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Exam 8: Flexible Budgets and Variance Analysis

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Question 51

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Oroz Company had the following information available: Expected Costs and Selling Price Based on 5,000 units: $\begin{array} { l } \text {Variable manufacturing costs per unit }&\$32 \\ \text {Fixed manufacturing costs per unit }&\$20 \\ \text { Selling price per unit}&\$70 \\\end{array}$ $\begin{array} { l } \text { Expected production level}& \text {5,000 unite }\\\end{array}$ In the flexible budget at 10,000 units,what is the total manufacturing cost?

A) $250,000
B) $420,000
C) $520,000
D) $700,000

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Question 52

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Brad Company planned to produce 12,000 units.This level of production required 20 setups at a cost of $18,000 plus $500 per setup.Actual production was 10,000 units,requiring 15 setups.Actual setup cost was $26,000.What is the static budget variance for setup costs?

A) $2,000 Favorable
B) $2,000 Unfavorable
C) $2,500 Favorable
D) $2,500 Unfavorable

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Question 53

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A company has the following information available about one of its products: $\begin{array}{ll}\text { Standard price per pound of input } & ? \\\text { Actual price per pound of input } & \$ 27 \\\text { Standard inputs per unit of output } & 3 \text { pounds } \\\text { Actual units of output } & 3,000 \\\text { Direct Materials Price Variance } & \$ 18,000 \mathrm{~F} \\\text { Actual pounds of input used } & 9,000\end{array}$ What is the standard price per pound of input?

The Tulip Company makes mugs for which the following standards have been developed: $\begin{array}{lll}&\text { Standard Inputs Expected }&\text { Standard Price }\\\text { Expected }&\text { For Each Unit of Output }&\text { Per Unit of Input }\\\hline\text { Direct Materials } & 5 \text { ounces } & \$ 2 \text { per ounce } \\\text { Direct Labor } & 2.5 \text { hours } & \$ 8 \text { per hour }\end{array}$ Production of 400 mugs was expected in August,but 440 mugs were actually completed.Direct materials purchased and used were 2,100 ounces at an actual price of $2.20 per ounce.Direct labor cost for the month was $5,310,and the actual pay per hour was $9.00.What is the direct labor price variance for August?

As the terms are used in the budgeting process,it is possible for a company to be efficient at the same time it is ineffective.

In the relevant range,fixed overhead costs do not vary with cost driver activity.

The flexible budget variance for direct labor equals the labor price variance plus the labor quantity variance.

When preparing a flexible budget income statement,________ costs are constant at different levels of activity.

The efficiency variance for fixed overhead costs ________.

Dooley Company has the following information available for variable overhead costs.Direct labor hours are the cost driver for variable overhead costs. $\begin{array}{ll}\text { Actual variable overhead costs } & \$ 4,700 \\\text { Standard variable overhead costs } & \$ 1.20 \text { per hou1 } \\\text { Actual direct labor hours } & 3,750 \text { hours } \\\text { Standard direct labor hours per unit } & 5 \text { hours } \\\text { Units produced } & 700\end{array}$ What is the variable overhead efficiency variance?

Which of the following is used to develop flexible budgets?

The Matthew Company makes tables for which the following standards have been developed: $\begin{array}{lll}&\text { Standard Inputs Expected }&\text { Standard Price }\\\text { Expected }&\text { For Each Unit of Output }&\text { Per Unit of Input }\\\hline\text { Direct Materials } & 7 \text { ounces } & \$5.20 \text { per ounce } \\\text { Direct Labor } & 3 \text { hours } & \$ 16 \text { per hour }\end{array}$ Production of 200 tables was expected in May,but 220 tables were actually completed.Direct materials purchased and used were 2,100 pounds at an actual price of $4.40 per pound.Direct labor cost for the month was $10,620,and the actual pay per hour was $18.00.What is the direct labor price variance for the month of May?

Potter Company has the following information: $\begin{array}{ll}\text { Actual operating loss at 5,000 units } & \$(11,000) \\\text { Budgeted operating income at 5,000 units } & \$ 5,000 \\\text { Budgeted operating income at 10,000 units } & \$ 12,000 \\\text { Planned level of operations } & 10,000 \text { units } \\\text { Actual level of operations } & 5,000 \text { units }\end{array}$ Assume the cost driver of product costs is units of production.What is the flexible budget variance for operating income?

If the total sales-activity variance and the static-budget variance are equal,there is no flexible budget variance.

Conner Company has the following information: $\begin{array}{ll}\text { Actual operating loss at 5,000 units } & \$(11,000) \\\text { Budgeted operating income at 5,000 units } & \$ 5,000 \\\text { Budgeted operating income at 10,000 units } & \$ 12,000 \\\text { Planned level of operations } & 10,000 \text { units } \\\text { Actual level of operations } & 5,000 \text { units }\end{array}$ Assume units of output are the cost driver for product costs.What is the static budget variance for operating income?

Unfavorable variances ________ represent bad decisions made by managers.

At 60,000 machine hours,Norwall Company's static budget for variable overhead costs is $180,000.At 60,000 machine hours,the company's static budget for fixed overhead costs is $300,000.Machine hours are the cost driver of all overhead costs.The static budget is based on 60,000 machine hours.At 60,000 machine hours,the company produces 40,000 units.The following data is available: $\begin{array} { l } \text {Actual units produced and sold }&42,000 \\ \text {Actual machine hours }&64,000 \\ \text {Actual variable overhead costs }& \$185,600\\ \text {Actual fixed overhead costs }&\$302,400 \\\end{array}$ What is the variable overhead spending variance?

A company that has an activity-based costing system with multiple cost drivers will prepare a(n) ________ budget.

For fixed overhead costs,the spending variance is ________ equal to the flexible-budget variance.

Kilsdonk Company has the following information available: $\begin{array} { l } \text {Budgeted cost of direct materials at 900,000 units }&\$900,000 \\ \text {Budgeted cost of direct materials at 820,000 units }&\$820,000 \\ \text {Actual cost of direct materials at 820,000 units }&\$840,000 \\ \text {Actual level of output(units) }&820,000 \\ \text {Planned level of output(units) }& 900,000\\\end{array}$ The cost driver of product costs is units of output.What is the static budget variance for direct material costs?