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Exam 23: Flexible Budgets and Standard Costs

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Question 61

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

A) True
B) False

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Question 62

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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:

A) Carried forward to the next accounting period.
B) Allocated between cost of goods sold, finished goods, and goods in process.
C) Closed to cost of goods sold.
D) Written off as a selling expense.
E) Ignored.

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

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Question 63

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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

Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards.

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:

The difference between the flexible budget sales and the fixed budget sales is called the __________________________ variance.

Regarding overhead costs,as volume increases:

Kyle,Inc.has collected the following data on one of its products.The direct materials price variance is: $\begin{array} { l l } \text { Direct materials stardard (4lbs. @ \$1/lb.) } & \$ 4 \text { per firished unit } \\\text { Total direct materials cost variance-unfavorable } & \$ 13,750 \\\text { Actual direct materials used } & 150,000 \text { bs. } \\\text { Actual firushed units produced } & 30,000 \text { units }\end{array}$

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

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

Adams,Inc.uses the following standard to produce a single unit of its product: overhead (2 hrs.@ $3/hr.) $ 6.The flexible budget for overhead is $100,000 plus $1 per direct labor hour.Actual data for the month show overhead costs of $150,000,and 24,000 units produced.The overhead volume variance is:

Identify the four steps in the budgetary control process.

A flexible budget expresses all costs on a per unit basis.

A variable or flexible budget is so named because it only focuses on variable costs.

A management approach that emphasizes significant differences from plans is known as ___________________.

A cost variance is the difference between actual cost and standard cost.

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

The difference between the actual cost incurred and the standard cost is called the:

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

Kyle,Inc.has collected the following data on one of its products.The direct materials quantity variance is: $\begin{array} { l l } \text { Direct materials stardard (4lbs. @ \$1/lb.) } & \$ 4 \text { per firished unit } \\\text { Total direct materials cost variance-unfavorable } & \$ 13,750 \\\text { Actual direct materials used } & 150,000 \text { bs. } \\\text { Actual firushed units produced } & 30,000 \text { units }\end{array}$