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Exam 24: Flexible Budgets and Standard Costs

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Question 21

True/False

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Sales variances may be computed in a manner similar to cost variances-that is, computing both price and volume variances.

A) True
B) False

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Question 22

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The following information relating to a company's overhead costs is available. Based on this information, the total overhead variance is: Based on this information, the total overhead variance is:

A) $7,000 favorable.
B) $6,000 favorable.
C) $1,000 unfavorable.
D) $6,000 unfavorable.
E) $1,000 favorablE.

F) A) and D)
G) D) and E)

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Question 23

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Regarding overhead costs, as volume increases:

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the company produces and sells 16,000 units is:

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

Define standard costs. How do they assist management?

A report based on predicted amounts of revenues and expenses corresponding to the actual level of output is called a:

Another name for a static budget is a variable budget.

A flexible budget is also called a _______________ budget.

Duval, Inc. budgets direct materials at $1/liter and each product requires 4 liters per unit of finished product. April's activities show usage of 832 liters to complete 196 units at a cost of $798.72. Compute the direct materials price and quantity variances. Indicate is the variance is favorable or unfavorable.

A flexible budget expresses variable costs on a per unit basis and fixed costs on a total basis.

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

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?

Although a fixed budget is only useful over the relevant range of operations, a flexible budget is useful over all possible production levels.

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

What are the four steps in the effective management of variance analysis?

While companies strive to achieve ideal standards, reality implies that some loss of materials usually occurs with any process.

Kyle, Inc. has collected the following data on one of its products. The direct materials price variance is:

In producing 700 units of Product CBA last period, Cobalt Company used 5,000 pounds of Material H, costing $34,250. The company has established the standard of using 7.2 pounds of Material H per unit of CBA, at a price of $7.50 per pound. Calculate the materials price and quantity variances associated with producing the 700 units, and indicate whether they are favorable or unfavorable:

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.