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Exam 8: Performance Evaluation

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Question 81

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What aspects of variances should managers consider in deciding which variances to investigate?

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When deciding which variances to investi...

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Question 82

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Southern Company established direct labor standards of 0.5 hours per unit at $12 per hour for one of its products.In March,Southern used 12,000 direct labor hours,and the total amount paid to direct labor employees was $143,400. Required: Based on this information, (a)Which variance can you calculate? (b)What is the dollar amount of the variance? (c)Is the variance favorable or unfavorable? (d)Do you consider the variance to be sufficiently material that managers should investigate to discover the cause of the variance?

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(a)Labor price variance
(b)$14...

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Question 83

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The Russell Company provides the following standard cost data per unit of product: $\begin{array}{lrr} \text {Direct material (3 gallons @ \$6 per gallon) } &\$18.00\\ \text {Direct labor (2 hours@\$10per hour) } &\$20.00\\\end{array}$ During the period,the company produced and sold 22,000 units,incurring the following costs: $\begin{array}{llll}\text { Direct material } & 68,00 \text { Cgallons } & @ & \$ 5.90 \text { per gallon } \\\text { Direct labor } & 45,500 \text { hours } & @ & \$ 9.75 \text { per hour }\end{array}$ The direct labor usage variance was:

Two budgeting games sometimes played by employees are building in budget slack and making the numbers.

The purchasing department is considered to have primary responsibility for the materials usage variance.

Which of the following is not an example of budget gamesmanship that may occur in a company?

Select the incorrect statement concerning the human factor of performance evaluation.

Which of the following is not an advantage of using a standard cost system?

Standards that do allow for normal downtime and can be achieved with reasonable amounts of effort are known as:

Which manager is usually held responsible for labor price variances?

If the master budget prepared at a volume level of 10,000 units includes direct labor of $10,000,a flexible budget based on a volume of 11,000 units would include direct labor of $10,000.

Under all circumstances,unfavorable variances are bad; favorable variances are good.

The best standards to include in a standard cost system are ideal standards.

Volume variances are computed for which of the following costs?

Ick Manufacturing Company established the following standard price and cost information: $\begin{array}{lrr}\text { Sales price } & \$ 50 \text { per unit } \\\text { Variable manufacturing cost } & 32 \text { per unit } \\\text { Fixed manufacturing cost } & \$ 100,000 \text { total } \\\text { Fixed selling and administrative cost } & \$ 40,000 \text { total }\end{array}$ Ick expected to produce and sell 20,000 units.Actual production and sales amounted to 21,500 units. Required: (a)Prepare the pro forma income statement in contribution format that would appear in Ick's master budget for the year. (b)Prepare the income statement in contribution format that would appear in Ick's flexible budget.

Distinguish between static and flexible budgets.Give an example of how flexible budgets can be used.