Question 1

Efficient Corporation uses a standard cost system.The following information was provided for the period that just ended: $\begin{array}{ll}
\text { Actual price per gallon } & \$ 11.75 \
\text { Actual gallons of material used } & 5,000 \
\text { Actual hourly labor rate } & \$ 17.00 \
\text { Actual hours of production } & 24,300 \
\text { Standard price per gallon } & \$ 12.00 \
\text { Standard gallons per completed unit } & 1 / 2 \
\text { Standard hourly labor rate } & \$ 12.00 \
\text { Standard time per completed unit } & 3 \text { hrs. } \
\text { Units completed during the period } & 9,000
\end{array}$ ? The direct labor time variance is:

Accepted Answer

The answer of Efficient Corporation uses a standard cost system.The...

Question 2

Standards that can be achieved only under perfect operating conditions, such as no idle time, no machine breakdowns, and no materials spoilage, are called:

Accepted Answer

Theoretical standards are those that can only be achieved under perfect operating conditions, with no allowances made for any downtime, inefficiencies, or waste. They are idealistic and serve as a benchmark for what the organization could achieve in ideal circumstances.

Question 3

Efficient Corporation uses a standard cost system.The following information was provided for the period that just ended:

Accepted Answer

The variance for A is favorable, meaning the actual cost was lower than the standard cost. This is good news, but it alone doesn't tell us whether the company as a whole did well or not. Similarly, B is favorable and also good news, but it still doesn't give us a sense of whether the company as a whole did well or not. D is unfavorable, which is definitely bad news, but again, it doesn't give us the big picture. 
C is the only option that tells us the company as a whole did not do well because it is the only unfavorable variance. It means the actual cost exceeded the standard cost by $89,100, which is a significant amount. The company needs to investigate this variance to understand where the actual cost is higher and take corrective actions to improve efficiency and reduce costs.

Question 4

Following is the information about Standard Inc. The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are as follows: $\text { Standard Costs }$ 
$\begin{array}{ll}
\text { Direct materials } & 2,500 \text { kilograms } @ \$ 8 \
\text { Direct labor } & 7,500 \text { hours } @ \$ 12
\end{array}$

$\underline{\text { Actual Costs} }$
$\begin{array}{ll}
\text { Direct materials } & 2,600 \text { kilograms } @ \$ 8.75 \
\text { Direct labor } & 7,400 \text { hours } @ \$ 11.40
\end{array}$

$\text { Factory overhead ( } 100 \% \text { capacity - } 10,000 \text { hrs.): }$

Variable cost $ @ \$ 2 $ per hour
 Total variable cost, $ \$ 18,000 $
 Fixed cost $ @ \$ 0.80 $ per hour 
Total fixed cost, $ \$ 8,000 $ ?
The amount of the direct materials quantity variance is:

Accepted Answer

The answer of Following is the information about Standard Inc....

Question 5

A _____ summarizes actual costs, standard costs, and the differences for the units produced.

Accepted Answer

The budget performance report compares actual costs with standard or budgeted costs, and highlights any differences. This allows managers to identify areas where costs exceeded or fell below expectations and take corrective action as necessary. A zero-base report, on the other hand, is a budgeting method that involves starting from scratch each period and justifying all expenditures. Budgeted balance sheet and budgeted income statement are part of the budgeting process, but do not provide the comparison of actual versus budgeted costs.

Question 6

As of January 1 of the current year, the Butner Company had accounts receivables of $50,000.Sales for January, February, and March were as follows: $120,000, $140,000, and $150,000.20% of each month's sales are for cash.Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with the remaining 40% collected in the following month.What is the total cash collected (both from accounts receivable and for cash sales) in the month of February?

