Exam 23: Flexible Budgets and Standard Cost Systems

Purchase discounts, freight in and receiving costs ________.

The difference between a standard and a budget is that ________.

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?

The total product cost flexible budget variance is obtained by adding direct labor efficiency variance and fixed overhead volume 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 purchase a higher grade of materials that would be more reliable. This would produce a(n) ________.

An unfavorable flexible budget variance in operating income might be due to a(n) ________.

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

The Alaska Fish Company completed the flexible budget analysis for the second quarter, which is given below. Which of the following statements would be a correct factor to explain the sales volume variance for operating income?

Top Half produces and sells two types of t-shirts-Fancy and Plain. The company provides the following data: Budget Actual Unit sales price - Fancy \ 24 \ 25 Unit sales price - Plain \ 18 \ 17 Unit sales - Fancy 1,300 1,250 Unit sales - Plain 900 875 Compute the flexible budget variance for Fancy t-shirts for sales revenue.

The management of Pamela's Pet Supplies has calculated the following variances: Direct materials cost variance \ 8000 Direct materials efficiency variance 40,000 Direct labor cost variance 16,500 Direct labor efficiency variance 12,500 Total variable overhead variance 8000 Fixed overhead cost variance 3500 When determining the total product cost flexible budget variance, what is the fixed overhead variance of the company?

The production manager of a company, in an effort to gain a promotion, negotiated a new labor contract with the factory employees that required them to bear a greater percentage of benefit costs than before, thus bringing down the cost of direct labor to the company. Shortly afterward, several experienced and highly skilled workers resigned and were replaced by new employees whose work was very slow during their training period. At the end of the quarter, the company's profits fell 10%. This would produce a(n) ________.

In a standard cost system, the standard overhead allocation rate replaces the predetermined overhead allocation rate but the concept is the same.

Marciano Manufacturing uses a standard cost system. Standards for direct materials are as follows: Direct materials (pounds per unit of output) 3 Cost per pound of direct materials \ 3 The company plans to produce 3500 units and has purchased on account 15,000 pounds of direct materials at a net cost of $43,200. What is the journal entry to record this transaction?

Sharp Company manufactures jeans. In June, Sharp made 1200 pairs of jeans, but had budgeted production at 1400 pairs of jeans. The allocation base for overhead costs is direct labor hours. The following additional data is available for the month: Variable overhead cost standard \ 0.60 per DLHr Direct labor efficiency standard 2.00 DLHr per jean Actual amount of direct labor hours 2,520 DLHr Actual cost of variable overhead \ 1,512 Fixed overhead cost standard \ 0.25 per DLHr Budgeted fixed overhead \ 700 Actual cost of fixed overhead \ 750 Calculate the following variances: a. Variable overhead cost variance b.Variable overhead efficiency variance c. Total variable overhead variance d. Fixed overhead cost variance e. Fixed overhead volume variance f. Total fixed overhead variance

Bear Creek Golf Center reported actual operating income for the current year as $65,000. The flexible budget operating income for actual volume is $59,000, while the static budget operating income is $60,000. What is the flexible budget variance for operating income?

Infinity Clock Company prepared the following static budget for the year: Static Budget Units/Volume 9000 Per Unit Sales Revenue \ 5.00 \ 45,000 Variable Costs 1.50 Contribution Margin 31,500 Fixed Costs Operating Income/(Loss) If a flexible budget is prepared at a volume of 8900 units, calculate the amount of operating income. The production level is within the relevant range.

What does the variable overhead cost variance measure?

The sales volume variance is the difference between the expected results in the flexible budget for the actual units sold and the static budget.

Which of the following is NOT a flexible budget variance?

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 situation would lead to a(n) ________.