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Exam 7: Flexible Budgets, direct-Cost Variances, and Management Control

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Question 1

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Lunicious Corporation currently produces baseball caps in an automated process.Expected production per month is 15,000 units,direct material costs are $3.50 per unit,and manufacturing overhead costs are $40,000 per month.Manufacturing overhead is entirely fixed costs.What is the flexible budget for 12,000 and 15,000 units,respectively?

A) $74,000; $92,500
B) $74,000; $84,500
C) $82,000; $92,500
D) $82,000; $84,500

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Question 2

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Answer the following questions using the information below: Contrafic Corporation used the following data to evaluate its current operating system. The company sells items for $21 each and used a budgeted selling price of $21 per unit. $\begin{array} { l r r } & \underline { \text { Actual } } & \text { Budgeted } \\\text { Units sold }& 180,000 \text { units } & 185,000 \text { units } \\\text { Variable costs } & \$ 1,080,000 & \$ 1,295,000 \\\text { Fixed costs }&\$ 800,000 & \$ 775,000\end{array}$ -What is the static-budget variance of variable costs?

A) $25,000 favorable
B) $25,000 unfavorable
C) $215,000 favorable
D) $215,000 unfavorable

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Question 3

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A master budget is ________.

Coffey Company maintains a very large direct materials inventory because of critical demands placed upon it for rush orders from large hospitals.Item A contains hard-to-get material Y.Currently,the standard cost of material Y is $4.00 per gram.During February,22,000 grams were purchased for $4.10 per gram,while only 20,000 grams were used in production.There was no beginning inventory of material Y. Required: a.Determine the direct materials price variance,assuming that all materials costs are the responsibility of the materials purchasing manager. b.Determine the direct materials price variance,assuming that all materials costs are the responsibility of the production manager. c.Discuss the issues involved in determining the price variance at the point of purchase versus the point of consumption.

A variance is the difference between the actual cost for the current and expected (or budgeted)performance.

A favorable variance indicates that ________.

A favorable price variance for direct manufacturing labor might indicate that ________.

Answer the following questions using the information below: These questions refer to flexible-budget variance formulas with the following descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity. -The best label for the formula (AP - BP) AQ is the ________.

The following data for the telephone company pertain to the production of 450 rolls of telephone wire during June.Selected items are omitted because the costing records were lost in a windstorm. Required: Compute the missing elements in the report represented by the lettered items.

Answer the following questions using the information below: Animent Industries, Inc. (AII) , developed standard costs for direct material and direct labor. In 2015, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container. $\begin{array}{lll}&\text { Budgeted quantity }&\text { Budgeted price }\\\text { Direct materials } & 0.10 \text { pounds } & \$ 60 \text { per pound } \\\text { Direct labor } & 0.05 \text { hours } & \$ 30 \text { per hour }\end{array}$ During June, AII produced and sold 20,000 containers using 1,900 pounds of direct materials at an average cost per pound of $64 and 1,000 direct manufacturing labor-hours at an average wage of $30.50 per hour. -June's direct material flexible-budget variance is ________.

Answer the following questions using the information below: The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results. $\begin{array}{lccc} & \text { Actual } & \text { Flexible } & \text { Static } \\& \text { Results } & \text { Budget } & \text { Budget } \\\text { Sales volume (in units) } & 11,000 & & 10,000\\\\\text { Sales revenues } & \$ 238,000 & \$ & \$230,000 \\\text { Variable costs } & 150,000 & \$ & 180,000\\\\\text { Contribution margin }& 88,000& \$ &50,000\\\\\text { Fixed costs } & 36,000 & \$ & 35,000\\\text { Operating profit } & \$ 52,000& \$& \$ 15,000\end{array}$ -The flexible-budget variance for variable costs is ________.

Quindo Table Company manufactures tables for schools.The 2015 operating budget is based on sales of 44,000 units at $55 per table.Operating income is anticipated to be $132,000.Budgeted variable costs are $35 per unit,while fixed costs total $660,000. Actual income for 2015 was a surprising $477,000 on actual sales of 46,000 units at $57 each.Actual variable costs were $33 per unit and fixed costs totaled $627,000. Required: Prepare a variance analysis report with both flexible-budget and sales-volume variances.

Answer the following questions using the information below: Genent Company manufactures tires. Some of the company's data was misplaced. Use the following information to replace the lost data: $\begin{array}{|l|r|r|r|r|r|}\hline &\text { Actual } & \text { Flexible Budget } & \text { Flexible } & \text { Sales-Volume } & \text { Static } \\&\text { Results } & \text { Variances } & \text { Budget } & \text { Variances } & \text { Budget } \\\hline\text { Units sold } & 495,000 & & 495,000 & & 453,750 \\\hline \text { Revenues } & \$ 185,150 & \$ 4,400 \mathrm{~F} & (\mathrm{~A}) & \$ 6,160 \mathrm{U} & (\mathrm{B}) \\\hline \text { Variable } & & & & & \\\text { costs } & (\mathrm{C}) & \$ 880 \mathrm{U} & \$ 69,780 & \$ 10,300 \mathrm{~F} & \$ 88,080 \\\hline \text { Fixed costs } & \$ 36,430 & \$ 3,770 \mathrm{~F} & \$ 40,200 & 0 & \$ 40,200 \\\hline \text { Operating } & & & & & \\\text { income } & \$ 78,060 & (\mathrm{D}) & \$ 70,770 & (\mathrm{E}) & \$ 66,630\\\hline\end{array}$ -What are the actual variable costs (C) ?

Answer the following questions using the information below: The actual information pertains to the month of September. As a part of the budgeting process, Twilith Fencing Company developed the following static budget for September. Twilith is in the process of preparing the flexible budget and understanding the results. $\begin{array}{lrrr}&\begin{array}{r}\text { Actual } \\\text { Results }\end{array} & \begin{array}{r}\text { Flexible } \\\text { Budget }\end{array} & \begin{array}{r}\text { static } \\\text { Budget }\end{array}\\\text { Sales volume (in units) } & 12,000 & & 15,000 \\\text { Sales revenues } & \$ 600,000 & \$ & \$ 750,000 \\\text { Variable costs } & 307,200 & \$ & 360,000\\\text { Contribution margin }&292,800&\$&7390,000\\\text { Fixed costs } & 274,800& \$ & 270,000 \\\text { Operating profit } & \$ 18,000 & \$ & \$ 120,000\end{array}$ -The flexible budget will report ________ for the fixed costs.

An unfavorable variance is conclusive evidence of poor performance.

If variance analysis is used for performance evaluation,managers are encouraged to meet targets using creativity and resourcefulness.

Which of the following is an example of nonfinancial performance measure?

Standard labor rate is $8 per hour.Standard labor allowed per unit is 0.6 hours.Actual cost per labor hour is $7.5 and actual labour hour per unit is 0.7 hours.What is the standard labor cost per output unit?

A purchasing manager's performance is best evaluated using the ________.

If manufacturing machines are breaking down more than expected,this will contribute to a(n) ________.