Exam 8: Performance Evaluation

Distinguish between static and flexible budgets.Give an example of how flexible budgets can be used.

Select the incorrect statement concerning the human factor of performance evaluation.

The Wentworth Company,estimating its sales to be 40,000 units for the upcoming period,prepared the following static budget: Units: Sales Less variable costs: Manufacturing costs Selling and administrative costs Contribution margin Less fixed costs: Manufacturing costs Selling and administrative costs Net income 40,000 \ 400,000 140,000 \ 180,000 44,000 \ 102,000 The owner of the business is not so sure about the 40,000 unit sales volume and has requested additional budgets. Required: In the table provided,prepare two additional budgets,one at 90% of the static budget volume level and one at 110% of the static budget volume level.

The Ferguson Company estimated that October sales would be 100,000 units with an average selling price of $6.00.Actual sales for October were 105,000 units and average selling price was $5.95. The sales revenue flexible budget variance was:

A difference between the static budget based on planned volume and a flexible budget prepared at actual volume is called a:

The purchasing department is considered to have primary responsibility for the materials usage variance.

Assuming actual volume is 10,000 units and planned volume is 12,000 units,the sales volume variance in units:

Timberlake Company planned for a production and sales volume of 12,000 units.However,the company actually makes and sells 13,000 units. Number of units Sales revenue Variable manufacturing costs: Materials Labor Overhead Variable G,S\&A Contribution margin Fixed costs Manufacturing overhead G,S\&A Net income Per unit standards \ 65.00 \ 11.00 \ 9.00 \ 4.20 \ 11.00 Static Budget 12,000 \ 780,000 132,000 108,000 50,400 \ 357,600 100,800 \ 211,800 Flexible Budget 13,000 \ 845,000 143,000 117,000 54,600 \ 387,400 100,800 \ 241,600 What was the total variable cost volume variance?

Which of the following applications is most suited for developing flexible budgets?

Indicate whether each of the following statements is

Which manager is usually held responsible for materials usage variances?

Select the term that best fits the definition or description;enter the number of the term in the column for Your Answer. Your Answer Definition or Description Term A. Differences between budgets based on standard amownts a the actual level of activity and actual resuls 1. Budget slack B. The difference between ifflated and realistic standards 2. Cost per nuit of imput C. A variance occuring in a standard cost accotuting system when the actual amount or quantiy of direct labor used differs from the standard amount required 3. Favorable variance D. The per unt price or coet that "should be" based on a certain set of anticipated circumstances 4. Fexible budget vaniances E. Standard representing the highest level of efficiency attainable based on all inpui factors interacting perfectly muder ideal or optimun conditions 5. Ideal standard F. A variance that occus when actual prices paid for raw materials differs from the standard prices 6. Labor usage variance G. The difference between sales based on a static budget (standard sales price times standard level of activity) and sall based on a flexible budget (standard sales price times actual level of activity) 7. Labor price variance H. A variance that occuss when the actual pay rate differs from the sandard pay rate for direct labor 8. Materials price variance I. A variance that occurs when the actual costs are less than standard costs or when actual sales are greater than standard sales 9. Materials usage variance J. A variance that occurs when the actual amounts of raw materials used to produce a good differ from the standard amounts required to prochice that good 10. Sales volume variance K . Budgets based solely on the planned level of activity and that remain constant even when vohme of activity changes 11. Standards L. The cost of one wit of materinl labor, or overhead 12. Static budgets CHANGE NEEDs TO BE MADE TO TABLE Given that exact wording is not in chapter,change term 2 to: Cost per unit

Which of the following is a difference between a static and a flexible budget?

White Company budgeted for $200,000 of fixed overhead cost and volume of 40,000 units.During the year,the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The fixed overhead cost volume variance is:

The total sales variance includes both price and volume variances.

Select the term that best fits the definition or description;enter the number of the term in the column for Your Answer. Your Answer Definition or Descuiption Term A. The difference between actual sales in dollars and the standard sales price per unit times the actual level of activity 1. Economies of scale B. A variance that occuss when the amount of applied overhead differs from the actual overhead costs 2. Flexible budgets C. Budgets that show expected revenues and costs for muliple levels of activity 3. Lax standards D. Differences between standard and actual amounts 4. Making the mubers E. The lower unit cost advantage possible for companies with high fixed costs when volume increases 5. Management by exception F. Standard representing a level of performance attainable wit reasomable effort 6. Practical standard G. Marketing managers attaining the sales vohune indicated in the master budget 7. Sales price variance H. Easily attainable goals that can be accomplished with minnal effort 8. Total ovenhead vanance I. The use of management resources in areas that are not performing in accordance with expectations 9. Unfavorable variance J. A variance that occurs when actual costs exceed standard costs or when actual sales are less than standard sales 10. Variances First set of changes are due to wording in text ("…Melrose has a fixed cost volume variance of $16,200 ($307,800 budgeted fixed cost − $291,600 applied fixed cost)"

What should be the organizational purpose for identifying and calculating variances?

What is the result when the quantity of materials used is less than the standard quantity?

A budget prepared at a single volume of activity is referred to as a:

When would a sales price variance be listed as unfavorable?