Exam 24: Flexible Budgets and Standard Costs

Jacques Company planned to use 18,000 pounds of material costing $2.50 per pound to make 4,000 units of its product. In actually making 4,000 units, the company used 18,800 pounds that cost $2.54 per pound. Calculate the direct materials quantity variance.

Fairfield Co. collected the following information about its production activities for the current year. a. Compute the direct materials price and quantity variances and indicate whether each is favorable or unfavorable. b. Prepare the journal entry to record the issuance of direct materials into production. Actual costs and quantities: Direct materials used 95,000 lbs. @ $6.30 per lb. Units completed during the year, 50,000 units Standard costs and quantities: Price per lb. of direct material, $6.05 Two lbs. of direct material per unit

The following information describes a company's usage of direct labor in a recent period. The direct labor rate variance is:

Should both favorable and unfavorable variances be investigated, or only the unfavorable ones? Explain.

Cabot Company collected the following data regarding production of one of its products. Compute the variable overhead cost variance.

Companies promoting continuous improvement strive to achieve _____________ standards by eliminating inefficiencies and waste.

If cost variances are material, they should always be closed directly to Cost of Goods Sold.

A management approach that emphasizes significant differences from plans is known as _________________________________.

The following company information is available. The direct materials quantity variance is:

What are some causes of direct labor rate and efficiency variances?

Selected information from Michaels Company's flexible budget is presented below: Michaels Company applies overhead to production at a rate of $31.25 per unit based on a normal operating level of 80% of capacity. For the current period, Michaels Company produced 5,400 units and incurred $62,000 of fixed overhead costs and $96,000 of variable overhead costs. The company used 11,000 labor hours to produce the 5,400 units. Calculate the variable overhead spending and efficiency variances, and the fixed overhead spending and volume variances. Indicate whether each variance is favorable or unfavorable. Variable overhead

A product has a sales price of $20. Based on a 15,000-unit production level, the variable costs are $12 per unit and the fixed costs are $6 per unit. Using a flexible budget for an actual production and sales level of 18,000 units, what is the budgeted operating income?

The following information describes a company's usage of direct labor in a recent period. The direct labor efficiency variance is:

When standard manufacturing costs are recorded in the accounts and the cost variances are immaterial at the end of the accounting period, the cost variances should be:

A volume variance is the difference between overhead at maximum production volume and that at the budgeted production volume.

The following information comes from the records of Dina Co. for the current period. a. Compute the direct materials price and quantity variances, direct labor rate and efficiency variances and state whether the variance is favorable or unfavorable. b. Prepare the journal entries to charge direct materials and direct labor costs to goods in process and the materials and labor variances to their proper accounts. Factory overhead (based on budgeted production of 24,500 units) Variable overhead $2.25/direct labor hour Fixed overhead $1.95/direct labor hour

At the end of the accounting period, immaterial variances are closed to ____________________.

Cheshire, Inc. allocates fixed overhead at a rate of $18 per direct labor hour. This amount is based on 90% of capacity or 3,600 direct labor hours for 6,000 units. During May, Cheshire produced 5,500 units. Budgeted fixed overhead is $66,000, and overhead incurred was $67,000. Required: Determine the volume variance for May.

Thomas Co. provides the following fixed budget data for the year: Required: Prepare a flexible budget performance report for the year using the contribution margin format.

A cost variance equals the sum of the quantity variance and the price variance.