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Exam 13: Budgeting and Standard Cost Systems

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Question 1

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In preparing flexible budgets, the first step is to identify the fixed and variable components of the various costs and expenses being budgeted.

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Question 2

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Below is budgeted production and sales information for Cooper Cans, Inc. for the month of March: $\begin{array}{lll}\text { Tin }& \text { Aluminum }\\4,000 \text { units } & 10,000 \text { units } & \text { Estimated beginning inventory } \\3,000 \text { units } & 14,000 \text { units } & \text { Desired ending inventory } \\80,000 \text { units } & 360,000 \text { units } & \text { Region I, anticipated sales } \\20,000 \text { units } & 120,000 \text { units } & \text { Region II, anticipated sales }\end{array}$ The unit selling price for aluminum cans is $0.10 and for tin cans is $0.15. Refer to the information provided for Cooper Cans Inc. Budgeted production for aluminum cans during the month is:

A) 476,000 units.
B) 484,000 units.
C) 480,000 units.
D) 504,000 units.

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Question 3

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The standard fixed factory overhead rate is based on 100% capacity of 50,000 direct labor hours. The standard costs and the actual costs for factory overhead for the production of 8,000 units during the current month were as follows: $\begin{array}{lll}\$ 120,000 & 40,000 \text { hours at } \$ 3 & \text { Standard: } \\& \text { Factory overhead } & \text { Actual } \\131,200 & \text { (41,000 direct labor hours) } &\end{array}$ If there was a $9,000 unfavorable volume variance for December, what is the standard fixed factory overhead cost rate?

Planning for capital expenditures is necessary for all of the following reasons except:

The difference between the actual amount of variable factory overhead cost incurred and the amount of variable factory overhead budgeted for the standard product is termed as variable factory overhead controllable variance.

Standard costs should be revised when they differ from actual costs.

Kohlman Company began its operations on March 31 of the current year. Projected manufacturing costs for the first three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June. Depreciation, insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was paid on March 31, and property taxes will be paid in November. Three-fourths of the remainder of the manufacturing costs are expected to be paid in the month in which they are incurred with the balance to be paid in the following month. Refer to the information provided for Kohlman Company. The cash payments for manufacturing in the month of June are:

Normally standard costs should be revised when labor rates change to incorporate new union contracts.

The cash budget summarizes future plans for acquisition of fixed assets.

The budgeted direct materials purchases are normally computed as the sum of (1) the materials for production and (2) the desired beginning inventory.

The standard price and quantity of direct materials are separated because:

Frogue Corporation uses a standard cost system. The following information was provided for the period that just ended: $\begin{array}{ll}\$ 2.50 & \text { Actual price per kilogram } \\31,000 & \text { Actual lilograms of material used } \\\$ 18.10 & \text { Actual hourly labor rate } \\4.900 \text { lahor hrs } & \text { Actual hmurs of morhuction }\\\$ 2.80 & \text { Standard price per kilogram } \\6 \text { kilograms } & \text { Standard kilograms per completed urit } \\\$ 18.00 & \text { Standard hourly labor rate } \\1 \text { hr. } & \text { Standard time per completed urit } \\\$ 34,900 & \text { Actual total factory overhead }\\\$ 18,000 & \text { Actual fixed factory overhead } \\\$ 1.20 \text { per labor hour } & \text { Standard fixed factory overhead rate } \\\$ 3.80 \text { per labor hour } & \text { Standard variable factory overhead rat } \\15,000 \text { hours } & \text { Maximum plant capacity } \\5,000 & \text { Units completed churing the period }\end{array}$ Refer to the information provided for Frogue Company. The direct materials cost variance is:

Cape Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below. $\begin{array}{lll}\$ 0.60 \text { per pound } & .50 \mathrm{lb} . \text { per unit } & \text { Material A } \\\$ 1.70 \text { per pound } & 1.00 \mathrm{lb} \text {. per unit } & \text { Material } \mathrm{B} \\\$ 1.00 \text { per pound } & 1.20 \mathrm{lb} . \text { per unit } & \text { Material C }\end{array}$ Refer to the information provided for Cape Corporation. The amount of direct material C purchased during the year is:

Efficient Corporation uses a standard cost system. The following information was provided for the period that just ended: $\begin{array}{ll}\$ 11.75 & \text { Actual price per gallon } \\5,000 & \text { Actual gallons of material used } \\\$ 17.00 & \text { Actual hourly labor rate } \\24,300 & \text { Actual hours of prochuction } \\\$ 12.00 & \text { Standard price per gallon } \\1 / 2 & \text { Standard gallons per completed urit } \\\$ 12.00 & \text { Standard hourly labor rate } \\3 \mathrm{hrs} . & \text { Standard time per completed urit } \\9,000 & \text { Units completed churingthe period }\end{array}$ Refer to the information provided for Efficient Corporation. The direct materials cost variance is:

An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost.

The budget process involves all of the following except:

The budgeted volume of production is normally computed as the sum of (1) the expected sales volume and (2) the desired ending inventory.

Ideal standards are developed under conditions that assume no idle time, no machine breakdowns, and no materials spoilage.

The following data relate to direct materials costs of Texas Inc. for November: $\begin{array}{lrr} \text { 4,500 pounds at \$ 6.00 } & \text { Actual costs }\\ \text { 4,600 pounds at \( \$ 5.50 \) } & \text {Standard costs }\\\end{array}$ Refer to the information provided for Texas Inc. What is the direct materials price variance?

Benjamin Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $250,000, $300,000, and $420,000, respectively, for September, October, and November. The company expects to sell 20% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month of the sale, 25% in the month following the sale, and the remainder in the following month. Refer to the information provided for Benjamin Corporation. The cash collections from accounts receivable in September are: