A306 Exam 3
a flexible budget performance report combines the
activity variances with revenue and spending variances
the final schedule of the master budget is the ____
budgeted balance sheet
a quantity variance is
calculated using the standard price of the input
budgets ___
communicate management's plan throughout the organization
the amount of direct labor hours that should be used to produce one unit of finished goods is the _____ hours per unit
standard
the labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by
standard hourly rate
revenue and spending variances
subtract flexible budget from actual results
which of the following is needed to prepare a sales budget?
the budgeted number of units to be sold
a performance report shows that the planning revenue was $200,000, the flexible budget revenue was $225,000, and the actual revenue was $223,000. what is true about this?
the revenue variance is $2,000 unfavorable the activity variance is $25,000 favorable
fixed costs are often more controllable than variable costs
true
a spending variance is the
difference between what a cost should have been at the actual level of activity and the actual amount of the cost
the materials price variance is
- impacted by the delivery method chosen - charged to the production manager when production problems occur - generally, the responsibility of the purchasing manager
a materials price variance is equivalent to a labor ____ variance and a materials quantity variance is equivalent to a labor ____
- rate - efficiency
to understand why actual net operating income differs from what it should have been at the actual level of activity, the _____ variances should be analyzed
- revenue and spending
all costs of production other than direct materials and direct labor are shown on the
manufacturing overhead budget
an integrated business plan that formally lays out the company's goals is called the ____ budget
master
in large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the ____ budget
selling and administrative
the difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n) _____ variance
spending
the number of working hours required to satisfy the production budget is shown on the
direct labor budget
in a manufacturing company, the ___ ___ budget details the raw materials that must purchased to fulfill the production budget and to provide for adequate inventories
direct materials
when the actual quantity of materials used is less than the standard quantity allowed, the material variance is ___ _
favorable
a budget that takes into account how costs are affected by changes in level of activity is called a(n) _____ budget
flexible
an estimate of what revenue and costs should have been, based on the actual level of activity is shown on a
flexible budget
an estimate of what revenue should have been, based on the actual level of activity is shown on a ___
flexible budget
the materials price variance is generally the responsibility of the ____ manager
purchasing
a favorable activity variance may not indicate good performance because a favorable activity variance
for a variable cost will occur simply because of the actual level of activity is less than the budgeted level of activity
borrowing money is required whenever ____
- there is a cash deficiency - the cash excess is less than the minimum required cash balance
an unfavorable labor efficiency variance can result from ___
- unmotivated workers - faulty equipment - poor quality materials
the annual master budget file includes the _____from last year because it is needed for the schedule of expected cash collections
balance sheet
when the standard price is higher than the actual price, the materials price variance is
favorable
in a manufacturing company, the ____ budget is prepared right after the sales budget
production
material requirements plus an allowance for normal inefficiencies are added together to determine the ____ ____ per unit of output for direct materials
standard quantity
the spending variance is
(AQ x AP) - (SQ x SP)
a budget that is prepared at the beginning of the period for a specific level of activity is called a _____ budget
planning
(Actual cost per unit - standard cost per unit) x actual quantity = materials ___ variance
price
the purchasing manager is generally responsible for the material ____
price variance only
given the following, the standard cost of this item is $ ______ per unit - Direct materials per unit 2 pounds Direct material cost $2.50 per pound Direct labor per unit .75 hours Direct labor rate $16.00 per hour Variable overhead rate $8.00 per hour
$23(16*0.75) + 2.5 + 8
the amounts under the year column in the cash budget always equal the sum of the amounts for the months or quarters of the budget
FALSE
one option to generate a favorable ___ variance for net operating income is to increase the number of clients
activity
the difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) ____ variance
activity
if poor-quality materials results in excessive labor processing time, the _____ manager will probably be held responsible for the labor efficiency variance
purchasing
a price variance is the difference between
actual price and the standard price multiplied by the actual amount of the input
required borrowings on a cash budget is calculated by ____
adding the desired ending cash balance to the amount of the cash deficiency
the spending variance is the ______
difference between what a cost should have been at the actual level of activity and the actual amount of the cost
the difference between the actual hours used and the standard hours allowed for actual output is used in the calculation of the labor ____ variance
efficiency
the cost of unsold units is computed on the ____ budget
ending finished goods inventory
when actual revenue _____ what the revenue should have been, the variance is labeled as favorable
exceeds
When the standard price is higher than the actual price, the materials price variance is ______.
favorable
when the actual quantity of materials used is less than the standard quantity allowed, the material quantity variance is ____
favorable
Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is ______ units.
