Exam 24: Flexible Budgets and Standard Costs

Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are:

Landlubber Company established a standard direct materials cost of 1.5 gallons at $2 per gallon for one unit of its product. During the past month, actual production was 6,500 units. The material quantity variance was $700 favorable and the material price variance was $470 unfavorable. The entry to charge Goods in Process Inventory for the standard material costs during the month and to record the direct material variances in the accounts would include:

Sales variance analysis is useful for:

When recording variances in a standard cost system:

The amounts in a flexible budget are based on one expected level of sales or production.

A _______________________ contains relevant information that compares actual results to planned activities.

The difference between actual and standard cost caused by the difference between the actual quantity and the standard quantity is called the:

If Falcon Company's actual overhead incurred during a period was $32,700 and the company reported a favorable overhead controllable variance of $1,200 and an unfavorable overhead volume variance of $900, how much standard overhead cost was assigned to the products produced during the period?

Cost variances are ignored under management by exception.

Quantity variances for direct cost categories (direct materials and direct labor) are based on differences between the actual inputs used and the standard inputs allowed for the actual output achieved. A key difference in the analysis of quantity variances for direct cost categories and the analysis of the efficiency variance for variable overhead is:

Standard costs provide a basis for assessing the reasonableness of actual costs incurred for producing a product or service.

A variable or flexible budget is so named because it only focuses on variable costs.

Bradford Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units. What is the direct materials price variance?

Casco Co. planned to produce and sell 40,000 units. At that volume level, variable costs are determined to be $320,000 and fixed costs are $30,000. The planned selling price is $10 per unit. Casco actually produced and sold 42,000 units. Using a contribution margin format: (a) Prepare a fixed budget income statement for the planned level of sales and production. (b) Prepare a flexible budget income statement for the actual level of sales and production.