Question 1

A flexible budget summarizes revenues and costs for various levels of sales volume within a relevant range.

Accepted Answer

A) True 
 B)False

Question 2

Lee Maritime Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Lee 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: 2 pounds per unit; $3 per pound
Direct labor: 4 hours per unit; $14 per hour
Lee produced 5,000 units during the quarter.At the end of the quarter,an examination of the labor costs records showed that the company used 30,000 direct labor hours and actual total direct labor costs were $375,000.What is the direct labor cost variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )

Accepted Answer

A) $45,000 Favorable 
B) $280,000 Favorable 
C) $280,000 Unfavorable 
D) $45,000 Unfavorable 
A) $45,000 Favorable 
B) $280,000 Favorable 
C) $280,000 Unfavorable 
D) $45,000 Unfavorable

Question 3

A favorable variance has a debit balance and is a contra revenue.

Accepted Answer

A) True 
 B)False

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

The static budget,at the beginning of the month,for Keats Company follows: Static budget:
Sales volume: 2,100 units; Sales price: $\$ 52.00$ per unit
Variable costs: $\$ 12.00$ per unit; Fixed costs: $\$ 26,000$ per month
Operating income: $\$ 58,000$

Actual results, at the end of the month, follows:
Actual results:
Sales volume: 1,850 units; Sales price: $\$ 59.00$ per unit
Variable costs: $\$ 18.00$ per unit; Fixed cost: $\$ 37,000$ per month
Operating income: $\$ 38,850$
Calculate the sales volume variance for operating income.

Accepted Answer

A) $9,150 U 
B) $250 F 
C) $10,000 U 
D) $10,000 F 
A) $9,150 U 
B) $250 F 
C) $10,000 U 
D) $10,000 F

Question 6

Caterlebe Productions uses a standard cost system.On December 31,the account balances include the following:
Sales Revenues: $750,000
Cost of Goods Sold (standard costing): $400,500
Selling & Admin expenses: $150,000
Variances:
 $$\begin{array} { | l | r | c | } 
\hline \text { Sales revenue variance } & \$ 6,000 & \text { F } \
\hline \text { Direct materials cost variance } & 400 & \text { U } \
\hline \text { Direct materials efficiency variance } & 375 & \text { F } \
\hline \text { Direct labor cost variance } & 675 & \text { U } \
\hline \text { Direct labor efficiency variance } & 150 & \text { F } \
\hline \text { Variable overhead cost variance } & 250 & \text { U } \
\hline \text { Variable overhead efficiency variance } & 800 & \text { F } \
\hline \text { Fixed overhead cost variance } & 420 & \text { U } \
\hline \text { Fixed overhead volume variance } & 100 & \text { F } \
\hline
\end{array}$$ Prepare a standard cost income statement.

Accepted Answer

\[\begin{array} { l l l } 
& \text { Cat

Question 7

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

Accepted Answer

A) The cost of workers' medical insurance plans jumped up dramatically during the quarter. 
B) The factory lost two experienced workers at the beginning of the quarter,and their replacements wasted a large amount of direct materials during their training period. 
C) The purchasing manager was able to secure a volume discount on dried fruit,purchasing the fruit for less than the amount set by standard. 
D) The production staff changed the work flow process so that production required fewer direct labor hours. 
A) The cost of workers' medical insurance plans jumped up dramatically during the quarter. 
B) The factory lost two experienced workers at the beginning of the quarter,and their replacements wasted a large amount of direct materials during their training period. 
C) The purchasing manager was able to secure a volume discount on dried fruit,purchasing the fruit for less than the amount set by standard. 
D) The production staff changed the work flow process so that production required fewer direct labor hours.

Question 8

The standard cost income statement doesn't alter the actual operating income-it simply emphasizes the variances from standard.

Accepted Answer

A) True 
 B)False

Question 9

Allen Boating Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Allen 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: 1 pound per unit; $11 per pound
Direct labor: 4 hours per unit; $19 per hour
Allen produced 4,000 units during the quarter.At the end of the quarter,an examination of the direct materials records showed that the company used 7,500 pounds of direct materials and actual total materials costs were $99,300.
What is the direct materials efficiency variance?

