Exam 7: Flexible Budgets, Variances, and Management Control: I

Tyson's Hardware, a retailing company with several locations, anticipated that it would have 96,000 sales units for 664 customer shipments. Average storage bin usage for various inventories was estimated to be 200 storage bins per day. The costs and cost drivers were determined to be as follows: During the year the warehouse processed 90,000 units for 600 customer shipments. The workers used 225 storage bins on average each day to sort, store, and process goods for shipment. The actual costs for were: Required: a. Prepare a static-budget and show the static-budget variances for each cost item and the total static-budget variance.

A flexible-budget variance can be decomposed into an efficiency variance and a price variance.

Benchmarking is the continuous process of measuring products, services, and activities against the best possible levels of performance.

Samson Equipment Ltd. is a company that manufactures an abdominal exerciser called The Ab Rippler. The following information is for three of the company's activities in 2012: The output measure is the number of units produced. Batch size in terms of units produced: Required: a. Calculate the flexible-budget variance for each activity in 2012. b. Calculate the price and efficiency variances for each activity in 2012.

Use the information below to answer the following question(s). Tractor Corporation produces toy tractors. The company uses the following direct cost categories: Actual performance and budgeted performance for the company is shown below: Direct Materials: Direct Manufacturing Labour: Direct Marketing Labour: -What is the price variance of the direct materials?

A variance is the difference between the actual cost for the current and previous year.

A packaging company produces a variety of cardboard boxes in an automated process. Expected production per month is 160,000 units. The required direct materials costs $0.30 per unit. Variable manufacturing overhead costs are $24,000 per month and are allocated based on units of production. Direct labour is budgeted to be $6,400. The company only produces based on customer orders, so all production is considered sold as it is produced. Revenue for the month will be $240,000. What is the budgeted contribution margin per unit?

The only difference between the static budget and flexible budget is that the static budget is prepared using planned output.

Use the information below to answer the following question(s). A company makes table lamps, for which the following standards have been developed: During January, production of 100 lamps was expected, but 110 lamps were actually completed. Direct materials purchased and used were 2,100 kilograms at an actual price of $2.20 per kilogram. Direct labour cost for the month was $5,310, and the actual pay per hour was $9.00. -What is the All Good Things Ltd. flexible-budget variance?

Use the information below to answer the following question(s). Bates Corporation used the following data to evaluate their current operating system. The company sells items for $10 each and used a budgeted selling price of $10 per unit. -What is the static-budget variance of variable costs?

Use the information below to answer the following question(s). The following data for a pottery company pertain to the production of 2,000 clay pots during July. Direct Materials (all materials purchased were used): Direct Manufacturing Labour: -What is the direct materials price variance for the clay pots?

Glenn's Draperies manufactures curtains. A certain window requires the following: Direct materials standard is 10 square metres at $5 per metre Direct manufacturing labour standard is 5 hours at $10 During the second quarter the company made 1,500 curtains and used 14,000 square metres of fabric costing $68,600. Direct labour totaled 7,600 hours for $79,800. Required: a. Compute the direct materials price and efficiency variances for the quarter. b. Compute the direct manufacturing labour rate and efficiency variances for the quarter.

Video Producers manufactures two types of videos: regular and CD. The regular tapes require 5 units of direct material X at a standard price of $2 per unit. The CDs require 2 units of direct material Y at a standard price of $3. During January the company purchased 9,000 units of X for $2.10 each and 3,600 units of Y at $3.20 each. January production used 8,800 units of X and 3,400 units of Y. Outputs of finished tapes was 1,750 of each type. Required: Compute the price and efficiency variances for each material. For the price variances use two different responsibility assumptions. First assume that price variances are isolated at the time of purchase; second assume that the price variances are isolated as materials are placed into production. The efficiency variances for each material are determined during production.

When benchmarking,

Flexible budget quantity computations should be focused at the appropriate level of the cost hierarchy.

Managers generally have more control over efficiency variances than price variances.

The materials yield variance will be unfavourable when

The input standard cost per completed unit may be calculated by

The most important task in variance analysis is to understand why variances occur, and then to use that knowledge to promote learning and continual improvement.

Use the information below to answer the following question(s). Ames Golf Company used the following data to evaluate their current operating system. The company sells 1 pack of golf balls for $10 per pack. The $10 selling price is also the budgeted selling price. -What is the total static budget variance for Ames Golf Company?