Exam 23: Flexible Budgets and Standard Cost Systems

The following information relates to Regency Manufacturing's overhead costs for the month: Static budget variable overhead \ 14,200 Static budget fixed overhead \ 5,600 Static budget direct labor hours 1,000 hours Static budget number of units 5,000 units Regency allocates manufacturing overhead to production based on standard direct labor hours. Regency reported the following actual results for last month: actual variable overhead,$14,500; actual fixed overhead,$5,400; actual production of 4,700 units at 0.22 direct labor hours per unit.The standard direct labor time is 0.20 direct labor hours per unit. Compute the variable overhead cost variance.(Round the answer to the nearest dollar.)

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)________.

Favorable and unfavorable variances are netted together in the same way debits and credits are.

Oceanside Marine Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Oceanside 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 pound per unit; $12 per pound Direct labor: 2 hours per unit; $18 per hour Oceanside produced 2,000 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 $98,700. What is the direct materials cost variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

Discount Sales Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Discount Sales had a favorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

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; $4 per pound Labor: 5 hours per unit; $24 per hour During the first quarter,Golden produced 4,000 units of this product.At the end of the quarter,an examination of the direct materials records showed that the company used 11,500 pounds of direct materials and the direct materials cost variance was $3,780 U.Which of the following is a logical explanation for this variance?

A standard is a sales price,cost,or quantity that is expected under normal conditions.

The fixed overhead volume variance always reveals underallocated fixed overhead costs.

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 recruit some highly skilled production workers from another company to bring down the defect rate but was worried that the higher wages of these workers might negatively affect operating income.This would produce a(n)________.

Akao Products uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Akao had an unfavorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

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: $32.00 per unit; Fixed costs: $38,500 per month Operating income: $3,300 Actual results,at the end of the month,follows: Actual results: Sales volume: 995 units; Sales price: $74.00 per unit Variable costs: $36.00 per unit; Fixed costs: $35,000 per month Operating income: $2,810 Calculate the sales volume variance for revenue.

The management of Alpha Lawnmowers has calculated the following variances: Direct materials cost variance \ 9,000 Direct materials efficiency variance 36,000 Direct labor cost variance 16,000 Direct labor efficiency variance 13,000 Variable overhead cost variance 2,000 Variable overhead efficiency variance 6,500 Fixed overhead cost variance 4,000 What is the total variable overhead variance of the company?

Fisher Manufacturing uses a standard cost system.Data on standard costs and actual costs are as follows: Direct materials: Standard Artual Direct materials units per unit of output 2.0 3.3 Sales price per unit of direct materials \ 5.00 \ 4.80 Direct materials cost per unit \ 10.00 \ 16.00 Number of units 3,000 3,000 Direct materials cost \ 30,000 \ 48,000 Direct labor: Standard Actual Hours per unit 0.5 0.4 Cost per hour \ 18.00 \ 20.00 Labor cost per unit \ 9.00 \ 8.00 Number of units 3,000 3,000 Direct labor cost \ 27,000 \ 24,000 Variable overhead* Standard Actual Hours per unit 0.5 0.4 Cost per hour \ 30.00 \ 29.00 Variable overhead cost per unit \ 15.00 \ 11.60 Number of units 3,000 3,000 Variable overhead cost \ 45,000 \ 34,800 *allocated based on direct labor hours Fixed overhead* Standard Artual Hours per unit 0.5 0.4 Cost per hour \ 10.00 \ 9.00 Fixed overhead cost per unit \ 5.00 \ 3.60 Number of units 3,000 3,000 Fixed overhead cost \ 15,000 \ 10,800 *allocated on the basis of direct labor hours Give the journal entry to transfer the cost of units from Work-in-Process Inventory to Finished Goods Inventory.

List the direct materials variances,and briefly describe each.

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

The management of Delta Pet Supplies has calculated the following variances: Direct materials cost variance \ 8,000 Direct materials efficiency variance 36,000 Direct labor cost variance 15,500 Direct labor efficiency variance 12,000 Total variable overhead variance 7,500 Fixed overhead cost variance 4,000 When determining the total production cost flexible budget variance,what is the fixed overhead cost variance of the company?

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?

Underwater Sports Equipment Company projected sales of 78,000 units at a unit sales price of $12 for the year.Actual sales for the year were 76,000 units at $15 per unit.Variable costs were budgeted at $3 per unit,and the actual amount was $6 per unit.Budgeted fixed costs totaled $385,000,while actual fixed costs amounted to $446,000.What is the flexible budget variance for variable costs?

Emerald Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Emerald 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: 5 pounds per unit; $6 per pound Direct labor: 4 hours per unit; $20 per hour During the first quarter,Emerald produced 5,000 units of this product.Actual direct materials and direct labor costs were $66,000 and $331,000,respectively. For the purpose of preparing the flexible budget,calculate the total standard direct materials cost at a production volume of 5,000 units.

Under a standard cost system,the journal entry to record direct labor includes ________.