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Exam 21: Flexible Budgets and Standard Costs

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Question 41

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The following information describes production activities of the Central Corp.: $\begin{array}{ll}\text { Raw materials used } & 16,00016 s . \text { at } \$ 4.05 \text { per lb. } \\\text { Factory payroll } & 5,545 \text { hours for a total of } \$ 72,085\end{array}$ 30,000 units were completed during the year Budgeted standards for each unit produced: 1/2 lb.of raw material at $4.15 per lb. 10 minutes of direct labor at $12.50 per hour Compute the direct materials price and quantity and the direct labor rate and efficiency variances.Indicate whether each variance is favorable or unfavorable.

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Direct materials:
†...

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Question 42

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Elroy Co.has prepared the following fixed budget for the year,assuming production and sales of 30,000 units.This level of production represents 80% of capacity. Calculate the following flexible budget amounts at the indicated levels of capacity: $\begin{array}{lcc} & \text { Operations at } & \text { Operations at } \\ &\text { 60 \% of Capacity } & \text { 75 \% of Capacity } \\ \text { Sales } &\underline{\quad\quad}&\underline{\quad\quad}\\ \text {Total variable costs } &\underline{\quad\quad}&\underline{\quad\quad}\\ \text { Total fixed costs } &\underline{\quad\quad}&\underline{\quad\quad}\\ \text { Income from operations} &\underline{\quad\quad}&\underline{\quad\quad}\\\end{array}$

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Capacity = 30,000 units/80% = 37,500 uni...

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Question 43

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Product A has a sales price of $10 per unit.Based on a 10,000-unit production level,the variable costs are $6 per unit and the fixed costs are $3 per unit.Using a flexible budget for 12,500 units,what is the budgeted operating income from Product A?

A _______________________ contains relevant information that compares actual results to planned activities.

Sales analysis is useful for:

A performance report compares the differences between:

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.

Provide at least one cause of direct labor rate and efficiency variances and provide an example of how this might occur.

Reference: 21_06 The following information describes a company's use of direct labor in a recent period: $\begin{array}{llr} \text { Actual hours used} &45,000\\ \text { Actual rate per hour} &\$15\\ \text { Standard rate per hour} &\$14\\ \text { Standard hours for units produced} &47,000\\\end{array}$ -The direct labor cost variance is:

The following company information is available: $\begin{array} { l l } \text { Direct materials used for production } & 712 \text { pounds } \\\text { Standard quantity for units produced } & 750 \text { pounds } \\\text { Stardard cost per pound of direct material } & \$ 48 \\\text { Actual cost per pound of direct material } & \$ 50\end{array}$ The direct materials quantity variance is:

Reference: 21_07 Montaigne Corp. has the following information about its standards and production activity in November: $\begin{array}{llr} \text { Actual total factory overhead incurred } &\$28,175\\ \text { Standard factory overhead:} &\\ \text { Variable overhead } &\text { \$ 3.10 per unit}\\\& \text { produced}\\ \text { Fixed overhead} &\\ \text { \( (\$ 12,000 / 6,000 \) estimated units to be produced) } &\text { \( \$ 2 \) per unit }\\ \text { Actual units produced } &\text { 4,800 units}\\\end{array}$ -The volume variance is:

Use the following data to find the total direct labor cost variance: $\begin{array}{ll}\text { Direct labor standard (4 hrs. @ } & \text { \$28 per unit } \\\text { \$7/hr.) } & \\\text { Actual hours worked per unit } & \text { 3.5 hours } \\\text { Actual units produced } & 3,500 \text { units } \\\text { Actual rate per hour } & \$ 7.50\end{array}$

Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards.

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 volume variance for March?

A management approach that emphasizes significant differences from plans is known as ___________________.

Variable budget is another name for a flexible budget.

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.)

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

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

If cost variances are material,they should always be closed directly to Cost of Goods Sold.