Exam 23: Flexible Budgets and Standard Cost Systems

When favorable variances are added to unfavorable variances,the result is always a total favorable variance.

Accurate Tax Returns budgets two direct labor hours for every tax return that it prepares,at a standard cost of $32 an hour.During the most recent year,540 returns were completed with the labor cost totaling $24,000.The actual labor cost was $44.44 per hour during that period.The actual number of labor hours was 1000.What is the direct labor cost variance?

Setting standard costs is a function of the company's production department and does not require input from other departments.

Under a standard cost system,when recording the use of direct materials in the production process,the debit to Work-in-Process Inventory is ________.

Which of the following is a reason companies use standard costs?

Seaworthy Designs manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Seaworthy uses standard costs to prepare its flexible budget.For the first quarter of the year,direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 4 pounds per unit; $6 per pound Direct labor: 2 hours per unit; $19 per hour During the first quarter,Seaworthy produced 2000 units of this product.Actual direct materials and direct labor costs were $66,000 and $326,000,respectively. For the purpose of preparing the flexible budget,what is the total standard direct labor cost at a production volume of 2000 units?

Alpine Productions uses a standard cost system for recording transactions.Alpine reported the following data for the year ended December 31: Sales revenues: $700,000 Cost of goods sold (standard costing): $382,500 Selling & administrative expenses: $100,000 Variances: Sales revenue variance \ 4100 Direct materials cost variance 20 Direct materials efficiency variance 325 Direct labor cost variance 75 Direct labor efficiency variance 10 Variable overhead cost variance 300 Variable overhead efficiency variance 80 Fixed overhead cost variance 410 Fixed overhead volume variance 130 What is the net operating income on a standard cost income statement?

Palmer Productions uses a standard cost system.On December 31,the account balances include the following: Sales Revenues: $750,000 Cost of Goods Sold (standard costing): $400,500 Selling & Administrative expenses: $150,000 Variances: Sales revenue variance \ 6,000 Direct materials cost variance 400 Direct materials efficiency variance 375 Direct labor cost variance 675 Direct labor efficiency variance 150 Variable overhead cost variance 250 Variable overhead efficiency variance 800 Fixed overhead cost variance 420 Fixed overhead volume variance 100 Prepare a multi-step,standard cost income statement.

Firelight Company manufactures candles.The standard direct materials quantity required to produce one large candle is one pound at a cost of $5 per pound.During November,7,200 large candles were produced using 7,500 pounds of direct materials that cost $45,000. Using the format below,prepare an analysis of the direct materials variances.

A new factory manager was hired for a company that was experiencing slow production rates and lower production volumes than demanded by management.Upon investigation,the manager found that the workers were poorly motivated and not closely supervised.Midway through the quarter,an incentive program was initiated,and cash bonuses were given when workers hit their production targets.Within a short time,production output increased,but the bonuses had to be charged to the direct labor budget.This could produce a(n)________.

The following information relates to Turpin Manufacturing's overhead costs for the month: Static budget variable overhead \ 14,200 Static budget fixed overhead \ 5,600 Static budget direct labor hours 1,000 hours Static budget number of units 5,000 units Turpin allocates manufacturing overhead to production based on standard direct labor hours. Turpin reported the following actual results for last month: actual variable overhead,$14,500; actual fixed overhead,$5,400; actual production of 4,700 units at 0.22 direct labor hours per unit.The standard direct labor time is 0.20 direct labor hours per unit. Compute the fixed overhead cost variance.

The management of Guardian Fire Alarms has calculated the following variances: Direct materials cost variance \ 11,000 Direct materials efficiency variance 36,000 Direct labor cost variance 16,500 Direct labor efficiency variance 13,500 Total variable overhead variance 7500 Total fixed overhead variance 4000 What is the total direct materials variance of the company?

The management of Cleancut Lawnmowers has calculated the following variances: Direct materials cost variance \ 11,000 Direct materials efficiency variance 35,000 Direct labor cost variance 15,000 Direct labor efficiency variance 13,000 Variable overhead cost variance 3500 Variable overhead efficiency variance 6000 Fixed overhead cost variance 4500 When determining the total product cost flexible budget variance,what is the total manufacturing overhead variance of the company?

The production manager of a company,in an effort to gain a promotion,negotiated a new labor contract with the factory employees that required them to bear a greater percentage of benefit costs than before,thus bringing down the cost of direct labor to the company.Shortly afterward,several experienced and highly skilled workers resigned,and were replaced by new employees whose work was very slow during their training period.At the end of the quarter,the company's profits fell 10%.This would produce a(n)________.

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing a higher waste of valuable direct materials.The production manager decided to purchase a higher grade of materials that would be more reliable.This would produce a(n)________.

Purchase discounts,freight in and receiving costs ________.

When evaluating variances,exceptions can be expressed as a percentage of a budgeted amount or a dollar amount.

The standard cost income statement doesn't alter the actual operating income-it simply emphasizes the variances from standard.