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Exam 13: Budgeting and Standard Cost Systems

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Question 81

True/False

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The budget procedure that requires all levels of management to start from zero in estimating sales, production, and other operating data is called zero-based budgeting.

A) True
B) False

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Question 82

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McCabe Manufacturing Co.'s static budget at 8,000 units of production includes $40,000 for direct labor and $4,000 for electric power. Total fixed costs are $23,000. At 9,000 units of production, a flexible budget would show:

A) variable costs of $49,500 and $25,875 of fixed costs.
B) variable costs of $44,000 and $23,000 of fixed costs.
C) variable costs of $49,500 and $23,000 of fixed costs.
D) variable costs of $44,000 and $25,875 of fixed costs.

E) B) and D)
F) B) and C)

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Question 83

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Which of the following formula is used to calculate direct labor rate variance?

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. Refer to the information provided for Kohlman Company. The cash payments for manufacturing in the month of May are:

Standard and actual costs for direct materials for the manufacture of 1,000 units of product were as follows: $\begin{array}{ll}1,5501 \mathrm{bs} .@ \$ 9.10 & \text { Actual costs } \\1,6001 \mathrm{bs} . @\$ 9.00 & \text { Standard costs }\end{array}$ Determine the (a) quantity variance, (b) price variance, and (c) total direct materials cost variance.

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: $\begin{array}{lrr} \text { Standard Costs } &\\ \text {2,500 kilograms@\$8 } & \text {Direct material}\\ \text { 7,500 hours @\$12 } & \text { Direct labor}\\\\ \text { Actual Costs } &\\ \text { 2,600 kilograms@\$8.75 } & \text {Direct material }\\ \text { 7,400 hours @ \$ 11.40 } & \text {Direct labor}\\\\ \text { Factory overhead (100\% capacity } &\\ \text { \( 10,000 \mathrm{hrs}) : \) } &\\\end{array}$ 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 fixed factory overhead volume variance is:

The following data relate to direct labor costs for the current period of Executive Inc.: $\begin{array}{lrr} \text {6,000 hours at \$12.00 } & \text { Standard costs } \\ \text {7,500 hours at \( \$ 11.60 \) } & \text { Actual costs } \\\end{array}$ Refer to the information provided for Executive Inc. What is the direct labor time variance?

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: $\begin{array}{lrr} \text { Standard Costs } &\\ \text {2,500 kilograms@\$8 } & \text {Direct material}\\ \text { 7,500 hours @\$12 } & \text { Direct labor}\\\\ \text { Actual Costs } &\\ \text { 2,600 kilograms@\$8.75 } & \text {Direct material }\\ \text { 7,400 hours @ \$ 11.40 } & \text {Direct labor}\\\\ \text { Factory overhead (100\% capacity } &\\ \text { \( 10,000 \mathrm{hrs}) : \) } &\\\end{array}$ Variable cost @ $2 per hour Total variable cost, $18,000 Fixed cost @ $0.80 per hour Total fixed cost, $8,000 Refer to the information provided for Standard Inc. The amount of the direct materials quantity variance is:

Which of the following conditions normally would not indicate that standard costs should be revised?

If the actual direct labor hours spent producing a commodity differ from the standard hours, the variance is termed:

Nonmanufacturing activities are usually controlled using a static budget rather than a standard costing system.

The standard cost is a detailed estimate of how much a product should cost.

If the expected sales volume for the current period is 7,000 units, the desired ending inventory is 400 units, and the beginning inventory is 300 units, the number of units set forth in the production budget, representing total production for the current period, is:

The formula to compute direct material quantity variance is:

If the standard to produce a given amount of product is 12,000 hours at a factory overhead rate of $5 ($3 fixed, $2 variable), actual variable factory overhead was $26,400, actual fixed factory overhead was $45,000, and 100% of productive capacity is 15,000 hours, the volume variance was $9,000 favorable.

Brown Inc.'s production budget for Product X for the year ended December 31 is as follows: $\begin{array}{ll} \underline{\text { Product X} }\\640,000 \text { units }&\text { Sales } \\ \underline{85,000 }& \text { Plus desired ending inventory }\\ 725,000& \text { Total } \\ \underline{90,000}&\text { Less estimated beginning inventory, Jan 1} \\ \underline{ 635,000} & \text { Total production }\\ \end{array}$ In Brown's production operations, Materials A, B, and C are required to make Product X. The quantities of direct materials expected to be used for each unit of product are as follows: Product X Material A .50 pound per unit Material B 1.00 pound per unit Material C 1.20 pound per unit The prices of direct materials are as follows: Material A $0.60 per pound Material B $1.70 per pound Material C $1.50 per pound Prepare a direct materials purchases budget for Product X.

A variable cost system is an accounting system where standards are set for each manufacturing cost element.

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

Cape Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below. $\begin{array}{lll}\$ 0.60 \text { per pound } & .50 \mathrm{lb} . \text { per unit } & \text { Material A } \\\$ 1.70 \text { per pound } & 1.00 \mathrm{lb} \text {. per unit } & \text { Material } \mathrm{B} \\\$ 1.00 \text { per pound } & 1.20 \mathrm{lb} . \text { per unit } & \text { Material C }\end{array}$ Refer to the information provided for Cape Corporation. The amount of direct material B purchased during the year is:

Goal conflict can be avoided if budget goals are carefully designed for consistency across all areas of the organization.