Exam 8: Flexible Budget and Variance Analysis

As the terms are used in the budgeting process, it is possible for a company to be efficient at the same time it is ineffective.

This variance measures how effective managers have been in meeting the planned sales objective.

A budget that is often changed at the end of a reporting period is called:

Flexible budgets help to measure:

This is the difference between the quantity of inputs actually used and the quantity of inputs that should have been used to achieve the actual quantity of output multiplied by the expected price of the input

The Derby 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 10 pounds \ 4 per pound Direct labor 3 hours \ 16 per hour Production of 200 tables was expected in June, 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 usage variance for the month of June.

A static budget is prepared for a fixed level of activity.

The difference between the actual variable overhead and the variable overhead budgeted for the actual level of the cost- driver activity

The Foamy Company makes mugs for which the following standards have been developed: Standard Inputs Standard Price Expected for Each Expected per Unit of Output Unit of Output Direct materials 5 ounces \ 2 per ounce Direct labor 15 hours \ 8 per hour Production of 400 Mugs was expected in June, but 440 mugs were actually completed. Direct materials purchased and used were 2,100 ounces at an actual price of $2.20 per ounce. Direct labor cost for the month was $5,310, and the actual pay per hour was $9.00. _ is the direct- labor usage variance for the month of June.

Identify which statement below about "currently attainable standards" is not true.

If the direct- labor price variance is $900 favorable, and the direct- labor usage variance is $800 unfavorable, then must be true.

A variance is the difference between:

Louis Company planned to produce 12,000 units. This level of activities required 20 set- ups at a cost of $18,000 plus $500 per set- up. Actual sales were 10,000 units, requiring 15 set- ups and 12,000 machine hours. Actual set- up cost was $26,000. _ is the flexible budget amount for set- ups.

A favorable direct- labor usage variance may lead to an unfavorable direct- labor price variance.

The following data are for the month of December for the Aggressive Company, a maker of boots: Master budget data: Sales of 9,000 pairs at $90 per pair; variable costs of $69 per pair; total fixed costs of $108,000. Actual results: Sales of 9,600 pairs at $87 per pair; variable costs of $72 per pair; total fixed costs of $109,200. Required: a. What was the December master budget operating income? b. What were the total sales- activity and flexible- budget variances for the month of December?

The total flexible- budget variance can be broken down into a price variance and an effectiveness variance.

Favorable flexible- budget variances are good.

Fonda Company planned to sell 33,000 units. Actual sales were 29,000 units. Based on this information, Fonda Company was:

Rodriguez Company produces 2,500 units. Each unit was expected to require 2 labor hours at a cost of $10 per hour. Total labor cost was $55,250 for 4,750 hours worked. Direct labor is measured in hours. is the total flexible- budget variance for direct labor.

Kramer Company planned to produce 12,000 units. This level of activities required 20 set- ups at a cost of $18,000 plus $500 per set- up. Actual sales were 10,000 units, requiring 15 set- ups and 12,000 machine hours. Actual set- up cost was $26,000. is the flexible- budget variance for set- ups.