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Ch 20 / 21 / 19 Managerial Accounting 201b

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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 labor efficiency variance.

$2,000 F

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List the steps in cost variance analysis, with the first step on top.

1. prepare reports 2. analyze variances 3. questions and answers 4. take action

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 labor efficiency variance.

10,000 U Reason: (36,000 hrs x 1 hr x $10/hr) - (35,000 hrs x 1 hr x $10/hr)

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.

1000 F Reason: Labor cost variance = total actual cost - total standard cost. $84,000 - $85,000 = $1,000 F

LA Company has a beginning cash balance of $6,000, cash receipts of $12,000, cash payments of $7,200 and an outstanding loan balance of $1,500. Their preliminary cash balance is $

10800

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

A manufacturing company has budgeted direct labor hours of 940 at a budgeted direct labor hour rate of $15. The budgeted fixed cost is $950 per month. The total budgeted overhead cost will be $

15050

A manufacturer desires ending finished goods inventory of 5,000 units. Their budgeted unit sales are 20,000 units and beginning finished goods inventory is 3,000 units. The units to be produced is

20,000 plus 5,000 minus 3,000 equals 22,000 units. =22,000

A manufacturing company has budgeted production of 5,000 units for May and 4,400 units in June. Each unit requires 3 pounds of materials at a cost of $10 per pound. On May 1, there are 2,750 pounds of materials on hand. The company desires an ending materials inventory of 60% of the next month's materials requirements. The total cost of direct materials purchases for May will be $

201700

If direct materials per unit are $20, direct labor per unit is $10, variable overhead per unit is $2, and fixed overhead per unit is $1, total product cost per unit is $

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 manufacturing company accumulates the following data on fixed overhead: Actual fixed overhead cost incurred: $21,000; Budgeted fixed overhead: $20,000; Applied fixed overhead: $24,000. The fixed overhead volume variance is:

4,000 F Reason: Budget - applied. $20,000-$24,000=$4,000F.

A manufacturing company accumulates the following data on variable overhead: Actual cost incurred: $61,000; Budgeted variable overhead at hours used: $64,000; Applied variable overhead: $60,000. The variable overhead efficiency variance is:

4,000 U Reason: $64,000-$60000=$4,000U.

A company has budgeted overhead of $10,000 and standard overhead applied of $10,400. The volume variance is:

400 f Reason: $10,000 - 10,400 = $400 F

JP Service Company has budgeted direct labor hours of 100 and direct labor cost per hour of $25 for data analysis personnel and budgeted direct labor hours of 50 and direct labor cost per hour of $30 for staff accountants. JP Service Company's cost of direct labor is $

4000

A manufacturing company has units to produce of 940 units for the month. Each unit requires 3.5 hours of labor to produce. The cost of direct labor is $15 per hour. The total cost of direct labor for the month will be $

49350

A company has budgeted overhead of $8,750 and standard overhead applied of $9,250. The volume variance is:

500 F Reason: The volume variance is favorable. If applied is greater than budgeted, this is a favorable variances. This shows that they produced more units than planned, hence the favorable variance.

500 U Reason: Standard allowed=35,000 units x .5 pounds=17,500 pounds. Actual pounds=18,000. Actual 18,000-standard 17,500 x $1.00= $500 U

The fixed budget indicates direct labor costs of $27,500. Actual direct labor costs were $27,000. The variance is:

500 favorable

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 volume variance is $

7875

A company budgets the following direct materials purchases: April: $70,000; May $90,000; June: $60,000. All purchases are on account and the company pays 25% of purchases in the month of the purchase and the remaining amount in the following month. Cash payments for June for direct materials is $

82500

HA Service Company has total revenue of $8,500,000 and total employees of 100,000. HA Service Company's revenue per employee is $

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

BEFORE

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

The company did not reach its predicted operating level.

