Exam 21: Flexible Budgets and Standard Costs

Standard material costs,standard labor costs,and standard overhead costs can be obtained from standard cost tables published by the Institute of Management Accountants.

A company provided the following direct materials cost information.Compute the direct materials quantity variance.

A flexible budget is based on a single predicted amount of sales or other activity measure.

Lavoie Company planned to use 18,500 pounds of material costing $2.50 per pound to make 4,000 units of its product.In actually making 4,000 units,the company used 18,800 pounds that cost $2.54 per pound.Calculate the direct materials price variance.

When recording variances in a standard cost system:

If ending variance account balances are immaterial,they can be closed directly to Cost of Goods Sold.

A company's flexible budget for 30,000 units of production showed sales of $90,000,variable costs of $36,000,and fixed costs of $23,000.Prepare a flexible budget for 25,000 units assuming it is within the same relevant range of production.

Based on predicted production of 25,000 units,Marvel Mix Co.anticipates $175,000 of variable costs and $137,500 of fixed costs.What are the flexible budget amounts of total costs for 28,000 units?

When computing a price variance,the quantity is held constant.

Fletcher Company collected the following data regarding production of one of its products. -Compute the variable overhead efficiency variance.

Summerlin Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units.The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units.What is the direct materials quantity variance?

Milltown Company specializes in selling used cars.During the month,the dealership sold 22 cars at an average price of $15,000 each.The budget for the month was to sell 20 cars at an average price of $16,000.Compute the dealership's sales price variance for the month.

A flexible budget is useful both before and after the period's activities are complete.

The difference between the total actual cost incurred and the total standard cost is called the:

Gleason Company has developed the following standard cost data based on 60,000 direct labor hours,which is 75% of capacity.Fixed overhead is $360,000 and variable overhead is $180,000 at this level of activity. During the current period,the company operated at 80% of capacity and produced 128,000 units.Actual costs were: Calculate the variable overhead spending and efficiency variance and the fixed overhead spending and volume variances.Indicate whether each is favorable or unfavorable.

Joseph,Inc.,provides the following results of June's operations: Required: (a)Determine the total overhead cost variance for June. (b)Applying the management by exception approach,which of the variances shown are of greatest concern? Why?

What are sales variances? How are they used?

A company's flexible budget for 10,000 units of production reflects sales of $200,000; variable costs of $40,000; and fixed costs of $75,000.Calculate the expected level of operating income if the company produces and sells 13,000 units.

An analytical technique used by management to focus attention on the most significant variances and give less attention to the areas where performance is reasonably close to standard is known as:

The difference between actual overhead costs incurred and the budgeted overhead costs based on a flexible budget is the: