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Exam 6: Performance Evaluation: Variance Analysis

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Question 41

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Assume you have been assigned to a team responsible for using the flexible budget to assist in determining managers' bonuses.When you approach the production manager about some variances,he says,"I don't know why your team can't just use the budget we developed at the beginning of the year.It was based on last year's actual numbers which seems reasonable.I don't understand this 'flexible budget' stuff.When I compare my actual results with our beginning of the year budget I have beat the budget,so that should be sufficient.That will save us all a lot of time and effort." Explain to the sales manager why a flexible budget is better than a static budget and its use in evaluating performance.

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A flexible budget is a budget that is pr...

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Question 42

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Assembly line workers at Thompson Manufacturing worked a total of 8,800 direct labor hours to produce 36,000 units. The standard for producing one unit is 15 minutes at a wage rate of $10. If the actual wage rate was $10.50 per direct labor hour, Thompson’s direct labor efficiency variance is

A) $2,000 favorable
B) $2,000 unfavorable
C) $2,100 favorable
D) $2,100 unfavorable

E) None of the above
F) All of the above

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Question 43

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Why is the direct materials price variance based on the quantity of materials purchased,but the direct materials quantity variance on the quantity of materials used?

A flexible budget is a budget based on the budgeted sales volume at the beginning of the period.

The flexible budget breaks down into the rate and efficiency variances for direct labor. a.List two reasons why actual wage rates might differ from standard wage rates,resulting in a direct labor rate variance. b.List two reasons why actual labor hours might differ from standard labor hours,resulting in a direct labor efficiency variance.

If the actual price of direct materials is $200 and the standard price of the direct materials is $180,

R&N Manufacturing produces music boxes.This year's budget was based on the production of 3,000 music boxes using a standard of 3 direct labor hours per music box and $4 variable overhead per direct labor hour.R&N incurred 9,200 hours to produce 2,950 music boxes.If actual variable overhead for the year is $32,000,what is R&N's variable overhead spending variance?

Variances are labeled as

The fixed overhead spending variance is the difference between actual fixed overhead cost and budgeted fixed overhead cost.

The master budget is an example of a

Which of the following is not an explanation for a favorable variable overhead spending variance?

Assume R&N Manufacturing has always used a static budget approach to analyze variances, but the new controller has suggested that the company implement a flexible budget strategy. Required: Answer the following questions relating to flexible budget variances. a. What are the direct materials and direct labor variances that the controller will be analyzing? b. Give an example of what would cause each variance to be favorable. c. Give an example of what would cause each variance to be unfavorable.

Adobe Company produces electric lawn mowers suitable for home and industrial use.During the year Adobe produced 54,000 mowers,using 163,000 direct labor hours.Adobe's fixed overhead rate is $12 per direct labor hour and the company budgeted 166,500 direct labor hours.Actual fixed overhead for the year was $1,996,000.What is Adobe's fixed overhead spending variance?

Which of the following is not a factor that managers use in deciding whether to investigate a variance?

The difference between actual sales volume and budgeted sales volume has an effect on

Normally,managers will not see many fixed overhead spending variances because

The direct materials price variance is calculated using which of the three amounts?

The direct labor rate variance is part of the direct labor flexible budget variance that arises when the actual wage rate differs from the standard wage rate.

Backyard Creations purchased 7,200 feet of copper tubing at a price of $2.60 per foot and used 7,500 feet during the period.The standard price of the copper tubing was $2.70 per foot.What is Backyard Creations' direct materials price variance for the period?

Hobart Company manufactures patio umbrellas.The direct labor standard for each umbrella is 1.25 direct labor hours at a standard rate of $12.00 per hour.During June,Hobart used 36,000 direct labor hours to produce 30,000 umbrellas.Hobart's direct labor payroll totaled $428,400.What is Hobart's direct labor rate variance for November?