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Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 23
1301
Chapter 23
Flexible Budgets and Standard Costs
QUESTIONS
1. Fixed budget performance reports have limited usefulness because they do not
2. The primary purpose of a flexible budget is to help managers better evaluate past
performance, which can improve their abilities to monitor and control operations.
3. The proper title is:
Spalding Company
Flexible Budget Performance Report
For Year Ended December 31, 2017
The proper title communicates to the user the focus of the report. Although it may
4. A flexible budget performance report is useful for an analysis of the difference
6. The human resource department is usually responsible for a labor rate variance.
The production department is usually responsible for a labor efficiency variance.
7. A price variance is that portion of a cost variance caused by a difference between
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8. Standard costs are used to establish a basis to assess the reasonableness of actual
9. An overhead volume variance is the difference between (a) the amount of (fixed)
10. A predetermined standard overhead rate is a measure computed and used in a
standard cost system to assign overhead costs to products. Before the period
11. In general, variance analysis is said to provide information about price and quantity
variances.
12. A controllable variance is the difference between (a) the total overhead cost actually
13. Standard costs provide a basis for evaluating actual performance. Summary
information comparing actual costs to budgeted costs is captured and reported in a
14. Before a period starts, the manager can prepare flexible budgets for the various
types of advertising. Then, she could estimate both the best and worst case
15. Apple schedules appointments with customers to service Apple computers,
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16. The controllable variance should not be affected by achieving an actual operating
level different from the budgeted level. If the company operated at 75% of capacity,
17. Positive features of standard cost systems include: Provides benchmarks to be
used in management by exception; motivates employees to work towards goals;
18. Management by exception involves managers focusing on the most significant
variances for analysis and action strategies. It also results in less attention given to
QUICK STUDIES
Quick Study 23-1 (15 minutes)
BEECH COMPANY
Flexible Budget Performance Report
For Month Ended May 31
Flexible
Actual
Budget
Results
Variances
Sales ..................................................
$1,300,000
$1,275,000
$25,000
U
Quick Study 23-2 (5 minutes)
Quick Study 23-3 (10 minutes)
From the flexible budget at 20,000 units, compute the sales price and variable
costs per unit:
Quick Study 23-4 (10 minutes)
BRODRICK COMPANY
Flexible Budget Performance Report
For Year Ended December 31
Flexible
Actual
Budget
Results
Variances
Sales (26,000 units) .........................
$520,000
$480,000
$40,000
U
Quick Study 23-5 (5 minutes)
A standard cost card for one bat would include:
Quick Study 23-6 (5 minutes)
Actual cost for one bat ......................................................................
$40
Quick Study 23-7 (10 minutes)
Quick Study 23-8 (10 minutes)
Direct materials price variance:
Actual cost of direct materials used (given) ..............................................
$535,000
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Quick Study 23-9 (15 minutes)
Following information is given:
It is also known that:
Material price variance = Price variance per pound x Actual pounds used
Quick Study 23-10 (10 minutes)
Standard direct materials cost ..........................................................
$150,000
Quick Study 23-11 (10 minutes)
Direct labor rate variance:
Actual hours x Actual rate per hour (65,000 x $15) ................................
$975,000
Actual hours x Standard rate per hour (65,000 x $14) ..............................
910,000
Direct labor rate variance ................................................................
$ 65,000
U
Direct labor efficiency variance:
Actual hours x Standard rate per hour (65,000 x $14) ..............................
$910,000
Standard hours x Standard rate per hour (67,000 x $14) .........................
938,000
Direct labor efficiency variance ................................................................
$ 28,000
F
Quick Study 23-12 (10 minutes)
Standard direct labor cost ................................................................
$400,000
Quick Study 23-13 (10 minutes)
Actual overhead incurred ................................................................
$262,800
Quick Study 23-14 (10 minutes)
Actual overhead incurred ................................................................
$ 28,175
Quick Study 23-15 (5 minutes)
Budgeted fixed overhead (at 12,000 units) ................................................
$12,000
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1362
Quick Study 23-16 (10 minutes)
Standard overhead cost ..............................................................................
$225,000
Quick Study 23-17A (10 minutes)
Work in Process Inventory ......................................................
225,000
Quick Study 23-18 (10 minutes)
Actual overhead (4,700 x $4.15)*................................................................
$19,505
Quick Study 23-19A (15 minutes)
Variable overhead spending and efficiency variances
Actual Overhead
AH x AVR
AH x SVR
Applied Overhead
SH x SVR
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Sales
Actual
Flexible Budget
Fixed Budget
Units
50
50
45
Quick Study 23-21 (15 minutes)
Sales
Actual
Flexible Budget
Fixed Budget
Units
182,158
182,158
191,158
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Quick Study 23-22 (5 minutes)
Quick Study 23-23 (10 minutes)
a) Standard overhead rate before sustainability improvement:
b) Standard overhead rate after sustainability improvement:
Exercise 23-1 (20 minutes)
Item
Cost
a. Bike frames
Variable
b. Screws for assembly
Variable
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Exercise 23-2 (30 minutes)
TEMPO COMPANY
Flexible Budgets
For Quarter Ended March 31, 2017
Flexible Budget
Flexible
Flexible
Flexible
Variable
Amount
per Unit*
Total
Fixed
Cost
Budget for
Unit Sales
of 6,000
Budget for
Unit Sales
of 7,000
Budget for
Unit Sales
of 8,000
Sales ................................
$400.00
$2,400,000
$2,800,000
$3,200,000
Variable costs
Direct labor .......................
70.00
420,000
490,000
560,000
Packaging .........................
22.00
132,000
154,000
176,000
Fixed costs
Plant manager salary .......
$ 65,000
65,000
65,000
65,000
Advertising .......................
125,000
125,000
125,000
125,000
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Exercise 23-3 (25 minutes)
SOLITAIRE COMPANY
Flexible Budget Performance Report
For Month Ended June 30
Flexible
Actual
Budget
Results
Variances
Sales (10,800 units) .........................
$540,000
$540,000
$ 0
Supporting computations
Total fixed budget sales ................................
$ 420,000
Total fixed budget units ................................
÷ 8,400
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Exercise 23-4 (25 minutes)
BAY CITY COMPANY
Flexible Budget Performance Report
For Month Ended July 31
Flexible
Actual
Budget
Results
Variances
Sales (7,200 units)............................
$720,000
$737,000
$17,000
F
Supporting computations
Total fixed budget sales ................................
$ 750,000
Total units budgeted ..................................................
÷ 7,500
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Exercise 23-5 (10 minutes)
Exercise 23-6 (5 minutes)
Following management by exception, the company should focus on those
Exercise 23-7 (15 minutes)
Exercise 23-8 (10 minutes)
(1) The standard cost for one unit is computed as:
Direct materials (6 lbs. @$8 per lb.) ................................................
$ 48
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Exercise 23-8 (continued)
(2) Total cost variance
Actual costs incurred during the month:
Direct materials (48,500 x $8.10) ................................................................
$392,850
Direct labor (15,700 x $16.50) ................................................................
259,050
Exercise 23-9 (15 minutes)
Direct materials price variance:
Actual cost of direct materials used (48,500 x $8.10) ...............................
$392,850
1371
Exercise 23-10 (15 minutes)
Direct labor rate variance:
Actual hours x Actual rate per hour (15,700 x $16.50) ..............................
$259,050
Exercise 23-11 (25 minutes)
Part 1
Direct materials price variance:
Actual cost of direct materials used (138,000 x $3.75) .............................
$517,500
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Exercise 23-11 (continued)
Part 2 Direct labor rate variance:
Actual hours x Actual rate per hour (31,000 x $15.10) ..............................
$468,100
Exercise 23-12 (25 minutes)
Part 1 Direct materials price variance:
Actual cost of direct materials used (92,000 x $2.95) ...............................
$271,400
Direct materials quantity variance:
Actual quantity used x Standard price (92,000 x $3.00) ...........................
$276,000
