Deck 7: Flexible Budgets, Direct-Cost Variances, and Management Control

Question 1

Answer the following questions using the information below:
Hikmat Corporation used the following data to evaluate their current operating system. The company sells items for $20 each and used a budgeted selling price of $20 per unit.


-What is the static-budget variance of revenues?

A) $2,000 favorable
B) $2,000 unfavorable
C) $20,000 unfavorable
D) $20,000 favorable

Answer 1

$20,000 favorable

Question 2

Answer the following questions using the information below:
Khan Corporation used the following data to evaluate their current operating system. The company sells items for $20 each and used a budgeted selling price of $20 per unit.


-What is the static-budget variance of revenues?

A) $60,000 unfavorable
B) $6,000 favorable
C) $60,000 favorable
D) $6,000 unfavorable

Answer 2

$60,000 unfavorable

Question 3

Answer the following questions using the information below:
Khan Corporation used the following data to evaluate their current operating system. The company sells items for $20 each and used a budgeted selling price of $20 per unit.


-What is the static-budget variance of operating income?

A) $190,000 unfavorable
B) $60,000 unfavorable
C) $60,000 favorable
D) $165,000 favorable

Answer 3

$165,000 favorable

Question 4

Answer the following questions using the information below:
Rana Company planned to use $164 of material per unit but actually used $160 of material per unit, and planned to make 1,200 units but actually made 1,000 units.

-The flexible-budget amount is:

A) $160,000
B) $164,000
C) $196,800
D) $192,000

Question 5

Answer the following questions using the information below:
Rana Company planned to use $164 of material per unit but actually used $160 of material per unit, and planned to make 1,200 units but actually made 1,000 units.

-The flexible-budget variance is:

A) $4,800 favorable
B) $28,000 unfavorable
C) $32,800 unfavorable
D) $4,000 favorable

Question 6

Answer the following questions using the information below:
Rana Company planned to use $164 of material per unit but actually used $160 of material per unit, and planned to make 1,200 units but actually made 1,000 units.

-The sales-volume variance is:

A) $32,800 unfavorable
B) $4,000 favorable
C) $4,800 favorable
D) $28,000 unfavorable

Question 7

Bebee Corporation currently produces cardboard boxes in an automated process. Expected production per month is 40,000 units, direct-material costs are $0.60 per unit, and manufacturing overhead costs are $18,000 per month. Manufacturing overhead is all fixed costs. What is the flexible budget for 20,000 and 40,000 units, respectively?

A) $30,000; $42,000
B) $21,000; $33,000
C) $21,000; $42,000
D) None of these answers are correct.

Question 8

Answer the following questions using the information below:
Samir Incorporated planned to use $24 of material per unit but actually used $25 of material per unit, and planned to make 2,000 units but actually made 2,400 units.

-The flexible-budget variance is:

A) $12,000 favorable
B) $9,600 favorable
C) $2,400 unfavorable
D) $10,000 unfavorable

Question 9

Answer the following questions using the information below:
Samir Incorporated planned to use $24 of material per unit but actually used $25 of material per unit, and planned to make 2,000 units but actually made 2,400 units.

-The sales-volume variance is:

A) $2,400 unfavorable
B) $9,600 favorable
C) $12,000 favorable
D) $10,000 unfavorable

Question 10

Alexandria Engines Incorporated planned to use $37.50 of material per unit but actually used $36.75 of material per unit, and planned to make 1,800 units but actually made 1,600 units.

-The flexible-budget variance is:

A) $1,200 unfavorable
B) $7,500 unfavorable
C) $7,500 favorable
D) $1,200 favorable

Question 11

Alexandria Engines Incorporated planned to use $37.50 of material per unit but actually used $36.75 of material per unit, and planned to make 1,800 units but actually made 1,600 units.

-The sales-volume variance is:

A) $7,500 unfavorable
B) $7,500 favorable
C) $1,200 unfavorable
D) $1,200 favorable

Question 12

Alexandria Engines Incorporated planned to use $37.50 of material per unit but actually used $36.75 of material per unit, and planned to make 1,800 units but actually made 1,600 units.

-Gulf Sporting Corporation currently produces baseball caps in an automated process. Expected production per month is 20,000 units, direct material costs are $3.00 per unit, and manufacturing overhead costs are $46,000 per month. Manufacturing overhead is entirely fixed costs. What is the flexible budget for 10,000 and 20,000 units, respectively?

