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Exam 13: Budgeting and Standard Costs

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Question 21

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The following data relate to direct labor costs for the current period: $\begin{array} { l l } \text { Standard costs } & 36,000 \text { hours at } \$ 23.50 \\\text { Actual costs } & 35,000 \text { hours at } \$ 23.00\end{array}$ What is the direct labor time variance?

A) $23,000 unfavorable
B) $23,500 unfavorable
C) $23,500 favorable
D) $23,000 favorable

E) B) and C)
F) C) and D)

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Question 22

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The standard factory overhead rate of Quaker Inc.is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours.The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows: $\begin{array} { l l r } \text { Standard: } & 25,000 \text { hours at } \$ 10 & \$ 250,000 \\\text { Actual: } & \text { Variable factory overhead } & 202,500 \\& \text { Fixed factory overhead } & 60,000\end{array}$ ? What is the amount of the fixed factory overhead volume variance?

A) $12,500 favorable
B) $10,000 unfavorable
C) $12,500 unfavorable
D) $10,000 favorable

E) A) and B)
F) None of the above

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Question 23

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The formula to compute direct materials price variance is:

The capital expenditure budget summarizes future plans for acquisition of fixed assets.

Standard and actual costs for direct materials for the manufacture of 2,000 units of product were as follows: $\begin{array} { l l } \text { Actual costs } & 2,750 \mathrm { lbs } . @ \$ 8.10 \\\text { Standard costs } & 2,800 \mathrm { lbs } . @ \$ 8.00\end{array}$ ? Determine the (a) quantity variance, (b) price variance, and (c) total direct materials cost variance.

Favorable volume variances may be harmful when:

The budget procedure that requires all levels of management to start from zero in estimating sales, production, and other operating data is called zero-based budgeting.

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $2,200 favorable.

Which of the following is true of a capital expenditures budget?

Standards are designed to evaluate price and quantity variances separately.

Since the controllable variance measures the efficiency of using variable overhead resources, if budgeted variable overhead exceeds actual results, the variance is favorable.

The most effective means of presenting standard factory overhead cost variance data is through a factory overhead cost variance report.

The cash budget summarizes future plans for acquisition of fixed assets.

The following data relate to direct labor costs for the current period of Executive Inc.: $\begin{array} { l l } \text { Standard costs } & 6,000 \text { hours at } \$ 12.00 \\\text { Actual costs } & 7,500 \text { hours at } \$ 11.60\end{array}$ ? What is the direct labor time variance?

Budgetary slack can be avoided if lower and mid-level managers are requested to support all of their spending requirements with specific operational plans.

The standard fixed factory overhead rate is based on 100% capacity of 135,000 machine hours for Interile Inc.The standard costs and the actual costs of factory overhead for the production of 32,000 units during March were as follows: $\begin{array} { l r } \text { Actual: Factory overhead } & \$ 860,000 \\\text { Standard: } 100,000 \text { hours at } \$ 8.00 & 800,000\end{array}$ ? If there was a $70,000 unfavorable volume variance for March, what is the standard fixed factory overhead cost rate?

Based on the following information, calculate the direct materials quantity variance. $\begin{array} { l l } \text { Actual quantity } & 2,500 \text { pounds at } \$ 6.00 \\\text { Standard quantity } & 2,900 \text { pounds at } \$ 5.50\end{array}$ ?

If Division Inc.expects to sell 200,000 units in 2016, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for 2016 is 198,000 units.

When budget goals are set too tight, the budget becomes less effective for planning and controlling operations.

The difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed cost for the actual units produced is termed volume variance.