BAD Ch: 8,09, 10
The BRS Corporation makes collections on sales according to the following schedule: 50% in month of sale 47% in month following sale 3% in second month following sale The following sales have been budgeted: Sales April $200,000 May $170,000 June $160,000 Budgeted cash collections in June would be:
- June sales collected in June ($160,000 × 50%) = $80,000 - May sales collected in June ($170,000 × 47%) = $79,900 - April sales collected in June ($200,000 × 3%) = $6,000 -------------------------------------- Total cash collections in June$165,900
Which of the following may appear on a flexible budget performance report?
All of the above may appear on a flexible budget performance report.
Parwin Corporation plans to sell 38,000 units during August. If the company has 15,500 units on hand at the start of the month, and plans to have 16,500 units on hand at the end of the month, how many units must be produced during the month?
Budgeted unit sales 38,000 Add desired ending finished goods inventory 16,500 -------------------------------------- Total needs 54,500 Less beginning finished goods inventory 15,500 -------------------------------------------------------------- Required production in units 39,000
A revenue variance is unfavorable if the revenue in the static planning budget is less than the revenue in the flexible budget.
False
Actual costs are determined by plugging the actual level of activity for the period into the cost formulas used in flexible budgets.
False
If activity is higher than expected, total fixed costs should be higher than expected. If activity is lower than expected, total fixed costs should be lower than expected.
False
The cash budget is the starting point in preparing the master budget.
False
The selling and administrative expense budget lists all costs of production other than direct materials and direct labor.
False
Piechocki Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 6,400 units, but its actual level of activity was 6,350 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for May: Data used in budgeting: Revenue - $33.90 Direct labor $0 $5.90 Direct materials 0 13.50 Manufacturing overhead 34,000 1.40 Selling and administrative expenses 25,200 0.60 Total expenses $59,200 $21.40 Actual results for May: Revenue$216,300 Direct labor$36,930 Direct materials$86,900 Manufacturing overhead$42,000 Selling and administrative expenses$30,440 The activity variance for direct labor in May would be closest to:
Flexible budget [$0 + ($5.90 × 6,350)] = $37,465 Planning budget [$0 + ($5.90 × 6,400)] = 37,760 -------------------------------------- Activity variance$295F
Bade Midwifery's cost formula for its wages and salaries is $1,370 per month plus $236 per birth. For the month of October, the company planned for activity of 102 births, but the actual level of activity was 98 births. The actual wages and salaries for the month was $25,480. The activity variance for wages and salaries in October would be closest to:
Flexible budget [$1,370 + ($236 × 98)] = $24,498 Planning budget [$1,370 + ($236 × 102)] = 25,442 -------------------------------------------------------------- Activity variance$944F
Petrus Framing's cost formula for its supplies cost is $1,880 per month plus $8 per frame. For the month of March, the company planned for activity of 628 frames, but the actual level of activity was 632 frames. The actual supplies cost for the month was $7,350. The activity variance for supplies cost in March would be closest to:
Flexible budget [$1,880 + ($8 × 632)] = $6,936 Planning budget [$1,880 + ($8 × 628)] = 6,904 -------------------------------------- Activity variance $32 U*
The following materials standards have been established for a particular product: Standard quantity per unit of output 4.3meters Standard price$18.60per meter The following data pertain to operations concerning the product for the last month: Actual materials purchased 7,100meters Actual cost of materials purchased $138,805 Actual materials used in production 6,600meters Actual output 1,500units What is the materials price variance for the month?
Materials price variance = (AQ × AP) - (AQ × SP) = $138,805 - (7,100 meters × $18.60 per meter) = $138,805 - $132,060 = $6,745 U
The following labor standards have been established for a particular product: Standard labor-hours per unit of output 9.1hours Standard labor rate$12.90per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 6,900hours Actual total labor cost$86,250 Actual output 900units What is the labor efficiency variance for the month?
SH = 900 units × 9.1 hours per unit = 8,190 hours Labor efficiency variance = (AH - SH) × SR = (6,900 hours - 8,190 hours) × $12.90 per hour = (-1,290 hours) × $12.90 per hour = $16,641 F
Paulis Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During February, the kennel budgeted for 5,000 tenant-days, but its actual level of activity was 5,020 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting: Revenue - $31.50 Wages and salaries $4,000 $7.50 Food and supplies 600 12.30 Facility expenses 9,000 4.50 Administrative expenses 8,800 0.30 Total expenses $22,400 $24.60 Actual results for February: Revenue$108,780 Wages and salaries$23,600 Food and supplies$36,800 Facility expenses$19,350 Administrative expenses$9,160 The net operating income in the planning budget for February would be closest to:
1) Revenue per tenant-day$31.50 Total variable expense per tenant-day 24.60 Contribution margin per tenant-day$6.90 -------------------------------------- Total fixed expense$22,400 -------------------------------------- 2) Net operating income = ($6.90 × 5,000) − $22,400 = $12,100*
Kerekes Manufacturing Corporation has prepared the following overhead budget for next month. Activity level 3,100machine-hours Variable overhead costs: - Supplies$15,810 - Indirect labor 27,900 Fixed overhead costs: - Supervision 17,000 - Utilities 6,500 - Depreciation 7,500 Total overhead cost$74,710 The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 3,000 machine-hours rather than 3,100 machine-hours?
1) Variable cost per MH for supplies = $15,810 ÷ 3,100 MHs = $5.10 per MH Variable cost per MH for indirect labor = $27,900 ÷ 3,100 MHs = $9.00 per MH -------------------------------------- 2) Machine-hours (q) 3,000 Supplies ($5.10q) = $15,300 Indirect labor ($9.00q)= 27,000 Supervision ($17,000) = 17,000 Utilities ($6,500) = 6,500 Depreciation ($7,500) = 7,500 -------------------------------------- Total overhead cost$73,300*
Kerekes Manufacturing Corporation has prepared the following overhead budget for next month. Activity level 4,000machine-hours Variable overhead costs: Supplies $24,000 Indirect labor 39,600 Fixed overhead costs: Supervision 14,000 Utilities 7,400 Depreciation 8,400 -------------------------------------- Total overhead cost$93,400 The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 3,900 machine-hours rather than 4,000 machine-hours?
1) Variable cost per MH for supplies = $24,000 ÷ 4,000 MHs = $6.00 per MH Variable cost per MH for indirect labor = $39,600 ÷ 4,000 MHs = $9.90 per MH -------------------------------------------------------------- 2) Machine-hours (q) 3,900 Supplies ($6.00q) $23,400 Indirect labor ($9.90q) 38,610 Supervision ($14,000) 14,000 Utilities ($7,400) 7,400 Depreciation ($8,400) 8,400 -------------------------------------------------------- Total overhead cost$91,810*
The following labor standards have been established for a particular product: Standard labor-hours per unit of output 8.8hours Standard labor rate $15.70per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 8,700hours Actual total labor cost $133,980 Actual output 860units What is the labor rate variance for the month?
AH × AR = $133,980 Labor rate variance = (AH × AR) - (AH × SR) = $133,980 - (8,700 hours × $15.70 per hour) = $133,980 - ($136,590) -------------------------------------- $2,610 F
The following labor standards have been established for a particular product: Standard labor-hours per unit of output 8.9hours Standard labor rate $16.50per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 9,500hours Actual total labor cost $153,900 Actual output 940units What is the labor rate variance for the month?
AH × AR = $153,900 Labor rate variance = (AH × AR) - (AH × SR) = $153,900 - (9,500 hours × $16.50 per hour) = $153,900 - ($156,750) = $2,850 F*
The following labor standards have been established for a particular product: Standard labor-hours per unit of output 8.5hours Standard labor rate$15.75per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 10,600hours Actual total labor cost $164,300 Actual output 1,300units What is the labor rate variance for the month?
AH × AR = $164,300 Labor rate variance = (AH × AR) − (AH × SR) = ($164,300) − (10,600 hours × $15.75 per hour) = $164,300 − $166,950 -------------------------------------- = $2,650 F
Herrod Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $640 per month plus $113 per job plus $29 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in December to be 21 jobs and 130 meals, but the actual activity was 16 jobs and 135 meals. The actual cost for catering supplies in December was $6,250. The spending variance for catering supplies in December would be closest to:
Actual results $6,250 Flexible budget [$640 + ($113 × 16) + ($29 × 135)] = 6,363 -------------------------------------------------------------- Spending variance $113F
Dermody Snow Removal's cost formula for its vehicle operating cost is $2,980 per month plus $328 per snow-day. For the month of December, the company planned for activity of 22 snow-days, but the actual level of activity was 20 snow-days. The actual vehicle operating cost for the month was $10,490. The spending variance for vehicle operating cost in December would be closest to:
Actual results = $10,490 Flexible budget [$2,980 + ($328 × 20)] = 9,540 -------------------------------------------------------------- Spending variance$950
Dermody Snow Removal's cost formula for its vehicle operating cost is $3,010 per month plus $331 per snow-day. For the month of December, the company planned for activity of 13 snow-days, but the actual level of activity was 15 snow-days. The actual vehicle operating cost for the month was $7,585. The spending variance for vehicle operating cost in December would be closest to:
Actual results = $7,585 Flexible budget [$3,010 + ($331 × 15)] = 7,975 -------------------------------------- Spending variance $390 F
Speyer Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,250 patient-visits and the actual level of activity was 1,240 patient-visits. The cost formula for administrative expenses is $4.90 per patient-visit plus $26,500 per month. The actual administrative expense was $25,000. In the clinic's flexible budget performance report for last month, the spending variance for administrative expenses was:
Actual results$25,000 Flexible budget [$26,500 + ($4.90 × 1,240)] 32,576 -------------------------------------- Spending variance$7,576F
Pooler Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.73 direct labor-hours. The direct labor rate is $11.60 per direct labor-hour. The production budget calls for producing 6,500 units in April and 6,300 units in May. The company guarantees its direct labor workers a 40-hour paid work week. With the number of workers currently employed, that means that the company is committed to paying its direct labor work force for at least 5,480 hours in total each month even if there is not enough work to keep them busy. What would be the total combined direct labor cost for the two months?
April May Required production in units 6,500 6,300 Direct labor-hours per unit 0.73 0.73 Total direct labor-hours needed 4,745 4,599 Minimum guaranteed paid labor-hours 5,480 5,480 Direct labor cost per hour $11.60 $11.60 ------------------------------------------------------------- Total direct labor cost $63,568.00 $63,568.00 $127,136.00*
Bries Corporation is preparing its cash budget for January. The budgeted beginning cash balance is $19,400. Budgeted cash receipts total $190,000 and budgeted cash disbursements total $190,800. The desired ending cash balance is $31,400. To attain its desired ending cash balance for January, the company should borrow:
Beginning cash balance$19,400 Add cash receipts 190,000 -------------------------------------- Total cash available 209,400 Less cash disbursements 190,800 -------------------------------------- Excess (deficiency) of cash available over disbursements 18,600 Financing (plug figure) 12,800 -------------------------------------- Ending cash balance $31,400*
Sedita Inc. is working on its cash budget for July. The budgeted beginning cash balance is $20,000. Budgeted cash receipts total $192,000 and budgeted cash disbursements total $191,000. The desired ending cash balance is $36,000. The excess (deficiency) of cash available over disbursements for July will be:
Beginning cash balance$20,000 Add cash receipts (all sales are for cash) 192,000 -------------------------------------- Total cash available 212,000 Less cash disbursements 191,000 -------------------------------------- Excess (deficiency) of cash available over disbursements $21,000*
The manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 3,800 direct labor-hours will be required in January. The variable overhead rate is $6 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,220 per month, which includes depreciation of $3,540. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
Budgeted direct labor-hours 3,800 Variable manufacturing overhead rate$6 -------------------------------------- Variable manufacturing overhead$22,800 Fixed manufacturing overhead 43,220 -------------------------------------- Total manufacturing overhead 66,020 Less depreciation 3,540 -------------------------------------- Cash disbursement for manufacturing overhead$62,480*
The manufacturing overhead budget at Foshay Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 6,100 direct labor-hours will be required in May. The variable overhead rate is $8.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $111,630 per month, which includes depreciation of $24,960. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for May should be:
Budgeted direct labor-hours 6,100 Variable manufacturing overhead rate$8.50 -------------------------------------- Variable manufacturing overhead$51,850 Fixed manufacturing overhead 111,630 -------------------------------------- Total manufacturing overhead (a)$163,480 Budgeted direct labor-hours (b) 6,100 -------------------------------------- Predetermined overhead rate (a) ÷ (b)$26.80*
Haylock Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,700 direct labor-hours will be required in August. The variable overhead rate is $1.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,500 per month, which includes depreciation of $8,850. All other fixed manufacturing overhead costs represent current cash flows. The August cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
Budgeted direct labor-hours 8,700 Variable manufacturing overhead rate$1.60 ---------------------------------------------------- Variable manufacturing overhead$13,920 Fixed manufacturing overhead 100,500 ---------------------------------------------------- Total manufacturing overhead 114,420 Less depreciation 8,850 -------------------------------------------------------------- Cash disbursement for manufacturing overhead$105,570
The manufacturing overhead budget at Polich Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 8,800 direct labor-hours will be required in February. The variable overhead rate is $9.20 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $109,120 per month, which includes depreciation of $18,240. All other fixed manufacturing overhead costs represent current cash flows. The February cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
Budgeted direct labor-hours 8,800 Variable manufacturing overhead rate$9.20 -------------------------------------- Variable manufacturing overhead$80,960 Fixed manufacturing overhead 109,120 -------------------------------------- Total manufacturing overhead 190,080 Less depreciation 18,240 -------------------------------------- Cash disbursement for manufacturing overhead $171,840*
Capelli Hospital bases its budgets on patient-visits. The hospital's static budget for August appears below: Budgeted number of patient-visits 8,900 Budgeted variable costs: Supplies (@$10.00 per patient-visit)$89,000 Laundry (@$9.70 per patient-visit) 86,330 Total variable cost 175,330 Budgeted fixed costs: Wages and salaries 99,840 Occupancy costs 107,840 Total fixed cost 207,680 Total cost $383,010 The total variable cost at the activity level of 9,000 patient-visits per month should be:
Budgeted number of patient-visits 9,000 Budgeted variable costs: Supplies (@$10.00 per patient-visit) = $90,000 Laundry (@$9.70 per patient-visit) = 87,300 --------------------------------------------------------- Total variable cost$177,300*
Parwin Corporation plans to sell 39,000 units during August. If the company has 16,000 units on hand at the start of the month, and plans to have 17,000 units on hand at the end of the month, how many units must be produced during the month?
Budgeted unit sales 39,000 Add desired ending finished goods inventory 17,000 ------------------------------------ Total needs 56,000 Less beginning finished goods inventory 16,000 ---------------------------------- Required production in units 40,000
The BRS Corporation makes collections on sales according to the following schedule: 25% in month of sale 71% in month following sale 4% in second month following sale The following sales have been budgeted: April $180,000 May $110,000 June $100,000 Budgeted cash collections in June would be:
Cash collections for June: June sales collected in June ($100,000 × 25%) = $25,000 May sales collected in June ($110,000 × 71%) = $78,100 April sales collected in June ($180,000 × 4%) = $7,200 ------------------------------------------------------------- Total cash collections in June$110,300*
Which of the following budgets are prepared before the sales budget? Budgeted Income Direct Labor Statement Budget A) Yes No B) Yes No C) No Yes D) No No
Choice D
Piechocki Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 7,100 units, but its actual level of activity was 7,050 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for May: Data used in budgeting: Revenue - $34.60 Direct labor $0 $6.60 Direct materials 0 13.10 Manufacturing overhead 41,000 2.10 Selling and administrative expenses 25,900 0.60 Total expenses $66,900 $22.40 Actual results for May: Revenue$244,930 Direct labor$46,320 Direct materials$93,535 Manufacturing overhead$45,500 Selling and administrative expenses$30,510 The direct labor in the planning budget for May would be closest to:
Cost = Fixed cost + (Variable cost per unit × q) = $0 + ($6.60 × 7,100) = $46,860*
Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: - Sales are budgeted at $330,000 for November, $310,000 for December, and $300,000 for January. - Collections are expected to be 50% in the month of sale and 50% in the month following the sale. - The cost of goods sold is 75% of sales. - The company would like to maintain ending merchandise inventories equal to 65% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. - Other monthly expenses to be paid in cash are $23,900. - Monthly depreciation is $14,900. - Ignore taxes.
December credit sales collected in December ($310,000 × 50%) = $155,000 November credit sales collected in December ($330,000 × 50%) = 165,000 -------------------------------------- Total cash collections in December$320,000
Harrti Corporation has budgeted for the following sales: July $445,800 August $580,800 September $615,400 October $890,400 November $734,000 December $694,000 Sales are collected as follows: 20% in the month of sale; 55% in the month following the sale; and the remaining 25% in the second month following the sale. In Harrti's budgeted balance sheet at December 31, at what amount will accounts receivable be shown?
December sales accounts receivable ($694,000 × 80%) = $555,200 November sales accounts receivable ($734,000 × 25%) = 183,500 -------------------------------------- Total accounts receivable $738,700*
Pratte Boat Wash's cost formula for its cleaning equipment and supplies is $2,610 per month plus $52 per boat. For the month of April, the company planned for activity of 57 boats, but the actual level of activity was 16 boats. The actual cleaning equipment and supplies for the month was $3,560. The activity variance for cleaning equipment and supplies in April would be closest to:
Flexible budget [$2,610 + ($52 × 16)] = $3,442 Planning budget [$2,610 + ($52 × 57)] = 5,574 ---------------------------------------------------------- Activity variance$2,132F
Feemster Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During October, the company budgeted for 5,930 units, but its actual level of activity was 5,880 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for October: Revenue - $30.20 Direct labor $0 $5.90 Direct materials 0 8.90 Manufacturing overhead 37,300 1.60 Selling and administrative expenses 26,900 1.10 Total expenses $64,200 $17.50 Actual results for October: Revenue $177,595 Direct labor $33,010 Direct materials $51,300 Manufacturing overhead $47,275 Selling and administrative expenses $33,170 The activity variance for selling and administrative expenses in October would be closest to:
Flexible budget [$26,900 + ($1.10 × 5,880)] = $33,368 Planning budget [$26,900 + ($1.10 × 5,930)] = 33,423 -------------------------------------- Activity variance$55F
Dubberly Corporation's cost formula for its manufacturing overhead is $32,400 per month plus $54 per machine-hour. For the month of March, the company planned for activity of 7,880 machine-hours, but the actual level of activity was 7,790 machine-hours. The actual manufacturing overhead for the month was $482,490. The activity variance for manufacturing overhead in March would be closest to:
Flexible budget [$32,400 + ($54 × 7,790)] = $453,060 Planning budget [$32,400 + ($54 × 7,880)] = 457,920 ------------------------------------------------------------- Activity variance$4,860F
Groupe Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $36,220 per month plus $2,054 per flight plus $1 per passenger. The company expected its activity in October to be 82 flights and 232 passengers, but the actual activity was 81 flights and 237 passengers. The actual cost for plane operating costs in October was $197,000. The activity variance for plane operating costs in October would be closest to:
Flexible budget [$36,220 + ($2,054 × 81) + ($1 × 237)] = $202,831 Planning budget [$36,220 + ($2,054 × 82) + ($1 × 232)] = 204,880 -------------------------------------------------------------- Activity variance$2,049F*
0/0points awarded ItemScored eBookReferences Explanationsame page Item 34 TB MC Qu. 9-289 Kirnon Clinic uses client-visits as its measure... Kirnon Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 4,000 client-visits, but its actual level of activity was 3,920 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting: Revenue - $40.60 Personnel expenses $36,600 $11.80 Medical supplies 2,600 8.60 Occupancy expenses 9,600 2.60 Administrative expenses 6,600 0.80 Total expenses $55,400 $23.80 The activity variance for administrative expenses in July would be closest to:
Flexible budget [$6,600 + ($0.80 × 3,920)] = $9,736 Planning budget [$6,600 + ($0.80 × 4,000)] = 9,800 -------------------------------------- Activity variance$64F
The manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 2,300 direct labor-hours will be required in January. The variable overhead rate is $6 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,070 per month, which includes depreciation of $3,690. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
JanuaryBudgeted direct labor-hours 2,300Variable manufacturing overhead rate $6 ------------------------------------------------ Variable manufacturing overhead$13,800 Fixed manufacturing overhead 43,070 ------------------------------------------------ Total manufacturing overhead 56,870 Less depreciation 3,690 -------------------------------------------------------------- Cash disbursement for manufacturing overhead$53,180
The Fime Corporation uses a standard costing system. The following data have been assembled for December: Actual direct labor-hours worked 5,200hours Standard direct labor rate $12per hour Labor efficiency variance $3,000Unfavorable\ The standard hours allowed for December's production is:
Labor efficiency variance = (AH - SH) × SR $3,000 U = (5,200 hours - SH) × $12 per hour $3,000 = (5,200 hours - SH) × $12 per hour $3,000 = $62,400 - (SH × $12 per hour) SH × $12 per hour = $62,400 - $3,000 SH × $12 per hour = $59,400 SH = $59,400 ÷ $12 per hour SH = 4,950 hours*
Milar Corporation makes a product with the following standard costs: Direct materials 4.5pounds $4.00per pound Direct labor 0.8hours $21.00per hour Variable overhead 0.8hours $9.50per hour in January the company produced 3,320 units using 13,280 pounds of the direct material and 2,776 direct labor-hours. During the month, the company purchased 14,040 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $57,895 and the actual variable overhead cost was $25,260. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The labor rate variance for January is:
Labor rate variance = (AH × AR) − (AH × SR) = ($57,895) − (2,776 hours × $21.00 per hour) = $57,895 − $58,296 -------------------------------------- = $401 F
Milar Corporation makes a product with the following standard costs: Direct materials 2.0pounds $7.00per pound Direct labor 0.7hours $15.00per hour Variable overhead 0.7hours $5.00per hour In January the company produced 4,500 units using 10,130 pounds of the direct material and 2,110 direct labor-hours. During the month, the company purchased 10,700 pounds of the direct material at a cost of $76,580. The actual direct labor cost was $38,255 and the actual variable overhead cost was $11,956. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for January is:
Materials price variance = (AQ × AP) − (AQ × SP) = ($76,580) − (10,700 pounds × $7.00 per pound) = $76,580 − $74,900 -------------------------------------- = $1,680 U
Suver Corporation has a standard costing system. The following data are available for June: Actual quantity of direct materials purchased 50,000pounds Standard price of direct materials$6.00per pound Material price variance $5,000 Unfavorable Material quantity variance $1,500Favorable The actual price per pound of direct materials purchased in June was:
Materials price variance = AQ × (AP - SP) $5,000 U = 50,000 pounds × (AP - $6.00 per pound) $5,000 = 50,000 pounds × (AP - $6.00 per pound) AP - $6.00 per pound = $5,000 ÷ 50,000 pounds AP - $6.00 per pound = $0.10 per pound AP = $6.00 per pound + $0.10 per pound AP = $6.10 per pound
Gipple Corporation makes a product that uses a material with the quantity standard of 7.8 grams per unit of output and the price standard of $6.50 per gram. In January the company produced 3,900 units using 25,370 grams of the direct material. During the month the company purchased 27,900 grams of the direct material at $6.70 per gram. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for January is:
Materials price variance = AQ × (AP − SP) = 27,900 grams × ($6.70 per gram − $6.50 per gram) = 27,900 grams × ($0.2 per gram) = $5,580 U*
Tracie Corporation manufactures and sells women's skirts. Each skirt (unit) requires 2.2 yards of cloth. Selected data from Tracie's master budget for next quarter are shown below: Budgeted sales (in units) 9,000 11,000 13,000 Budgeted production (in units) 10,000 12,500 15,000 Each unit requires 0.7 hours of direct labor, and the average hourly cost of Tracie's direct labor is $20. What is the cost of Tracie Corporation's direct labor in September?
Required production in units 15,000 Direct labor-hours per unit 0.7 ------------------------------------ Total direct labor-hours needed 10,500 Direct labor cost per hour$20 ------------------------------------- Total direct labor cost$210,000*
Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 3.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: August 24,500units September 23,200units October 24,600units November 25,800units December 25,500units The company wants to maintain monthly ending inventories of Jurislon equal to 25% of the following month's production needs. On July 31, this requirement was not met since only 12,700 kilograms of Jurislon were on hand. The cost of Jurislon is $26 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months. The total cost of Jurislon to be purchased in August is:
Required production in units 24,500 Raw materials required per unit (kilograms) 3.5 -------------------------------------- Raw materials needed for production 85,750 Add desired ending raw materials inventory(25% × 23,200 units × 3.5 kilograms per unit) 20,300 -------------------------------------- Total raw materials needs 106,050Less beginning raw materials inventory 12,700 -------------------------------------- Required purchases of raw material in units 93,350Cost per kilogram$26 -------------------------------------- Required purchases$2,427,100*
Bulluck Corporation makes a product with the following standard costs: Direct materials 4.70grams$2.20per gram Direct labor 0.70hours $23.00per hour Variable overhead 0.70hours $3.20per hour The company reported the following results concerning this product in July. Actual output 4,200units Raw materials used in production 12,570grams Actual direct labor-hours 2,740hours Purchases of raw materials 13,300grams Actual price of raw materials purchased $2.40per gram Actual direct labor rate $12.60per hour Actual variable overhead rate $3.30per hour The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for July is:
SH = 4,200 units × 0.70 hours per unit = 2,940 hours Variable overhead efficiency variance = (AH - SH) × SR = (2,740 hours − 2,940 hours) × $3.20 per hour = (−200 hours) × $3.20 per hour -------------------------------------- = $640 F
Turrubiates Corporation makes a product that uses a material with the following standards Standard quantity 6.9 liters per unit Standard price $1.40per liter Standard cost $9.66 per unit The company budgeted for production of 2,700 units in April, but actual production was 2,800 units. The company used 19,900 liters of direct material to produce this output. The company purchased 19,000 liters of the direct material at $1.5 per liter. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for April is:
SQ = 2,800 units × 6.9 liters per unit = 19,320 liters Materials quantity variance = (AQ − SQ) × SP = (19,900 liters − 19,320 liters) × $1.40 per liter = (580 liters) × $1.40 per liter -------------------------------------- = $812 U
The following materials standards have been established for a particular product: Standard quantity per unit of output 4.5pounds Standard price$13.30per pound The following data pertain to operations concerning the product for the last month: Actual materials purchased 4,950pounds The actual cost of materials purchased $62,980 Actual materials used in production 4,450pounds Actual output 710units he direct materials purchases variance is computed when the materials are purchased. What is the materials quantity variance for the month?
SQ = 710 units × 4.5 pounds per unit = 3,195 pounds Materials quantity variance = (AQ − SQ) × SP = (4,450 pounds − 3,195 pounds) × $13.30 per pound = (1,255 pounds) × $13.3 per pound = $16,692 U*
Piper Corporation's standards call for 5,800 direct labor-hours to produce 1,450 units of product. During October the company worked 1,050 direct labor-hours and produced 1,050 units. The standard hours allowed for October would be:
Standard hours per unit of output = 5,800 direct labor-hours ÷ 1,450 units = 4 direct labor-hours per unit -------------------------------------- Standard hours allowed = 1,050 units × 4 direct labor-hours per unit = 4,200 hours
Which of the following statements is NOT correct concerning the Manufacturing Overhead Budget?
The Manufacturing Overhead Budget shows only the variable portion of manufacturing overhead.
An unfavorable activity variance for revenue indicates that activity was less than expected when the static planning budget was developed.
True
If demand is insufficient to keep everyone busy and workers are not laid off, an unfavorable (U) variable overhead efficiency variance often will be a result unless managers build excessive inventories.
True
In the merchandise purchases budget, the required purchases (in units) for a period can be determined by subtracting the beginning merchandise inventory (in units) from the budgeted sales (in units) and desired ending merchandise inventory (in units).
True
Using a flexible budget, actual results can be compared to what costs should have been at the actual level of activity.
True
When more hours of labor time are necessary to complete a job than the standard allows, the labor efficiency variance is unfavorable.
True
Wadding Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 4,500 machine-hours. Budgeted and actual overhead costs for the month appear below: Based on 4,500 Machine hour Variable overhead costs: Supplies $12,000 $12,730 Indirect labor 38,400 38,700 Fixed overhead costs: Supervision 20,600 20,240 Utilities 6,800 6,760 Factory depreciation 7,800 8,110 --------------------------------------------- Total overhead cost$85,600 $86,540 The company actually worked 4,520 machine-hours during the month. The standard hours allowed for the actual output were 4,510 machine-hours for the month. What was the overall variable overhead efficiency variance for the month? The company actually worked 4,520 machine-hours during the month. The standard hours allowed for the actual output were 4,510 machine-hours for the month. What was the overall variable overhead efficiency variance for the month?
Variable overhead = $12,000 + $38,400 = $50,400 SR = $50,400 ÷ 4,500 hours = $11.20 per hour Variable overhead efficiency variance = (AH - SH) × SR = (4,520 hours - 4,510 hours) × $11.20 per hour = (10 hours) × $11.20 per hour -------------------------------------- = $112 U
At Eady Corporation, maintenance is a variable overhead cost that is based on machine-hours. The performance report for July showed that actual maintenance costs totaled $13,550 and that the associated rate variance was $440 unfavorable. If 6,900 machine-hours were actually worked during July, the standard maintenance cost per machine-hour was:
Variable overhead rate variance = (AH × AR) - (AH × SR) $440 U = $13,550 - (6,900 MHs × SR) $440 = $13,550 - (6,900 MHs × SR) 6,900 MHs × SR = $13,550 - $440 6,900 MHs × SR = $13,110 SR = $13,110 ÷ 6,900 MHs -------------------------------------- SR = $1.90 per MH
Viger Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: - Budgeted level of activity 7,800MHs - Actual level of activity 8,000 - Standard variable manufacturing overhead rate $6.50per MH - Actual total variable manufacturing overhead $49,770 What was the variable overhead rate variance for the month?
Variable overhead rate variance = (AH × AR) - (AH × SR) = $49,770 - (8,000 hours × $6.50 per hour) = $49,770 - $52,000 = $2,230 F*
Sathre Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. Revenue $4,500 Employee salaries and wages $56,400 $900 Servicing materials $700 Other expenses $35,400 When the company prepared its planning budget at the beginning of December, it assumed that 34 wells would have been serviced. However, 32 wells were actually serviced during December. The "Employee salaries and wages" in the flexible budget for December would have been closest to:
Wells serviced (q) 32 -------------------------------------- Employee salaries and wages ($56,400 + $900q) = $85,200*
An unfavorable materials quantity variance indicates that:
actual usage of material exceeds the standard material allowed for output.
When using a flexible budget, a decrease in activity within the relevant range:
decreases total costs.
Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will be:
favorable.
When preparing a direct materials budget, the required purchases of raw materials in units equals:
raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.
