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Exam 24: Flexible Budgets and Standard Costs

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Question 31

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A company uses the following standard costs to produce a single unit of output. During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct materials price variance for the month was:

A) $6,000 unfavorable
B) $1,800 favorable
C) $1,000 favorable
D) $5,800 unfavorable
E) $1,800 unfavorable

F) C) and E)
G) B) and E)

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Question 32

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Identify the situation that will result in a favorable variance.

A) Actual revenue is higher than budgeted revenue.
B) Actual revenue is lower than budgeted revenue.
C) Actual income is lower than expected.
D) Actual costs are higher than budgeted costs.
E) Actual expenses are higher than budgeted expenses.

F) B) and D)
G) C) and D)

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Question 33

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The fixed overhead variance can be broken down into the _________________ variance and the _________________ variance.

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?

Briefly describe the procedure of management by exception.

The sum of the variable overhead spending variance, the variable overhead efficiency variance, and the fixed overhead spending variance is the:

The difference between the total budgeted fixed overhead cost and the fixed overhead applied to production using the predetermined overhead rate is the:

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

A planning budget based on a single predicted amount of sales or production volume is called a:

A company uses the following standard costs to produce a single unit of output. During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct labor efficiency variance for the month was:

A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. What is the total labor cost variance?

Flexible budgets may be prepared before or after an actual period of activity. Why would management prepare such budgets at differing time frames?

The following company information is available for January. The direct materials price variance is:

DT Co. produces picture frames. It takes 3 hours of direct labor to produce a frame. DT's standard labor cost is $11.00 per hour. During March, DT produced 4,000 frames and used 12,400 hours at a total cost of $133,920. What is DT's labor rate variance for March?

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.

A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased inferior materials.

Price Company's flexible budget shows $10,710 of overhead at 75% of capacity, which was the operating level achieved during May. However, the company applied overhead to production during May at a rate of $2.00 per direct labor hour based on a budgeted operating level of 6,120 direct labor hours (90% of capacity) . If overhead actually incurred was $11,183 during May, the controllable variance for the month was:

When the actual cost of direct materials used exceeds the standard cost, the company must have experienced an unfavorable direct materials price variance.

Gates Company reports the following information regarding the production on one of its products for the month. Compute the direct materials cost variance, the direct materials price variance, the direct materials quantity variance and identify each as either favorable or unfavorable.

What are sales variances? How are they used?