Accepted Answer

First, we need to calculate the credit sales for each month:

January: $120,000 x 0.8 = $96,000
February: $140,000 x 0.8 = $112,000
March: $150,000 x 0.8 = $120,000

Then, we need to calculate the collections for each month:

January:
- 40% of January credit sales: $96,000 x 0.4 = $38,400 (collected in February)
- 60% of January credit sales: $96,000 x 0.6 = $57,600 (collected in January)
Total collections in January: $38,400 + $57,600 = $96,000

February:
- Cash sales: $140,000 x 0.2 = $28,000
- 40% of January credit sales (collected in February): $38,400
- 60% of February credit sales (collected in February): $112,000 x 0.6 = $67,200
Total collections in February: $28,000 + $38,400 + $67,200 = $133,600

Therefore, the answer is C) $133,600.

Question 7

Which of the following is true of a capital expenditures budget?

Accepted Answer

A capital expenditures budget summarizes plans for acquiring fixed assets, such as buildings, equipment, or land. It is a tool used to plan and track the long-term investments that a company will make. Option B is referring to a cash budget, option C is referring to an operating budget, and option D is referring to a stockholders' equity budget, none of which are the same as a capital expenditures budget.

Question 8

Kohlman Company began its operations on March 31 of the current year.Projected manufacturing costs for the first three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June.Depreciation, insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs.Insurance was paid on March 31, and property taxes will be paid in November.Three-fourths of the remainder of the manufacturing costs are expected to be paid in the month in which they are incurred with the balance to be paid in the following month. The cash payments for manufacturing in the month of May are:

Accepted Answer

The answer of Kohlman Company began its operations on March...

Question 9

If the price paid per unit differs from the standard price per unit for direct materials, the variance is termed:

Accepted Answer

The variance described is the difference between the actual price paid per unit for direct materials and the standard price per unit. This is known as the price variance, which is a type of cost variance that is used to analyze the difference between the actual and expected cost of goods and services. The controllable and variable variances refer to different types of overhead costs, while the volume variance refers to differences in production levels.

Question 10

Nyt Garments Co.'s static budget at 10,000 units of production includes $30,000 for direct material and $5,000 for electric power.Total fixed costs are $31,000.At 12,000 units of production, a flexible budget would show:

Accepted Answer

To calculate the flexible budget at 12,000 units of production, we first need to calculate the variable costs per unit.

Variable costs per unit = (Total variable costs - Total fixed costs) / Units produced
Variable costs per unit = ($30,000 + 0 - $0 - $31,000) / 10,000
Variable costs per unit = $1

Using the variable cost per unit, we can calculate the total variable costs at 12,000 units of production:

Total variable costs at 12,000 units = Variable cost per unit x Units produced
Total variable costs at 12,000 units = $1 x 12,000
Total variable costs at 12,000 units = $12,000

Now we can calculate the flexible budget at 12,000 units:

Flexible budget at 12,000 units = Total fixed costs + Total variable costs
Flexible budget at 12,000 units = $31,000 + $12,000
Flexible budget at 12,000 units = $43,000

Therefore, the answer is C) variable costs of $42,000 and $31,000 of fixed costs.

Question 11

Production and sales estimates for June are as follows: $\begin{array}{lr}
\text { Estimated inventory (units), June 1 } & 18,500 \
\text { Desired inventory (units), June } 30 & 19,000 \
\text { Expected sales volume (units): } & \
\text { Area X } & 3,000 \
\text { Area Y } & 4,000 \
\text { Area Z } & 5,500 \
\text { Unit sales price } & \$ 20
\end{array}$ ? The number of units expected to be manufactured in June is:

Accepted Answer

To calculate the number of units to be manufactured, add the expected sales volume (3,000 + 4,000 + 5,500 = 12,500 units) to the desired ending inventory (19,000 units) and subtract the beginning inventory (18,500 units). This results in 13,000 units to be manufactured.

Question 12

Based on the following information, calculate the direct materials price variance. $$\begin{array} { l l } 
\text { Actual costs } & 3,590 \text { pounds at } \$ 8.00 \
\text { Standard costs } & 4,100 \text { pounds at } \$ 6.00
\end{array}$$

Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. Here, it is ($8.00 - $6.00) x 3,590 = $2.00 x 3,590 = $7,180 unfavorable.

