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Exam 23: Flexible Budgets and Standard Costs

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Question 51

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A budget based on several different levels of activity, often including both a best-case and worst-case scenario, is called a:

A) Rolling budget.
B) Merchandise purchases budget.
C) Fixed budget.
D) Production budget.
E) Flexible budget.

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

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Question 52

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

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Flexible budgets are prepared prior to a...

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Question 53

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

Gala Enterprises collected the following data regarding production of one of its products. Compute the variable overhead cost variance, the variable overhead spending variance, the variable overhead efficiency variance, the fixed overhead cost variance, the fixed overhead spending variance, and the fixed overhead volume variance. $\begin{array} { l l } \text { Direct labor standard (2 hrs. @ \$15/hr.) } & \$ 30.00 \text { per finished unit } \\\text { Actual direct labor hours } & 60,800 \text { hrs. } \\\text { Budgeted units } & 31,000 \text { units } \\\text { Actual finished units produced } & 30,000 \text { units } \\\text { Standard variable OH rate } ( 2 \text { hrs. @ } \$ 14.00 / \mathrm { hr } . ) & \$ 28.00 \text { per finished unit } \\\text { Standard fixed OH rate } ( \$ 310,000 / 31,000 \text { units) } & \$ 10.00 \text { per unit } \\\text { Actual variable overhead costs incurred } & \$ 857,600 \\\text { Actual fixed overhead costs incurred } & \$ 312,000\end{array}$

An analytical technique used by management to focus attention on the most significant variances and give less attention to the areas where performance is reasonably close to standard is known as:

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?

The standard materials cost to produce 1 unit of Product R is 6 pounds of material at a standard price of $50 per pound. In manufacturing 8,000 units, 47,000 pounds of material were used at a cost of $51 per pound. - What is the direct materials price variance?

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

Clevenger Co. planned to produce and sell 30,000 units with a selling price of $10 per unit. Variable costs are expected to be $4 per unit and fixed costs are expected to be $80,000. Clevenger actually produced and sold 37,000 units. Using a contribution margin format: Prepare a fixed budget income statement for the planned level of sales and production.

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

Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead efficiency variance. $\begin{array}{lll}\text { Direct labor stendard (2 hrs. @ } \$ 12.75 / \mathrm{hr} \text {.) } & \$ 25.50 &\text {per finished unit}\\\text { Actual direct labor hours } & 81,500&\text { hrs}\\\text { Budgeted units } & 42,000&\text {units}\\\text {Actual finished units produced}&40,000&\text {units}\\\text {Standad variable OH rate (2 hrs. @ \$14.30/hr) }&\$28.60&\text {per finished unit}\\\text {Standard fixed OH rate (\$ 336,000 / 42,000 units) }&\$8.00 &\text {per unit}\\\text {Actual cost of variable overhead costs incurred}&\$1,140,000\\\text {Actual cost of fixed overhead costs incurred} &\$ 338,000 \end{array}$

A standard that takes into account the reality that some loss usually occurs with any process under normal application of the process is known as a ________ standard.

Claremont Company specializes in selling refurbished copiers. During the month, the company sold 180 copiers for total sales of $540,000. The budget for the month was to sell 175 copiers at an average price of $3,200. -The sales price variance for the month was:

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 variable costs expected if the company produces and sells 16,000 units is:

A fixed budget is also called a ________ budget.

The following information relating to a company's overhead costs is available. $\begin{array}{llr} \text { Budgeted tixed overhead rate per machine hour } &\$0.50\\ \text { Actual variable overhead } &\$73,000\\ \text {Budgeted variable overhead rate per machine hour } &\$2.50\\ \text { Actual fixed overhead} &\$17,000\\ \text { Budgeted hours allowed for actual output achieved } &32,000\\\end{array}$ Based on this information, the total overhead variance is:

Define standard costs. How do they assist management?

A company's flexible budget for 48,000 units of production showed variable overhead costs of $72,000 and fixed overhead costs of $64,000. The company incurred overhead costs of $122,800 while operating at a volume of 40,000 units. The total controllable cost variance is:

A flexible budget may be prepared:

Milltown Company specializes in selling used cars. During the month, the dealership sold 22 cars at an average price of $15,000 each. The budget for the month was to sell 20 cars at an average price of $16,000. - Compute the dealership's total sales variance for the month.