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

A percentage of products started and completed without requiring any rework is an example of nonfinancial performance measure.

For any actual level of output, the efficiency variance is the difference between actual quantity of input used and the budgeted quantity of input allowed to produce actual output, multiplied by the budgeted price.

The sales-volume variance is sometimes due to ________.

Waddell Productions makes separate journal entries for all cost accounting-related activities. It uses a standard cost system for all manufacturing items. For the month of June, the following activities have taken place: Required: Record the necessary journal entries to close the accounts for the month.

Fine Lumber Inc. mills and finishes furniture kits. A certain kit requires the following: Direct materials standard2 square yards at $13.50 per yard Direct manufacturing labor standard1.5 hours at $20.00 per hour During the third quarter, the company made 1,500 kits and used 3,150 square yards of wood costing $42,600. Direct labor totaled 2,100 hours for $46,150. Required: a.Compute the direct materials price and efficiency variances for the quarter. b.Compute the direct manufacturing labor price and efficiency variances for the quarter.

The president of the company, Peter Francis, has come to you for help. Use the following data to prepare a flexible budget for possible sales/production levels of 10,000, 15,000, and 20,000 units. Show the contribution margin at each activity level.

Give at least three good reasons why a favorable price variance for direct materials might be reported.

Bennett Street Table Company manufactures tables for schools. The 2018 operating budget is based on sales of 45,000 units at $55 per table. Operating income is anticipated to be $240,000. Budgeted variable costs are $35 per unit, while fixed costs total $660,000. Actual income for 2018 was a surprising $569,000 on actual sales of 46,000 units at $60 each. Actual variable costs were $34 per unit and fixed costs totaled $627,000. Required: Prepare a variance analysis report with both flexible-budget and sales-volume variances.

An unfavorable efficiency variance for direct manufacturing labor might indicate that ________.

Which of the following is an example of nonfinancial performance measure?

With a direct materials price variance of $40,000 F and direct materials efficiency, direct manufacturing labor price, and direct labor efficiency variances of $60,000 U, 20,000 U, and 15,000 U, the write-off to cost of goods sold if these are deemed immaterial would be a debit of $55,000.

If management experiences an unfavorable direct materials efficiency variance, which of the following would not be the possible corrective action?

Handley Manufacturing Company has prepared the following flexible budget for August and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. The most likely explanation of the above direct manufacturing labor variances is that ________.

A favorable efficiency variance for direct materials might indicate that ________.

Coast to Coast Bus Lines acquired the following data about the operating cost of three of its top competitors. Operating cost per seat per mile Competitor A $.11 Competitor B $.15 Competitor C $.16 Management decides to use the average operating cost per seat per mile as a mark. Coast to Coast per seat is 12.5 cents per mile.

Daniels Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and had used a budgeted selling price of $19 per unit. What is the static-budget variance of operating income?

When using variance analysis for performance evaluation, managers often focus on effectiveness and efficiency as two of the common attributes used in comparing expected results with actual results.

Which of the following statements is true about analyzing a single variance?

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 operating income?

Harland Corporation currently produces cardboard boxes in an automated process. Expected production per month is 20,000 units, direct material costs are $2.50 per unit, and manufacturing overhead costs are $15,000 per month. Manufacturing overhead is all fixed costs. What are the flexible budget for 14,000 and 20,000 units, respectively?