Exam 7: Flexible Budgets, Variances, and Management Control: I

Coffey Company maintains a very large direct materials inventory because of critical demands placed upon it for rush orders from large hospitals. Item A contains hard-to-get material Y. Currently, the standard cost of material Y is $2.00 per gram. During February, 22,000 grams were purchased for $2.10 per gram, while only 20,000 grams were used in production. There was no beginning inventory of material Y. Required: a. Determine the direct materials rate variance, assuming that all materials costs are the responsibility of the materials purchasing manager so rate variances are based on purchase quantities. b. Determine the direct materials rate variance, assuming that all materials costs are the responsibility of the production manager so rate variances are determined as quantities are placed into production. c. Discuss the issues involved in determining the rate variance at the point of purchase versus the point of consumption.

Brussels Chocolate Company produces chocolates in large batches. One batch of chocolate has the following standard costs and amounts: Brussels Chocolate Company produced 600 batches of chocolates in the most recent month. Actual input costs and per batch usage levels were as follows: Required: a. Calculate the total material input rate variance. b. Calculate the total material efficiency variance. c. Calculate the total labour rate variance.

Video Producers manufactures two types of videos: regular and CD. The regular tapes require 5 units of direct material X at a standard price of $2 per unit. The CDs require 2 units of direct material Y at a standard price of $3. During January the company purchased 9,000 units of X for $2.10 each and 3,600 units of Y at $3.20 each. January production used 8,800 units of X and 3,400 units of Y. Outputs of finished tapes was 1,750 of each type. Required: Compute the price and efficiency variances for each material. For the rate variances use two different responsibility assumptions. First assume that rate variances are isolated at the time of purchase; second assume that the rate variances are isolated as materials are placed into production. The efficiency variances for each material are determined during production.

Use the information below to answer the following question(s). Sawyer Industries Inc. (SII), developed standard costs for direct material and direct labour. In 2016, SII estimated the following standard costs for one of their major products, the 30-litre heavy-duty plastic container. During July 2017, SII produced and sold 10,000 containers using 2,200 kilograms of direct materials at an average actual cost per kilogram of $24 and 1,050 direct manufacturing labour hours at an average actual wage of $14.75 per hour. -July's direct material flexible-budget variance is

Match the department that is most likely responsible for the listed variance. -Direct material efficiency variance

Use the information below to answer the following question(s). Ames Golf Company used the following data to evaluate their current operating system. The company sells 1 pack of golf balls for $10 per pack. The $10 selling price is also the budgeted selling price. -What is the budgeted operating income for Ames Golf Company?

Use the following data to prepare a flexible budget for possible sales/production levels of 10,000; 11,000; and, 12,000 units. Show the contribution margin at each activity level.