The management of Watchdog Security Systems has calculated the following variances: \[\begin{array} { | l | r | } \hline \text { Direct materials cost variance } & \$ 9000 \mathrm { U } \\ \hline \text { Direct materials efficiency variance } & 37,000 \mathrm {~F} \\ \hline \text { Direct labor cost variance } & 15,500 \mathrm {~F} \\ \hline \text { Direct labor efficiency variance } & 12,000 \mathrm { U } \\ \hline \text { Total variable overhead variance } & 7500 \mathrm {~F} \\ \hline \text { Total fixed overhead variance } & 3000 \mathrm {~F} \\ \hline \end{array}\] What is the total direct labor variance of the company?

A) $15,500 F B) $10,500 F C) $27,500 F D) $3500 F A) $15,500 F B) $10,500 F C) $27,500 F D) $3500 F

The Body Balance Fitness Company completed the flexible budget analysis for the second quarter,which is given below. \(\begin{array}{|l|c|c|c|c|c|c|c|} \hline & \begin{array}{l} \text { Actual } \\ \text { Results } \end{array} & \begin{array}{c} \text { Flexible } \\ \text { Budget } \\ \text { Variance } \\ \end{array} && \begin{array}{l} \text { Flexible } \\ \text { Budget } \end{array} & \begin{array}{c} \text { Sales } \\ \text { Volume } \\ \text { Variance } \end{array} && \begin{array}{c} \text { Static } \\ \text { Budget } \end{array} \\ \hline \text { Units } & \underline{12,800}_{} & \underline{0} && \underline{12,800} & \underline{1000}& \underline{{F}} & \underline{11,800} \\ \hline \text { Sales Revenue } & \$ 62,770 & \$2391&U& \$ 65,161 & \$ 5091 &{F} & \$ 60,070 \\ \hline \text { Variable Costs } & \underline{27,540}_{} & \underline{150} &\underline{U} & \underline{27,390} & \underline{\$ 2140} &\underline{U} & \underline{25,250}\\ \hline \text { Contribution Margin } & \$ 35,230 & \$ 2541 &{U} & \$ 37,771 & \$ 2951 &{F} & \$ 34,820 \\ \hline \text { Fixed Costs } & \underline{34,280} & \underline{270 }&\underline{U} & \underline{34,010 }& \underline{\$ 0}& & \underline{34,010}_{} \\ \hline \text { Operating Income/(loss) } & \underline{\$ 950} &\underline{ \$ 2811 }&\underline{U} &\underline{ \$ 3761} & \underline{\$ 2951 }&\underline{F} & \underline{\$810}\\ \hline \end{array}\) Which of the following statements would be a correct factor to explain the flexible budget variance for variable costs?

A) decrease in sales price per unit B) increase in variable cost per unit C) increase in sales volume D) increase in fixed costs A) decrease in sales price per unit B) increase in variable cost per unit C) increase in sales volume D) increase in fixed costs

Exam 23: Flexible Budgets and Standard Cost Systems

The purchasing manager was able to bring down the cost of direct materials by purchasing direct materials of a slightly lower grade quality than the company had used previously.The lower grade of direct materials,however,meant a higher defect rate on the assembly line and a higher waste of direct materials during production,which in turn lowered operating income.This would have led to a(n)________.

(Multiple Choice)

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Question 41

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)________.

(Multiple Choice)

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Question 42

Cake Lady Bakery is famous for its pound cakes.The main ingredient of the cakes is flour,which Cake Lady purchases by the pound.In addition,the production requires a certain amount of direct labor.Cake Lady uses a standard cost system,and at the end of the first quarter,there was an unfavorable direct labor cost variance.Which of the following is a logical explanation for that variance?

(Multiple Choice)

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Question 43

The flexible budget variance is the difference between the ________.

(Multiple Choice)

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Question 44

The fixed overhead volume variance is a cost variance that explains why fixed overhead is overallocated or underallocated.

(True/False)

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Question 45

To compute the variable overhead cost variance,first compute the difference between actual cost and standard cost.Then,multiply this difference by standard quantity.

(True/False)

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Question 46

The management of Watchdog Security Systems has calculated the following variances: Direct materials cost variance \ 9000 Direct materials efficiency variance 37,000 Direct labor cost variance 15,500 Direct labor efficiency variance 12,000 Total variable overhead variance 7500 Total fixed overhead variance 3000 What is the total direct labor variance of the company?

(Multiple Choice)

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Question 47

A report that summarizes actual results,budgeted amounts and the difference between them is called the ________.

(Multiple Choice)

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Question 48

The total fixed overhead variance is the total of the variable overhead cost variance and fixed overhead volume variance.

(True/False)

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Question 49

Poseidon Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Poseidon 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: 3 pounds per unit; $3 per pound Direct labor: 5 hours per unit; $15 per hour Poseidon produced 5000 units during the quarter.At the end of the quarter,an examination of the labor costs records showed that the direct labor cost variance was $8000 F.Which of the following is a logical explanation for this variance?

(Multiple Choice)

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Question 50

Which of the following is the correct formula for measuring an efficiency variance?

(Multiple Choice)

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Question 51

The Body Balance Fitness Company completed the flexible budget analysis for the second quarter,which is given below. Actual Results Flexible Budget Variance Flexible Budget Sales Volume Variance Static Budget Units Sales Revenue \ 62,770 \2 391 U \ 65,161 \ 5091 F \ 60,070 Variable Costs Contribution Margin \ 35,230 \ 2541 U \ 37,771 \ 2951 F \ 34,820 Fixed Costs Operating Income/(loss) Which of the following statements would be a correct factor to explain the flexible budget variance for variable costs?

(Multiple Choice)

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Question 52

A standard is a sales price,cost,or quantity that is expected under normal conditions.

(True/False)

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Question 53

Only substantial unfavorable variances should be investigated to determine their causes.

(True/False)

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Question 54

A direct labor cost variance is unfavorable if the employer pays workers more per hour than budgeted.

(True/False)

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Question 55

The following information relates to Randolph 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 Randolph allocates manufacturing overhead to production based on standard direct labor hours. Randolph 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 variable overhead efficiency variance.(round the answer to the nearest dollar)

(Essay)

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Question 56

A standard cost system helps management set performance standards.

(True/False)

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Question 57

Define variance.What is the difference between a favorable and an unfavorable variance?

(Essay)

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Question 58

Which department is usually responsible for a direct materials cost variance due to favorable price negotiations?

(Multiple Choice)

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Question 59

A favorable variance has a debit balance and is a contra revenue.

(True/False)

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Question 60

The flexible budget variance is the difference between the ________.

The fixed overhead volume variance is a cost variance that explains why fixed overhead is overallocated or underallocated.

To compute the variable overhead cost variance,first compute the difference between actual cost and standard cost.Then,multiply this difference by standard quantity.

A report that summarizes actual results,budgeted amounts and the difference between them is called the ________.

The total fixed overhead variance is the total of the variable overhead cost variance and fixed overhead volume variance.

Which of the following is the correct formula for measuring an efficiency variance?

A standard is a sales price,cost,or quantity that is expected under normal conditions.

Only substantial unfavorable variances should be investigated to determine their causes.

A direct labor cost variance is unfavorable if the employer pays workers more per hour than budgeted.

A standard cost system helps management set performance standards.

Define variance.What is the difference between a favorable and an unfavorable variance?

Which department is usually responsible for a direct materials cost variance due to favorable price negotiations?

A favorable variance has a debit balance and is a contra revenue.

Accounting Information Systems

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems

Cost-Volume-Profit Analysis

Variable Costing

Master Budgets

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

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