Study4smart Quality review Materials

109.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.

1. Volume
variance

The difference between the total budgeted overhead cost and the overhead cost that was allocated to products using the __ _ predetermined fixed overhead rate. A planning budget based on a single predicted amount of sales or production volume; unsuitable for evaluations if the actual __ volume differs from the predicted volume. _ _ Preset costs for delivering a product, component, or service _ under normal conditions.

2. Manag
ement by exception 3. Cost variance 4.Qu antity variance

5. Flexible budget
6. Price variance

_ A process of examining the differences between actual and budgeted sales or costs and describing them in terms of the __ amounts that resulted from price and quantity differences. _ The difference between actual and budgeted sales or cost caused by the difference between the actual price per unit and the __ budgeted price per unit. A budget prepared based on predicted amounts of revenues and expenses corresponding to the actual level of output. _ _ _ _ _ 7. Fixed budget The difference between actual and budgeted cost caused by the difference between the actual quantity and the budgeted quantity. _ The combination of both overhead spending variances (variable and fixed) and the variable overhead efficiency variance. _ _ _

8. Varianc
e analysis

9. Standar d costs

10. Con
trollable variance

_ _

__

A management process to focus on significant variances and give less attention to areas where performance is close to the __ standard. The difference between actual cost and standard cost, made up of a price variance and a quantity variance.

1 10.Presented below are terms preceded by letters a through h and followed by a list of definitions 1 through 8. Enter the letter of the term with the definition, using the space preceding the definition.

1. Fixed
budget performance report

Difference in sales or costs, when the actual value is compared to the budgeted value, that contributes to a lower _ income.

2. Quantity
variance _

3. Favorable variance
_ _ A report that compares results with fixed budgeted amounts and identifies the differences as favorable or unfavorable _ variances.

The difference between the actual price of an item and its

standard price. _ _

4. Budgetary control

Difference in sales or costs, when the actual value is compared to the budgeted value, that contributes to a higher _ income.

Use of budgets by management to monitor and control the operations of a company. _

_ between actual quantity of an input and the standard quantity of the input. _

Difference

5. Flexible
budget performance report

6. Spending
variance _

7. Overhead
cost variance _

8. Unfavora ble variance

Difference between the total overhead cost applied to products and the total overhead cost actually incurred. _ _

_ A report that compares actual revenues and costs with their variable budgeted amounts based on actual sales volume _ (or other level of activity) and identifies the differences as _ variances. _

_ 111 .Define standard costs. How do they assist management?

1 12.Explain variance analysis. Describe how variance analysis assists managers.

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

114. Should both favorable and unfavorable variances be investigated, or only the unfavorable ones? Explain.

1 15.Briefly describe the procedure of management by exception.

1 16.Identify and explain the primary differences between fixed and flexible budgets.

1 17.Identify the four steps in the budgetary control process.

11 8.Flexible budgets may be prepared before or after an actual period of activity. Why would management prepare such budgets at differing time frames?

11 9.What are sales variances? How are they used?

120.Whistler Company determined that in the production of their products last period; they had a favorable price variance and an unfavorable quantity variance for direct materials. What might be the cause of this pattern of variances?

121.What are some causes of direct labor rate and efficiency variances?

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

123.How are unfavorable variances recorded? How are favorable variances recorded?

124.Abrams, Inc., provides the following results of March's

operations: Required: (a) Determine the total overhead cost variance for March. (b) Applying the management by exception approach, which of the variances shown are of greatest concern? Why?

125.Stanton Co. produces and sells two lines of t-shirts, Deluxe and Mega. Stanton provides the following data. Compute the sales price and the sales volume variances for each

product.

126.A company's flexible budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units?

127.Based on predicted production of 25,000 units, Best Co. anticipates $175,000 of fixed costs and $137,500 of variable costs. What are the flexible budget amounts of total costs for 20,000 and 30,000 units?

128.Casco 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. Casco 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.

129.A product has a sales price of $20. Based on a 15,000-unit production level, the variable costs are $12 per unit and the fixed costs are $6 per unit. Using a flexible budget for an actual production and sales level of 18,000 units, what is the budgeted operating income?

130. Thomas Co. provides the following fixed budget data for the

year:

Required: Prepare a flexible budget performance report for the year using the contribution margin format.

131 .Perkins Company provides the following data developed for its master

budget: Require d: Prepare flexible budgets for sales of 20,000, 22,000 and 24,000 units. Use a contribution margin format.

132. 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:

13 3.Big Bend Co. fixed budget for the year is shown below: Prepare a flexible budget for Big Bend Co. that shows a detailed budget for its actual sales volume of 42,000 units. Use the contribution margin format.

134.Jacques Company planned to use 18,000 pounds of material costing $2.50 per pound to make 4,000 units of its product. In actually making 4,000 units, the company used 18,800 pounds that cost $2.54 per pound. Calculate the direct materials price variance.

