Exam 23: Flexible Budgets and Standard Cost Systems

Accurate Tax Returns budgets two direct labor hours for every tax return that it prepares, at a standard cost of $32 an hour. During the most recent year, 540 returns were completed with the labor cost totaling $24,000. The actual labor cost was $44.44 per hour during that period. The actual number of labor hours was 1000. What is the direct labor cost variance?

What does a cost variance measure?

The flexible budget variance is the difference between the ________.

Based on the following, what is the total direct labor variance?

Under a standard cost system, when recording the use of direct materials in the production process, the debit to Work-in-Process Inventory is ________.

The purchasing manager was able to bring down the cost of direct materials by purchasing direct materials of a slightly lower grade quality than the company had used previously. The lower grade of direct materials, however, meant a higher defect rate on the assembly line and a higher waste of direct materials during production, which in turn lowered operating income. -This would have led to a(n) ________.

The fixed overhead volume variance reveals underallocated fixed overhead costs.

Fixed overhead volume variance is a flexible budget variance.

A report that summarizes actual results, budgeted amounts and the difference between them is called the ________.

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?

Match the variance to the correct definition -Flexible budget variance

Which of the following is an example of a direct labor efficiency standard?

A standard cost system helps management set performance standards.

The management of Cleancut Lawnmowers has calculated the following variances: Direct materials cost variance \ 11,000 Direct materials efficiency variance 35,000 Direct labor cost variance 15,000 Direct labor efficiency variance 13,000 Variable overhead cost variance 3500 Variable overhead efficiency variance 6000 Fixed overhead cost variance 4500 When determining the total product cost flexible budget variance, what is the total manufacturing overhead variance of the company?

The static budget, at the beginning of the month, for Divine Décor Company, follows: Static budget: Sales volume: 1500 units; Sales price: $70.00 per unit Variable costs: $32.00 per unit; Fixed costs: $38,000 per month Operating income: $19,000 Actual results, at the end of the month, follows: Actual results: Sales volume: 990 units; Sales price: $75.00 per unit Variable costs: $35.00 per unit; Fixed costs: $33,000 per month Operating income: $6600 Calculate the flexible budget variance for sales revenue.

Which of the following is a reason companies use standard costs?

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 ________.

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

Which of the following is a reason companies use standard costs?

The fixed overhead cost variance measures the difference between actual fixed overhead and budgeted fixed overhead to determine the controllable portion of total fixed overhead variance.