ACCT 202 Chapter 21

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

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

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.

$1,000 F

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 rate variance.

$1,000 U $84,000 - $83,000 = $1,000 U

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 $12,000 - 10,400 = $1,600 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 labor rate variance.

$14,400 U $374,400 - (36,000 hrs x $10/hr) = $14,400 U

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

$5,000 favorable

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

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.

$720 F

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 flexible budget has which of the following characteristics?

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

True or false: Volume variances are due to not producing at the predicted (expected) activity level. Therefore, the volume variance does not need to be investigated.

False

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

True

Budget reports are commonly prepared for:

a month. a year. a quarter.

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

actual

The overhead variance is the difference between

actual total overhead and the standard overhead applied

The controllable variance is the difference between the actual total overhead and:

budgeted overhead based on a flexible budget

Step 1 of computing a standard overhead rate is to:

determine an allocation base

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

favorable

The standard overhead rate is computed separately for:

fixed and variable costs

Management uses a(n) _____________ budget to establish the standard overhead rate.

flexible

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

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

quantity

The controllable variance is so called because it:

refers to activities usually under management control

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

standard

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

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.

$1,900 U

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

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.

$24,400 U

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.

$5,000 U

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

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

Before

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 $

Blank 1: 90 Blank 2: 108

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 $.

Blank 1: 90 Blank 2: 108

Which of the following is the correct formula?

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

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

Quantity variance Price variance

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

The company did not reach its predicted operating level.

All of the following individuals work to help set standard costs:

purchasing managers managerial accountants engineers

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

quantity

Budget _________ compare actual results to budgeted results.

reports

Costs developed which identify what products should cost are called

standard costs