Exam 6: Performance Evaluation: Variance Analysis

In June,Indigo Manufacturing purchased 6,000 gallons of blue dye used to produce stone-washed denim clothing.The price per gallon was $1.24 and the company used 5,400 gallons of the dye during the month.The standard price for the dye is $1.26.What is the materials price variance for Indigo for June?

The flexible budget breaks down into the price and quantity variances for direct materials. Required: a.List two reasons why actual prices might differ from standard prices,resulting in a direct materials price variance. b.List two reasons why actual materials usage might differ from standard material usage,resulting in a direct materials quantity variance. Unit 6-2,

The flexible budget variance for materials has which of the following two components?

Melrose Manufacturing produces gourmet blackberry preserves.Melrose based its current year budget on a production level of 540,000 jars of preserves using ½ hour direct labor time for each jar which includes hand-sorting and trimming the berries.Total budgeted variable overhead for the year was $1,242,000.During the year,Melrose used 280,000 direct labor hours to produce 550,000 jars of blackberry preserves.Actual variable overhead for the year was $1,246,000.What is Melrose's variable overhead efficiency variance?

Assembly line workers at Thompson Manufacturing worked a total of 12,000 direct labor hours to produce 36,000

Assume you have been assigned to a team responsible for using the flexible budget to assist in determining managers' bonuses.When you approach the production manager about some variances,he says,"I don't know why your team can't just use the budget we developed at the beginning of the year.It was based on last year's actual numbers which seems reasonable.I don't understand this 'flexible budget' stuff.When I compare my actual results with our beginning of the year budget I have beat the budget,so that should be sufficient.That will save us all a lot of time and effort." Explain to the production manager why a flexible budget is better than a static budget and its use in evaluating performance.

Nantucket,Inc.uses a standard cost system with the following labor standards for one

When the production manager is investigating and understanding the cause of the variable overhead spending variance relating to indirect materials,he will most likely want to talk to the

Why do variances have little meaning until their causes are identified?

Backyard Creations purchased 7,000 feet of copper tubing at a price of $2.70 per foot and used 7,200 feet during the period.The standard price of the copper tubing was $2.50 per foot.What is Backyard Creations' direct materials price variance for the period?

-The master budget is an example of a

A material variance is one that is large enough to make a difference in the outcome of a decision.

If a company that applies variable overhead on the basis of direct labor hours records an unfavorable direct labor efficiency variance,the variable overhead efficiency variance will be

Morgan's,Inc.has provided you with the following financial information: Required: Prepare a performance report for the period.

Materiality can be measured in terms of

R&N Manufacturing produces music boxes.The fixed overhead rate is $5.10 per direct labor hour,and the company budgeted for 4,600 direct labor hours for the year.During the year,R&N produced 2,500 music boxes using 4,800 direct labor hours.Actual fixed overhead for the year was $23,000.What is the company's fixed overhead spending variance?

Flexible budgets are used as a tool for

The difference between the actual cost of variable overhead items and the amount of variable overhead cost that is expected to be incurred at the actual level of activity base experienced is the

Because fixed overhead does not vary with changes in the level of activity,some managers do not see a need to investigate variances relating to fixed costs.However,that is not the case. a.How is the fixed overhead spending variance calculated? b.Discuss items that generally do not affect the fixed overhead variance and those that might affect the fixed overhead variances. Unit 6-4,

An unfavorable variance is a variance that