Exam 8: Flexible Budgets and Standard Costs

In this type of budget, the master budget is based on a single prediction for sales volume, and the budgeted amount for each cost essentially assumes that a specific amount of sales will occur:

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Question 1

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Should both favorable and unfavorable variances be investigated, or only the unfavorable ones? Explain.

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Question 2

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Any significant variance, whether favorable or unfavorable, should be investigated. A significant variance may indicate that the standard is unreasonable and needs to be adjusted. An unfavorable variance may indicate a problem requiring corrective action. A favorable variance may indicate better than expected performance. Management should investigate to determine if the methods used to generate the favorable result could be implemented again or duplicated elsewhere.

Ransom, Inc. budgets direct materials cost at $1.10/liter and each product requires 4 liters per unit of finished product. April's activities show usage of 832 liters to complete 196 units at a cost of $798.72. Compute the direct materials price and quantity variances. Indicate if the variance is favorable or unfavorable.

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Question 3

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* $798.72/832 liters = $0.96/liter
* 196 units ∗ 4 liters/unit = 784 liters

A flexible budget is also called a ________ budget.

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Question 4

The following information describes a company's usage of direct labor in a recent period. The total direct labor cost variance is:

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Question 5

Georgia, Inc. has collected the following data on one of its products. The direct materials quantity variance is:

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Question 6

Management by exception means studying industry standards to define normal conditions.

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Question 7

Based on predicted production of 25,000 units, FreshCo. anticipates $175,000 of fixed costs and $137,500 of variable costs. What are the flexible budget amounts of total costs for 20,000 and 30,000 units?

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Question 8

Use the following data to find the total direct labor cost variance if the company produced 3,500 units during the period.

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Question 9

Fletcher Company collected the following data regarding production of one of its products. Compute the fixed overhead cost variance.

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Question 10

A volume variance is the difference between overhead at maximum volume of production and the standard volume of production.

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Question 11

Sanchez Company's output for the current period was assigned a $400,000 standard direct labor cost. The direct labor variances included a $10,000 unfavorable direct labor rate variance and a $4,000 favorable direct labor efficiency variance. What is the actual total direct labor cost for the current period?

(Multiple Choice)

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Question 12

A budget performance report shows budgeted amounts, actual amounts, and differences between budgeted and actual amounts.

(True/False)

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Question 13

The following information relating to a company's overhead costs is available. Based on this information, the total variable overhead variance is:

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Question 14

Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is:

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Question 15

Gala Enterprises reports the following information regarding the production of one of its products for the month. Compute the total direct materials cost variance, the direct materials price variance, the direct materials quantity variance and identify each as either favorable or unfavorable.

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Question 16

Grant Co. uses the following standard to produce a single unit of its product: Variable overhead (2 hrs. per unit @ $4/hr.) Actual data for the month show total variable overhead costs of $190,000, and 23,000 units produced. The total variable overhead variance is:

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Question 17

Gala Enterprises collected the following data regarding production of one of its products. Compute the variable overhead cost variance, the variable overhead spending variance, the variable overhead efficiency variance, the fixed overhead cost variance, the fixed overhead spending variance, and the fixed overhead volume variance.

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Question 18

Ship Co. produces storage crates that require 1.2 meters of material at $.85 per meter and 0.1 direct labor hours at $15.00 per hour. Overhead is applied at the rate of $9 per direct labor hour. What is the total standard cost for one unit of product that would appear on a standard cost card?

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Question 19

A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z. The company has just produced 1,000 units of this product, using 5,200 pounds of Material J that cost $9,880.The direct materials price variance is:

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Question 20

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In this type of budget, the master budget is based on a single prediction for sales volume, and the budgeted amount for each cost essentially assumes that a specific amount of sales will occur:

Should both favorable and unfavorable variances be investigated, or only the unfavorable ones? Explain.

A flexible budget is also called a ________ budget.

The following information describes a company's usage of direct labor in a recent period. The total direct labor cost variance is:

Georgia, Inc. has collected the following data on one of its products. The direct materials quantity variance is:

Management by exception means studying industry standards to define normal conditions.

Based on predicted production of 25,000 units, FreshCo. anticipates $175,000 of fixed costs and $137,500 of variable costs. What are the flexible budget amounts of total costs for 20,000 and 30,000 units?

Use the following data to find the total direct labor cost variance if the company produced 3,500 units during the period.

Fletcher Company collected the following data regarding production of one of its products. Compute the fixed overhead cost variance.

A volume variance is the difference between overhead at maximum volume of production and the standard volume of production.

A budget performance report shows budgeted amounts, actual amounts, and differences between budgeted and actual amounts.

The following information relating to a company's overhead costs is available. Based on this information, the total variable overhead variance is:

Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is:

Gala Enterprises reports the following information regarding the production of one of its products for the month. Compute the total direct materials cost variance, the direct materials price variance, the direct materials quantity variance and identify each as either favorable or unfavorable.

Grant Co. uses the following standard to produce a single unit of its product: Variable overhead (2 hrs. per unit @ $4/hr.) Actual data for the month show total variable overhead costs of $190,000, and 23,000 units produced. The total variable overhead variance is:

Ship Co. produces storage crates that require 1.2 meters of material at $.85 per meter and 0.1 direct labor hours at $15.00 per hour. Overhead is applied at the rate of $9 per direct labor hour. What is the total standard cost for one unit of product that would appear on a standard cost card?

A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z. The company has just produced 1,000 units of this product, using 5,200 pounds of Material J that cost $9,880.The direct materials price variance is:

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