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Exam 8: Performance Evaluation

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Question 71

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How do differences between planned and actual volume impact companies that use a cost-plus pricing strategy?

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When a company uses a cost-plus pricing ...

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Question 72

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Indicate whether each of the following statements is true or false. The total flexible budget materials variance can be broken down into a price variance and a rate variance.______ If the materials price variance was $3,000 unfavorable and the materials usage variance was $2,000 favorable,the flexible budget materials variance was $1,000 unfavorable.______ If the actual quantity of material used was 10,000 pounds,the actual price per pound was $2.40,and the standard price per pound was $2.25,the materials price variance was $1,500 unfavorable.______ The production department normally is considered to be responsible for materials price variances.______ Analyzing both favorable and unfavorable variances can improve efficiency and benefit the entire company.______

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Question 73

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The resources used in the manufacturing process are frequently called:

A difference between the static budget based on planned volume and a flexible budget prepared at actual volume is called a:

The Bach Company provides the following standard and actual costs relating to material price and labor usage. $\begin{array} { l c c } \text { Item to Classify } & \text { Standard } & \text { Actual } \\\text { Material Price } & 8.50 \text { per gallon } & 8.35 \text { per gallon } \\\text { Luabor Usage } & 30,000 \text { hours } & 28,500 \text { per hour }\end{array}$ Based on the above information,which statement is correct?

The accountant for Dalton Company prepared the following performance report: $\begin{array}{|l|c|c|c|}\hline &\text { Static Budget } & \text { Flexible Budget } & \text { Actual Results } \\\hline \text { Number of units } & 4,000 & 4,500 & 4,500 \\\hline\\\hline \text { Sales } & \$ 200,000 & \$225,000 &\$ 223,000 \\\hline \text { Less variable costs: } & & & \\\hline \text { Materials } & 72,000 & 81,000 & 81,600 \\\hline \text { Labor } & 50,000 & 56,250 & 54,000 \\\hline \text { Overhead } & 16,000 & 18,000 & 17,800 \\\hline \text { Contribution margin } & \$ 23,000 & \$ 25,875 & \$ 21,900 \\\hline \text { Less fixed costs: } & & & \\\hline \text { Manufactuing } & 15,000 & 15,000 & 13,350 \\\hline \text { Selling and admin. } & 6,500 & 6,500 & 6,600 \\\hline \text { Net income } &\$ 1,500 &\$ 4,375 &\$ 1,950 \\\hline \end{array}$ Required: 1)Compute the sales volume variance in units. 2)Compute the percentage increase in revenue generated by the increase in activity. 3)Compute the percentage increase in budgeted profitability that resulted from the increase in revenue.Explain this result. 4)How would differences between planned and actual volume impact companies that use a cost-plus pricing strategy?

Indicate whether each of the following statements is true or false. A company's variable overhead cost represents such inputs as rent and depreciation.______ The variable overhead cost pool is normally assigned to products using many different allocation rates.______ Variable overhead and fixed overhead variances are calculated using the same basic formulas.______ Many companies choose not to calculate price and usage variances for variable overhead costs.______

Which of the following factors should be considered in establishing standards for use with a standard costing system?

Cruz Company established a direct labor standard of 0.5 hours per unit at $12 per hour for one of its products.In April,Cruz produced 16,000 units and used 8,100 direct labor hours. Required: Based on this information, (a)Which variance can you calculate? (b)What is the dollar amount of the variance? (c)Is the variance favorable or unfavorable? (d)Do you consider the variance to be sufficiently material that managers should investigate to discover the cause of the variance?

The following standard cost card is provided for Navid Company's Product A: $\begin{array}{lr}\text { Direct material (2 lbs.@\$5.00 per lb.) } & \$ 10.00 \\\text { Direct labor }(1 \mathrm{hr} @ \$ 8.00 \text { per hr.) } & 8.00 \\\text { Variable overhead (1 hr. @\$3.00 per hr.) } & 3.00 \\\text { Fixed overhead (1 hr. @ \$2.00 per hr.) } & \underline{2.00} \\\text { Total standard cost per unit } & \underline{\$ 23.00} \\\end{array}$ The fixed overhead rate is based on total budgeted fixed overhead of $12,000.During the period,the company produced and sold 5,800 units at the following costs: Direct material 12,200 pounds @ $4.80 per pound Direct labor 5,950 hours @ $8.00 per hour Overhead $29,920 The standard manufacturing cost per unit is $23.00.What is the actual manufacturing cost per unit? (Do not round intermediate calculations.)

Which of the following equations can be used to compute a labor price variance? (A = Actual; S = Standard; H = Hour; P = Price)

How does the use of standard costs fit with the philosophy of management by exception?

Hurst Company's standard variable materials cost per unit was $8.The actual materials cost per unit on production of 10,000 units was $8.22.Based on this information,Hurst Company incurred an unfavorable variable materials price variance of $2,200.

Multiplying the difference between actual materials price per unit and the standard materials price per unit by actual quantity of materials used is known as the:

When would a cost variance be listed as unfavorable?

What is the result when the quantity of materials used is less than the standard quantity?

If the master budget prepared at a volume level of 10,000 units includes direct materials of $40,000,a flexible budget based on a volume of 12,000 units would include direct materials of $48,000.

The Vermont Company has requested a performance report that reports both sales activity variances and flexible budget variances.The following table of information is provided: Required: (1)Compute and enter the variances and label the variances as favorable (F)or unfavorable (U). (2)Which variances are sales volume variance and which variances are flexible budget variances? (3)Comment on this company's performance.

What should be the organizational purpose for identifying and calculating variances?

The differences between the standard and actual amounts are called variances.