Exam 8: Performance Evaluation

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.

Which of the following is not an advantage of using a standard cost system?

Select the incorrect statement regarding flexible budgets.

Indicate whether each of the following statements is true or false.A company's variable overhead cost represents such inputs as rent and depreciation.The variable overhead cost pool is normally assigned to products using many different allocation rates.Variable overhead and fixed overhead variances are calculated using the same basic formulas.Many companies choose not to calculate price and usage variances for variable overhead costs.

Which manager is normally held responsible for fixed cost volume variances?

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

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

What steps or activities are involved in developing standards for the materials that are used in making a product?

Sales volume variances are attributable to differences between planned and actual activity volumes, as well as differences in selling price.

The following information is provided by the Atlas Company: What is the direct material price variance? Actual direct material cost \ 20,000 Standard direct material cost \ 24,000 Direct material usage variance \ 3,000 favorable

If the master budget prepared at a volume level of 20,000 units includes factory rent of $40,000, a flexible budget based on a volume of 21,000 units would include factory rent of $40,000.

What is the result when the actual rate paid for labor is less than the standard rate?

Select the term that best fits the definition or description; enter the number of the term in the column for Your Answer. Your Answer Definution or Description Term A. The difference between actual sales in dollars and the standard sales price per unit times the actual level of activity 1. Economies of scale B. A variance that occurs when the amount of applied overhead differs from the actual overhead costs 2. Flexible budgets C. Budgets that show expected revenues and costs for muliple levels of activity 3. Lax standards D. Differences between standard and actual amounts 4. Making the numbers E. The lower unt cost advantage possible for companies with ligh fixed costs when volme increases 5. Management by exception F. Standard representing a level of performance attainable with reasonable effort 6. Practical standard G. Marketing managers attaining the sales vohume indicated in the master bodget 7. Sales price variance H. Easily attainable goals that can be accomplished with minimal effort 8. Total overhead variance I. The use of management resources in areas that are not performing in accordance with expectations 9. Unfavorable variance J. A variance that occurs when actual costs exceed standard costs or when actual sales are less than standard sales 10. Variances First set of changes are due to wording in text ("…Melrose has a fixed cost volume variance of $16,200 ($307,800 budgeted fixed cost − $291,600 applied fixed cost)" CHANGES NEED TO BE MAD TO TABLE Term #8 - Reword as: Fixed cost volume variance Item B to: Difference between applied fixed cost based on actual volume and the budgeted fixed cost based on planned volume Since the term "economies of scale" is not in the chapter: Remove item E Remove term #1 Reletter and renumber remaining items and terms.

Which of the following factors should be considered in establishing standards for use with a standard costing system?

A favorable flexible budget materials variance may indicate that the price per unit of materials was lower than expected and that less material was used than expected or either of these.

Which of the following statements is true?

Jones Company developed the following static budget at the beginning of the company's accounting period: If actual production totals 8,200 units, the flexible budget would show total costs of: Revenue (8,000 units ) \ 16,000 Variable costs 4,000 Contribution margin \ 12,000 Fixed costs \ 4,000 Net income \ 8,000

The standard amount of materials required to make one unit of Product Q is 4 pounds. Tusa's static budget showed a planned production of 3,800 units. During the period the company actually produced 4,100 units of product. The actual amount of materials used averaged 3.9 pounds per unit. The standard price of material is $1 per pound. Based on this information, the materials usage variance was:

Distinguish between static and flexible budgets. Give an example of how flexible budgets can be used.

Which of the following statements is incorrect? Item to Classify Actual Sales Revenue 820,000 835,000 Wages 125,000 128,000 S\&A Expenses 400,000 408,000 Cost of Goods Sold 608,000 600,000