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

budgeted overhead based on a flexible budget

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

efficiency

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

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

month year and quarter

A report which presents overhead variance information along with variances from budgeted amounts is called a(n):

overhead variance report

a ___ variance occurs when management pays an amount different from the standard price to aquire 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

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

In a standard costing income statement, favorable variances are _____ cost of goods sold at standard cost.

subtracted from

The volume variance is computed as:

the difference between budgeted overhead and standard overhead applied

ABC Company prepared a cash budget for the month. The company has outstanding loans and desires a minimum cash balance of $10,000. If the company has a preliminary cash balance of $25,000, the company should:

use 15,000 to repay

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 $ _____

90 108

A company has the following loan activity—Additional loan from bank: $19,000; Ending cash balance: $5,600. The preliminary cash balance is:

Reason: They had to borrow $19,000 to have an ending cash balance of $5,600, so they had a negative preliminary cash balance. $5,600 - $19,000 = ($13,400)

A flexible budget performance report indicates a sales variance of $200 unfavorable. The variance was likely caused by:

selling units for less than the budgeted price

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

unfavorable

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

If income under variable costing is $500,000, fixed overhead in ending FG inventory is $10,000 and fixed overhead in beginning FG inventory is $15,000 then INCOME UNDER ABSORPTION COSTING IS:

$495,000

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.

1000 U Reason: $84,000 - $83,000 = $1,000 U

A company has the following budget information: Sales: $118,800; COGS: $48,500; Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the company budgets 40% for income tax expense, the amount of budgeted income tax expense will be $

10668

A manufacturing company has budgeted direct labor hours of 600 at a variable overhead rate per direct labor hour of $20. The budgeted fixed cost is $500 per month. The total budgeted overhead cost will be $

12500

A company expects to sell 400 units of Product X in January and expects sales to increase by 10% per month. If Product X sells for $10 each, the total sales for the first quarter of the year will be $

13240

14400 U Reason: $374,400 - (36,000 hr x $10/hr) = $14,400 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:

1600 U Reason: $12,000 - 10,400 = $1,600 U.

A manufacturing company expects to sell 12,000 units in August and 15,000 units in September. The company desires to have an ending finished goods inventory of 80% of the next month's sales. If beginning finished goods inventory on August 1 is 8,000 units, then the company should produce

16000

16002

A manufacturing company's sales budget indicates the following sales: January: $30,000; February: $20,000; March: $15,000. The company expects 80% of the sales to be on account. Credit sales are collected 30% in the month of the sale and 70% in the month following the sale. The total cash receipts collected during March will be $

17800

Hamilton Company has decided to use variable costing and has identified the following costs: direct materials $5, direct labor $10, variable overhead $3, fixed overhead $2. What is Hamilton Company's total unit cost?

18 dollars

A manufacturing company has the following budgeted overhead costs: Indirect materials: $0.50 per unit; Utilities: $0.25 per unit; Supervisory salaries: $60,000; Building rent: $80,000. If the company expects to produce 200,000 units using 100,000 hours of direct labor, the standard overhead rate will be $

2.90

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

2000 f Reason: $150,000 - $152,000 = $2,000 F

220 F Reason: $17,280 - (35,000 x 0.5 lb x $1/lb) = $220 F

A merchandising company's sales budget indicates the following sales: January: $25,000; February: $30,000; March: $35,000. Sales personnel are paid a salary plus commission. Salaries are expected to be $5,000 per month and the commission is 10% of sales. Additionally, advertising is expected to be $600 per month. The total selling expenses for the quarter will be $

25800

A company's sales budget indicates the following sales: January: 25,000; February: 30,000; March: 35,000. Beginning inventory is 12,000 units and the company desires ending inventory of 45% of the next month's sales. Units to be produced in January will be

26500

A manufacturing company accumulates the following data on variable overhead: Actual variable cost incurred: $61,000; Budgeted variable overhead at actual hours used: $64,000; Applied variable overhead: $60,000. The variable overhead spending variance is:

3,000 F Reason: $61,000 - $64,000 = $3,000 F

HN Company had a beginning cash balance of $50,000; cash payments of $15,000 and a loan balance with the bank of $7,000. If HN has an agreement with the bank that they will maintain a minimum cash balance of $30,000, their ending cash balance is $

30000

A manufacturing company's sales budget indicates the following sales: January: $25,000; February: $30,000; March: $35,000. The company expects 70% of the sales to be on account and the remainder to be cash sales. Credit sales are collected in the month following the sale. The total cash collected during March will be $

31500

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

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.

