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Exam 8: Flexible Budgets and Standard Costing

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Question 51

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A company has a standard of 2 hours of direct labor per unit produced and $18 per hour for the labor rate.During last period, the company used 9,500 hours of direct labor at a $152,000 total cost to produce 4,000 units.Compute the direct labor rate and efficiency variances.

A) Rate variance: $19,000 unfavorable; Efficiency variance: $27,000 favorable.
B) Rate variance: $63,829 unfavorable; Efficiency variance: $99,000 unfavorable.
C) Rate variance: $152,000 favorable; Efficiency variance: $99,000 unfavorable.
D) Rate variance: $19,000 favorable; Efficiency variance: $27,000 unfavorable.
E) Rate variance: $152,000 unfavorable; Efficiency variance: $99,000 favorable.

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Question 52

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Landlubber Company established a standard direct materials cost of 1.5 gallons at $2 per gallon for one unit of its product.During the past month, actual production was 6,500 units.The material quantity variance was $700 favorable and the material price variance was $470 unfavorable.The entry to charge Goods in Process Inventory for the standard material costs during the month and to record the direct material variances in the accounts would include:

A) A credit to Goods in Process for $19,270.
B) A debit to Raw Materials for $19,500.
C) A debit to Direct Material Price Variance for $470.
D) A debit to Direct Material Quantity Variance for $700.
E) A credit to Goods in Process for $19,500.

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Question 53

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Companies promoting continuous improvement strive to achieve _____________ standards by eliminating inefficiencies and waste.

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

Folsom Custom Skis, founded by Jordon Grano, sells skis at an average price of approximately $1,300 per pair.At this price the company is breaking even.Jordan hopes to double his company's sales in the near future.Could the company make a profit if the current cost structure and sales price per pair of skis remained the same while sales volume doubled?

Job #305 was budgeted to require 3.5 hours of labor at $11 per hour.However, it was completed in 3 hours by a person who worked for $14 per hour. a.What is the total labor cost variance for Job #305? b.Calculate the direct labor rate and efficiency variance for this job.

A report based on predicted amounts of revenues and expenses corresponding to the actual level of output is called a:

What are sales variances? How are they used?

A flexible budget expresses all costs on a per unit basis.

Which department is often responsible for the direct materials price variance?

The following company information is available: $\begin{array}{ll}\text { Direct materials used for production } & 36,000\text { gallons } \\\text { Standard quantity for units produced } & 34,400\text { gallons } \\\text { Standard cost per gallon of direct material } & \$ 6.00 \\\text { Actual cost per gallon of direct material } & \$ 6.10\end{array}$ The direct materials quantity variance is:

Actual fixed overhead for Kapok Company during March was $92,780.The flexible budget for fixed overhead this period is $89,000 based on a production level of 5,000 units.If the company actually produced 4,200 units, what is the fixed overhead spending variance for March?

Standard material, labor, and overhead costs can be obtained from standard cost tables published by the Institute of Management Accountants.

A flexible budget is prepared:

During November, Heim Company allocated overhead to products at the rate of $26 per direct labor hour.This figure was based on 80% of capacity or 1,600 direct labor hours.However, Heim Company operated at only 70% of capacity, or 1,400 direct labor hours.Budgeted overhead at 70% of capacity is $38,900, and overhead actually incurred was $38,000.What is the company's volume variance for November? (Indicate whether the variance is favorable or unfavorable.)

The entry to record the material variances would include a:

Variable budget is another name for a flexible budget.

Sales variances may be computed in a manner similar to cost variances-that is, computing both price and volume variances.

Assume Martin Guitar Company has a standard of 3 hours of direct labor per unit produced and $20 per hour for the labor rate.During last period, the company used 24,000 hours of direct labor at a $456,000 total cost to produce 6,000 units.Compute the direct labor rate and efficiency variances.

The purchasing department is often responsible for the events that create a direct materials price variance.