Exam 8: Performance Evaluation

The sales volume variance is the difference between the:

For performance evaluation,the amount of costs actually incurred should be compared to the costs that would have been incurred at the actual volume of activity rather than at the planned volume of activity.

Describe how a flexible budget is useful in planning for an organization.

Grenada Company estimates sales of 15,000 units for the upcoming period.At this sales volume its budgeted income is as follows: Per Unit Total Sales \ 60 \ 900,000 Less variable costs: Manufacturing costs 30 450,000 Selling and administrative costs Contribution margin \ 20 \ 300,000 Less fixed costs: Manufacturing costs 125,000 Selling and administrative costs Net income During the period the company actually produced and sold 18,000 units. Required: Prepare a flexible budget based on 18,000 units.

A static budget is one that shows estimated revenues and costs at multiple activity levels.

Lax standards make allowances for normal material waste and spoilage.

Which of the following reason(s)cause flexible budgets to be useful planning tools?

Indicate whether each of the following statements is true or false. A variance is a difference between an expected amount and a standard amount.______ When actual sales revenue exceeds the expected revenue,a company has a favorable sales variance.______ A cost variance is considered to be unfavorable when actual costs are less than standard costs.______ A company can calculate variances for both revenues and costs.______ Flexible budgets can be used for planning,but not for performance evaluation.______

The Ferguson Company estimated that October sales would be 100,000 units with an average selling price of $6.00.Actual sales for October were 105,000 units,and average selling price was $5.95. The sales revenue flexible budget variance was:

Douglas Company provided the following budgeted information for the current year. Sales price \ 50 per unit Variable manufacturing cost 32 per unit Fixed manufacturing cost \ 100,000 total Fixed selling and administrative cost \ 40,000 total Douglas predicted that sales would be 20,000 units,but the sales actually were 22,000 units.The actual sales price was $48.50 per unit,and the actual variable manufacturing cost was $33 per unit.Actual fixed manufacturing cost and fixed selling and administrative cost were $104,000 and $39,000,respectively. Required: (a)Using the form below,prepare a flexible budget,show actual results,calculate the flexible budget variances,and indicate whether the variances are favorable (F)or unfavorable (U). (b)Assess the company's performance compared to the flexible budget.

Stafford Company prepared a static budget for a production and sales volume of 10,000 units. Static Budget Number of units \ 10,000 Per unit standards Sales revenue \ 65.00 \6 50,000 Variable manufacturing costs: Materials \ 11.00 110,000 Labor \ 9.00 90,000 Overhead \ 4.20 42,000 Variable general, selling, and administrative costs \ 11.00 110,000 Contribution margin \ 298,000 Fixed costs Manufacturing overhead 100,800 General, selling, and administrative costs 45,000 Net income \1 52,200 What is the net income if 9,000 units are sold?

Burruss Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 8,000 units: Per Unit Revenue \ 4.00 Variable costs Contribution margin \ 2.50 Fixed costs Net incone If actual production totals 10,000 units,which is within the relevant range,the flexible budget would show fixed costs of:

Describe several factors that should be considered in establishing standards for use with a standard costing system.

When would a sales variance be listed as favorable?

Global Company makes a product that is expected to use 2.2 pounds of material per unit of product.The material has a standard cost of $2 per pound.Global actually used 2.3 pounds of material per unit of product made in January.The actual cost of material was $1.95 per pound.Based on this information alone,the materials variances for the January production would be:

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00.Actual sales for April were 149,000 units,and average selling price was $6.12. The sales revenue flexible budget variance was:

Indicate whether each of the following statements is true or false. The amount of a sales volume variance is the difference between the static budget and a flexible budget based on actual volume.______ The sales volume variance measures managers' effectiveness in achieving the planned sales price for the company's products.______ Marketing managers are usually held responsible for the sales volume variance.______ If the planned sales volume was 25,000 units and the actual sales volume was 25,500 units,the sales volume variance was favorable.______ For marketing managers,"making the numbers" refers to reaching the budgeted sales volume.______

White Company budgeted for $200,000 of fixed overhead cost and volume of 40,000 units.During the year,the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The fixed overhead cost volume variance is:

Static and flexible budgets are similar in that:

Select the correct statement regarding general,selling,and administrative (GS&A)costs.