Scribd
Upload
164 views3 pages

Week 10 TUTE Chapter 7 Questions

The document contains questions from an accounting textbook about flexible budgets, variances, and standard costing. It provides background information on several companies and their budgets and actual results for direct materials and labor costs. It asks the student to calculate variances, break variances into flexible budget and volume components, identify possible causes for variances, and make recommendations.

Uploaded by

Evelyn Gladys
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
164 views3 pages

Week 10 TUTE Chapter 7 Questions

The document contains questions from an accounting textbook about flexible budgets, variances, and standard costing. It provides background information on several companies and their budgets and actual results for direct materials and labor costs. It asks the student to calculate variances, break variances into flexible budget and volume components, identify possible causes for variances, and make recommendations.

Uploaded by

Evelyn Gladys
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

ACCT2112 Week 10 TUTE Chapter 7 Questions

7-21 Flexible budget. Brabham Enterprises manufactures tires for the Formula I motor
racing circuit. For August 2017, it budgeted to manufacture and sell 3,000 tires at a variable
cost of $74 per tire and total fixed costs of $54,000. The budgeted selling price was $110 per
tire. Actual results in August 2017 were 2,800 tires manufactured and sold at a selling price
of $112 per tire. The actual total variable costs were $229,600, and the actual total fixed costs
were $50,000.

Required:
1. Prepare a performance report (akin to Exhibit 7-2, page274) that uses a flexible budget
and a static budget.
2. Comment on the results in requirement 1.

7-25 Flexible-budget and sales volume variances. Luster, Inc., produces the basic fillings
used in many popular frozen desserts and treats—vanilla and chocolate ice creams, puddings,
meringues, and fudge. Luster uses standard costing and carries over no inventory from one
month to the next. The ice-cream product group’s results for June 2017 were as follows:

Sam Adler, the business manager for ice-cream products, is pleased that more pounds of ice
cream were sold than budgeted and that revenues were up. Unfortunately, variable
manufacturing costs went up, too. The bottom line is that contribution margin declined by
$63,000, which is less than 3% of the budgeted revenues of $1,976,500. Overall, Adler feels that
the business is running fine.
Required:
1. Calculate the static-budget variance in units, revenues, variable manufacturing costs,
and contribution margin. What percentage is each static-budget variance relative to its
static-budget amount?
2. Break down each static-budget variance into a flexible-budget variance and a sales-
volume variance.
3. Calculate the selling-price variance.
4. Assume the role of management accountant at Luster. How would you present the
results to Sam Adler? Should he be more concerned? If so, why?

1
7-34 Flexible budget, direct materials, and direct manufacturing labor variances.
Milan Statuary manufactures bust statues of famous historical figures. All statues are the
same size. Each unit requires the same amount of resources. The following information is
from the static budget for 2017:
Expected production and sales 6,100 units
Expected selling price per unit $ 700
Total fixed costs $1,350,000
Standard quantities, standard prices, and standard unit costs follow for direct materials and
direct manufacturing labor:

Standard Quantity Standard Price Standard Unit Cost


Direct materials 16 pounds $14 per pound $224
Direct manufacturing labor 3.8 hours $ 30 per hour $114

During 2017, actual number of units produced and sold was 5,100, at an average selling price
of $730. Actual cost of direct materials used was $1,149,400, based on 70,000 pounds
purchased at $16.42 per pound. Direct manufacturing labor-hours actually used were 17,000, at
the rate of $33.70 per hour. As a result, actual direct manufacturing labor costs were $572,900.
Actual fixed costs were $1,200,000. There were no beginning or ending inventories.

Required:
1. Calculate the sales-volume variance and flexible-budget variance for operating income.
2. Compute price and efficiency variances for direct materials and direct manufacturing
labor.

2
7-37 Possible causes for price and efficiency variances. You have been invited to
interview for an internship with an international food manufacturing company. When you
arrive for the interview, you are given the following information related to a fictitious
Belgian chocolatier for the month of June. The chocolatier manufactures truffles in 12-piece
boxes. The production is labor intensive, and the delicate nature of the chocolate requires a
high degree of skill.

Actual
Boxes produced 12000
Direct materials used in production 2,640,000 g
Actual direct material cost 72,500 euro
Actual direct manufacturing labor-hours 1300
Actual direct manufacturing labor cost 15,360 euro

Standards
Purchase price of direct materials 0.029 euro/g
Materials per box 200 g
Wage rate 13 Euro/hr.
Boxes per hour 10

Please respond to the following questions as if you were in an interview situation:


Required:
1. Calculate the materials efficiency and price variance and the wage and labor efficiency
variances for the month of June.
2. Discuss some possible causes of the variances you have calculated. Can you make any
possible connection between the material and labor variances? What recommendations do
you have for future improvement?

You might also like