ACCT208 Study Guide - Midterm Guide: Sunk Costs, Standard Cost Accounting

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harlequinraven529

27 Jun 2018

School

University of Delaware

Department

Accounting

Course

ACCT208

Professor

Deb Dragone

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Fall 2014

● Flexible Budget: use actual activity

● Planning Budget: use expected activity

● An activity variance is not due to the difference between the level of activity used in the

flexible budget and the actual level of activity

● If planned for less than actual , Unfavorable

● If the actual level of activity is 4% less than planned, then the variable costs in the static

planning budget should be decreased by 4% before comparing them to actual costs

FALSE

● Revenue variance is favorable if the actual revenue is less than the revenue in the static

planning budget

● Static Planning Budget and Flexible Budget -- isolate the impact that changes in

operating efficiency have on performance

● Whoever is responsible for the control of the denominator activity in the Predetermined

Overhead Rate should also be responsible for the Variable Overhead Efficiency

Variance

● The Materials Quantity Variance is computed based on the amount of materials

purchased during the period FALSE

● Purchase of poor quality materials will generally result in an Unfavorable Materials Price

Variance and a Favorable Labor Rate Variance

● In standard costing, the standard quantity allowed refers to the inputs that should have

been used for the actual production achieved

● An Unfavorable Materials Quantity Variance indicates that actual usage of material

exceeds the standard material allowed for output

● A Favorable Materials Price Variance coupled with an Unfavorable Material Quantity

Variance would most likely result from the purchase and use of Lower than Standard

Quality Materials

● A Favorable Labor Rate Variance indicates that the Standard Rate exceeds the Actual

Rate

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Document Summary

An activity variance is not due to the difference between the level of activity used in the flexible budget and the actual level of activity. If planned for less than actual , unfavorable. If the actual level of activity is 4% less than planned, then the variable costs in the static planning budget should be decreased by 4% before comparing them to actual costs. Revenue variance is favorable if the actual revenue is less than the revenue in the static planning budget. Static planning budget and flexible budget -- isolate the impact that changes in operating efficiency have on performance. Whoever is responsible for the control of the denominator activity in the predetermined. Overhead rate should also be responsible for the variable overhead efficiency. The materials quantity variance is computed based on the amount of materials purchased during the period false. Purchase of poor quality materials will generally result in an unfavorable materials price.

Related Questions

***please type out the answer

Bay Company has collected the following operating informationbelow for its current month's activity. Using this information,prepare a flexible budget analysis to determine how well Bayperformed in terms of cost control. The flexible budget shouldcontain columns for actual costs incurred, flexible budget, andvariance. Please indicate if the variance is favorable orunfavorable.

Actual CostsIncurred Static Budget
Activity level inunits 5,200 5,000
Variable costs:
Indirectmaterials $53,500 $50,000
Utilities 20,400 20,000

Fixed costs:
Administration 44,000 40,000
Rent 32,000 30,000

yellowwasp623

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

magentabat295

Problem 16-51 Sales Activity Variance (LO 16-3)

Odessa, Inc., reports the following information concerningoperations for the most recent month:

	Actual (based on actual of 540 units)			Master Budget (based on budgeted 600 units)
Sales revenue		$	94,300		$	102,000
Less
Manufacturing costs
Direct labor			13,034			13,800
Materials			12,490			14,400
Variable overhead			7,850			9,600
Marketing			5,140			5,820
Administrative			4,200			4,200
Total variable costs		$	42,714		$	47,820
Contribution margin		$	51,586		$	54,180
Fixed costs
Manufacturing			4,665			4,800
Marketing			9,984			9,600
Administrative			9,563			9,600
Total fixed costs		$	24,212		$	24,000
Operating profits		$	27,374		$	30,180

There are no inventories.

Required:

Prepare a sales activity variance analysis for Odessa, Inc.(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.)

ODESSA, INC.
Sales Activity Variance
	Flexible Budget (based on actual of 540 units)	Sales Activity Variance	Master Budget (based on budgeted 600 units)
Sales revenue			$102,000
Variable costs:
Manufacturing costs:
Direct labor			13,800
Materials			14,400
Variable overhead			9,600
Marketing			5,820
Administrative			4,200
Total variable costs	$0		$47,820
Contribution margin	$0		$54,180
Fixed costs:
Manufacturing			4,800
Marketing			9,600
Administrative			9,600
Total fixed costs	$0		$24,000
Operating profits	$0		$30,180

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ACCT208 Study Guide - Midterm Guide: Sunk Costs, Standard Cost Accounting

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