Match each term to the correct definition.
a. Flexible budget
b. Flexible budget variance
c. Sales volume variance
d. Static budget
1. A summarized budget for several levels of volume thatseparates variable costs from fixed costs.
2. A budget prepared for only one level of sales.
3. The difference between an actual amount and thebudgeted amount.
4. The difference arising because the company actuallyearned more or less revenue, or incurred more or lesscost, than expected for the actual level of output.
5. The difference arising only because the number ofunits actually sold differs from the static budget units.
A summarized budget prepared for different levels of volume
Flexible budget variance
The difference arising because the company actually earned more or less revenue, or incurred more or less cost, than expected for the actual level of output.
Sales volume variance
The difference arising only because the number of units actually sold differs from the static budget units.
A budget prepared for only one level of sales.
The difference between an actual amount and the budgeted amount.
Flexible budgets engage business visionaries to adapt to change. This nimble planning process allows to adjust spending throughout the year; benefits incorporate more opportunities, less overspending, and speedier responses to changing business and market conditions.
Flexible budget variance is any distinction between the outcomes generated by a flexible budget and actual outcomes.If actual revenues are embedded into a flexible budget , this implies that any variance will arise between budgeted and actual expenses, not incomes.
Sales volume variance is the distinction between the expected and actual number of units sold, multiplied by the budgeted price of per unit.
Static budget is a budget that expects a fixed amount in sales, expenses, and revenue. Static budgets can remain unaltered, or fixed, in an organisation's financial records regardless of fluctuations in income volume.
Variance is the distinction between a budgeted or planned expense and the actual amount incurred/sold. Variances can be calculated for both expenses and revenues.
Question: Tipton Company manufactures shirts. During June, Tipton made 1,200 shirts and gathered the following additional data:
Direct materials cost standard $6.00 per yard of fabric
Direct materials efficiency standard 1.50 yards per shirt
Actual amount of fabric purchased and used 1,680 yards
Actual cost of fabric purchased and used $10,500
Direct labor cost standard $15.00 per DLHr
Direct labor efficiency standard 2.00 DLHr per shirt
Actual amount of direct labor hours 2,520 DLHr
Actual cost of direct labor $36,540
Calculate the following variances:
7. Direct materials cost variance
8. Direct materials efficiency variance
9. Total direct materials variance
10. Direct labor cost variance
11. Direct labor efficiency variance
12. Total direct labor variance
McCarthy Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018. The 2018 revenue and cost information for McCarthy follows:
Sales Revenue $ 1,300,000
Cost of Goods Sold (at standard) 196,800
Direct materials cost variance 7,150 F
Direct materials efficiency variance 5,950 U
Direct labor cost variance 400 U
Direct labor efficiency variance 530 F
Variable overhead cost variance 650 U
Variable overhead efficiency variance 360 F
Fixed overhead cost variance 2,350 U
Fixed overhead volume variance 4,410 U
Assume each fender produced was sold for the standard price of $65, and total selling and administrative costs were $250,000. Prepare a standard cost income statement for 2018 for McCarthy Fender
Headset manufactures headphone cases. During September 2018, the company produced 106,000 cases and recorded the following cost data:
Standard Cost Information
$ 0.16 per part
8.00 per hour
Variable Manufacturing Overhead
11.00 per hour
|Fixed Manufacturing Overhead ($30,720 for static budget volume of 96,000 units and 1,920 hours, or $16 per hour)|
Direct Materials (209,000 parts @ $0.21 per part) $ 43,890
Direct Labor(1,620 hours @ $8.10 per hour) 13,122
Variable Manufacturing Overhead 9,000
Fixed Manufacturing Overhead 30,000
1. Compute the cost and efficiency variances for direct materials and direct labor.
2. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.
3. Headset’s management used betterquality materials during September. Discuss the tradeoff between the two direct material variances.
94% of StudySmarter users get better grades.Sign up for free