Variances Chapter 10
Direct materials (DM) efficiency variances are recorded when?
When materials are used
Fixed manufacturing overhead costs are recognized as period costs when incurred using
Variable costing
Who did the Tampa Bay Buccaneers play yesterday?
Carolina Panthers
If production volume decreases:
a. fixed costs per unit increase.
b. average costs per unit decrease.
c. variable costs per unit increase.
d. variable costs per unit decrease.
a.
Which type of costs will transfer from the master budget to the flexible budget unchanged assuming an operating capacity within the relevant range?
Fixed costs
What are two reasons companies would use variable costing?
- Focus management attention on controllable (variable) costs;
- Provide no incentive for inventory build up
- Easier
What bowl game will the USF Bulls football team play in?
The breakeven point is the point at which:
a. selling one more unit will not increase income
b. contribution margin equals fixed costs
c. total revenues equal contribution margin.
d. fixed costs divided by revenues equals zero
b.
Memorable Moments manufactures a product that uses 2.5 standard labor hours per unit at a standard hourly rate of $12.00 per hour. If 3,000 units required 7,400 actual hours at an hourly rate of $12.40 per hour, what is the Direct Labor (DL) Price Variance and (DL) Efficiency Variance?
Price Variance = $2,960 Unfavorable
Efficiency variance = $1,200 favorable
Price:
Actual costs AQ @ SP Flex
AQ * AP AQ * SP FG *
SQ*SP
7,400* $12.40 7,400 * $12 3,000 * 2.5
= 91,760 = 88,800 *$12=90,000
Price diff $2,960U Eff $1,200F
During 2025, KM Construction sold 10,000 units, with beginning and ending units for the year of 1,000. Manufacturing costs were as follows:
Variable Fixed
Mfg costs per unit $11.00 $7.00
Operating costs/unit $3.00 $2.50
What is the difference in operating income between absorption and variable costing for the year?
0 - The difference in income is based on the change in inventory. As the quantity of inventory did not change during the year, there is no difference in income.
Who is the President of USF and what was his/her background?
A cost function is:
a. a process of calculating present value of projected cash flows
b. A process of allocating costs to cost centers or cost objects
c. a mathematical description of how a cost changes with changes in the level of an activity relating to that cost
d. a way to identify a cost object when there is a physical relationship between inputs and outputs.
c
Total costs = mX + Y
Century Company has the following information for the past month:
Actual Flexible Budget Master Budget
Sales $51,000 $54,000 $50,000
Var costs 23,000 23,000 21,000
Century's Sales Activity Variance is
$2,000 favorable
Sales Activity Variance = Flexible Budget Contribution Margin - Master Budget Contribution Margin = [($54,000 - $23,000) - ($50,000 - $21,000)] = $31,000 - $29,000 = 2,000, favorable
BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. What is the contribution margin using variable costing?
$3,885,000
Sales 105,000 * $80 = $8,400,000
Variable COS 105,000 * $40 = 4,200,000
Variable operating 105,000 * $3 = 315,000
CONTRIBUTION MARGIN $3,885,000
Highest temperature ever recorded in Tampa Bay
99
The number of units in the sales budget will differ from the number of units in the production budget when there is a change in:
a. the Finished Goods Inventory account
b. overhead charges.
c. the Direct Materials Inventory account.
d. sales returns and allowances.
a.
Variances-R-Us has been working on the company's year-end variance analysis.
Budgeted fixed-MOH costs were $153,000 for the planned 12,000 tablets to be produced. Fixed-MOH was applied based on DL hours and every unit required 3 DL hours. Actual fixed-MOH costs totaled $158,000 for the year corresponding to 12,400 tablets being produced. Calculate the Fixed-MOH Price Variance and Fixed-MOH Volume Variance.
Price Variance = $5,000 U
Volume Variance = $5,100 F
Actual Master Bud Applied
FG*SQ*SR= 12,400*3*$4.25
$158,000 $153,000 =158,100
The following information applies to Beets Corporation:
Units produced 50,000
Beginning Inventory 1,000 Units
Ending Inventory 5,000 units
Direct materials per unit $20
Direct labor per unit $12
Variable manufacturing overhead per unit $5
Fixed manufacturing overhead $200,000
Variable operating expenses per unit $7
Fixed operating expenses $80,000
What is cost of sales using absorption costing? What is the difference in operating income between absorption and variable costing?
1. COS Absorption - $1,886,000
2. Difference in income = 16,000, ABS higher
Units sold 1,000 + 50,000 - 5,000 = 46,000
* cost/unit
DM $20, DM $12, VOH $5, FOH $4 (a) = $41
= Cost of sales $1,886,000
(a) $200,000/50,000 produced = $4U
2. Ending inventory 5,000 units
- Beg inventory 1,000
Change in inventory Quantity 4,000 units
* FOH per unit $4
= Difference in income $16,000 (ABS higher)
Name the Big 4
Deloitte
KPMG
PWc
EY
At a production level of 100,000 units, variable costs per unit are $1.00 and fixed costs are $50,000. If production rises to 150,000 units, what are the costs per unit for both variable and fixed costs, respectively?
a. $1.50 and $.67
b. $1.00 and $.50
c. $1.00 and $.33
d. $.67 and $.33
c.
Variable cost/unit stays constant regardless of production.
Fixed costs $50,000 / 150,000 = $.33 per unit