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Exam 24: Flexible Budgets and Standard Costs

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Question 21

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Elroy Co. has prepared the following fixed budget for the year, assuming production and sales of 30,000 units. This level of production represents 80% of capacity. Calculate the following flexible budget amounts at the indicated levels of capacity:

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Capacity = 30,000 units/80% = 37,500 uni...

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Question 22

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Overhead cost variance is:

A) The difference between the overhead costs actually incurred and the overhead budgeted at the actual operating level.
B) The difference between the actual overhead incurred during a period and the standard overhead applied.
C) The difference between actual and budgeted cost caused by the difference between the actual price per unit and the budgeted price per unit.
D) The costs that should be incurred under normal conditions to produce a specific product (or component) or to perform a specific service.
E) The difference between the total overhead cost that would have been expected if the actual operating volume had been accurately predicted and the amount of overhead cost that was allocated to products using the standard overhead rate.

F) B) and E)
G) A) and E)

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Question 23

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A volume variance is the difference between overhead at maximum production volume and that at the budgeted production volume.

Prichard Company has developed the following standard cost data based on 60,000 direct labor hours, which is 75% of capacity. Fixed overhead is $360,000 and variable overhead is $180,000 at this level of activity. During the current period, the company operated at 80% of capacity and produced 128,000 units. Actual costs were: Calculate the variable overhead spending and efficiency variance and the fixed overhead spending and volume variances. Indicate whether each is favorable or unfavorable.

Manatee Corp. has developed standard costs based on a predicted operating level of 352,000 units of production, which is 80% of capacity. Variable overhead is $281,600 at this level of activity, or $0.80 per unit. Fixed overhead is $440,000. The standard costs per unit are: Manatee actually produced 330,000 units at 75% of capacity and actual costs for the period were: Calculate the following variances and indicate whether each variance is favorable or unfavorable: (1) Direct labor efficiency variance: $__________________ (2) Direct materials price variance: $__________________ (3) Controllable overhead variance: $__________________

The purchasing department is often responsible for the price paid for materials that may create a direct materials price variance.

Sales variances allow managers to focus on sales mix as well as sales quantities.

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

Standard material, labor, and overhead costs can be obtained from standard cost tables published by the Institute of Management Accountants.

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

The following company information is available. The direct materials quantity variance is:

When recording the journal entry for labor, the Goods in Process Inventory account is

A flexible budget is also called a _______________ budget.

An unfavorable variance is recorded with a debit.

The difference between actual and standard cost caused by the difference between the actual price and the standard price is called the:

Montaigne Corp. has the following information about its standards and production activity for November. The volume variance is:

Presented below are terms preceded by letters a through j and followed by a list of definitions 1 through 10. Enter the letter of the term with the definition, using the space preceding the definition.

The difference between the total budgeted fixed overhead cost and the fixed overhead applied to production using the predetermined overhead rate is the:

Bradford Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units. What is the direct materials quantity variance?

Gates Company collected the following data regarding production of one of its products. Compute the variable overhead cost variance, the variable overhead spending variance, the variable overhead efficiency variance, the fixed overhead cost variance, the fixed overhead spending variance, and the fixed overhead volume variance.