A) $53,000; $83,000
B) $76,000; $106,000
C) $53,000; $106,000
D) None of these answers are correct.

Question 13

Answer the following questions using the information below:
Manash Company manufactures tires. Some of the company's data was misplaced. Use the following information to replace the lost data:


-What amounts are reported for revenues in the flexible-budget (A) and the static-budget (B), respectively?

A) $164,320; $158,720
B) $169,920; $166,720
C) $164,320; $169,920
D) $169,920; $177,920

Question 14

Answer the following questions using the information below:
Manash Company manufactures tires. Some of the company's data was misplaced. Use the following information to replace the lost data:


-What are the actual variable costs (C)?

A) $72,800
B) $54,080
C) $64,240
D) $62,640

Question 15

Answer the following questions using the information below:
Manash Company manufactures tires. Some of the company's data was misplaced. Use the following information to replace the lost data:


-What is the total sales-volume variance (E)?

A) $5,600 unfavorable
B) $14,960 favorable
C) $14,960 unfavorable
D) $3,760 favorable

Question 16

Answer the following questions using the information below:
Manash Company manufactures tires. Some of the company's data was misplaced. Use the following information to replace the lost data:


-What is the total static-budget variance?

A) $3,760 favorable
B) $3,760 unfavorable
C) $6,640 favorable
D) $10,400 favorable

Question 17

Zinat Table Company manufactures tables for schools. The 2015 operating budget is based on sales of 40,000 units at $50 per table. Operating income is anticipated to be $120,000. Budgeted variable costs are $32 per unit, while fixed costs total $600,000.
Actual income for 2015 was a surprising $354,000 on actual sales of 42,000 units at $52 each. Actual variable costs were $30 per unit and fixed costs totaled $570,000.
Required:
Prepare a variance analysis report with both flexible-budget and sales-volume variances.

Question 18

Answer the following questions using the information below:
Apple Valley Orchards, Inc. (AVO), developed standard costs for direct material and direct labor. In 2014, AVO estimated the following standard costs for one of their most well loved products, the AVO classic Grandma's large apple pie which had a brown sugar coating on the top of the crust as well as including cranberry and mince ingredients in addition to the apples.
During September, AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an average cost per pound of $7.00 and 280 direct labor hours at an average wage of $14.25 per hour.

-September's direct labor price variance is:

A) $70.00 favorable
B) $210.00 favorable
C) $70.00 unfavorable
D) $210.00 unfavorable

Question 19

Answer the following questions using the information below:
Apple Valley Orchards, Inc. (AVO), developed standard costs for direct material and direct labor. In 2014, AVO estimated the following standard costs for one of their most well loved products, the AVO classic Grandma's large apple pie which had a brown sugar coating on the top of the crust as well as including cranberry and mince ingredients in addition to the apples.
During September, AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an average cost per pound of $7.00 and 280 direct labor hours at an average wage of $14.25 per hour.

-September's direct labor efficiency variance is:

A) $280.00 favorable
B) $210.00 favorable
C) $210.00 unfavorable
D) $280.00 unfavorable

Question 20

Answer the following questions using the information below:
Basir's Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.


-The actual amount spent for direct manufacturing labor was:

A) $80,000
B) $82,000
C) $83,000
D) $78,000

Question 21

Karim Comfort Company produces chairs and has determined the following direct cost categories and budgeted amounts:
Actual performance for the company is shown below:
Required:
a. What is the combined total of the flexible-budget variances?
b. What is the price variance of the direct materials?
c. What is the price variance of the direct manufacturing labor and the direct marketing labor, respectively?
d. What is the efficiency variance for direct materials?
e. What are the efficiency variances for direct manufacturing labor and direct marketing labor, respectively?

Question 22

Kamal Pharma Company maintains a very large direct materials inventory because of critical demands placed upon it for rush orders from large hospitals. Item A contains hard-to-get material Y. Currently, the standard cost of material Y is $4.00 per gram. During February, 22,000 grams were purchased for $4.10 per gram, while only 20,000 grams were used in production. There was no beginning inventory of material Y.
Required:
a. Determine the direct materials price variance, assuming that all materials costs are the responsibility of the materials purchasing manager.
b. Determine the direct materials price variance, assuming that all materials costs are the responsibility of the production manager.
c. Discuss the issues involved in determining the price variance at the point of purchase versus the point of consumption.