Exam 23: Flexible Budgets and Standard Cost Systems

The static budget,at the beginning of the month,for New England Furniture Company follows: $\underline{\text{Static budget:}}$ Sales volume: 1000 units; Sales price: $71.00 per unit Variable costs: $33.00 per unit; Fixed costs: $36,200 per month Operating income: $1800 $\underline{\text{Actual results,at the end of the month,follows:}}$ $\underline{\text{Actual results:}}$ Sales volume: 960 units; Sales price: $74.00 per unit Variable costs: $35.00 per unit; Fixed costs: $35,000 per month Operating income: $2440 Calculate the sales volume variance for fixed costs.

The static budget, at the beginning of the month, for Amira Company follows: $\underline{\text{Static budget:}}$ Sales volume: 1000 units; Sales price: $70.00 per unit Variable costs: $32.00 per unit; Fixed costs: $36,800 per month Operating income: $1200 $\underline{\text{Actual results, at the end of the month, follows:}}$ $\underline{\text{Actual results:}}$ Sales volume: 980 units; Sales price: $74.00 per unit Variable costs: $35.00 per unit; Fixed costs: $34,600 per month Operating income: $3620 Calculate the flexible budget variance for fixed costs.

The fixed overhead volume variance reveals underallocated fixed overhead costs.

The term "management by exception" refers to investigating ________.

The sales volume variance is the difference between the ________.

Stafford Company uses standard costs for its manufacturing division.Standards specify 0.2 direct labor hours per unit of product.The allocation base for variable overhead costs is direct labor hours.At the beginning of the year,the static budget for variable overhead costs included the following data: Production volume 5000 units Budgeted variable overhead costs \ 13,500 Budgeted direct labor hours 620 hours At the end of the year,actual data were as follows: Production volume 4100 units Actual variable overhead costs \ 15,100 Actual direct labor hours 505 hours How much is the standard cost per direct labor hour for variable overhead? (Round your answer to the nearest cent.)

Reflector Glass Company prepared the following static budget for the year: Static Budget Units/Volume 6000 Per Unit Sales Revenue \ 7.00 \ 42,000 Variable Costs 1.50 Contribution Margin 33,000 Fixed Costs Operating Income/(Loss) If a flexible budget is prepared at a volume of 9700 units,calculate the amount of operating income.The production level is within the relevant range.

The fixed overhead volume variance is a volume variance,not a cost variance.

Sugar and Spice Foods is famous for its cupcakes.One of the main ingredients of the cupcakes is sugar,which Sugar and Spice purchases by the pound.In addition,the production requires a certain amount of direct labor.Sugar and Spice uses a standard cost system,and at the end of the first quarter,there was a favorable direct labor efficiency variance.Which of the following is a logical explanation for that variance?

Standard costs are developed by the cooperative effort of purchasing,production,human resources,and accounting personnel.

For each of the following variances,state which manager is most likely to be responsible for the variance. Variance Responsible Manager Direct Materials Efficiency Direct Labor Cost Variable Overhead Efficiency

Because it is a cost variance,the fixed overhead volume variance explains why fixed overhead is underallocated or overallocated.

Oceanside Marine Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Oceanside 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: 2 pound per unit; $12 per pound Direct labor: 4 hours per unit; $18 per hour Oceanside produced 3000 units during the quarter.At the end of the quarter,an examination of the direct materials records showed that the company used 7500 pounds of direct materials and actual total materials costs were $98,400. What is the direct materials cost variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

Golden Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Golden 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 Labor: 4 hours per unit; $24 per hour During the first quarter,Golden produced 5000 units of this product.At the end of the quarter,an examination of the direct materials records showed that the company used 14,500 pounds of direct materials and the direct materials cost variance was $3840 U.Which of the following is a logical explanation for this variance?

Golden Glow Company manufactures candles.The standard direct materials quantity required to produce one large candle is 1 pound at a cost of $5 per pound.Every candle requires 2 direct labor hours at a standard cost of $3 per direct labor hour.During November,7,200 large candles were produced using 7,500 pounds costing $45,000.At the end of November,an examination of the labor cost records showed that the company used 15,000 direct labor hours (DLHr)at a cost of $4 per hour. Using the format below,prepare an analysis of the direct labor cost variances.

Benson Company manufactures special metallic materials for luxury homes that require highly skilled labor.Benson 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: 2 pounds per unit; $4 per pound Direct labor: 5 hours per unit; $14 per hour Benson produced 5000 units during the quarter.At the end of the quarter,an examination of the labor costs records showed that the company used 30,000 direct labor hours and actual total direct labor costs were $225,000.What is the direct labor efficiency variance?

A company is setting its direct materials and direct labor standards for its leading product.Direct material costs from the supplier are $9 per square foot,net of purchase discount.Freight-in amounts to $0.20 per square foot.Basic wages of the assembly line personnel are $14 per hour.Payroll taxes are approximately 22% of wages.How much is the direct labor cost standard per hour? (Round your answer to the nearest cent.)

Favorable and unfavorable variances are subtracted from each other to arrive at a net favorable or unfavorable variance.

Complete the following table: Variance How is the variance calculated? How does the variance arise? Flexible budget Sales volume

Marshall Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Marshall had a favorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?