Accepted Answer

A) $44,000 U 
B) $38,500 U 
C) $44,000 F 
D) $38,500 F 
A) $44,000 U 
B) $38,500 U 
C) $44,000 F 
D) $38,500 F

Question 10

Complete the following table:
 $$\begin{array} { | l | l | l | } 
\hline \text { Variance } & \text { How is the variance calculated? } & \text { How does the variance arise? } \
\hline \text { Flexible budget } & & \
\hline \text { Sales volume } & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | l | } 
\hlin

Question 11

Lewis Marine Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Lewis 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: 4 pounds per unit; $6 per pound
Direct labor: 4 hours per unit; $17 per hour
During the first quarter,Lewis produced 4,000 units of this product.Actual direct materials and direct labor costs were $66,000 and $328,000,respectively.
For the purpose of preparing the flexible budget,what is the total standard direct labor cost at a production volume of 4,000 units?

Accepted Answer

A) $68,000 
B) $66,000 
C) $272,000 
D) $328,000 
A) $68,000 
B) $66,000 
C) $272,000 
D) $328,000

Question 12

The management of Delta Pet Supplies has calculated the following variances: $$\begin{array} { | l | r | } 
\hline \text { Direct materials cost variance } & \$ 11,000 \mathrm { U } \
\hline \text { Direct materials efficiency variance } & 38,000 \mathrm {~F} \
\hline \text { Direct labor cost variance } & 15,500 \mathrm {~F} \
\hline \text { Direct labor efficiency variance } & 13,500 \mathrm { U } \
\hline \text { Total variable overhead variance } & 8,500 \mathrm {~F} \
\hline \text { Fixed overhead cost variance } & 3,500 \mathrm {~F} \
\hline
\end{array}$$ When determining the total production cost flexible budget variance,what is the fixed overhead cost variance of the company?

Accepted Answer

A) $3,500 F 
B) $13,500 U 
C) $11,000 U 
D) $12,000 F 
A) $3,500 F 
B) $13,500 U 
C) $11,000 U 
D) $12,000 F

Question 13

When a manufacturing company uses a standard cost system,the direct materials cost variance is recorded at the time direct materials are issued in production.

Accepted Answer

A) True 
 B)False

Question 14

Ibis Paper Company prepared the following static budget for November: $$\begin{array} { | l | r | r | } 
\hline \text { Static Budget } & & \
\hline \text { Units/Volume } & & 12,000 \
\hline& \text { Per Unit } \
\hline \text { Sales Revenue } & \$ 21.00 & \$ 252,000 \
\hline \text { Variable Costs } &8.00 & \underline { 96,000 } \
\hline \text { Contribution Margin } && 156,000   \
\hline \text { Fixed Costs } & &\underline { 13,000 }\
\hline \text { Operating Income/(Loss) } & & \underline { 143,000 }  \
\hline
\end{array}$$ If a flexible budget is prepared at a volume of 13,300 units,calculate the operating income at 13,300 units of production.The production level is within the relevant range.

Accepted Answer

A) $172,900 
B) $156,000 
C) $143,000 
D) $159,900 
A) $172,900 
B) $156,000 
C) $143,000 
D) $159,900

Question 15

Miami Fashions uses standard costs for their manufacturing division.From the following data,calculate the fixed overhead allocated to production based on direct labor hours (DLHr). $$\begin{array} { | l | l | } 
\hline \text { Actual fixed overhead } & \$ 40,000 \
\hline \text { Budgeted fixed overhead } & \$ 23,000 \
\hline \text { Standard overhead allocation rate } & \$ 8 \
\hline \text { Standard direct labor hours per unit } & 3 \text { DLHr } \
\hline \text { Actual output } & 2,500 \text { units } \
\hline
\end{array}$$

