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

With disregard to all other factors, the use of high-quality raw materials is likely to result in a favorable efficiency variance and an unfavorable price variance.

Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2017, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container. During July, GII produced and sold 4,000 containers using 1,750 pounds of direct materials at an average cost per pound of $48 and 2,090 direct manufacturing labor hours at an average wage of $11.30 per hour. The direct manufacturing labor efficiency variance during July is ________.

Explain the difference between a static budget and a flexible budget. Explain what is meant by a static budget variance and a flexible budget variance.

A favorable variance indicates that ________.

Schooner Corporation used the following data to evaluate its current operating system. The company sells items for $23 each and used a budgeted selling price of $23 per unit. What is the static-budget variance of revenues?

Lincoln Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and used a budgeted selling price of $18 per unit. What is the static-budget variance of variable costs?

A master budget is called a static budget because it is developed around a single planned output level.

Cost variances should be investigated ________.

Classic Products Company manufactures colonial style desks. Some of the company's data was misplaced. Use the following information to replace the lost data: What is the total static-budget variance?

A flexible-budget variance pertaining to revenues is often called a sales-volume variance.

Variance analysis should be used ________.

The following data for the Prender Company pertain to the production of 800 urns during August. Direct Materials (all materials purchased were used): Standard cost: $4.80 per pound of urn. Total actual cost: $4,480. Standard cost allowed for units produced was $4,800. Materials efficiency variance was $96 unfavorable. Direct Manufacturing Labor: Standard cost is 2 urns per hour at $19.20 per hour. Actual cost per hour was $19.60. Labor efficiency variance was $288 favorable. Required: a.What is standard direct material amount per urn? b.What is the direct material price variance? c.What is the total actual cost of direct manufacturing labor? d.What is the labor price variance for direct manufacturing labor?

Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2017, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container. During July, GII produced and sold 4,000 containers using 600 pounds of direct materials at an average cost per pound of $26 and 1,290 direct manufacturing labor hours at an average wage of $18.40 per hour. The direct manufacturing labor price variance during July is ________.

One advantage of using standard times to develop a budget is they are simple to compile, are based solely on the past actual history, and do not require expected future changes to be taken into account.

Jalbert Incorporated planned to use materials of $11 per unit but actually used materials of $15 per unit, and planned to make 1,560 units but actually made 1,730 units. The flexible-budget amount for materials is ________.

When benchmarking, management accountants are most valuable when they ________.

A company purchases $650,000 of materials on credit. The standard cost for the materials is $675,000. Which of the following would be the correct journal entries to record the purchase under a standard costing system?

It is difficult for firms to find appropriate benchmarks because differences can exist across companies in their strategies, inventory costing methods, depreciation methods, and so on.

When preparing a flexible budget, fixed costs must be adjusted to reflect actual costs at actual output.

Benchmarking is the continuous process of measuring products, services, and activities against the best possible levels of performance, either inside or outside the organization.