13,000
when preparing a flexible budget, the level of activity
affects variable costs only
the materials price variance is the difference between the actual price of materials
and the standard price for materials with the difference multiplied by the actual quantity
because it is needed for the schedule of expected cash collections, the annual master budget file includes the
balance sheet from the year prior
working hours required to satisfy the production budget are shown on the _____ budget
direct labor
if the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 is
$108,000
a budgeted balance sheet is developed using data from the ____ of the budget period and data contained in the various schedules
beginning
the variance analysis cycle ______
begins with the preparation of performance reports
which of the following budgets shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured?
budgeted income statement
the receipts, disbursements, excess or deficiency, and financing sections are all part of the _____budget
cash
which of the following is not found in the financing section of the cash budget?
cash deficiency
on the cash budget, what is subtracted from total cash available to find the cash excess or deficiency
cash disbursements
Gathering feedback to ensure that the plan is being followed is referred to as
control/controlling
when creating an excel budget and performing what-if analysis, it is generally easiest to
create the budget with a budgeting assumptions tab
comparing actual costs to what the costs should have been for the actual level of activity is done a(n) ___ budget
flexible
a company's planned net profit that serves as benchmark against subsequent company performance can be measured is shown on the budgeted
income statement
unfavorable activity variances may not indicate bad performance because
increased activity should result in higher variable costs
the cash budget ______
is prepared near the end of the master budget process
poor supervision is one possible cause of an unfavorable ____ variance
labor efficiency
using budgeting assumptions when preparing the master budget, ____
makes it easier to answer the "What-if" questions
all costs of production other than direct materials and direct labor are shown on the _____ budget
manufacturing overhead
the calculation of unit product cost requires information from the _____ budget
manufacturing overhead
a number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the
master (static/planning) budget
Facing labor shortages or having to hire or lay off workers at awkward times are consequences of _____
neglecting to budget the amount of labor time that will be needed
the first line of the direct labor budget consists of the budgeted units expected to be ____ during the period
produced
in a manufacturing company, the ______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.
production
in a manufacturing company, the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget are all based on the ___ budget
production
the budgeted income statement does not rely on information from the _____ budget
production
the cash budget uses information from several other budgets. which of the following budgets is not used to prepare the cash budget?
production
the direct labor budget is based directly on the ____ budget
production
the labor efficiency variance is generally the responsibility of the ____ manager
production
the difference between the actual materials used in production and the standard amount allowed for the actual output is reflected in the materials ____ variance
quantity
the difference between the amount of input used and the amount that should have been used, all evaluated at the standard price for the input, is called a ____ variance
quantity
the difference between the standard and the actual direct labor wages per hour is reflected in the labor ____ variance
rate
what number does the direct materials budget take directly from the production budget?
required production
the difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n) ____ variance
revenue
the difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n) _____ variance
revenue
because all other parts of the budget depend on it, if the _____ budget is inaccurate, the rest of the budget will be inaccurate
sales
the first step in the budgeting process is preparing the ____ budget
sales
what is usually the major source of receipts in the receipts section of the cash budget?
sales
both the production and selling and administrative expense budgets are prepared using information from the
sales budget
to calculate total sales on the sales budget, multiply budgeted sales in units by ____
sales price per unit
budgeted expenses for areas other than manufacturing are shown on the ____ budget
selling and administrative
an unchanged planning budget is known as a(n) _____ planning budget
static
planning budgets are sometimes called _____ budgets
static
activity variance
subtract planning budget from flexible budget
an unfavorable materials quantity variance occurs when
the actual amount of material used is greater than the standard amount of material allowed for actual output
a company can consider making investments or repay outstanding principal and interest when
the cash excess is greater than the minimum required cash balance
if managers consider it unwise to adjust the workforce in response to changes in workload
the direct labor workforce is really fixed in the short run
many of the schedules in a master budget are based on the variety of management estimates and assumptions
true
When the standard hourly rate is lower than the actual rate, the labor rate variance is ______.
unfavorable
when the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is
unfavorable
when the standard price is less than the actual price paid for materials, the material price variance is ____
unfavorable
the ending finished goods inventory budget computes the cost of ___ units
unsold
the standard price of the material is used in the calculation of the material quantity variance because
using actual prices would hold the production manager responsible for the inefficiencies of the purchasing manager
The same basic formulas used for materials and labor are used to analyze ______ portion of manufacturing overhead.
variable
companies use ___ ___ cycle to evaluate and improve performance
variance analysis
S&P Enterprises has scheduled direct material purchases of $120,000 in April, $140,000 in May and $160,000 in June. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of May.
