Exam 7: Flexible Budgets, Direct-Cost Variances, and Management Control

Answer the following questions using the information below: These questions refer to flexible-budget variance formulas with the following descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity. -Which variance is calculated by using the formula: (AP - BP) AQ is the ________.

An unfavorable sales-volume variance could result from ________.

To prepare budgets based on actual data from past periods is preferred since past inefficiencies are EXCLUDED.

Which of the following is a disadvantage of using the standards developed by a firm itself to develop a budget?

Mid City Products Inc. (MCP), developed standard costs for direct material and direct labor. In 2017, MCP estimated the following standard costs for one of their most popular products. During September, MCP produced and sold 2,000 units using 14,400 pounds of direct materials at an average cost per pound of $7.00 and 950 direct labor hours at an average wage of $10.40 per hour. The direct labor flexible-budget variance during September is ________.

A firm's inefficiencies, such as the wastage of direct materials, are incorporated in past data. Hence the data represents the ideal performance of a firm.

Which of the following could be a reason for a favorable material price variance?

Daniels Corporation used the following data to evaluate their current operating system. The company sells items for $19 each and had used a budgeted selling price of $20 per unit. What is the static-budget variance of revenues?

Expected performance is also called budgeted performance.

Better Products Inc. planned to use $36 of material per unit but actually used $34 of material per unit, and planned to make 1,520 units but actually made 1,310 units. The flexible-budget variance for materials is ________.

The actual information pertains to the month of June. As a part of the budgeting process, Great Cabinets Company developed the following static budget for June. Great Cabinets is in the process of preparing the flexible budget and understanding the results. The flexible budget will report ________ for the fixed costs.

The price variance is the difference between the actual price and the budgeted price of the input, multiplied by the actual quantity of input.

A standard price is the minimum price a company will have to pay for a unit of input.

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 $4.25 per gram. During February, 22,000 grams were purchased for $4.40 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 price variance, assuming that all materials costs are the responsibility of the materials purchasing manager. b.Determine the direct materials price variance, assuming that all materials costs are the responsibility of the production manager. c.Discuss the issues involved in determining the price variance at the point of purchase versus the point of consumption.

Schooner Corporation used the following data to evaluate its current operating system. The company sells items for $25 each and used a budgeted selling price of $25 per unit. What is the static-budget variance of variable costs?

Which of the following is true of variance?

Mid City Products Inc. (MCP), developed standard costs for direct material and direct labor. In 2017, MCP estimated the following standard costs for one of their most popular products. During September, MCP produced and sold 1,000 units using 1,400 pounds of direct materials at an average cost per pound of $8.00 and 160 direct labor hours at an average wage of $13.50 per hour. The direct material price variance during September is ________.

Daniels Corporation used the following data to evaluate their current operating system. The company sells items for $19 each and had used a budgeted selling price of $20 per unit. What is the static-budget variance of variable costs?

Effectiveness is ________.

A favorable flexible-budget variance for variable costs may be the result of using more input quantities than were budgeted.