Exam 8: Flexible Budgets and Standard Costs

A company uses the following standard costs to produce a single unit of output. During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct labor rate variance for the month was:

The following information comes from the flexible budget performance report of Jackal Corp. for the current period. Prepare the journal entries to charge direct materials and direct labor costs to work in process and the materials and labor variances to their proper accounts.

Oxford Co. produces and sells two lines of t-shirts, Classic and Mod. Oxford provides the following data. Compute the sales price and the sales volume variances for each product.

A company uses the following standard costs to produce a single unit of output. During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct materials quantity variance for the month was:

Joseph, Inc., provides the following results of June's operations: Required: (a) Determine the total overhead cost variance for June. (b) Applying the management by exception approach, which of the variances shown are of greatest concern? Why?

Lavoie Company planned to use 18,500 pounds of material costing $2.50 per pound to make 4,000 units of its product. In actually making 4,000 units, the company used 18,800 pounds that cost $2.54 per pound. Calculate the direct materials quantity variance.

Flexible budgets may be prepared before or after an actual period of activity. Why would management prepare such budgets at differing time frames?

Naches Co. assigned direct labor cost to its products in May for 1,300 standard hours of direct labor at the standard $8 per hour rate. The direct labor rate variance for the month was $200 favorable and the direct labor efficiency variance was $150 favorable. Prepare the journal entry to charge Work in Process Inventory for the standard labor cost of the goods manufactured in May and to record the direct labor variances. Assuming that the direct labor variances are immaterial, prepare the journal entry that Naches would make to close the variance accounts.

Presented below are terms preceded by letters a through h and followed by a list of definitions 1 through 8. Enter the letter of the term with the definition, using the space preceding the definition. (a) Unfavorable variance (b) Fixed budget performance report (c) Overhead cost variance (d) Efficiency variance (e) Spending variance (f) Flexible budget performance report (g) Quantity variance (h) Favorable variance ________(1) Results from a comparison of actual cost or revenue to budget that contributes to a lower income. ________(2) A report that compares actual results with the results expected under a fixed budget. ________(3) When management pays an amount different from the standard price to acquire an item. ________(4) Results from a comparison of actual cost or revenue to budget that contributes to higher income. ________(5) Difference in variable overhead when the standard allocation base expected for actual production differs from the actual allocation base. ________(6) Difference between actual quantity of an input and the standard quantity of the input. ________(7) Difference between the total overhead cost applied to products and the total overhead cost actually incurred. ________(8) A report that compares actual performance and budgeted performance based on actual sales volume or other activity level.

A variable or flexible budget is so named because it only focuses on variable costs.

Cavern Company's output for the current period results in a $5,250 unfavorable direct material price variance. The actual price per pound is $56.50 and the standard price per pound is $55.00. How many pounds of material are used in the current period?

The sum of the variable overhead spending variance, the variable overhead efficiency variance, the fixed overhead spending variance is the ________.

Presented below are terms preceded by letters a through j and followed by a list of definitions 1 through 10. Enter the letter of the term with the definition, using the space preceding the definition. (a) Cost variance (b) Volume variance (c) Price variance (d) Quantity variance (e) Standard costs (f) Controllable variance (g) Fixed budget (h) Flexible budget (i) Variance analysis (j) Management by exception ________ (1) Occurs when the company operates at a different capacity level than was predicted. ________ (2) A planning budget based on a single predicted amount of sales or other activity measure. ________ (3) Preset costs for delivering a product, or service under normal conditions. ________ (4) A process of examining differences between actual and budgeted sales or costs and describing them in terms of the price and quantity differences. ________ (5) The difference between actual price per unit of input and standard price per unit of input. ________ (6) A budget prepared based on several different amounts of sales, often including a best-case and worst-case scenario. ________ (7) The difference between actual quantity of input used and standard quantity of input used. ________ (8) The difference between actual overhead costs incurred and the budgeted overhead costs based on a flexible budget. ________ (9) A management process to focus on significant differences between actual costs and standard costs. ________ (10) The difference between actual and standard cost.

A company uses the following standard costs to produce a single unit of output. During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the total direct materials cost variance for the month was:

A company's flexible budget for 30,000 units of production showed sales of $90,000, variable costs of $36,000, and fixed costs of $23,000. Prepare a flexible budget for 25,000 units assuming it is within the same relevant range of production.

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The contribution margin expected if the company produces and sells 16,000 units is:

Clevenger Co. planned to produce and sell 30,000 units with a selling price of $10 per unit. Variable costs are expected to be $4 per unit and fixed costs are expected to be $80,000. Clevenger actually produced and sold 37,000 units. Using a contribution margin format: Prepare a flexible budget income statement for the actual level of sales and production.

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The sales expected if the company produces and sells 16,000 units is:

A flexible budget may be prepared:

Levelor Company's flexible budget shows $10,710 of overhead at 75% of capacity, which was the operating level achieved during May. However, the company applied overhead to production during May at a rate of $2.00 per direct labor hour based on a budgeted operating level of 6,120 direct labor hours (90% of capacity). If overhead actually incurred was $11,183 during May, the controllable variance for the month was: