Ch. 20-21Exam Review Acct 2302

The formula to compute the budgeted direct labor cost is

units to produce times direct labor required per unit times direct labor cost per hour

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 15*3.5 = 52.5 52.5*940=49350

Unfavorable variance

(AQ x AP) > (SQ x SP) Actual > Standard

The formula to determine the materials to be purchased is:

(units to produce times materials required for each unit) plus desired ending materials inventory minus beginning materials inventory

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.

1,000 U

List the individual budgets of the master budget in the order in which they are prepared

1. Sale budget 2. Production budget 3. Direct materials, Direct Labor and Factory Overhead budgets 4. Cash budgets

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 Unfavorable 35,000 x $10/hr = 350,000 374,400-350,000= 24,400

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

5,000 favorable

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,____________ unit will need to be produced in the second quarter.

500-46(beginning units) = 454 Then take 10% of next quarter units so 550*.10 = 55 454+55 = 509

The input used to manufacture the quantity of output

Actual quantity

All of the following are guidelines that should be followed for budgets to be a positive motivating force except:

Budgets should be prepared using a top-down approach

the reporting of expected cash receipts and cash payments related to the sale and purchase of plant assets is reported on the ___________ expenditures budget

Capital

Budgeted performance considers all of the following in relation to a benchmark: (Select all that apply).

Company factors Industry factors Economic factors

The _________ function requires that management evaluate operations against some norm.

Control

Which of the following is the correct formula?

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

When analyzing variances, it is most likely that management will direct their attention to:

Large and unfavorable variances large and favorable variances

The main factors that can cause a variance include the following

Price variance quantity variance

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

Standard costs

The expected input for the quantity of output

Standard quantity

Actual price

The amount paid to acquire input

Standard Price

The preset, or expected price

True or false: Depreciation on non-manufacturing assets and property taxes are considered general and administrative expenses and, therefore, are included on the general and administrative expense budget.

True

A flexible budge has which of the following characteristics?

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

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

a quarter a month a year

Characteristics of budgets include:

expressed in dollars. typically cover a month, quarter or one year. formal statement of a company's plans.

Costs developed which identify what products should cost are called

standard costs

Budgeting guidelines that help insure budgeting is a positive motivating force include:

the opportunity to explain differences between actual and budgeted amounts. attainable goals. participatory budgeting.

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 $

$12,500 600*20=12,000 + $500= $12,500

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 quantity 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

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.

(36,000hrs x1hr x10/hr) - 360,000 (35,000hrs x1hr x10/hr) 350,000 360,000-350,000 = 10,000 Unfavorable because higher than standard

Favorable Variance

(AQ x AP) < (SQ x SP) Actual < Standard

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 Unfavorable The product was marked down* Unfavorable 1.79*9,500=17005 1.59*9,500=15105 subtract these.

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

30,000*.70 = 21,000 on credit 35,000*.30 = 10,500 21,000+10,500 = 31,500

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.

7,000 Favorable $145,000-$152,000

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 $

940*15 = $14,100 $14,100+950=15050

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.

AHxAR= 84,000 (Actual) SHxSR=85,000 (standard) 85-84= 1,000 Favorable

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

Cash balance + Cash receipts = 18,000 - 7200 (cash payments) = 10,800 we ignore outstanding loan balance.

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.

Direct Materials Variance 35,000*0.5*1 = 17,500 = standard price. Actual price was 17,280 17500-17280 = 220 Favorable because it is lower than standard price.

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

Feb- 30,000*.45= 13,500 $13,500- $12,000 (Begin Inventory) = $1,500. 25,000+1,500= 26,500

A manufacturing company would typically prepare all of the following budgets except:

Merchandise inventory budget

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

Which of the following items would be included on the capital expenditures budget?

Sale of plant assets Plant asset purchases

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

Standard costs have which of the following characteristics?

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

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

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