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ACCY 207 Chapter Notes - Chapter 8: Standard Cost Accounting, The Variable, Direct Labor Cost

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NIU
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Accountancy
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ACCY 207
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Chapter 8: flexible budgets, standard costs, and variance analysis. Standard costs setting the stage: standard= a benchmark or norm for measuring performance, a standard is the expected cost for one unit. (a budget is the expected cost for. Using standard costs direct materials variances: lo 8-4: compute the direct materials price and quantity variances and explain their. Vi. significance: standard quantity allowed for actual output = refers to the amount of an input that should have been used to manufacture the actual output of finished goods produced during the period. Raw materials purchases may be help in inventory for a period of time before being used in production. Appendix 8a: predetermined overhead rates and overhead analysis in a standard costing. System: lo 8-7: compute and interpret the fixed overhead budget and volume variances, predetermined overhead rates, pohr = how overhead costs are assigned to products and services.

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Related Questions

I need some feedback if these are correct.
1.
A flexible budget is a budget that:
A) is updated with actual costs as they occur during theperiod.
B) is updated to reflect the actual level of activity during theperiod.
C) is prepared using a computer spreadsheet application.
D) contains only variable production costs.
2.
Ofarrell Snow Removal's cost formula for its vehicle operating costis $1,840 per month plus $377 per snow-day. For the month ofNovember, the company planned for activity of 14 snow-days, but theactual level of activity was 19 snow-days. The actual vehicleoperating cost for the month was $9,280. The vehicle operating costin the flexible budget for November would be closest to:
A) $9,003
B) $7,118
C) $9,280
D) $9,660
3.
Entler Framing's cost formula for its supplies cost is $2,250 permonth plus $16 per frame. For the month of June, the companyplanned for activity of 502 frames, but the actual level ofactivity was 497 frames. The actual supplies cost for the month was$10,580. The supplies cost in the planning budget for June would beclosest to:
A) $10,580
B) $10,282
C) $10,686
D) $10,202
4.
Johannsen Catering uses two measures of activity, jobs and meals,in the cost formulas in its budgets and performance reports. Thecost formula for catering supplies is $310 per month plus $103 perjob plus $23 per meal. A typical job involves serving a number ofmeals to guests at a corporate function or at a host's home. Thecompany expected its activity in February to be 28 jobs and 187meals, but the actual activity was 26 jobs and 192 meals. Theactual cost for catering supplies in February was $7,620. Thecatering supplies in the flexible budget for February would beclosest to:
A) $7,495
B) $7,404
C) $7,620
D) $6,960
5.
Kimbril Catering uses two measures of activity, jobs and meals, inthe cost formulas in its budgets and performance reports. The costformula for catering supplies is $530 per month plus $91 per jobplus $12 per meal. A typical job involves serving a number of mealsto guests at a corporate function or at a host's home. The companyexpected its activity in January to be 27 jobs and 174 meals, butthe actual activity was 31 jobs and 173 meals. The actual cost forcatering supplies in January was $5,330. The activity variance forcatering supplies in January would be closest to:
A) $255 F
B) $255 U
C) $352 F
D) $352 U
6.
Lapinsky Air uses two measures of activity, flights and passengers,in the cost formulas in its budgets and performance reports. Thecost formula for plane operating costs is $31,400 per month plus$2,148 per flight plus $7 per passenger. The company expected itsactivity in April to be 89 flights and 261 passengers, but theactual activity was 84 flights and 260 passengers. The actual costfor plane operating costs in April was $204,810. The spendingvariance for plane operating costs in April would be closestto:
A) $8,842 U
B) $19,589 F
C) $19,589 U
D) $8,842 F
7.
Velten Corporation's flexible budget performance report for lastmonth shows that actual indirect materials cost, a variable cost,was $45,198 and that the spending variance for indirect materialscost was $9,114 favorable. During that month, the company worked18,600 machine-hours. Budgeted activity for the month had been19,000 machine-hours. The cost formula per machine-hour forindirect materials cost must have been closest to:
A) $1.90
B) $2.86
C) $1.94
D) $2.92
8.
Which of the following comparisons best isolates the impact thatchanges in prices of inputs and outputs have on performance?
A) static planning budget and flexible budget
B) static planning budget and actual results
C) flexible budget and actual results
D) master budget and static planning budget
9.
The excess or deficiency of cash available over disbursements onthe cash budget is calculated as follows:
A) The beginning balance less the expected cash receipts less theexpected cash disbursements.
B) The cash available less the expected cash receipts plus theexpected cash disbursements.
C) The beginning balance plus the expected cash receipts less theexpected cash disbursements.
D) None of the above.
10.
There are various budgets within the master budget. One of thesebudgets is the production budget. Which of the following BESTdescribes the production budget?
A) It details the required direct labor hours.
B) It details the required raw materials purchases.
C) It is calculated based on the sales budget and the desiredending inventory.
D) It summarizes the costs of producing units for the budgetperiod.
1.B
2.A
3.A
4.C
5.D
6.C
7.A
8.B
9.A
10.C

Problem 16-46 Solve for Master Budget Given Actual Results (LO16-2, 4)

A new accounting intern at Gibson Corporation lost the only copyof this period's master budget. The CFO wants to evaluateperformance for this period but needs the master budget to do so.Actual results for the period follow:

Sales volume 130,000 units
Sales revenue $ 873,600
Variable costs
Manufacturing 192,192
Marketing andadministrative 78,624
Contribution margin $ 602,784
Fixed costs
Manufacturing 251,200
Marketing andadministrative 146,000
Operating profit $ 205,584

The company planned to produce and sell 110,500 units for $6.00each. At that volume, the contribution margin would have been$464,100. Variable marketing and administrative costs are budgetedat 10 percent of sales revenue. Manufacturing fixed costs areestimated at $2.40 per unit at the normal volume of 110,500 units.Management notes, "We budget an operating profit of $1.00 per unitat the normal volume."

Required:

a. Construct the master budget for the period.(Do not round intermediate calculations.)

GIBSON CORPORATION
Master Budget
Salesvolume units
Salesrevenue
Variablecosts:
Manufacturing
Marketingand administrative
Contribution margin $0
Fixedcosts:
Manufacturing
Marketingand administrative
Operating profit $0

b. Prepare a profit variance analysis.(Do not round intermediate calculations. Indicate theeffect of each variance by selecting "F" for favorable, or "U" forunfavorable. If there is no effect, do not select eitheroption.)

GIBSON CORPORATION
Profit Variance Analysis
Actual (130,000 Units) Manufacturing Variances Marketing and Administrative Variances Sales Price Variance Flexible Budget Sales Activity Variance Master Budget
Sales revenue $873,600
Variable costs:
Manufacturing 192,192
Marketing andadministrative 78,624
Contribution margin $602,784
Fixed costs:
Manufacturing 251,200
Marketing andadministrative 146,000
Operating profit $205,584

Several years ago, Westmont Corporation developed acomprehensive budgeting system for planning and control purposes.While departmental supervisors have been happy with the system, thefactory manager has expressed considerable dissatisfaction with theinformation being generated by the system.

A typical departmental cost report for a recent periodfollows:


Assembly Department
Cost Report
For the Month Ended March 31
Actual Results Planning Budget Variances
Machine-hours 50,000 55,000
Variable costs:
Supplies $ 48,950 $ 52,250 $ 3,300 F
Scrap 32,400 33,000 600 F
Indirect materials 82,800 88,000 5,200 F
Fixed costs:
Wages and salaries 89,250 90,000 750 F
Equipment depreciation 70,000 70,000 –
Total cost $ 323,400 $ 333,250 $ 9,850 F


After receiving a copy of this cost report, the supervisor ofthe Assembly Department stated, “These reports are super. It makesme feel really good to see how well things are going in mydepartment. I can’t understand why those people upstairs complainso much about the reports.”

For the last several years, the company’s marketing departmenthas chronically failed to meet the sales goals expressed in thecompany’s monthly budgets.


Required:

1. The company’s president is uneasy about the cost reports,what can be the reason? (You may select more than oneanswer. Single click the box with the question mark to produce acheck mark for a correct answer and double click the box with thequestion mark to empty the box for a wrong answer.)

Cost reports are ineffective sincebudgeted costs at one level of activity are compared to actualcosts at another level of activity.
Cost reports show whether fixedcosts are controlled and do not show whether variable costs arecontrolled.
Cost reports are effective sincebudgeted costs at one level of activity are compared to actualcosts at another level of activity.
Cost reports show whether fixedcosts and variable costs are controlled.


2. What kind of reports should be used to give better insightinto how well departmental supervisors are controlling costs?

Flexible budget performance reportsmust be used
Fixed budget performance reportsmust be used


3. Complete the new performance report for the quarter, based onFlexible Budget Performance approach. (Indicate the effectof each variance by selecting "F" for favorable, "U" forunfavorable, and "None" for no effect (i.e., zero variance). Inputall amounts as positive values.)



4. Were costs well controlled in March?