Exam 8: Performance Evaluation

Which range of difficulty should normally be used to develop standards?

Marks Company makes one product,for which it has established the following standards for materials: Average quantity of material per unit of product: 4.5 pounds Price per pound of materials,$16 During March,Marks made 10,000 units of the product,using 50,000 pounds at a total purchase price of $825,000. Required: (a)Determine the total flexible budget materials variance and indicate whether it is favorable or unfavorable. (b)Calculate the materials price variance and indicate whether it is favorable or unfavorable. (c)Determine the materials usage variance and indicate whether it is favorable or unfavorable.

Sometimes employees will deliberately overstate the amount of materials and/or labor that should be required to complete a job.The difference between inflated and realistic standards is known as:

Which of the following is not an advantage of using a standard cost system?

Dandridge Company established a direct materials standard of 4 pounds at $4.50 per pound for one of its products.During April,Dandridge produced 22,000 units of the product,using 86,000 pounds of material. Required: Based on this information, (a)Which variance can you calculate? (b)What is the dollar amount of the variance? (c)Is the variance favorable or unfavorable? (d)Do you consider the variance to be sufficiently material that managers should investigate to discover the cause of the variance?

Management by exception means that only unfavorable cost variances are investigated.

The Landrum Company provides the following standard cost data per unit of product: Variable overhead \ 8.00 Landrum anticipated that they would produce and sell 24,000 units.During the period,the company produced and sold 25,000 units incurring $210,000 of variable overhead costs. The variable overhead flexible budget variance was:

What aspects of variances should managers consider in deciding which variances to investigate?

The Russell Company provides the following standard cost data per unit of product: Direct material ( 3 gallons @ \ 6 per gallon) \ 18.00 Direct labor ( 2 hours @ \ 10 per hour) \ 20.00 During the period,the company produced and sold 22,000 units incurring the following costs: Direct material 68,000 gallons @ \ 5.90 per gallon Direct labor 45,500 hours @ \ 9.75 per hour The direct material usage variance was:

Describe how a flexible budget is useful in planning for an organization.

Which of the following equations can be used to compute a labor price variance? (A = Actual;S = Standard;H = Hour;P = Price)

Which of the following statements is incorrect regarding variable overhead variances?

Global Company makes a product that is expected to use 2.2 pounds of material per unit of product.The material has a standard cost of $2 per pound.Global actually used 2.3 pounds of material per unit of product made in January.The actual cost of material was $1.95 per pound.Based on this information alone,the materials variances for the January production would be:

Stafford Company prepared a static budget for a production and sales volume of 10,000 units. Number of units Sales revenue Variable manufacturing costs: Materials Labor Overhead Variable general, selling, and administrative costs Contribution margin Fixed costs Manufacturing overhead General, selling, and administrative costs Net income Per unit standards \ 65.00 \ 11.00 \ 9.00 \ 4.20 \ 11.00 Static Budget \ 10,000 \ 650,000 110,000 90,000 42,000 \ 298,000 100,800 \ 152,200 What is net income if 9,000 units are sold?

Static and flexible budgets are similar in that:

Ick Manufacturing Company established the following standard price and cost information: Sales price \ 50 per unit Variable manufacturing cost 32 per unit Fixed manufacturing cost \ 100,000 total Fixed selling and administrative cost \ 40,000 total Ick expected to produce and sell 20,000 units.Actual production and sales amounted to 21,500 units. Required: (a)Prepare the pro forma income statement in contribution format that would appear in Ick's master budget for the year. (b)Prepare the income statement in contribution format that would appear in Ick's flexible budget.

Which of the following is not an example of budget gamesmanship that may occur in a company?

Jared expects to charge $60 per hour for his industrial maintenance business during the following year.He expects to reach 50,000 hours at that price.Jared's partner disagrees with the estimate and expects closer to 40,000 hours. What should Jared do when preparing the budget for the year?

Jones Company developed the following static budget at the beginning of the company's accounting period: Revenue (8,000 units) \ 16,000 Variable costs Contribution margin \ 12,000 Fixed costs Net income If actual production totals 8,200 units,the flexible budget would show total costs of:

The Bach Company provides the following standard and actual cost relating to material price and labor usage. Materials Price 8.50 per gallon 8.35 per gallon Labor Usage 30,000 hours 28,500 hours Based on the above information,which statement is correct?