00.Actual sales for the year were 71,000 units at $18.00 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 $378,000 while actual fixed costs amounted to $410,000.What is the flexible budget variance for operating income?

When using management by exception,managers investigate only those variances that are unfavorable.

Grand Canyon Food Products is famous for its frosted fruit cake.The main ingredient of the cake is dried fruit,which Grand Canyon purchases by the pound.In addition,the production requires a certain amount of direct labor.Grand Canyon uses a standard cost system,and at the end of the first quarter,there was an unfavorable direct materials efficiency variance.Which of the following is a logical explanation for that variance?

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.

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.

When using management by exception,which of the following variances would not affect the production manager?

Melissa Antiques Company has collected the following data for one of its products: What is the direct materials efficiency variance?