Question 1

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

Accepted Answer

The answer of Fairfield Co. collected the following information about...

Question 2

Calais Company's fixed budget for the first quarter of the calendar year appears below. Prepare flexible budgets that show variable costs per unit, fixed costs and two different flexible budgets for sales volumes of 22,000 and 24,000.

Accepted Answer

The answer of Calais Company's fixed budget for the first...

Question 3

In the analysis of variances, management commonly focuses on four categories of production costs: __________________ cost, ___________________ cost; _________________ cost; and _________________ cost.

Accepted Answer

The answer of In the analysis of variances, management commonly...

Question 4

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 price variance.

Accepted Answer

The answer of Jacques Company planned to use 18,000 pounds...

Question 5

The difference between the actual sales and the flexible budget sales is called the ______________________ variance.

Accepted Answer

The answer of The difference between the actual sales and...

Question 6

A company has established 5 pounds of Material M at $2 per pound as the standard for the material in its Product A. The company has just produced 1,000 units of this product, using 5,200 pounds of Material M that cost $9,880. The direct materials quantity variance is:

Accepted Answer

A)  $400 unfavorable. 
B)  $120 favorable. 
C)  $400 favorable. 
D)  $520 favorable. 
E)  $520 unfavorable.

Question 7

Variable budget is another name for a flexible budget.

Accepted Answer

A) True 
 B)False

Question 8

Use the following data to find the direct labor cost variance.

Accepted Answer

A)  $6,125 unfavorable. 
B)  $7,000 unfavorable. 
C)  $7,000 favorable. 
D)  $12,250 favorable. 
E)  $6,125 favorable.

Question 9

Woods, Inc. budgeted the following overhead costs for the current year assuming operations at 80% of capacity, or 40,000 units:
The standard cost per unit when operating at this same 80% capacity level is:
The actual production achieved in the current year was 60% of capacity, or 30,000 units. The actual costs were:
Calculate the following variances and indicate whether each is favorable or unfavorable.

Accepted Answer

The answer of Woods, Inc. budgeted the following overhead costs...

Question 10

Brewer Company specializes in selling used cars. During the month, the dealership sold 22 cars at an average price of $15,000 each. The budget for the month was to sell 20 cars at an average price of $16,000. Compute the dealership's sales volume variance for the month.

Accepted Answer

A)  $22,000 unfavorable. 
B)  $10,000 favorable. 
C)  $22,000 favorable. 
D)  $32,000 unfavorable. 
E)  $32,000 favorable.

Question 11

Sales variances may be computed in a manner similar to cost variances-that is, computing both price and volume variances.

Accepted Answer

A) True 
 B)False

Question 12

During November, Heim Company allocated overhead to products at the rate of $26.00 per direct labor hour. This figure was based on 80% of capacity or 1,600 direct labor hours. However, Heim Company operated at only 70% of capacity, or 1,400 direct labor hours. Budgeted overhead at 70% of capacity is $38,900, and overhead actually incurred was $38,000. What is the company's volume variance for November? (Indicate whether the variance is favorable or unfavorable)

Accepted Answer

The answer of During November, Heim Company allocated overhead to...

Question 13

The following information comes from the records of Dina Co. for the current period.
a. Compute the overhead controllable and volume variances. In each case, state whether the variance is favorable or unfavorable.
b. Prepare the journal entries to charge overhead costs to goods in process and the overhead 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

Accepted Answer

The answer of The following information comes from the records...

Question 14

One possible explanation for direct labor rate and efficiency variances is the use of workers with different skill levels.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

The answer of At the end of the accounting period,...

Question 16

Use the following cost information to calculate the direct labor rate and efficiency variances and indicate whether they are favorable or unfavorable.

Accepted Answer

The answer of Use the following cost information to calculate...

Question 17

A company's flexible budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units?

Accepted Answer

The answer of A company's flexible budget for 60,000 units...

Question 18

A company's flexible budget for 36,000 units of production showed variable overhead costs of $54,000 and fixed overhead costs of $50,000. The company actually incurred total overhead costs of $95,300 while operating at a volume of 32,000 units. What is the controllable variance?

Accepted Answer

The answer of A company's flexible budget for 36,000 units...

Question 19

While companies strive to achieve ideal standards, reality implies that some loss of materials usually occurs with any process.

Accepted Answer

A) True 
 B)False

Question 20

Standard costs can serve as a basis for evaluating actual performance.

Accepted Answer

A) True 
 B)False

Exam 24: Flexible Budgets and Standard Costs

Calais Company's fixed budget for the first quarter of the calendar year appears below. Prepare flexible budgets that show variable costs per unit, fixed costs and two different flexible budgets for sales volumes of 22,000 and 24,000.

In the analysis of variances, management commonly focuses on four categories of production costs: ________ cost, _ cost; _ cost; and _________ cost.

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 price variance.

The difference between the actual sales and the flexible budget sales is called the ______________________ variance.

A company has established 5 pounds of Material M at $2 per pound as the standard for the material in its Product A. The company has just produced 1,000 units of this product, using 5,200 pounds of Material M that cost $9,880. The direct materials quantity variance is:

Variable budget is another name for a flexible budget.

Use the following data to find the direct labor cost variance.

Brewer Company specializes in selling used cars. During the month, the dealership sold 22 cars at an average price of $15,000 each. The budget for the month was to sell 20 cars at an average price of $16,000. Compute the dealership's sales volume variance for the month.

Sales variances may be computed in a manner similar to cost variances-that is, computing both price and volume variances.

One possible explanation for direct labor rate and efficiency variances is the use of workers with different skill levels.

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

Use the following cost information to calculate the direct labor rate and efficiency variances and indicate whether they are favorable or unfavorable.

A company's flexible budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units?

A company's flexible budget for 36,000 units of production showed variable overhead costs of $54,000 and fixed overhead costs of $50,000. The company actually incurred total overhead costs of $95,300 while operating at a volume of 32,000 units. What is the controllable variance?

While companies strive to achieve ideal standards, reality implies that some loss of materials usually occurs with any process.

Standard costs can serve as a basis for evaluating actual performance.