Exam 23: Flexible Budgets and Standard Cost Systems

The static budget,at the beginning of the month,for Helloise Décor Company follows: Static budget: Sales volume: 2,000 units: Sales price: $\$ 58.00$ per unit Variable cost: $\$ 14.00$ per unit: Fixed costs: $\$ 26,000$ per month Operating income: $\$ 62,000$ Actual results, at the end of the month, follows: Actual results: Sales volume: 1,850 units: Sales price: $\$ 59.00$ per unit Variable cost: $\$ 18.00$ per unit: Fixed costs $\$ 38,000$ per month Operating income: $\$ 37,850$ Variable cost: $18.00 per unit: Fixed costs $38,000 per month Operating income: $37,850 Calculate the sales volume variance for variable costs.

Accurate Tax Returns budgets two direct labor hours for every tax return that it prepares,at a standard cost of $34 an hour.During the most recent year,520 returns were completed with the labor cost totaling $18,000.The actual labor cost was $34.62 per hour during that period.The actual number of labor hours was 1,200.What is the direct labor cost variance?

Glendale Brands Company uses standard costs for its manufacturing division.Standards specify 0.1 direct labor hours per unit of product.At the beginning of the year,the static budget for variable overhead costs included the following data: Production volume 6,000 units Budgeted variable overhead costs \ 14,000 Budgeted direct labor hours (DLHr) 500 hours At the end of the year,actual data were as follows: Production volume 4,000 units Actual variable overhead costs \ 15,200 Actual direct labor hours (DLHr) 480 hours What is the variable overhead efficiency variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing wastage of valuable direct materials.The production manager decided to purchase a higher grade of materials that would be more reliable,but he was worried that the cost of the new materials might negatively affect operating income.This would produce a(n)________.

Which of the following amounts of a flexible budget changes,within the specified relevant range,with changes in sales volume?

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing wastage of valuable direct materials.The production manager decided to purchase a higher grade of materials that would be more reliable,but he was worried that the cost of the new materials might negatively affect operating income.This would produce a(n)________.

If both favorable and unfavorable variances exist,the variances are subtracted from each other.The variance is determined to be favorable or unfavorable based on which one is the larger amount.

When using management by exception,managers investigate only those variances that are unfavorable.

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

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

The sales volume variance is a result of the difference between the actual sales price and the budgeted sales price.

List the direct labor variances and briefly describe each.

Cake Lady Bakery is famous for its frosted fruit cake.The main ingredient of the cake is dried fruit,which Cake Lady purchases by the pound.In addition,the production requires a certain amount of direct labor.Cake Lady uses a standard cost system,and at the end of the first quarter,there was an unfavorable direct labor cost variance.Which of the following is a logical explanation for that variance?

In a standard costing system,each input of direct materials,direct labor,and manufacturing overhead has a cost standard and an efficiency standard.

When using management by exception,the purchasing manager should be questioned for which of the following variances?

The static budget,at the beginning of the month,for Steak Frites Company follows: Static budget: Sales volume: 1,100 units; Sales price: $\$ 70.00$ per unit Variable costs: $\$ 33.00$ per unit; Fixed costs: $\$ 39,800$ per month Operating income: $\$ 900$ Actual results, at the end of the month, follows: Actual results: Sales volume: 995 units; Sales price: $\$ 74.00$ per unit Variable costs: $\$ 35.00$ per unit; Fixed costs: $\$ 35,000$ per month Operating income: $\$ 3,805$ Calculate the sales volume variance for revenue.

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

Grand Canyon Food Products is famous for its frosted fruit cake.The main ingredient of the cake is dried fruit,which Grand Canyon purchases by the pound.In addition,the production requires a certain amount of direct labor.Grand Canyon uses a standard cost system,and at the end of the first quarter,there was an unfavorable direct materials efficiency variance.Which of the following is a logical explanation for that variance?

List the direct materials variances,and briefly describe each.

The California Fitness Company completed the flexible budget analysis for the second quarter,which is given below. Which of the following statements would be a correct analysis of the flexible budget variance for variable costs?