ADM 3346 Lecture Notes - Lecture 8: Cost Driver, Pro Forma

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12 Jan 2016

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Distinguish between levels 3 and 4 variance analyses for substitutable inputs, and calculate level 4 direct mix and yield variances. A standard cost is the expected cost of providing the group or service. In manufacturing, the standard cost of a unit of output is comprised of: The standard price of the input, and. The standard quality of the input expected to be consumed in the production of. Develop flexible budgets, and calculate flexible budget level 2 and level 3 variances for direct manufacturing costs. Distinguish between levels 3 and 4 variance analyses for substitutable inputs, and calculate. Is not altered after it is issued even if circumstances change. The difference between the actual result and the corresponding static budget. A budget which is adjusted for changes in the actual level of output or actual revenue and cost drivers. The difference between actual (realized) and budgeted (pro forma) results. A favourable variance results in operating income that exceeds the budgeted.

Related Questions

The following information was compiled by Wildhorse Company:

Expected volume of production	110,000	units
Actual level of production	105,000	units
Budgeted fixed overhead	$220,000
Actual fixed overhead	$228,150
Variable overhead rate per direct-labour hour	$8
Actual variable overhead	$406,000
Standard direct-labour hours allowed per unit produced	0.5	hour
Standard direct-labour rate per hour	$8.05
Actual direct-labour hours of input	52,400	hours
Actual direct-labour rate per hour	$8.10

Compute the following variances:

Direct-labour flexible-budget variance $______(Favourable/Unfavourable/neither)

tanbadger888

Problem 1:

Peaceful Corporation manufactures figurines based on thefollowing information.

Standard costs	$20
Materials (4 ounces at $5)	$8
Direct labor (1 hour per unit)	$4
Variable overhead (based on direct labor hours)
Fixed overhead budget		$19,000
Actual results and costs
Materials purchased
Units	9,000
Cost	$39,600
Materials used in production
Finished product units	2,000
Raw material (ounces)	8,200
Direct labor hours	2,000
Direct labor cost	$20,000
Variable overhead costs	$5,980
Fixed overhead costs	$19,500

Required:

Prepare a performance report for Peaceful using the following headings.
2. Actual Production Costs
3. Flexible Budget Costs
4. Flexible Budget Variances
Compute the following variances (show calculations).
2. Materials usage variance
3. Labor rate variance
4. Labor efficiency variance
5. Variable overhead spending variance
6. Variable overhead efficiency variance
7. Fixed overhead budget variance
Give one possible explanation for each of the six variances computed in part b.

Problem 2:

The following is the current variable costing income statementfor Dolly Corporation.

Sales (5,000 units)		$100,000
Variable expenses Cost of goods sold	$35,000
Selling (10% of sales)	$10,000	$45,000
Contribution margin		$55,000
Fixed expenses
Manufacturing overhead	$24,000
Administrative	$12,500	$36,500
Operating income		$18,500

Below is the following information on operations for DollyCorporation.

Beginning inventory (units)	0
Units produced (units)	6,000
Manufacturing costs
Direct labor (per unit)	$5.00
Direct materials (per unit)	$2.30
Variable overhead (per unit)	$2.40

Required:
Prepare an absorption costing income statement.

Problem 3:

The following information was compiled for two models of cellphones.

	3G model	4G model	Average
Budgeted Contribution Margin	$80.00	$120.00	$95.25
Budgeted Sales in Units	28,000	18,000
Actual Sales in Units	28,600	16,500

Required:
Calculate the sales mix variance. (Show your calculations.)

raspberrycoyote259

18. To calculate budgeted direct labor costs, multiply thenumber of units to be produced by the number of projected directlabor hours. Next, multiply that total by the average direct costper hour.

True

False

22. A flexible budget summarizes revenues and costs for variouslevels of sales volume within a relevant range.

True

False

29. A cost variance measures the difference in quantities ofactual inputs used and the standard quantity of inputs allowed forthe actual number of units produced.

True

False

32. Unfavorable variances are subtracted from each other toarrive at a favorable variance.

True

False

34. A direct labor cost variance is unfavorable if the employerpays workers more per hour than budgeted.

True

False

36. In a standard cost system, the manufacturing overheadallocated to production equals the standard overhead allocationrate multiplied by the standard quantity of the allocation baseallowed for expected output.

True

False

37. The direct materials cost and efficiency variances make upthe total direct materials variance.

True

False

41. Which of the following statements is true of absorptioncosting?

A) It considers variable selling and administrative costs asproduct costs.

B) It considers fixed selling and administrative costs asproduct costs.

C) It considers fixed manufacturing overhead cost as productcosts.

D) It considers variable manufacturing overhead cost as periodcosts.

42) Which of the following is true of the traditional format ofthe income statement?

A) It is prepared under the variable costing method.

B) It shows contribution margin as a line item.

C) It is not allowed under GAAP.

D) It is prepared under the absorption method.

43) Unit product cost calculations using absorption costing donot include ________.

A) fixed manufacturing overhead

B) variable manufacturing overhead

C) variable selling and administrative costs

D) direct materials

85. Provide responses to the following questions regarding thediscount rate.

Question? Your response

What does the discount rate represent?

What are other names for the discount rate?

Is the following statement true? Discuss the reason for yourresponse. "The higher the risk, the lower the discount rate."

orchidduck907

ADM 3346 Lecture Notes - Lecture 8: Cost Driver, Pro Forma

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