Exam 9: Performance Measurement in Decentralized Organizations

Controllability has little to do with whether a cost is fixed or variable.

Amundson Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting: In September, the company budgeted for 456 guests and 155 jeeps. The company's income statement showing the actual results for the month appears below: Required: Prepare a report showing the company's revenue and spending variances for September. Label each variance as favorable (F) or unfavorable (U).

Eliezrie Corporation makes a product with the following standard costs: In January the company's budgeted production was 7,400 units but the actual production was 7,500 units. The company used 45,580 kilos of the direct material and 2,030 direct labor-hours to produce this output. During the month, the company purchased 48,500 kilos of the direct material at a cost of $53,350. The actual direct labor cost was $18,473 and the actual variable overhead cost was $7,714. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The labor efficiency variance for January is:

Coderre Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During July, the company budgeted for 7,800 units, but its actual level of activity was 7,780 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for July: Data used in budgeting: Actual results for July: The direct labor in the planning budget for July would be closest to:

Akey Hospital bases its budgets on patient-visits. The hospital's static budget for March appears below: The total overhead cost at an activity level of 3,000 patient-visits per month should be:

Letts Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During January, the company budgeted for 7,000 units, but its actual level of activity was 6,970 units. The company has provided the following data concerning the formulas to be used in its budgeting: The selling and administrative expenses in the planning budget for January would be closest to:

The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: What is the materials quantity variance for the month?

Directly comparing a static planning budget to actual costs helps to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled.

Gilder Corporation makes a product with the following standard costs: The company reported the following results concerning this product in June. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for June is:

The Swenson Corporation has a standard costing system. The following data are available for June: The actual price per pound of direct materials purchased in June is:

The following labor standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: What is the labor rate variance for the month?

The standard cost card for a product indicates that one unit of the product requires 8 kilograms of a raw material at $0.80 per kilogram. The production of the product in April was 870 units, but production had been budgeted for 850 units. During April, 8,200 kilograms of the raw material were purchased for $6,888 and 7,150 kilograms of the raw material were used in production. The material variances for April were:

Blaster Inc., manufactures portable radios. Each radio requires 3 units of Part XBEZ52, which has a standard cost of $1.45 per unit. During May, the company purchased 12,000 units of the part for a total of $18,000. Also during May, the company manufactured 3,000 radios, using 10,000 units of part XBEZ52. The direct materials purchases variance is computed when the materials are purchased. During May, the materials quantity variance for part XBEZ52 was:

Holiday Chemical Corporation uses a standard cost system to collect costs related to the production of its "bowling ball" fruitcakes. The direct labor standard for each fruitcake is 1.25 hours at a standard cost of $11.00 per hour. During the month of November, Holiday's fruitcake production used 9,820 direct labor-hours at a total direct labor cost of $106,547. This resulted in production of 8,500 fruitcakes for November. What is Holiday's labor rate variance for November?

Labombard Clinic uses client-visits as its measure of activity. During February, the clinic budgeted for 3,600 client-visits, but its actual level of activity was 3,650 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting: Actual results for February: The administrative expenses in the planning budget for February would be closest to:

The standards for product F88W specify 3.4 direct labor-hours per unit at $13.00 per direct labor-hour. Last month 800 units of product F88W were produced using 2,500 direct labor-hours at a total direct labor wage cost of $30,500. Required: a. What was the labor rate variance for the month? b. What was the labor efficiency variance for the month?

Gilder Corporation makes a product with the following standard costs: The company reported the following results concerning this product in June. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for June is:

A planning budget is prepared before the period begins and is valid for whatever the actual level of activity turns out to be.

Chirico Clinic uses client-visits as its measure of activity. During February, the clinic budgeted for 2,500 client-visits, but its actual level of activity was 2,550 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting: Actual results for February: The personnel expenses in the planning budget for February would be closest to:

Lueders Memorial Diner is a charity supported by donations that provides free meals to the homeless. The diner's budget for April was based on 3,800 meals. The diner's director has provided the following cost formulas to use in budgets: The director has also provided the diner's statement of actual expenses for the month: Required: Prepare a report showing the revenue and spending variances for each of the expenses and for total expenses for April. Label each variance as favorable (F) or unfavorable (U).