5000 U Reason: $150,000 - $145,000 = $5,000 U

Fixed costs equal $25,000; variable cost per unit is $2.50 and units produced are 10,000. The total budgeted costs is $

50000

A company expects to sell 500 units during the second quarter and 550 units in the third quarter. Currently, during the second quarter, they have 46 units in beginning inventory. If they desire ending inventory of 10% of the next quarter's sales,

509

Sales commissions are 10% of budgeted sales and the sales manager's salary is $1,000 per month. If budgeted sales are $50,000 for January, the total selling expenses budget for January is $

6000

A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Salary for sales manager: $30,000; Miscellaneous administrative expenses: $5,000. The total selling expenses on the January selling expense budget will be $

60000

A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Depreciation on store equipment: $25,000; Rent on administrative building: $30,000; Miscellaneous administrative expenses: $5,000. The total general and administrative expenses on the January general and administrative expense budget will be $

61250

XYZ Company makes a 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 quantity variance.

7000 F Reason: $145,000 - $152,000 = $7,000 F

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

A company budgets the following direct materials purchases: April: $70,000; May $90,000; June: $60,000. All purchases are on account and the company pays 25% of purchases in the month of the purchase, 50% in the month after the purchase, and the remaining balance in the second month after the purchase. Cash payments for June for direct materials is $

77500

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 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 volume variance.

895 U Reason: (9,500-10,000)x$1.79=$895 U.

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 $

90 108

cost variance formula

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

A company has the following budgeted information: Cash receipts: $542,000; Beginning cash balance: $10,000; Cash payments (including interest payments): $560,000; Outstanding loan balance: $100,000; Desired ending cash balance: $50,000. In order to maintain the desired cash balance, the company will need to:

Reason: Beginning balance $10,000 + cash receipts $542,000 - cash payments $560,000 = -8,000. Desired cash balance $50,000 + 8000 negative preliminary balance = $58,000 needed to borrow. 5800 to borrow

A company has a favorable direct materials price variance. A possible reason for this variance is that:

Reason: This would result in a favorable direct materials quantity variance. A possible reason for a favorable direct materials price variance is that the purchasing department purchased materials at a cost less than expected.

Direct materials are $15 per unit; direct labor is $7 per unit and variable overhead costs are $2 per unit. If total product costs are $27, what are fixed costs per unit?

Total unit cost is $27. Direct materials $15 + direct labor $7 + variable overhead $2 = $24. Therefore, fixed costs per unit = $27 - 24 = $3.00. =3

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

actual

math them

actual quantity - the input used to manufacture the quanity of output standard quantity--the expected input for the quantity output actual price -- the amount paid to aquire input standard price -- the preset, or expected price

In a standard costing income statement, unfavorable variances are _____ cost of goods sold at standard cost.

added to

A fixed budget performance report indicates a sales variance of $20,000 favorable. The reason for the variance:

cannot be determined from the fixed budget performance report

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

costs 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.

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

efficiency variance

If actual cost is less than standard cost, the variance is ___.

favorable

The static budget is an example of a:

fixed budget

A fixed budget performance report compares the:

fixed budget to the actual results

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

flexible

The report that compares actual performance and budgeted performance based on actual activity level is called a ______ budget performance report.

flexible

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

price variance quantity variance

A company has an unfavorable direct materials quantity variance. A possible reason for this variance is that:

the production department used more materials than expected

True or false: An overhead variance report can be used to help management identify individual overhead costs to investigate.

true

1,000 U Reason: Actual-budget. $21,000-$20,000=$1,000U.

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

A manufacturing company has variable overhead costs of $2.50 per unit and fixed costs of $5,000 per month. Each unit requires 4 hours of direct labor and the company expects to produce 2,000 units each month. The standard overhead rate will be $

Ch 20 / 21 / 19 Managerial Accounting 201b

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