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Exam 23: Flexible Budgets and Standard Costs

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Question 71

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Fletcher Company collected the following data regarding production of one of its products. Compute the direct labor rate variance. $\begin{array}{llr} \text { Direct labor standard (2 hrs. @ \$12.75/hr.) } &\$25.50& \text { per finished unit } \\ \text { Actual direct labor hours} &81,500& \text {hrs. } \\ \text {Actual finished units produced } &40,000& \text {units } \\ \text { Actual cost of direct labor } &\$1,100,250\\\end{array}$

A) $61,125 unfavorable.
B) $19,125 unfavorable.
C) $61,125 favorable.
D) $80,250 unfavorable.
E) $80,250 favorable.

F) A) and E)
G) A) and B)

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Question 72

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When computing a price variance, the quantity is held constant.

A) True
B) False

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Question 73

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Variable budget is another name for:

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

Fletcher Company collected the following data regarding production of one of its products. Compute the direct materials price variance. $\begin{array}{llr} \text { Direct materrals standard (6 lbs. @ \$2/1b.) } &\$12& \text { per finished unit } \\ \text { Actual direct materials used} &243,000& \text {Ibs. } \\ \text {Actual finished units produced } &40,000& \text {units } \\ \text { Actual cost of direct materials used } &\$483,570\\\end{array}$

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 direct labor efficiency variance?

Gleason Company has developed the following standard cost data based on 60,000 direct labor hours, which is 75% of capacity. Fixed overhead is $360,000 and variable overhead is $180,000 at this level of activity. During the current period, the company operated at 80% of capacity and produced 128,000 units. Actual costs were: $\begin{array} { l | l | l } \text { Direct material } ( 380,000 \mathrm { lbs } . ) \ldots \ldots \ldots \ldots \ldots & \$ 779,000 \\\hline \text { Direct labor } ( 63,000 \mathrm { hrs } . ) \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 507,150 \\\hline \text { Fixed overhead } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 365,000 \\\hline \text { Variable overhe ad } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 220,000\end{array}$ Calculate the variable overhead spending and efficiency variance and the fixed overhead spending and volume variances. Indicate whether each is favorable or unfavorable.

Summerlin Company budgeted 4,000 pounds of material costing $5.00 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?

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 direct labor rate variance?

Use the following data to find the direct labor rate variance if the company produced 3,500 units during the period. Direct labor standard (4 hrs. @ $7/hr.) $ 28 per unit Actual hours worked 12,250 Actual rate per hour $ 7.50

A company uses the following standard costs to produce a single unit of output. $\begin{array} { l l l } \text { Direct materials } & 6 \text { pounds at } \$ 0.90 \text { per pound } & = \$ 5.40 \\\text { Direct labor } & 0.5 \text { hour at } \$ 12.00 \text { per hour } & = \$ 6.00 \\\text { Manufactuning overhead } & 0.5 \text { hour at } \$ 4.80 \text { per hour } & = \$ 2.40\end{array}$ 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:

The following information relating to a company's overhead costs is available. $\begin{array}{llr} \text { Actual total variable overhead } &\$ 73,000\\ \text {Actual total fixed overhead } &\$ 17,000\\ \text { Budgeted variable overhead rate per machine hour } &\$ 2.50\\ \text { Budgeted total fixed overhead } &\$ 15,000\\ \text { Budgeted machine hours allowed for actual output } &30,000\\\end{array}$ Based on this information, the total variable overhead variance is:

Regent, Inc. uses the following standard to produce a single unit of its product: overhead $6 (2 hrs. @ $3/hr.) . The flexible budget for overhead is $100,000 plus $1 per direct labor hour. Actual data for the month show overhead costs of $150,000, and 24,000 units produced. The overhead volume variance is:

An internal report that helps management analyze the difference between actual performance and budgeted performance based on the actual sales volume (or other level of activity) is called a(n) :

In the analysis of variances, management commonly focuses on four categories of production costs: ________ cost, ________ cost; ________ cost; and ________ cost.

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?

The usefulness of a flexible budget depends on the valid classification of variable and fixed costs.

A fixed budget is based on a single predicted amount of sales or other activity measure.

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.

An unfavorable variance is recorded with a debit because it reflects additional costs higher than the standard cost.