Question 1

Price 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:

Accepted Answer

A)  $473 unfavorable. 
B)  $473 favorable. 
C)  $1,530 favorable. 
D)  $1,530 unfavorable. 
E)  $1,057 favorablE.

Question 2

A company's flexible budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units?

Accepted Answer

The answer of A company's flexible budget for 60,000 units...

Question 3

Identify the situation that will result in a favorable variance.

Accepted Answer

A)  Actual revenue is higher than budgeted revenue. 
B)  Actual revenue is lower than budgeted revenue. 
C)  Actual income is lower than expected. 
D)  Actual costs are higher than budgeted costs. 
E)  Actual expenses are higher than budgeted expenses.

Question 4

Jacques Company planned to use 18,000 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 price variance.

Accepted Answer

The answer of Jacques Company planned to use 18,000 pounds...

Question 5

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 price variance for the month was:

Accepted Answer

A)  $6,000 unfavorable 
B)  $1,800 favorable 
C)  $1,000 favorable 
D)  $5,800 unfavorable 
E)  $1,800 unfavorable

Question 6

DT Co. produces picture frames. It takes 3 hours of direct labor to produce a frame. DT's standard labor cost is $11.00 per hour. During March, DT produced 4,000 frames and used 12,400 hours at a total cost of $133,920. What is DT's labor rate variance for March?

Accepted Answer

The answer of DT Co. produces picture frames. It takes...

Question 7

The difference between the total budgeted fixed overhead cost and the fixed overhead applied to production using the predetermined overhead rate is the:

Accepted Answer

A)  Production variance. 
B)  Volume variance. 
C)  Overhead cost variance. 
D)  Quantity variance. 
E)  Controllable variance.

Question 8

A planning budget based on a single predicted amount of sales or production volume is called a:

Accepted Answer

A)  Sales budget. 
B)  Standard budget. 
C)  Flexible budget. 
D)  Fixed budget. 
E)  Variable budget.

Question 9

A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. What is the total labor cost variance?

Accepted Answer

A)  $2,000 unfavorable. 
B)  $3,000 unfavorable. 
C)  $6,000 unfavorable. 
D)  $8,000 unfavorable. 
E)  $9,000 unfavorablE.

Question 10

What are sales variances? How are they used?

Accepted Answer

The answer of What are sales variances? How are they...

Question 11

A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased inferior materials.

Accepted Answer

A) True 
 B)False

Question 12

Cabot Company collected the following data regarding production of one of its products. Compute the direct labor cost variance.

Accepted Answer

A)  $53,500 unfavorable. 
B)  $40,500 favorable. 
C)  $53,500 favorable. 
D)  $13,000 unfavorable. 
E)  $40,500 unfavorablE.Actual units at actual cost = $1,093,500

Question 13

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

Accepted Answer

The answer of Gates Company reports the following information regarding...

Question 14

The sum of the variable overhead spending variance, the variable overhead efficiency variance, and the fixed overhead spending variance is the:

Accepted Answer

A)  Production variance. 
B)  Quantity variance. 
C)  Volume variance. 
D)  Price variance. 
E)  Controllable variance.

Question 15

The fixed overhead variance can be broken down into the _________________ variance and the _________________ variance.

Accepted Answer

The answer of The fixed overhead variance can be broken...

Question 16

The following company information is available for January. The direct materials price variance is:

Accepted Answer

A)  $5,000 favorable. 
B)  $300 favorable. 
C)  $5,200 unfavorable. 
D)  $5,000 unfavorable. 
E)  $5,200 favorablE.

Question 17

Briefly describe the procedure of management by exception.

Accepted Answer

The answer of Briefly describe the procedure of management by...

Question 18

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

Accepted Answer

The answer of Flexible budgets may be prepared before or...

Question 19

When the actual cost of direct materials used exceeds the standard cost, the company must have experienced an unfavorable direct materials price variance.

Accepted Answer

A) True 
 B)False

Question 20

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 efficiency variance for the month was:

Accepted Answer

A)  $3,650 favorable 
B)  $2,450 favorable 
C)  $1,200 unfavorable 
D)  $1,200 favorable 
E)  $2,450 unfavorable

Exam 24: Flexible Budgets and Standard Costs

A company's flexible budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units?

Identify the situation that will result in a favorable variance.

Jacques Company planned to use 18,000 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 price variance.

DT Co. produces picture frames. It takes 3 hours of direct labor to produce a frame. DT's standard labor cost is $11.00 per hour. During March, DT produced 4,000 frames and used 12,400 hours at a total cost of $133,920. What is DT's labor rate variance for March?

The difference between the total budgeted fixed overhead cost and the fixed overhead applied to production using the predetermined overhead rate is the:

A planning budget based on a single predicted amount of sales or production volume is called a:

A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. What is the total labor cost variance?

What are sales variances? How are they used?

A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased inferior materials.

Cabot Company collected the following data regarding production of one of its products. Compute the direct labor cost variance.

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

The sum of the variable overhead spending variance, the variable overhead efficiency variance, and the fixed overhead spending variance is the:

The fixed overhead variance can be broken down into the _ variance and the _ variance.

The following company information is available for January. The direct materials price variance is:

Briefly describe the procedure of management by exception.

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

When the actual cost of direct materials used exceeds the standard cost, the company must have experienced an unfavorable direct materials price variance.