Acct 2213 Chapter 8

$49000 Net operating income on the planning budget for 5000 units would be 49000 49000 = $13 CM x 5000 Units - Fixed expenses of 16000.

Khan Corp has budgeted the unit sales for April to be 5000 units. The sales price is $25 per unit and production costs are $10 per unit. Monthly utility exp are estimated to be $2000 plus $2 per unit whereas selling expenses are estimated to be $12000. The company pays a monthly rent of $2000. What is the net operating income in the company's planning budget?

$14000 The amount of utility expenses on the flexible budget for 6000 units would be $14000 $14000 = $2000 + ($2 x 6000 units)

Khan Corp has budgeted the unit sales for April to be 5000 units. The sales price is $25 per unit and production costs are $10 per unit. Monthly utility exp are estimated to be $2000 plus $2 per unit whereas selling expenses are estimated to be $12000. The company pays a monthly rent of $2000. What would be the utility expenses on the company's flexible budget if actual unit sales for April were 6000 units?

revenue variance

difference between what revenue should have been at the actual level of activity and the actual revenue.

False

True or False A planning budget is prepared to determine the costs that should have been incurred for the actual level of activity during the period.

True

True or False An unfavorable quantity variance indicates that more material was used to produce the actual output than the standard allows.

False

True or False Assigning highly skilled, highly paid workers to low skill, low pay level jobs will cause a favorable labor rate variance.

True

True or False How production supervisors use direct labor workers can lead to labor rate variances.

True

True or False Overtime premiums can cause an unfavorable labor rate variance.

True

True or False Standards provide info for measuring performance

standard

A benchmark used in measuring performance is called a _____.

difference between what a cost should have been at the actual level of activity and the actual amount of the cost

A spending variance is the

Unfavorable variance

Actual revenue is less than budgeted revenue

Favorable variance

Actual revenue is more than budgeted revenue.

Flexible budget

An estimate of what revenue and costs should have been, based on the actual level of activity is shown on a _____.

the actual amount of material used is greater than the standard amount of material allowed for the acutal output

An unfavorable materials quantity variance occurs when

$3000 Unfavorable Budgeted selling cost - acutal selling cost = selling cost variance. 25000 - 28000 = -3000

Budget Solutions has determined from its flexible budget that selling costs for actual level of activity for a period should have been $25000. Actual selling costs incurred during the period were $28000. What is the amount and direction of variance in selling costs?

$5.00 per machine hour The predetermined OH rate is total estimated overhead cost ($350000) divided by the estimated total of the allocation base (70000 hours) 350000/70000 = 5

Calculate the predetermined OH rate using machine hours as the allocation base Budgeted overhead $350000 Budgeted production $28000 units Total budgeted machine hours 70000 hrs Acutal production 20000 units Standard machine hr allowed for actual production 50000 hrs Acutal machine hours used for production 52000 hrs

price standard

How much should be paid for an input is indicated by a ____ ____.

Variable

If activity levels are lower than expected, total ______ costs should be lower than expected.

unfavorable

If the actual cost is greater than the flexible budget cost, the spending variance will be

Static planning budget

Only considers the planned level of activity.

Flexible

Revenues and costs are adjusted as the level of activity changes on a ______ budget.

employment taxes fringe benefits the direct labor rate per hour

Standard rate per hour includes

Flexible budget

Takes into account changes in level of activity

Actual fixed overhead and budgeted fixed overhead. Actual fixed OH - Budgeted fixed OH = Budget variance

The calculation of the budget variance uses _____.

quantity

The difference b/t the amount of an input used and the amount that should have been used all evaluated at the standard price for the input, is called a ___ variance.

Standard

The final, delivered price that should be paid for each unit of direct materials is the _______ price per unit of materials.

actual; standard

The material quantity variance reflects the difference b/t the ____ quantity of materials used in production and the ___quantity allowed for the actual output.

actual

The materials price variance is calculated using the ____ quantity of the input purchased.

actual quantity of the input purchased actual price of the input standard price of the input

The materials price variance is calculated using the:

- simplifies bookkeeping - allows materials to be carried in the inventory accounts at standard cost - management can generate more timely variance reports

The materials price variance is generally calculated at the time materials are purchased because:

standard hours per unit

The most difficult standard to determine is perhaps the

7500 for supplies [6250/1000 = $6.25 per unit x 1200 = 7500] $28800 revenue [24000/1000= 24 per unit x 1200 = 28800]

The planning budget calls for total variable costs for supplies to be $6250 based on 1000 units with planned revenue at $24000. A total of 1200 units were actually produced and sold. What amounts should appear on the flexible budget?

True Computing the price variance when the materials are purchased allows materials to be carried in the inventory accounts at their standard cost. This greatly simplifies bookkeeping.

True or False To ensure that inventories are carried at their standard costs, the price variance should be computed when the materials are purchased.

False

True or False Wage rates paid to workers are unpredictable in most companies.

True

True or False When actual results depart significantly from the standard, the reasons why should be investigated.