Accepted Answer

A) $23,000 
B) $60,000 
C) $40,000 
D) $20,000 
A) $23,000 
B) $60,000 
C) $40,000 
D) $20,000

Question 16

Speedy Bikes Couriers Company prepared the following static budget for the year: $$\begin{array} { | l | r | r | } 
\hline \text { Static Budget } & & \
\hline \text { Units/Volume } & & 5,000 \
\hline& \text { Per Unit } \
\hline \text { Sales Revenue } &\$ 7.00 & \$ 35,000 \
\hline \text { Variable Costs } & 1.50 & \underline { 7,500 }   \
\hline \text { Contribution Margin } && 27,500\
\hline \text { Fixed Costs } & & \underline { 4,000 } \
\hline \text { Operating Income/(Loss) } && \underline {23,500}  \
\hline
\end{array}$$ If a flexible budget is prepared at a volume of 8,400,calculate the amount of operating income.The production level is within the relevant range.

Accepted Answer

A) $23,500 
B) $12,600 
C) $42,200 
D) $4,000 
A) $23,500 
B) $12,600 
C) $42,200 
D) $4,000

Question 17

Fernandez Manufacturing uses a standard cost system.Standard and actual data for manufacturing overhead are as follows:
Variable overhead allocation rate: $30 per direct labor hour
Fixed overhead allocation rate: $10 per direct labor hour
Actual overhead incurred (variable and fixed): $45,600
Standards for direct labor are as follows:
Hours per unit 0.5,Direct labor cost per hour $18.00
Actual direct labor for the month: 1,200 hours for a total cost of $24,000
Actual and planned production for the month: 3,000 units
Prepare the journal entry to allocate overhead cost (both variable and fixed)to production.

Accepted Answer

\[\begin{array} { | l | r | r | } 
\hlin

Question 18

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

Accepted Answer

A) $150 U 
B) $300 F 
C) $150 F 
D) $300 U 
A) $150 U 
B) $300 F 
C) $150 F 
D) $300 U

Question 19

When evaluating variances,exceptions can be expressed as a percentage of a budgeted amount or a dollar amount.

Accepted Answer

A) True 
 B)False

Question 20

Bridget Company manufactures candles.The standard direct materials quantity required to produce one large candle is 1 pound at a cost of $5 per pound.Every candle requires 2 direct labor hours at a standard cost of $3 per direct labor hour.During November,7,200 large candles were produced using 7,500 pounds costing $45,000.At the end of November,an examination of the labor cost records showed that the company used 15,000 direct labor hours (DLHr)at a cost of $4 per hour.
Using the format below,prepare an analysis of the direct labor cost variances.

Accepted Answer

@#IMG-DLM& 
Note:Standard quan

A flexible budget summarizes revenues and costs for various levels of sales volume within a relevant range.

A favorable variance has a debit balance and is a contra revenue.

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.

The standard cost income statement doesn't alter the actual operating income-it simply emphasizes the variances from standard.

Complete the following table: Variance How is the variance calculated? How does the variance arise? Flexible budget Sales volume

When a manufacturing company uses a standard cost system,the direct materials cost variance is recorded at the time direct materials are issued in production.

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

When evaluating variances,exceptions can be expressed as a percentage of a budgeted amount or a dollar amount.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems

Cost-Volume-Profit Analysis

Variable Costing

Master Budgets

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Accounting Information Systems

Filters

Exam 23: Flexible Budgets and Standard Cost Systems

A flexible budget summarizes revenues and costs for various levels of sales volume within a relevant range.

A favorable variance has a debit balance and is a contra revenue.

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.

The standard cost income statement doesn't alter the actual operating income-it simply emphasizes the variances from standard.

Complete the following table: Variance How is the variance calculated? How does the variance arise? Flexible budget Sales volume

When a manufacturing company uses a standard cost system,the direct materials cost variance is recorded at the time direct materials are issued in production.

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

When evaluating variances,exceptions can be expressed as a percentage of a budgeted amount or a dollar amount.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems

Cost-Volume-Profit Analysis

Variable Costing

Master Budgets

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Accounting Information Systems

Filters