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Exam 8: Flexible Budgets and Standard Costing

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Question 41

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A fixed budget is also called a _____________ budget.

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Question 42

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Briefly describe the procedure of management by exception.

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Management by exception is an analytical...

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Question 43

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

Direct materials variances are called price and quantity variances.However, when referring to direct labor, these variances are usually called _________________ and _____________ variances.

A favorable variance for a cost means that when compared to the budget, the actual cost is ____________________ than the budgeted cost.

Identify and explain the primary differences between fixed and flexible budgets.

How are unfavorable variances recorded?

A job was budgeted to require three hours of labor per unit at $8 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 labor rate variance?

One possible explanation for direct labor rate and efficiency variances is the use of workers with different skill levels.

Thomas Co.provides the following fixed budget data for the year: $\begin{array}{l}\text { Sales }(20,000 \text { units })&&\$600,000\\\text { Cost of sales: }\\\text { Direct materials } & \$ 200,000 \\\text { Direct labor } & 160,000 \\\text { Variable overhead } & 60,000 \\\text { Fixed overhead } & \underline{80,000}& \underline { 500,000 } \\\text {Gross profit } &&\$100,000\\\text { Operating expenses: } \\\text { Fixed } & \$ 12,000 & \\\text { Variable } &\underline{40,000} &\underline {52,000} \\ \text { Income from operations } &&\underline {\$ 48,000}\\\\\text { The company's actual activity for the year follows: } \\\text { Sales (21,000 units) } && \$ 651,000 \\\text { Cost of goods sold }\\\text { Direct materials } & \$ 231,000 \\\text { Direct labor } & 168,000 \\\text { Variable overhead } & 73,500 \\\text { Fixed overhead } & \underline { 77,500} & \underline { 550,000 }\\\text { Gross profit }&& \$ 101,000\\\text { Operating expenses: }\\ \text { Fixed } & 12,000 \\ \text { Variable } &\underline{39,500} & \underline{51,500}\\ \text { Income from operations } &&\underline{\$ 49,500} \\\end{array}$ Prepare a flexible budget performance report for the year using the contribution margin format.

Use the following data to find the total direct labor cost variance: $\begin{array}{llcc} \text { Direct labor standard (4 hrs. @\$7/hr.) } & \text {\$ 28 per unit } \\ \text { Actual hours worked per unit } & \text { 3.5 hours } \\ \text { Actual units produced } & \text { 3,500 units } \\ \text { Actual rate per hour } & \text { \$ 7.50 } \\\end{array}$

A management approach that emphasizes significant differences from plans is known as ___________________.

Static budget is another name for:

A direct labor cost variance may be broken down into a controllable variance and a volume variance.

Bradford Company budgeted 4,000 pounds of material costing $5 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units. -What is the direct materials quantity variance?

Tiger, Inc., has developed the following standard cost data based on 60,000 direct labor hours, which is 75% of capacity: $\begin{array}{lr} & \underline{\text { Per Unit }} \\\text { Direct materials (6lbs. } @, \$ 2 / l \mathrm{~b} .) & \$ 12 \\\text { Direct labor (1hrs. } @ 8 / \mathrm{hr} \text {.) } & 8\end{array}$ During the last period, the company operated at 80% of capacity and produced 128,000 units.Actual costs were: $\begin{array} { l r } \text { Direct materials } ( 760,000 \mathrm { lbs } . ) & \$ 1,558,000 \\\text { Direct labor (126,000 hrs.) } & 1,014,300\end{array}$ Determine the direct materials price and quantity variances and the direct labor rate and efficiency variances.Indicate whether each variance is favorable or unfavorable.

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 operating income expected if the company produces and sells 16,000 units is:

A job was budgeted to require three hours of labor per unit at $8 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?

A job was budgeted to require three hours of labor per unit at $8 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. -The entry to record the labor costs and variances would include a:

Calculate the direct materials price and quantity variances and indicate whether each is favorable or unfavorable.