Accounting Ch 21

A company has budgeted total overhead at actual units produced of $10,400. The company has actual total overhead of $12,000. The controllable variance is:

Reason: $12,000 - 10,400 = $1,600 U.

A manufacturing company has an unfavorable volume variance. Which statement is true?

The company did not reach its predicted operating level.

Budget reports are commonly prepared for: (Check all that apply).

a month. a year. a quarter.

Budget reports are commonly prepared for: (Check all that apply).

a quarter. a month. a year.

The standard overhead applied is based on the ______ level of activity multiplied by the predetermined overhead rate.

actual

When recording journal entries for production costs using a standard cost accounting system, the credit to Raw Materials Inventory for the materials used in production is for the ______ amount.

actual

The overhead variance is the difference between:

actual total overhead and the standard overhead applied

A flexible budget prepared (before/after) the period begins allows management to make adjustments to increase profits or decrease losses.

before

When recording journal entries for production costs using a standard cost accounting system, the favorable variances are recorded as ______ and the unfavorable variances are recorded as ______.

credits; debits Reason: The favorable variances are recorded as credits and the unfavorable variances are recorded as debits.

Step 1 of computing a standard overhead rate is to:

determine an allocation base

A(n) (labor/spending/volume/efficiency) variance occurs when the standard direct labor hours expected for actual production differs from the actual direct labor hours used.

efficiency

When standard direct labor hours differ from actual direct labor hours used, the company experienced a(n):

efficiency variance

When standard direct labor hours differ from actual direct labor hours used, the company experienced a(n):

efficiency variance Reason: When standard direct labor hours differ from actual direct labor hours used, the company experienced an efficiency variance.

All of the following individuals work to help set standard costs

engineers managerial accountants purchasing managers

When compared to the budgeted amount, if the actual cost or revenue contributes to a higher income, then the variance is considered .

favorable

The first step in preparing a flexible budget is to:

identify activity levels

Which of the following are examples of an overhead allocation base:

machine hours direct labor hours

When preparing a flexible budget, variable costs are expressed as a constant amount _____, and fixed costs are expressed as a constant amount _____.

per unit; in total

The main factors that can cause a variance include the following. Select all that apply.

quantity variance price variance

A___ variance is the difference between the actual quantity of input used and the standard quantity of input that should have been used.

quantity, usage, or efficiency

Budget compare actual results to budgeted results.

reports or report

A(n) variance occurs when management pays an amount different from the standard price to acquire an overhead item.

spending

The difference between the actual amount paid and the standard price paid to purchase an overhead item is called a

spending variance Reason: The difference between the actual amount paid and the standard price paid to purchase an overhead item is called a spending variance.

Preset costs for delivering a product or service under normal conditions are called costs.

standard

When recording journal entries for production costs using a standard cost accounting system, the debit to Work in Process Inventory is for the ______ amount.

standard

Costs developed which identify what products should cost are called

standard costs.

Standard costs have which of the following characteristics? (Check all that apply.)

they are preset costs for delivering a product or service under normal conditions they are used to help management understand reasons for variances production managers help determine production requirements for a unit of product

A company has budgeted total overhead at actual units produced of $10,400. The company has actual total overhead of $12,000. The controllable variance is:

$1,600 U

The fixed budget indicates sales of $50,000. Actual sales were $55,000. The variance is:

$5,000 favorable

A company has budgeted total overhead of $10,575 at actual units produced and actual total overhead of $9,775. The controllable variance is:

$800 F

A company sells a product for $3. The company prepares a flexible budget at two sales volumes. At a sales volume of 50 units, budgeted sales will be $. At a sales volume of 60 units, budgeted sales will be $.

150 180 ($3 * 50) and ($3 * 60)

Actual sales volume for a period is 5,000 units. Budgeted sales volume is 4,500. Actual selling price per unit is $15 and budgeted price per unit is $15.75. The sales price variance is $.

3750

A company budgets administrative salaries at $5,000 at a sales level of 1,000 units. At a sales level of 1,200 units, budgeted administrative salaries will be $.

5000

A company sells a product for $3. Direct materials are $1.80 per unit. The company prepares a flexible budget at two sales volumes. At a sales volume of 50 units, budgeted direct materials will be $. At a sales volume of 60 units, budgeted direct materials will be $.

90 (50*1.08) 108 (60*1.08)

Match the cost variance component to its definition.

Actual quantity---The input used to manufacture the quantity of output Standard quantity---The expected input for the quantity of output Actual price---The amount paid to acquire input Standard price---The expected price

At the end of the accounting period, if the net amount of the variances is immaterial, the variance accounts are closed to:

Cost of Goods Sold Reason: At the end of the accounting period, if the net amount of the variances is immaterial, the variance accounts are closed to Cost of Goods Sold.

Which of the following is the correct formula?

Cost variance = (AQ x AP) - (SQ x SP)

True or false: Volume variances are due to the difference between expected production and actual production and, therefore, never need to be investigated.

False

A flexible budget has which of the following characteristics?

Often based on several levels of activity Useful to compare what-if scenarios Useful for evaluating past performance

XYZ Company makes one product and has calculated the following amounts for direct materials: AQ x AP = $150,000; AQ x SP = $145,000; SQ x SP = $152,000. Compute the direct materials price variance.

Reason: $150,000 - $145,000 = $5,000 U

ABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the direct materials price variance.

Reason: $17,280/18,000=.96 actual cost. $1.00-.96=.04 x 18,000 lbs = $720 F 720 F

ABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the direct labor variance.

Reason: $374,400 - (35,000 units x 1 hr x $10/hr) = $24,400 U

A company had a standard sales price of $1.79 per unit and expected to sell 10,000 units. Due to a downturn in the economy, the product was marked down to $1.59 per unit and the company only sold 9,500 units. Calculate the sales price variance.

Reason: ($1.59-$1.79)x9500=$1,900U.

XYZ Company makes one product and has calculated the following amounts for direct labor: AH x AR = $84,000; AH x SR = $83,000; SH x SR = $85,000. Compute the direct labor cost variance.

Reason: Labor cost variance = total actual cost - total standard cost. $84,000 - $85,000 = $1,000 F

True or false: A flexible budget reporting sales volumes at three different levels will have the same fixed costs.

True