Exam 23: Flexible Budgets and Standard Cost Systems

Judd 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 6100 units Budgeted variable overhead costs \ 14,000 Budgeted direct labor hours 600 hours At the end of the year,actual data were as follows: Production volume 4200 units Actual variable overhead costs \ 15,100 Actual direct labor hours 480 hours What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

When using management by exception,which of the following variances would NOT affect the production manager?

When using management by exception,managers investigate only those variances that are unfavorable.

What does the variable overhead cost variance measure?

Companies conduct time-and-motion studies and use benchmarks from other companies when developing standards.

Cedar Designs Company,a custom cabinet manufacturing company,is setting standard costs for one of its products.The main material is cedar wood,sold by the square foot.The current cost of cedar wood is $6.00 per square foot from the supplier.Delivery costs are $0.25 per square foot.Carpenters' wages are $30.00 per hour.Payroll costs are $3.60 per hour,and benefits are $6.00 per hour.How much is the direct labor standard cost per hour?

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

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 recruit some highly skilled production workers from another company to bring down the defect rate.This would produce a(n)________.

-According to the above table.,what is the total direct materials variance?

The static budget is used to compute flexible budget variances as well as cost and efficiency variances for direct materials and direct labor.

A company is setting its direct materials and direct labor standards for its leading product.Direct materials cost from the supplier are $8 per square foot,net of purchase discount.Freight-in amounts to $0.10 per square foot.Basic wages of the assembly line personnel are $18 per hour.Payroll taxes are approximately 25% of wages.Benefits amount to $4 per hour.How much is the direct materials cost standard per square foot?

Allen Boating Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Allen 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; $11 per pound Direct labor: 2 hours per unit; $15 per hour Allen produced 3000 units during the quarter.At the end of the quarter,an examination of the direct materials records showed that the company used 6500 pounds of direct materials and actual total materials costs were $99,300. What is the direct materials efficiency variance?

When investigating variable overhead variances,management needs to determine whether cost increases were controllable or if the cost standard needs to be updated.

A company is analyzing its month-end results by comparing it to both static and flexible budgets.During the month,the actual fixed costs were lower than the expected fixed costs as per the static budget.This difference results in a(n)________.

List the direct labor variances and briefly describe each.

In a standard costing system,each input of direct materials,direct labor,and manufacturing overhead has a cost standard and an efficiency standard.

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

Atoka Manufacturing uses a standard cost system.Standards for direct materials are as follows: Direct materials (pounds per unit of output) 2 Cost per pound of direct materials \ 6 Actual purchases of direct materials for the current month are 10,000 pounds for $50,400.Planned and actual production for the month is 3000 units.Atoka has issued 10,000 pounds of direct materials to production.The journal entry to record this transaction is ________.

An unfavorable variance means more cost has been incurred than planned.

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