Question 13

Production and sales estimates for May for the Hudson Co.are as follows: $\begin{array}{ll}
\text { Estimated inventory (units), May } 1 & 17,500 \
\text { Desired inventory (unit), May 31 } & 19,300 \
\text { Expected sal es volume (units): } &\\text { Area } W & 4,200 \
\text { Area } X & 7,000 \
\text { Area Y } & 9,000 \
\text { Unit sales price } & \$ 15
\end{array}$ ? The number of units expected to be sold in May is:

Accepted Answer

The answer of Production and sales estimates for May for...

Question 14

Standard cost per unit is calculated as:

Accepted Answer

Standard cost per unit is calculated by multiplying the standard price with the standard quantity. This is because the standard cost is the estimated cost of producing one unit of a product or service, which is determined by multiplying the standard price, or the cost of each individual input, with the standard quantity, or the amount of each input required to produce one unit of output.

Question 15

Based on the following information, calculate the direct materials quantity variance. $$\begin{array} { l l } 
\text { Actual quantity } & 2,500 \text { pounds at } \$ 6.00 \
\text { Standard quantity } & 2,900 \text { pounds at } \$ 5.50
\end{array}$$ ?

Accepted Answer

The direct materials quantity variance is calculated as (Standard Quantity - Actual Quantity) x Standard Price. Here, (2,900 - 2,500) x $5.50 = $2,200 favorable.

Question 16

Production and sales estimates for June are as follows: $\begin{array}{lr}
\text { Estimated inventory (units), June 1 } & 8,000 \
\text { Desired inventory (units), June } 30 & 9,000 \
\text { Expected sal es volume (units): } & \
\text { Area X } & 3,000 \
\text { Area Y } & 4,000 \
\text { Area Z } & 5,500 \
\text { Unit sales price } & \$ 25
\end{array}$ ? The budgeted total sales for June is:

Accepted Answer

The answer of Production and sales estimates for June are...

Question 17

Which of the following is true of standards?

Accepted Answer

Standards can sometimes limit operating improvements because they may discourage employees from exceeding the set standards, thus potentially stifling innovation and improvement beyond the established benchmarks.

Question 18

Efficient Corporation uses a standard cost system.The following information was provided for the period that just ended: $\begin{array}{ll}
\text { Actual price per gallon } & \$ 11.75 \
\text { Actual gallons of material used } & 5,000 \
\text { Actual hourly labor rate } & \$ 17.00 \
\text { Actual hours of production } & 24,300 \
\text { Standard price per gallon } & \$ 12.00 \
\text { Standard gallons per completed unit } & 1 / 2 \
\text { Standard hourly labor rate } & \$ 12.00 \
\text { Standard time per completed unit } & 3 \text { hrs. } \
\text { Units completed during the period } & 9,000
\end{array}$ ? The direct materials cost variance is:

Accepted Answer

The answer of Efficient Corporation uses a standard cost system.The...

Question 19

Based on the following information, calculate the direct labor rate variance. ? $$\begin{array} { l l } 
\text { Actual rate } & 2,500 \text { hours at } \$ 15.00 \
\text { Standard rate } & 2,650 \text { hours at } \$ 15.50
\end{array}$$

Accepted Answer

The direct labor rate variance is calculated as (Actual Hours x Actual Rate) - (Actual Hours x Standard Rate). Here, it is (2,500 hours x $15.00) - (2,500 hours x $15.50) = $37,500 - $38,750 = $1,250 favorable.

Question 20

Kohlman Company began its operations on March 31 of the current year.Projected manufacturing costs for the first three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June.Depreciation, insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs.Insurance was paid on March 31, and property taxes will be paid in November.Three-fourths of the remainder of the manufacturing costs are expected to be paid in the month in which they are incurred with the balance to be paid in the following month. The cash payments for manufacturing in the month of June are:

Accepted Answer

The cash payments for June include three-fourths of June's costs excluding non-cash items ($217,600 - $28,800) and one-fourth of May's costs excluding non-cash items ($195,200 - $28,800).

Quiz 13: Budgeting and Standard Costs