1) Why do companies develop flexible budgets for variance analysis?   Because actual activity level may not be the same as the budgeted activity level.    Because flexible budgets reflect the normal production capacity.    Because flexible budgets are more accurate than static budgets.    Because static budgets become obsolete in the end of year when variance analysis are performed.  2)  If excessive direct hours are used in the current operations, what variance would be resulted under the standard cost accounting?   Unfavorable labor efficiency variance    Favorable labor quality variance    Favorable labor efficiency variance    Unfavorable labor rate variance  3) The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product: Actual Costs Standard Costs Direct Material 4,900 lb. $5.85 per pound 5,000 lb. $5.90 per pound Direct Labor 1,900 hrs. $20.50 per hour 2,000 hrs. $20.00 per hour What is the materials price variance?   $2,950 Unfavorable    $245 Favorable    $245 Unfavorable    $2,950 Favorable

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter8: Budgeting
Section: Chapter Questions
Problem 1CMA: When compared to static budgets, flexible budgets: a. offer managers a more realistic comparison of...
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1) Why do companies develop flexible budgets for variance analysis?

  Because actual activity level may not be the same as the budgeted activity level. 
  Because flexible budgets reflect the normal production capacity. 
  Because flexible budgets are more accurate than static budgets. 
  Because static budgets become obsolete in the end of year when variance analysis are performed. 

2)  If excessive direct hours are used in the current operations, what variance would be resulted under the standard cost accounting?

  Unfavorable labor efficiency variance 
  Favorable labor quality variance 
  Favorable labor efficiency variance 
  Unfavorable labor rate variance 

3) The following actual and standard cost data for direct material and direct labor relate to the production of 4,000 units of product:

Actual Costs

Standard Costs

Direct Material

4,900 lb. $5.85 per pound

5,000 lb. $5.90 per pound

Direct Labor

1,900 hrs. $20.50 per hour

2,000 hrs. $20.00 per hour

What is the materials price variance?

  $2,950 Unfavorable 
  $245 Favorable 
  $245 Unfavorable 
  $2,950 Favorable 

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