$4125 Unfavorable The labor rate variance is AH(AR-SR) =5500 x (14.75-14.00) = 4125

Use the following info to calculate the labor rate variance for Adkinson Company Actual hours used 5500 Standard hours allowed 5800 Actual labor rate $14.75 per hr Standard labor rate $14.00 per hr

flexible

What costs and revenues should be tfor the actual level of activity is shown on a ____ budget.

True The variable overhead efficiency variance measures the difference between the actual hours used in production and the hours that should have been used times the standard variable overhead rate.

The variable overhead efficiency variance measures the difference between the actual hours used in production and the hours that should have been used times the standard variable overhead rate.

fixed ; standard

The volume variance = the ____ component of the predetermined overhead rate x (denominator hours - the ____ hours allowed for the actual output).

True

True of False The activity base that is used to apply overhead to units of a product is usually machine hours or direct labor hours

False The variable overhead efficiency variance doesn't tell us anything about how efficiently overhead resources were used. It depends solely on how efficiently the allocation base was used.

True or False The variable overhead efficiency variance tells us how efficiently overhead resources were used.

False

True or False When direct labor is used as the base for applying overhead, if the direct labor efficiency variance is unfavorable the variable overhead efficiency variance will be favorable.

3000 lbs Standard quantity allowed = Actual output x Standard quantity

Warren, Inc. standard cost card indicates that each widget should require 2 lbs of material. In July warren budgeted 2000 widgets and actually produced 1500 widgets. Each widget produced used 2.2 of material. The standard quantity of materials allowed for July is:

$400 U Comparing the actual hours used with the standard hours, we determine that the company used more labor hours than what was actually estimated. Labor efficiency variance = (AH-SH) x SR =(2200 - 2000) x 2 =200 x 2 = 400 U

What is the labor efficiency variance for the month of March? Actual hours of Input at actual rate (AH x AR) =(2200 hrs x $1.90) Actual Hrs of Input at standard rate (AH x SR) =(2200 hrs x $2.00) Standard Hrs Allowed for Actual Output at Standard Rate (SH x SR) =2000 hrs x $2.00)

$220 F Comparing the actual labor rate with the standard labor rate we determine that the company could pay laborers a lower rate than what was estimated. Labor rate variance = AH x (AR - SR) =(1.90 - 2.00) x 2200 =(-0.10) x 2200 =-220

What is the labor rate variance for the month of March? Actual hours of Input at actual rate (AH x AR) =(2200 hrs x $1.90) Actual Hrs of Input at standard rate (AH x SR) =(2200 hrs x $2.00) Standard Hrs Allowed for Actual Output at Standard Rate (SH x SR) =2000 hrs x $2.00)

$180 U Comparing the actual hours used at the actual rate with the standard hours that should have been used at the standard rate, we determine that the company paid $180 more than what was expected, or that there was an unfavorable variance of $180 AH x AR = 4180 AH x SR = 4400 SH x SR = 4000 spending variance = standard hrs allowed at standard rate - actual hours at actual rate =(SH x SR) - (AH x AR)

What is the spending variance for the month of March? Actual hours of Input at actual rate (AH x AR) =(2200 hrs x $1.90) Actual Hrs of Input at standard rate (AH x SR) =(2200 hrs x $2.00) Standard Hrs Allowed for Actual Output at Standard Rate (SH x SR) =2000 hrs x $2.00)

labor efficiency

When demand for a product is insufficient to keep all of the production workers busy and no layoffs occur, an unfavorable ______ ______ variance may occur.

debited; credited

When recording the standard cost journal entry for direct labor, unfavorable labor variances are ___ and favorable labor variances are ___.

unfavorable

When the standard purchase price is less than the actual price paid for materials the material price variance is ___.

in the WIP account at standard cost

When using standard cost journal entries, direct labor costs are recorded

a. and c. freight and transportation costs are used in calculating the standard price per unit.

Which of the following are used to calculate the standard quantity per unit of direct materials? a. direct materials requirements per unit of finished product b. freight and transportation cost c. allowance for waste and spoilage.

2000 U SQ Standard quantity allowed = 12000 Actual units * 2 yards per unit = 24000 yards AQ = 2SQ = 2 * 12000 Quantity Variance = SP(AQ - SQ) =$2(25000 yards - 24000 yards) =$2 * 1000 =$2000

Zeta Corp is a manufacturer of sports caps which require soft fabric. Each cap requires 2.00 yards of soft fabric, at a cost of $2.00 per yard. During the month of January, the company purchased 25000 yards of soft fabric at $2.10 per yard to produce 12000caps. What is Zeta Corp's materials quantity variance for the month of January?

$2500 U Price variance = Budgeted cost - actual cost = (2*25000) - (2.10*25000) = 50000 - 52500 = 2500

Zeta Corp is a manufacturer of sports caps which require soft fabric. Each cap requires 2.00 yards of soft fabric, at a cost of $2.00 per yard. During the month of January, the company purchased 25000 yards of soft fabric at $2.10 per yard to produce 12000caps. What is Zeta Corp's price variance for the month of January?