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Exam 23: Flexible Budgets and Standard Costs

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Question 71

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A favorable variance reflects an increase in operating income.

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Question 72

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The Carolina Products Company has just completed a flexible budget analysis of 2^nd quarter operating income, as shown here: Based on the above data, which of the following statements would be a correct interpretation of the flexible budget variance for sales revenue?

A) Decrease in price per unit
B) Increase in variable cost per unit
C) Increase in sales volume
D) Increase in fixed costs

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Question 73

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The Carolina Products Company has just completed a flexible budget analysis of 2^nd quarter operating income, as shown here: Based on the above data, which of the following statements would be a correct interpretation of the flexible budget variance for fixed expenses?

The sales volume variance is the difference between the static budget and the flexible budget amounts, and is caused by actual sales volume being different than budgeted sales volume.

Global Engineering's actual operating income for the current year is $50,000. The flexible budget operating income for actual volume achieved is $40,000, while the static budget operating income is $53,000. What is the sales volume variance for operating income?

Portobello Company prepared the following static budget for the coming month: If a flexible budget was prepared at a volume of 6,000, how much would the operating income be?

Georgia Custom Cabinet Company is setting standard costs for one of its products. The main material is cedar wood, sold by the board foot. The current cost of cedar wood is $2.00 per board foot from the supplier. Delivery costs are $0.25 per board foot. Carpenters' wages are $22.00 per hour. Payroll costs are $3.60 per hour and benefits are $3.00 per hour. How much is the direct materials price standard (per -board foot) ?

Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly skilled labor, and special metallic materials. Faas uses standard costs to prepare its flexible budget. For the first quarter of 2011, direct material and direct labor standards for one of their popular products were as follows: During the first quarter, Faas produced 5,000 units of this product. At the end of the quarter, an examination of the materials records showed that the company used 7,000 pounds of materials and actual total material costs were $29,750. Using the format below, please prepare an analysis of the direct materials variances.

Which of the following statements is TRUE about price variances and quantity (or efficiency) variances?

When a company is using standard costs, favorable variances are good news, and so the reasons for them do not need to be explained or investigated.

Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly skilled labor, and special metallic materials. Faas uses standard costs to prepare its flexible budget. For the first quarter of 2011, direct material and direct labor standards for one of their popular products were as follows: During the first quarter, Faas produced 5,000 units of this product. At the end of the quarter, an examination of the materials records showed that the company used 7,000 pounds of materials and actual total material costs were $29,750. The direct materials price variance was $1,750 U. Which of the following would be a logical explanation for this variance?

The flexible budget is based on the actual number of outputs.

Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts. Atlantic produced 3,000 units of product during the month. Data on standard costs and actuals are as follows: The journal entry to transfer the cost to Finished goods from Work in process is to:

What do price variances measure?

Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly skilled labor, and special metallic materials. Faas uses standard costs to prepare its flexible budget. For the first quarter of 2011, direct material and direct labor standards for one of their popular products were as follows: During the first quarter, Faas produced 5,000 units of this product. Actual direct materials costs were $29,750. Actual direct labor costs were $184,800. For purposes of calculating the flexible budget variances, what is the direct labor cost variance?

Which of the following BEST describes sales volume variance?

Shirt Fantasy produces and sells two types of tee shirtsFancy and Plain. Shirt Fantasy provides the following data: Using the format below, compute the flexible budget variance for Plain tee shirts for sales revenue only.

Which of the following BEST describes flexible budget variance?

Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts. Standards for direct labor are as follows: Actual direct labor for the month: 1,200 hours for a total cost of $24,000 Planned production for the month: 3,000 units The journal entry to record the usage of direct labor would be to:

Tiger's Golf Center reported actual operating income for the current year of $60,000. The flexible budget operating income for actual volume achieved is $55,000, while the static budget operating income is $58,000. What is the flexible budget variance for operating income?