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Exam 8: Performance Evaluation

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Question 61

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The following standard cost card is provided for Navid Company's Product A: The fixed overhead rate is based on total budgeted fixed overhead of $12,000. During the period, the company produced and sold 5,800 units at the following costs: Direct material 12,200 pounds @ $4.80 per pound Direct labor 5,950 hours @ $8.00 per hour Overhead $29,920 The standard manufacturing cost per unit is $23.00. What is the actual manufacturing cost per unit? (Do not round intermediate calculations.) $\begin{array}{|l|r|}\hline \text { Direct material }(2 \mathrm{lbs} . @ \$ 5.00 \text { per lb.) } & \$ 10.00 \\\hline \text { Direct labor }(1 \mathrm{hr} @ \$ 8.00 \text { per hr.) } & 8.00 \\\hline \text { Variable overhead }(1 \mathrm{hr} . @ \$ 3.00 \text { per hr. }) & 3.00 \\\hline \text { Fixed overhead }(1 \mathrm{hr} . \$ 2.00 \text { per hr.) } & 2.00 \\\hline {\text { Total standard cost per unit }} & \$ 23.00 \\\hline\end{array}$

A) $23.46.
B) $36.16.
C) $17.96.
D) Cannot be determined from the information provided.

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

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Question 62

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The Ferguson Company estimated that October sales would be 100,000 units with an average selling price of $6.00. Actual sales for October were 105,000 units and average selling price was $5.95.The sales volume variance was:

A) $30,000 favorable.
B) $30,000 unfavorable.
C) $29,750 favorable.
D) $29,750 unfavorable.

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

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Question 63

Multiple Choice

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Spark Company's static budget is based on a planned activity level of 45,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 40,000 units and one based on 50,000. The company actually produced and sold 49,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets?

A benefit of using a standard cost system is that it can boost morale and motivate employees, if properly maintained.

A cost variance is unfavorable if actual cost exceeds standard cost.

Volume variances are computed for which of the following costs?

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

Indicate whether each of the following statements is true or false.Managerial performance can be evaluated by comparing actual amounts with standard amounts.Differences between standard and actual amounts are called variances.When the static budget is compared to a flexible budget based on actual volume of activity, any variances result from differences between standard and actual per unit amounts.If the actual sales price per unit is higher than the standard, a company's sales price variance is unfavorable.Differences between flexible budget costs and revenues and the actual results are price variances.

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units and average selling price was $6.12.The sales revenue flexible budget variance was:

Lax standards make allowances for normal material waste and spoilage.

When would a sales price variance be listed as unfavorable?

Which of the following statements is incorrect? $\begin{array}{ccc}\text { Item to Classify }&\text {Standard}&\text { Actual }\\\text { Sales volume } & 100.000 \text { units } & 96.000 \text { units } \\\text { Sales price } & \$ 4 \text { per unit } & \$ 3.90 \text { per unit } \\\text { Materials usage } & 40,000 \text { gallons } & 42.000 \text { gallons } \\\text { Labor price } & 12.50 \text { per Hour } & 12.45 \text { per hour }\end{array}$

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

Hurst Company's standard variable materials cost per unit was $8. The actual materials cost per unit on production of 10,000 units was $8.22. Based on this information, Hurst Company incurred an unfavorable variable materials price variance of $2,200.

Indicate whether each of the following statements is true or false.A company's standard costs may need to be re-evaluated when there is a change in the training and experience level of the work force.Standard costs are the basis for preparing flexible budgets but not static budgets.Standard costing focuses managerial attention on operations that are not functioning normally.Standard costing does not fit with the practice of management by exception.Standard costs should not serve as benchmarks for evaluating performance.

Monroe Corporation budgeted fixed costs of $250,000 for the current year. The company expected to make 20,000 units during the year. Actual fixed costs were $256,000, and Monroe actually made 22,000 units of product.Required: (a) Calculate the fixed cost spending variance and indicate whether it is favorable or unfavorable.(b) Calculate the fixed cost volume variance and indicate whether it is favorable or unfavorable. Explain why the variance is favorable or unfavorable.

Which of the following statements is correct?

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

Achieving the sales volume in the master budget is known as:

Unfavorable flexible budget variances are those that are the result of lower than expected sales volume.