$135,000 --> 30,000+105,000
a performance report shows that the planning revenue was $240,000, the flexible budget revenue was $225,000, and actual revenue was $230,000. The activity variance is $
$15,000 unfavorable
Given the following, compute the standard cost per widget. Direct materials per unit 4 pounds Direct material cost $1.25 per pound Direct labor per unit 1.5 hours Direct labor rate $10.00 per hour Variable overhead rate $4.00 per hour
$26.00 (Reason: Materials (4 pounds × $1.25) + Labor (1.5 hours × $10.00) + Overhead (1.5 hours × $4.00) = $26.00)
the quantity variance is
(SQ - AQ ) x SP
a planning budget called for 500 units to be produced and total direct labor cost of $7,500. actual production was 600 units and actual direct labor cost was $9,300. the spending variance is
- $300 U ($7,500 ÷ 500 = $15 standard rate per unit × 600 = $9,000 flexible budget - $9,300 actual = $300 U)
the material quantity variance reflects the difference between the ___ quantity of the materials used in production and the _____ quantity of materials allowed for the actual output
- actual - standard
master budget schedules _____
- answer several key questions for a company - are based on estimates and assumptions
material quantity variances
- are usually the responsibility of the production manager - resulting from inferior materials are the responsibility of the purchasing department manager - may be caused by faulty machinery or poor supervision
revenue variances can be caused by
- changes in the mix of products sold - poor accounting controls - changes in selling price
Budgets:
- coordinate the activities of the entire organization by integrating the plans of its various parts - force managers to think about and plan for the future - define goals and objectives that can serve as benchmarks for evaluating subsequent performance - and the budgeting process can uncover potential bottlenecks before they occur
a revenue variance is
- difference between what revenue should have been at the actual level of activity and the actual level of activity
which of the following budgets are needed to calculate unit product costs?
- direct materials - direct labor - manufacturing overhead
which of the following are used to calculate the standard quantity per unit of direct materials?
- direct materials requirements per unit of finished product - allowance for normal scrap and spoilage
risks of not knowing in advance how much labor time will be needed throughout the budget period includes
- erratic layoffs - labor shortages - low employee morale
unfavorable labor rate variances may occur as a result of
- overtime premiums being charged to the direct labor account - skilled workers being assigned to jobs requiring
Which of the following statements is true?
- overtime premiums can cause unfavorable labor rate variances - how production supervisors use direct labor hour workers can lead to labor rate variances
possible cause of a spending variance include
- paying less than expected for inputs - changes in technology - using too many inputs for the actual level of activity
which of the following are directly based on information from the sales budget?
- production budget - selling and administrative expense budget
The material variance terms price and quantity are replaced with the terms ____________ and ____________ when computing direct labor variances.
- rate - hours
which of the following is needed to calculate raw materials to be purchased on the direct materials budget?
- raw materials required per unit - beginning inventory of raw materials
options to generate favorable revenue and spending variances include
- reducing the prices of inputs - increasing operating efficiency - protecting the selling price
a flexible budget shows what budgeted amounts should have been at the actual level of activity. as a result of this change in activity, the flexible budget will show a change in total
- revenue - variable cost
standards are
- set for each major production input or task - compared to the actual quantities and costs of inputs - benchmarks for measuring performance
which of the following statements are true?
- standards provide information for measuring performance - when actual results depart significantly from the standard, the reasons why should be investigated
all unfavorable materials quantity variance occurs when
- the actual amount of material is greater than the standard amount of material allowed for the actual output
the planning budget, based on 1,000 units shows revenue of $24,000 and $6,250 for supplies. a total of 1,200 units were actually produced and sold. the flexible budget will show
-$7500 for supplies -$28,800 for revenue
S&P Enterprises has scheduled direct material purchases of $100,000 in January, $130,000 in February and $150,000 in March. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of February.
122,500
ABC, Inc.'s expected sales for the first six month of the year are: Month Expected Unit Sales January 12,000 February 15,000 March 16,000 April 20,000 May 22,000 June 25,000 If desired ending inventory is 25% of next month's sales, the number of units to be produced in March is ______.
17,000 --> 5,000 + 16,000 -4,000
budgets are used for two distinct purposes
Planning and control
to prepare a budgeted balance sheet as of December 31, 2023, data is needed from the _____ december 31,2022
balance sheet as of
a detailed plan for the future that is usually expressed in formal quantitative terms is ___
a budget
which of following statements are true
a labor efficiency variance is a quantity variance
the materials price variance is calculated using the ____ quantity of the input purchased
actual
the spending variance is labeled favorable when the
actual cost is less than what the cost should have been at the actual level of activity
