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Exam 21: Flexible Budgets and Standard Costing

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Question 21

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A performance report compares the differences between:

A) Actual results and predicted results.
B) Actual results over several periods.
C) Predicted results over several periods.
D) Predicted results over several levels of activity.
E) Predicted results and standard results.

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Question 22

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What is the overhead volume variance? What would be the cause of a favorable volume variance?

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A volume variance occurs when the actual...

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Question 23

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Adams Co. uses the following standard to produce a single unit of its product: Variable overhead (2 hrs. @ $3/hr.) = $6 Actual data for the month show variable overhead costs of $150,000 based on 24,000 units of production. The total variable overhead variance is:

Stanton Co. produces and sells two lines of t-shirts, Deluxe and Mega. Stanton provides the following data: Required: Compute the sales price and the sales volume variances for each product.

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

A company's budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units?

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the company produces and sells 16,000 units is:

Prepare the journal entry to record the direct materials purchases and the issuance of direct materials into production.

Fixed budgets are also known as flexible budgets.

The costs that should be incurred under normal conditions to produce a specific product or component or to perform a specific service are:

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 $2.00 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:

Define standard costs. How do they assist management?

A budget performance report that includes variances can have variances caused by both price differences and quantity differences.

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.

Use the following cost information to calculate the direct labor rate and efficiency variances and indicate whether they are favorable or unfavorable.

Based on predicted production of 25,000 units, Best Co. anticipates $175,000 of fixed costs and $137,500 of variable costs. What are the flexible budget amounts of total costs for 20,000 and 30,000 units?

Duval, Inc., budgets direct materials at $1/liter and requires 4 liters per unit of finished product. April's activities show usage of 832 liters to complete 196 units at a cost of $798.72. Required: Calculate the direct materials price and quantity variances.

Job #305 was budgeted to require 3.5 hours of labor at $11.00 per hour. However, it was completed in 3 hours by a person who worked for $14.00 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.

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

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