Exam 8: Flexible Budget and Variance Analysis

The Cool Hand Company makes tables for which the following standards have been developed: Standard Inputs Standard Price Expected for E ach Expected per Unit of Output Unit of Output Direct materials 17 pounds \ 5.20 per pound Direct labor 3 hours \ 16 per hour Production of 200 tables was expected in May, but 220 tables were actually completed. Direct materials purchased and used were 2,100 pounds at an actual price of $4.40 per pound. Direct labor cost for the month was $10,620, and the actual pay per hour was $18.00. _ is the direct- labor price variance for the month of May.

The following information is for University Heights Corporation: Direct Material Standard price p er unit of input \ 20 Actual price per unit of input \ 18 Standard inputs allowed per unit of output 3 pounds Actual units of input 8,300 pounds Actual units of output 2,770 units * Direct material is measured in pounds is the total direct- material flexible- budget variance.

compares actual results with budget.

The following data are for Sponge Corporation: Flexible Budget for Master Actual Sales Actual Budget Activity Units S ales \ 360,000 \ 320,000 \ 360,000 Variable costs 234,000 192,000 216,000 Contribution \ 126,000 \ 128,000 \ 144,000 margin Fixed costs 76,000 \ 80,000 \ 80,000 Operating income \ 50,000 \ 48,000 \6 4,000 The total of the sales- activity variances is:

Ideal standards have an adverse effect on employee motivation.

The type of budget which serves as the original benchmark for evaluating performance is called:

Direct- labor usage variance = (actual quantity used - standard quantity allowed) x actual price.

Corrugated Company currently produces cardboard boxes in an automated process. Expected production per month is 40,000 units. The required direct materials cost $0.30 per unit. Manufacturing fixed overhead costs are $24,000 per month. Manufacturing overhead is allocated based on units of production. is the flexible budget for 40,000 and 20,000 units, respectively.

The difference between the actual results and the master budget

The overhead efficiency variance indicates to management how much overhead cost it may waste by not controlling the use of cost- driver activity.

Price variances reflect the organization's efficiency at actual levels of activity.

A standard cost is a unit cost that:

The following data for the Pull Company pertain to the production of 2,000 clay pigeons during October: Standard variable overhead cost was $6.00 per pound of clay. Total actual variable overhead cost was $18,200. Standard variable overhead cost allowed for units produced was $20,000. Variable overhead efficiency variance was $740 unfavorable. Is standard direct material amount per clay pigeon.

This is another name for the flexible budget

A usage variance measures actual deviations from the quantity of inputs that should have been used to achieve the actual output quantity.

Given the following data: direct direct material labor standerd price per unit of input \1 2 per foot \1 4 per hour \1 4 per foot \1 3 per hour actual price per unit of input standerd inputs allowed per unit pf output 5 feet 3 hours actual units of inputs 2,500 feet 1,550 hours actual units produced 600 units Required: Compute the price, usage and flexible- budget variances for direct material and labor. Indicate whether each variance is favorable or unfavorable.

(Actual quantity used - standard quantity allowed) x standard price

Given the following information: Variable-overhead costs incurred \ 20,570 Material purchased and used 2,900 pounds Direct labor costs incurred 2,450 hours; \ 24,500 Finished units produced 500 units Actual material cost \ 37 per pound Standard direct labor cost \ 9 per hour Standard material cost \ 40 per pound Standard variable overhead \ 8 per hour Standard pounds of material in a financial unit 6 Standard direct labor hours per finished unit 5 Required: Compute the price and usage variances for direct material, labor, and the spending and efficiency variances for variable overhead. Indicate whether each variance is favorable or unfavorable.

(Actual price - standard price) x actual quantity

The most recent operating budget for Gilligan Company is based on production of 42,000 units with 1.0 machine hour allowed per unit. Variable manufacturing overhead is anticipated to be $20 per unit. Actual production was 45,000 units using 40,000 machine hours. Actual variable cost was $725,000. Required: Compute the commonly used variances for a variable overhead report. Do not prepare the report.