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Exam 8: Flexible Budgets and Standard Costs

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Question 101

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During November, Gliem Company allocated overhead to products at the rate of $26.00 per direct labor hour. This figure was based on 80% of capacity or 1,600 direct labor hours. However, Gliem Company operated at only 70% of capacity, or 1,400 direct labor hours. Budgeted overhead at 70% of capacity is $38,900, and overhead actually incurred was $38,000. What is the company's volume variance for November? (Indicate whether the variance is favorable or unfavorable)

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Question 102

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A company provided the following direct materials cost information. Compute the total direct materials cost variance.

A) $2,500 Favorable.
B) $78,250 Favorable.
C) $78,250 Unfavorable.
D) $80,750 Favorable.
E) $80,750 Unfavorable.

F) C) and E)
G) A) and E)

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Question 103

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A company's flexible budget for 12,000 units of production showed total contribution margin of $24,000 and fixed costs, $16,000. The operating income expected if the company produces and sells 15,000 units is:

When standard manufacturing costs are recorded in the accounts and the cost variances are immaterial at the end of the accounting period, the cost variances should be:

Fixed budgets are also known as flexible budgets.

An overhead cost variance is the difference between the total overhead actually incurred for the period and the standard overhead applied to products.

Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead spending variance. $\begin{array}{lrl}\text { Direct labor standard (2 hrs. @ } \$ 12.75 / \mathrm{hr} .) & \$ 25.50& \text { per finished unit} \\\text { Actual direct labor hours } & 81,500& \text { hrs.} \\\text { Budgeted units } & 42,000& \text { units} \\\text { Actual finished units produced } & 40,000 & \text { units}\\\text { Standard variable OH rate }(2 \mathrm{hrs} . @ \$ 14.30 / \mathrm{hr} .) & \$ 28.60& \text { per finished unit} \\\text { Standard fixed OH rate }(\$ 336,000 / 42,000 \text { units) } & \$ 8.00 & \text { per unit}\\\text { Actual cost of variable overhead costs incurred } & \$ 1,140,000 \\\text { Actual cost of fixed overhead costs incurred } & \$ 338,000\end{array}$

Clevenger Co. planned to produce and sell 30,000 units with a selling price of $10 per unit. Variable costs are expected to be $4 per unit and fixed costs are expected to be $80,000. Clevenger actually produced and sold 37,000 units. Using a contribution margin format: Prepare a flexible budget income statement for the actual level of sales and production.

Job #411 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. What is the total labor cost variance for Job #4115?

An internal report that helps management analyze the difference between actual performance and budgeted performance based on the actual sales volume (or other level of activity) is called a(n) :

The following company information is available for March. The direct materials price variance is:

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

Use the following data to find the direct labor rate variance if the company produced 3,500 units during the period.

Hatter, Inc. allocates fixed overhead at a rate of $17 per direct labor hour. This amount is based on 90% of capacity or 3,600 direct labor hours for 6,000 units. During July, Hatter produced 5,500 units. Budgeted fixed overhead is $66,000, and overhead incurred was $67,000. Required: Determine the volume variance for July.

Selected information from Richards Company's flexible budget is presented below: Richards Company applies overhead to production at a rate of $31.25 per unit based on a normal operating level of 80% of capacity. For the current period, Richards Company produced 5,400 units and incurred $62,000 of fixed overhead costs and $96,000 of variable overhead costs. The company used 11,000 labor hours to produce the 5,400 units. Calculate the variable overhead spending and efficiency variances, and the fixed overhead spending and volume variances. Indicate whether each variance is favorable or unfavorable.

Based on predicted production of 25,000 units, Marvel Mix Co. anticipates $175,000 of variable costs and $137,500 of fixed costs. What are the flexible budget amounts of total costs for 28,000 units?

Anniston Co. planned to produce and sell 40,000 units. At that volume level, variable costs are determined to be $320,000 and fixed costs are $30,000. The planned selling price is $10 per unit. Anniston actually produced and sold 42,000 units. Using a contribution margin format: (a) Prepare a fixed budget income statement for the planned level of sales and production. (b) Prepare a flexible budget income statement for the actual level of sales and production.

The sum of the variable overhead spending variance, the variable overhead efficiency variance, the fixed overhead spending variance is the ________.

The following information describes production activities of the Midtown Corp.: $\begin{array}{|l|l|} \hline\text { Raw materials used } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 16,000 \mathrm{lbs} . \text { at } \$ 4.05 \text { per } \mathrm{lb} . \\\hline& \text { 5,545 hours for a total of }\\ \text { Factory payroll .................... } &\$72,085\\\hline\end{array}$ 30,000 units were completed during the year Budgeted standards for each unit produced: 1/2 lb. of raw material at $4.15 per lb. 10 minutes of direct labor at $12.50 per hour Compute the direct materials price and quantity and the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.

The following information describes a company's usage of direct labor in a recent period. The direct labor efficiency variance is: