Exam 8: Performance Evaluation

If the master budget prepared at a volume level of 10,000 units includes direct materials of $40,000,a flexible budget based on a volume of 12,000 units would include direct materials of $48,000.

Multiplying the difference between actual materials price per unit and the standard materials price per unit by actual quantity of materials used is known as the:

Unfavorable flexible budget variances are those that are the result of lower than expected sales volume.

The sales volume variance is the difference between the:

Burruss Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 8,000 units: Per unit Revenue \ 4.00 Vanable costs Contribution margin \ 2.50 Fixed costs Net income If actual production totals 10,000 units which is within the relevant range,the flexible budget would show fixed costs of:

When a comparison of static and flexible budgets shows an unfavorable sales volume variance,the variable cost volume variances will also be unfavorable.

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00.Actual sales for April were 149,000 units and average selling price was $6.12. The sales volume variance was:

Indicate whether each of the following statements is

For a product made by George Company,last year's standards for labor were 2 hours at $12 per hour.Which of the following considerations should George take into account in setting the standards for this year?

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 price variance was:

Pfeiffer Company produces a number of products,including a small American flag.The firm,which began operations at the beginning of the current year,uses a standard cost system.The standard costs for one American Flag are provided below: Direct material (0.5 yd.@ \1 .00) \ 0.50 Direct labor (1hr.@ \1 0.00) 10.00 Variable overhead (1.@1.00) 1.00 Fixed overhead (1@\ 0.50) The $0.50 fixed overhead rate is based on total budgeted fixed overhead costs of $17,000.There were no changes in any inventory account during the period.The company produced and sold 35,000 units at the following costs: Direct materials ( 18,000 yds.) \ 17,280 Direct labor (36,000 .) 374,400 Variable factory overhead 34,500 Fixed factory overhead 15,000 Required: 1)Compute and label as Favorable (F)or Unfavorable (U)the following flexible budget variances: a) Direct materials price variance b) Direct materials usage variance c) Direct labor price variance d) Direct labor usage variance e) Total variable overhead variance f) Fixed overhead spending variance g) Fixed overhead volume variance 2)Comment on the firm's performance.

Indicate whether each of the following statements is

The following standard cost card is provided for Navid Company's Product A: Direct material (2lbs.@ \5 .00 per lb.) \ 10.00 Direct labor (1hr@ \ 8.00 per hr.) 8.00 Variable overhead (1 hr.@ \ 3.00 per hr.) 3.00 Fixed overhead (1 hr.@ \2 .00 per hr.) Total standard cost per unit The fixed overhead rate is based on total budgeted fixed overhead of $12,000.During the period,the company produced and sold 5,800 units at the following costs: Direct material 12,200 pounds @ $4.80 per pound Direct labor 5,950 hours @ $8.00 per hour Overhead $29,920 The standard manufacturing cost per unit is $23.00.What is the actual manufacturing cost per unit? (Do not round intermediate calculations. )

A favorable flexible budget materials variance may indicate that the price per unit of materials was lower than expected and that less material was used than expected or either of these.

Indicate whether each of the following statements is

With respect to cost variances,managers seek to achieve actual costs that are higher than standard costs.

When would a variance be labeled as unfavorable?

Standards that do not allow for normal down time,waste of materials,or machine breakdowns are known as:

The following static budget is provided: Units Sales \ 200,000 Less variable costs: Manufacturing costs \ 70,000 Selling and administrative costs \ Contribution Margin \ 90,000 Less fixed costs: Manufacturing costs \ 22,000 Selling and administrative costs \ Net Income \ What will budgeted net income equal if 21,000 units are produced and sold? (Do not round intermediate calculations. )

Canton Company estimates sales of 12,000 units for the upcoming period.At this sales volume its budgeted income is as follows: Sales Less variable costs: Manufacturing costs Selling and administrative costs Contribution margin Less fixed costs: Manufacturing costs Selling and administrative costs Net income Per Unit \ 30 16 \ 6 12.000 Units \ 360,000 192,000 \ 72,000 20,000 \ 7,000 During the period the company actually produced and sold 14,000 units. Required: 1)The manager now wants to evaluate the company's performance by comparing actual costs and revenues to those shown above but you have advised against it.Explain your reasoning. 2)Prepare a flexible budget based on 14,000 units. 3)If management compares actual revenues and costs to the appropriate flexible budget,will they be able to fully understand what went right and what went wrong with the operation during the period? Why or why not?