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Exam 21: Flexible Budgets and Standard Costs

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Question 71

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Bartels Corp.produces woodcarvings.It takes two hours of direct labor to produce a carving.Bartels' standard labor cost is $12 per hour.During August,Bartels produced 10,000 carvings and used 21,040 hours of direct labor at a total cost of $250,376.What is Bartels' labor efficiency variance for August?

A) $10,376 unfavorable
B) $2,104 unfavorable
C) $2,104 favorable
D) $12,480 unfavorable
E) $ 12,480 favorable

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Question 72

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A company's flexible budget for 36,000 units of production showed variable overhead costs of $54,000 and fixed overhead costs of $50,000.The company actually incurred total overhead costs of $95,300 while operating at a volume of 32,000 units.What is the controllable variance?

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Question 73

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Reference: 21_08 Fairfield Co. has collected the following information about its production activities for the current year: Actual costs and quantities: Direct materials used 95,000 lbs. @ $6.30 per lb. Units completed during the year, 50,000 units Standard costs and quantities: Price per lb. of direct material, $6.05 Two lbs. of direct material per unit -Prepare the journal entry to record the direct materials purchases and the issuance of direct materials into production.

Based on predicted production of 22,000 units,a company anticipates $15,000 of fixed costs and $27,500 of variable costs.The flexible budget amounts of fixed and variable costs for 16,000 units are:

Reference: 21_05 A job was budgeted to require three hours of labor per unit at $8 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 efficiency variance?

Identify and explain the primary differences between fixed and flexible budgets.

Match the following definitions with the appropriate terms

Reference: 21_02 Kermit Enterprises has collected the following data on one of its products: $\begin{array}{ll}\text { Direct materials standard (4 lbs. @ \$1/lb.) } & \$ 4 \text { per finished unit } \\\text { Total direct materials cost variance-unfavorable } & \$ 7,500 \\\text { Actual direct materials used } & 150,000 \mathrm{lbs} . \\\text { Actual finished units produced } & 30,000 \text { units }\end{array}$ -The direct materials quantity variance is:

Which department is often responsible for the direct materials price variance?

Rising,Inc.,uses the following standard to produce a single unit of its product: Overhead (2 hrs.@ $3/hr.) = $6 The flexible budget for overhead is $100,000 plus $1 per direct labor hour.Actual data for the month show overhead costs of $150,000 based on 24,000 units of production.The overhead volume variance is:

Price Company's flexible budget shows $10,710 of overhead at 75% of capacity,which was the operating level achieved during May.However,the company applied overhead to production during May at a rate of $2 per direct labor hour based on a budgeted operating level of 6,120 direct labor hours (90% of capacity) .If overhead actually incurred was $11,183 during May,the controllable variance for the month was:

When recording variances in a standard cost system:

The difference between the total budgeted overhead cost and the overhead applied to production using the predetermined overhead rate is the:

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

Reference: 21_09 This information comes from the records of Dina Co. for the current period: Factory overhead (based on budgeted production of 24,500 units) Variable overhead $2.25/direct labor hour Fixed overhead $1.95/direct labor hour -Calculate the direct materials price and quantity variances,direct labor rate and efficiency variances,and the overhead controllable and volume variances.In each case,state whether the variance is favorable or unfavorable.

The difference between actual and standard cost caused by the difference between the actual quantity and the standard quantity is called the:

Abrams,Inc.provides the following results of March's operations: $\begin{array}{lr}\text { Direct materials price variance } & \$ 400 \mathrm{~F} \\\text { Direct materials quantity variance } & 2,000 \mathrm{U} \\\text { Direct labor rate variance } & 100 \mathrm{U} \\\text { Direct labor efficiency variance } & 1,200 \mathrm{~F} \\\text { Variable overhead spending variance } & 400 \mathrm{U} \\\text { Variable overhead efficiency variance } & 800 \mathrm{~F} \\\text { Fixed overhead spending variance } & 100 \mathrm{U} \\\text { Fixed overhead volume variance } & 600 \mathrm{~F}\end{array}$ Required: a.Determine the total overhead cost variance for March. b.Applying the management by exception approach,which of the variances shown are of greatest concern? Why? c.Assuming the variances are immaterial and we close them to Cost of Goods Sold,what will the effect be on that account of these variances?

Reference: 21_01 Five Rings, Inc, has collected the following data on one of its products: $\begin{array}{ll}\text { Direct materials standard (4 lbs. @ \$1/lb.) } & \$ 4 \text { per finished unit } \\\text { Total direct materials cost variance-unfavorable } & \$ 13,750 \\\text { Actual direct materials used } & 150,000 \mathrm{lbs} . \\\text { Actual finished units produced } & 30,000 \text { units }\end{array}$ -The actual cost of the direct materials used is:

A company established a direct material standard of 2 pounds of material at a cost of $6 per pound for unit produced.During August the company produced 6,000 units of product.10,000 pounds of direct material which cost $6.50 per pound were used in the production process.Compute the direct material quantity variance for August.

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 controllable variance is: