Accounting II 101-120

What is budgetary control?
The use of budgets in controlling operations
A major element in budgetary control is
the comparison of actual results with planned objectives.
Budget reports should be prepared
as frequently as needed.
A static budget is appropriate in evaluating a manager’s performance if
actual activity closely approximates the master budget activity.
If costs are not responsive to changes in activity level, then these costs can be best described as
A flexible budget can be prepared for which of the following budgets comprising the master budget?
All of these.
If a company plans to sell 48,000 units of product but sells 60,000, the most appropriate comparison of the cost data associated with the sales will be by a budget based on
60,000 units of activity.
Management by exception
means that material differences will be investigated.
A company’s planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs:
Variable Indirect materials
Indirect labor Factory supplies
Budget Contribution margin $600,000 Controllable fixed costs $200,000
The manager’s overall performance
A) is 10% above expectations.
B) is 10% below expectations.
C) is equal to expectations.
Actual $580,000 $220,000
Difference $20,000 U $20,000 U
$140,000 Depreciation 200,000 Taxes
20,000 Supervision
$60,000 10,000 50,000
A flexible budget prepared at the 80,000 machine hours level of activity would show total manufacturing overhead costs of
Kathleen Corp. produced 320,000 units in 150,000 direct labor hours. Production for the period was estimated at 330,000 units and 165,000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at
150,000 hours and 150,000 hours.
Given below is an excerpt from a management performance report:
Budget Contribution margin $600,000 Controllable fixed costs $200,000
The manager’s overall performance
is 10% below expectations.
The difference between a budget and a standard is that
a budget expresses a total amount, while a standard expresses a unit amount.
Which of the following statements is false?
A standard cost is more accurate than a budgeted cost.
If standard costs are incorporated into the accounting system,
it may simplify the costing of inventories and reduce clerical costs.
Use the following to answer questions 115-118:
Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is .2 hours and .1 hours, respectively.
115. The standard direct materials price per pound i
The standard direct materials quantity per unit is
3.0 pounds.
The standard direct labor rate per hour is
The standard direct labor hours per unit is
1.3 hours.
Scorpion Production Company planned to use 1 yard of plastic per unit budgeted at $81 a yard. However, the plastic actually cost $80 per yard. The company actually made 3,900 units, although it had planned to make only 3,300 units. Total yards used for production were 3,960. How much is the total materials variance?
$900 U
A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700. The direct materials price variance for last month was
$300 favorable.