135.Jacques Company planned to use 18,000 pounds of material costing $2.50 per pound to make 4,000 units of its product. In actually making 4,000 units, the company used 18,800 pounds that cost $2.54 per pound. Calculate the direct materials quantity variance.

136.Job #305 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 #305?

137.DT Co. produces picture frames. It takes 3 hours of direct labor to produce a frame. DT's standard labor cost is $11.00 per hour. During March, DT produced 4,000 frames and used 12,400 hours at a total cost of $133,920. What is DT's labor rate variance for March?

138.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:

139.Use the following cost information to calculate the direct labor rate and efficiency variances and indicate

whether they are favorable or unfavorable.

140.The following informatio n describes production activities of the Central Corp.:

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.

141 .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.

142.Tiger, Inc. has developed the following standard cost data based on 60,000 direct labor hours, which is

75% of capacity. During the last period, the company operated at 80% of capacity and produced 128,000 units. Actual costs were: Determine the direct materials price and quantity variances and the direct labor rate and efficiency variances. Indicate whether each variance is favorable or

unfavorable.

143.Fairfield Co. collected the following information about its production activities for the current year.

a. Compute the direct materials price and quantity variances and indicate whether each is favorable or
unfavorable. b. Prepare the journal entry to record the issuance of direct materials into production. Actual costs and quantities:

Direct materials used 95,000 lbs. @ $6.30 per lb. Units completed during the year, 50,000 units Standard costs and quantities: Price per lb. of direct material, $6.05 Two lbs. of direct material per unit

144.Falcon Company's output for a period was assigned the standard direct labor cost of $17,160. If the company had a favorable direct labor rate variance of $1,000 and an unfavorable direct labor efficiency variance of $275, what was the total actual cost of direct labor incurred during the period?

145.Woods, Inc. budgeted the following overhead costs for the current year assuming operations at 80% of

capacity, or 40,000 units: Th e st an da rd cost per unit when operating at this same 80% capacity level

is: The actual production achieved in the current year was 60% of capacity, or 30,000 units. The actual costs

were:

Calculate the following variances and indicate whether each is favorable or

unfavorable.

146.Manatee Corp. has developed standard costs based on a predicted operating level of 352,000 units of productio n, 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:

$

147.The following information comes from the records of Dina Co. for the current period.

a. Compute the direct materials price and quantity variances, direct labor rate and efficiency variances and state whether the variance is favorable or unfavorable. b. Prepare the journal entries to charge direct materials and direct labor costs to goods in process and the materials and labor variances to their proper

148.The following information comes from the records of Dina Co. for the current period.

a. Compute the overhead controllable and volume variances. In each case, state whether the variance is favorable or unfavorable. b. Prepare the journal entries to charge overhead costs to goods in process and the overhead variances to their proper accounts.

Factory overhead (based on budgeted production of 24,500 units) Variable overhead $2.25/direct labor hour Fixed overhead $1.95/direct labor hour

149.If Falcon Company's actual overhead incurred during a period was $32,700 and the company reported a favorable overhead controllable variance of $1,200 and an unfavorable overhead volume variance of $900, how much standard overhead cost was assigned to the products produced during the period?

150.A company's flexible budget for 36,000 units of production showed variable overhead costs of $54,000 and fixed overhead costs of $50,000. The company actually incurred total overhead costs of $95,300 while operating at a volume of 32,000 units. What is the controllable variance?

151 .During November, Heim 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, Heim 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)

152.Selecte d informatio n from Michaels Company's flexible budget is presented

below: Michaels 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, Michaels 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. Variable overhead

153.Cheshire, Inc. allocates fixed overhead at a rate of $18 per direct labor hour. This amount is based on 90% of capacity or 3,600 direct labor hours for 6,000 units. During May, Cheshire produced 5,500 units. Budgeted fixed overhead is $66,000, and overhead incurred was $67,000. Required: Determine the volume variance for May.

154.Prichard Company has developed the following standard cost data based on 60,000 direct labor hours, which is 75% of capacity . Fixed overhea d is $360,00 0 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.

155.Chips Co. assigned direct labor cost to its products in May for 1,300 standard hours of direct labor at the standard $8 per hour rate. The direct labor rate variance for the month was $200 favorable and the direct labor efficiency variance was $150 favorable. Prepare the journal entry to charge Goods in Process Inventory for the standard labor cost of the goods manufactured in May and to record the direct labor variances. Assuming that the direct labor variances are immaterial, prepare the journal entry that Chips would make to close the variance accounts.

156.Calais Company's fixed budget for the first quarter of the calendar year appears below. Prepare flexible budgets that show variable costs per unit, fixed costs and two different flexible budgets for sales volumes

of 22,000 and 24,000.

157. Gates Company reports the following information regarding the production on one of its products for the month. Compute the direct materials cost variance, the direct materials price variance, the direct materials quantity variance and identify each as either favorable or

158. Gates Company reports the following information regarding the production on one of its products for the month. Compute the direct labor cost variance, the direct labor rate variance, the direct labor efficiency variance and identify each as either favorable or

159.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.