Untitled document - 2023-07-26T210216.786

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Nov 24, 2024

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Managerial Accounting The master budget is frequently called a(n) - ANSWER static budget. Flexible budgets can use a variety of volume levels. - ANSWER True--Flexible budgets allow the manager to analyze revenues and costs at a variety of volume levels. Durango Co. prepared the following static budget based on sales projections of 10,000 units: Revenue---$20,000 Variable costs---10,000 Contribution margin---10,000 Fixed costs---5,000 Net income---5,000 What would be reported for net income on a flexible budget, assuming 12,000 units were sold? - ANSWER $7,000--Revenue 24,000 (12,000 X 2) Var. Costs 12,000 Cont. Marg. 12,000 Fixed Costs 5,000 Net Income 7,000 The static and flexible budgets use the same - ANSWER per unit variable costs total fixed costs per unit sales price The difference between the standard and the actual amount is called a(n) - ANSWER variance When would a variance be labeled as unfavorable? - ANSWER When standard costs are less than actual cost. A budget that shows revenues and costs at a variety of volume levels is a - ANSWER flexible budget Durango Co. prepared the following static budget based on sales projections of 10,000 units: Revenue--$200,000 Variable costs---100,000 Contribution margin---100,000 Fixed costs---50,000 Net income---50,000 What would be reported for net income on a flexible budget, assuming 12,000 units were sold? - ANSWER $70,000---Revenue 240,000 Variable Cost 120,000 Cont. Margin 120,000 Fixed Costs 50,000 net Income 70,000 The primary difference between the static and flexible budget is the - ANSWER expected number of units sold.

A variance is - ANSWER The difference between the standard and the actual amount is called a(n)________ . (Enter only one word.) - ANSWER variance Sales variances are unfavorable when - ANSWER actual sales are less than expected sales. If Stan Company planned for variable cost per unit to be $2.00 but actual variable cost per unit is $2.50, the variance is________ - ANSWER favorable A budget that shows revenues and costs at a variety of volume levels is a(n)_________ budget. - ANSWER Flexible Actual costs exceed standard costs - ANSWER Unfavorable Actual costs are less than standard costs - ANSWER Favorable Durango Co. prepared the following static budget based on sales projections of 5,000 units: Revenue ---$20,000 Variable costs---10,000 Contribution margin---10,000 Fixed costs---5,000 Net income---5,000 What would be reported for net income on a flexible budget, assuming 10,000 units were sold? - ANSWER $15,000--Revenue=40,000 (10,000 x 2) (20,000/50,000)=2 Variable Cost 20,000 (40,000/2)=20,000 Cont. Margin 20,000 (40,000/2)=20,000 Fixed Costs 5,000 (20,000-5000)=15,000 net Income 15,000 The difference between sales on the static budget and sales on a flexible budget based on actual volume is a(n) _______volume variance. (Enter only one word.) - ANSWER sales The Boyle Company estimated that April sales would be 10,000 units with an average selling price of $2.00. Actual sales for April were 8,000 units and average selling price was $2.10. The sales volume variance was: - ANSWER $4,000---10,000 units X $2=$20,000 Sales on the Static Budget 8,000 units X $2=$16,000 Sales on the Flexible Budget $20,000-$16,000=$4,000 The sales volume variance is unfavorable because the sales were lower than expected. Sales variances are favorable when - ANSWER actual sales exceed expected sales. The cost volume variance is defined as the difference between the - ANSWER cost on the static budget and the cost on a flexible budget based on actual volume.

Cost variances are favorable when - ANSWER actual costs are less than standard costs. The difference between sales on the static budget and sales on a flexible budget based on actual volume is a - ANSWER sales volume variance. Volume variances are typically the responsibility of_______ managers. (Enter only one word.) - ANSWER marketing The Boyle Company estimated that April sales would be 10,000 units with an average selling price of $2.00. Actual sales for April were 11,000 units and average selling price was $1.90. The sales volume variance was: - ANSWER $2,000 favorable---10,000 units X $2=$20,000 Sales on the Static Budget 11,000 units x $2=$22,000 Sales on the Flexible Budget $20,000-$22,000=$2,000 The sales volume variance is favorable because the sales were higher than expected. The difference between the cost on the static budget and the cost on a flexible budget based on actual volume is determines the __________ __________ volume variance. - ANSWER variable cost Changes in the level of activity will not affect the - ANSWER total fixed cost Who is typically responsible for volume variances? - ANSWER marketing managers Flexible budget variances occur due to differences in standard and __________per-unit amounts. - ANSWER actual Actual results and the flexible budget reflect _____ volume of activity, and variances result from differences between standard and actual _____. - ANSWER the same; per-unit amounts The difference between costs on the static budget and costs on a flexible budget based on actual volume is a - ANSWER cost volume variance. When comparing the static and flexible budget, which volume variance is always zero? - ANSWER fixed cost volume variance A flexible budget variance is the difference between - ANSWER actual figures and figures on a flexible budget based on actual volume. The total sales variance includes both price variance and variances. (Enter only one word.) - ANSWER volume The Boyle Company estimated that April sales would be 50,000 units with an average selling price of $5.00. Actual sales for April were 80,000 units and average selling price was $5.20. The

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sales volume variance was: - ANSWER $150,000 favorable---50,000 units X $5=$250,000 Sales on the Static Budget 80,000 units X $5=$400,000 Sales on the Flexible Budget $250,000-$400,000=$150,000 The sales volume variance is favorable because the sales were higher than expected. Sales variances are unfavorable when - ANSWER actual sales are less than expected sales. JJ Company planned to sell 5,000 units for $10 per unit. The Company actually sold 6,000 units for $8 per unit. What is the sales price variance? - ANSWER $12,000 unfavorable---6,000 units X ($10-$8)=$12,000 The variance is unfavorable because the actual sales price was lower than the expected sales price. The difference between flexible budget figures and actual figures are - ANSWER flexible budget variances When the actual sales price exceeds the expected sales price a company has a - ANSWER favorable sales price variance Sales price variances always occur when - ANSWER actual sales differ from sales on a flexible budget based on actual volume. A favorable labor variance could mean - ANSWER management motivated employees to work hard. JJ Company planned to sell 5,000 units for $10 per unit. The Company actually sold 2,000 units for $14 per unit. What is the sales price variance? - ANSWER $8,000---2,000 units X ($10-$14)=$8,000 The variance is favorable because the actual sales price was higher than the expected sales price. The difference between actual figures and figures on a flexible budget based on actual volume is a(n) ______budget variance. (Enter only one word.) - ANSWER flexible The difference between budgeted fixed costs and actual fixed costs is called a fixed cost______ variance. (Enter only one word.) - ANSWER spending Which of the following is a reason for a favorable sales variance? - ANSWER When actual sales exceed budgeted or expected sales How do companies allocate fixed overhead before actual cost is known? - ANSWER Use a predetermined rate to allocate the fixed overhead. Sales price variances always occur when - ANSWER the sales price is different than expected.

A favorable material variance could mean - ANSWER purchasing agents negotiated price concessions or discounts JJ Company planned to sell 5,000 units for $10 per unit. The Company actually sold 6,000 units for $8 per unit. What is the sales price variance? - ANSWER $12,000 Unfavorable----6,000 units X ($10-$8)=$12,000 The variance is unfavorable because the actual sales price was lower than the expected sales price. The predetermined overhead rate is calculated as budgeted fixed cost divided by - ANSWER planned volume The difference between budgeted fixed costs and the actual fixed costs is called a - ANSWER spending variance Which of the following are reasons companies use a predetermined overhead rate to allocate fixed overhead? (Select all that apply.) - ANSWER Estimate cost to determine a sales price. Estimate cost for quarterly financial statements. Sales price variances always occur when - ANSWER actual sales differ from sales on a flexible budget based on actual volume. True or false: When actual volume is different than expected volume, a fixed costs volume variance will occur. - ANSWER True--When actual volume is different than expected fixed costs, per unit cost will change, resulting in a fixed cost volume variance. The predetermined overhead rate is calculated as - ANSWER Budgeted Fixed Cost/Planned Volume If actual volume is less than the planned volume, the fixed cost volume variance will be - ANSWER unfavorable A fixed cost spending variance is defined as the difference between - ANSWER budgeted fixed costs and actual fixed costs. For 2016, Monroe Corporation budgeted fixed costs of $300,000. It expected to make 20,000 units during the year. Actual fixed costs were $346,000, and Monroe actually made 19,000 units of product. What is the fixed cost volume variance? - ANSWER $15,000 unfavorable---Fixed cost volume variance = (19,000 - 20,000) × $300,000/20,000 = $15,000 unfavorable Why do companies use a predetermined rate to allocate fixed overhead? - ANSWER To estimate the cost of a product before the actual cost is known. The difference between actual sales and sales on a flexible budget based on actual volume is a - ANSWER sales price variance.

Normally, the upper-level_______ managers are held responsible for fixed cost volume variances. (Enter only one word.) - ANSWER marketing A fixed cost volume variance occurs when - ANSWER actual per unit fixed costs are different than budgeted per unit fixed costs. If actual volume is________ than the planned volume, the fixed cost volume variance will be unfavorable. (Enter only one word.) - ANSWER less According to a philosophy known as management by exception, what type of cost variances should be investigated? - ANSWER unfavorable For 2016, Monroe Corporation budgeted fixed costs of $400,000. It expected to make 20,000 units during the year. Actual fixed costs were $406,000, and Monroe actually made 22,000 units of product. What is the fixed cost volume variance? - ANSWER $40,000 Favorable (22,000-20,000) X $400,000/20,000=40,000 A(n) _________represents the amount that a price, cost, or quantity should be under certain anticipated circumstances. (Enter only one word.) - ANSWER standard Normally, upper level marketing managers are held accountable for the - ANSWER fixed cost volume variance What type of standard represents flawless performance including what costs should be under the best possible circumstances? - ANSWER ideal A management philosophy that encourages managers to concentrate on areas not performing as expected is known as - ANSWER management by exception True or false: Deciding which variances to investigate is an exact science and does not rely on managerial judgment. - ANSWER False A standard represents the amount that a price, cost, or quantity should be under certain - ANSWER anticipated circumstances True or false: In deciding whether to investigate a variance, managers should consider the materiality, but not the type or direction of the variance. - ANSWER false--In deciding whether to investigate a variance, managers should consider the materiality. Managers should also consider the type or direction of the variance. ______standards represent reasonable effort; they are attainable for most employees. (Enter only one word.) - ANSWER Practical

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True or false: Management should only investigate material variances if they are unfavorable. - ANSWER false---Material variances should be investigated if they are favorable or unfavorable. Fixed cost volume variances occur when - ANSWER actual volume is different than expected volume. Benefits of a standard cost system include (Select all that apply) - ANSWER alerting management to trouble spots motivating employees boosting morale encouraging good planning Which of the following factors should influence a decision to investigate a variance? (Select all that apply.) - ANSWER Materiality of variance Capacity for management to control the variance Frequency of variance A(n) ________ variance is one that could influence management decisions. - ANSWER material Material variances should be investigated if they are - ANSWER favorable or unfavorable Sometimes the sales staff will deliberately underestimate the amount of expected sales. This practice is known as: - ANSWER lowballing The primary advantage of a standard cost system is efficient use of management talent to control________ . (Enter only one word.) - ANSWER costs Melrose has a $4,180 favorable flexible budget materials cost variance. This indicates that Melrose spent less than expected on materials to make 19,000 trophies. This could be a result of a price variance or a variance_______. (Enter only one word.) - ANSWER usage True or false: Managers should consider the materiality of a variance, the frequency with which it occurs, their ability to control the variance, and the characteristics of the items behind the variance. - ANSWER True Select the correct statement from the following, assuming Carmichael Company had a favorable direct materials price variance of $3,000 and an unfavorable direct materials usage variance of $2,000. - ANSWER The total direct materials variance is $1,000 favorable. $3,000 favorable direct materials price variance + $2,000 unfavorable materials usage variance = $1,000 favorable total direct materials variance.

Sometimes employees will deliberately overstate the amount of materials and/or labor that should be required to complete a job. The difference between inflated and realistic standards is known as: - ANSWER budget slack Which of the following correctly represents the materials price variance formula? - ANSWER actual price - standard price X actual quantity Which of the following statements is true concerning flexible budget variances? - ANSWER Flexible budget variances can be caused by price or usage variances. The standard amount of materials required to make one unit of Product Q is 4 pounds. Tusa's static budget showed a planned production of 3,800 units. During the period the company actually produced 4,100 units of product. The actual amount of materials used averaged 3.9 pounds per unit. The standard price of material is $1 per pound. Based on this information, the materials usage variance was: - ANSWER $410 favorable---Materials usage variance= (Actual quantity - Standard quantity) x Standard price Actual quantity= 4100 units x 3.9 pounds per unit= 15990 Standard quantity= 4100 units X 4 pounds per unit= 16400 MUV=(15990- 16400) $1 MUV =$410 favorable A management philosophy that encourages managers to concentrate on areas not performing as expected is known as management by________ . (Enter only one word.) - ANSWER exception Who is normally held responsible for the materials price variance? - ANSWER purchasing agent Which of the following is the correct formula for the labor price variance? - ANSWER Actual price - standard price x actual hours Select the correct statement from the following, assuming Carmichael Company had a favorable direct materials price variance of $5,000 and an unfavorable direct materials usage variance of $6,000. - ANSWER The total direct materials variance is 1,000 unfavorable. $5,000 favorable direct materials price variance + $6000 unfavorable materials usage variance = $1,000 unfavorable total direct materials variance. The labor price variance is normally the responsibility of the________supervisor. (Enter only one word.) - ANSWER production Marks Company makes one product, for which it has established the following standards for materials: Average quantity of material per unit of product: 4.5 pounds Price per pound of materials, $18.50 During March, Marks made 10,000 units of the product, using 50,000 pounds

at a total purchase price of $900,000. What is the materials price variance? - ANSWER $25,000 favorable---Price variance= (Actual price-Standard price) X Actual quantity Materials price variance: 50,000 pounds × ($18 - 18.50) = $25,000 favorable The standard amount of materials required to make one unit of Product Q is 2 pounds. Sam's static budget showed a planned production of 2,000 units. During the period the company actually produced 2,100 units of product. The actual amount of materials used averaged 2.3 pounds per unit. The standard price of material is $3 per pound. Based on this information, the materials usage variance was: - ANSWER $1,890 unfavorable--Materials usage variance= (Actual quantity - Standard quantity) X Standard price Actual quantity= 2100 units X 2.3 pounds per unit= 4830 Standard quantity= 2100 units X 2 pounds per unit= 4200 MUV=(4830- 4200) X $3 MUV=$1,890 unfavorable The purchasing agent is normally responsible for the - ANSWER materials price variance Heartwood Company reported a $4,000 favorable direct labor price variance and a $1,500 unfavorable direct labor usage variance. Select the correct statement from the following. - ANSWER The total direct labor variance is $2,500 favorable. It took employees more time to produce the outputs than expected as can be seen in the $1500 unfavorable direct labor usage variance. The actual direct labor rate must have been below the standard direct labor rate as can be seen by the $4000 favorable direct labor price variance. It is probable that the supervisor used less skilled employees and paid them less since there was a favorable direct labor price variance and a unfavorable direct labor usage variance. Hickam Company makes one product, for which it has developed the following standard for labor: each unit should require 1.50 hours at $12/hour. In April, Hickam made 10,000 units, using 1.65 hours per unit at a cost of $11.50 per hour. What is the labor price variance? - ANSWER $8,250 favorable--Labor price variance = 16,500 (10,000*1.65) hours × ($12 - 11.50) = $8,250 favorable Who is normally held responsible for labor usage variances? - ANSWER Production supervisors A variable overhead usage variance provides no clue about which overhead inputs were overused or________ . (Enter only one word.) - ANSWER underused Variable selling, general, and administrative costs can have price and usage________. (Enter only one word.) - ANSWER variance

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If the actual rate paid for labor is more than the standard rate there is a(n) - ANSWER unfavorable labor price variance Which of the following statements is incorrect regarding variable overhead variances? - ANSWER All companies must calculate price and usage variances for variable overhead costs. Variable selling, general, and administrative costs can have ______ and usage variances. (Enter only one word.) - ANSWER price

Untitled document - 2023-07-26T210216.786

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