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Chapter 23: Q4SE (page 1306)

Matching terms

Match each term to the correct definition.

Terms Definitions

a. Benchmarking

b. Efficiency variance

c. Cost variance

d. Standard

1. Measures whether the quantity of materials or laborused to make the actual number of outputs is within thestandard allowed for the number of outputs.

2. Uses standards based on best practice.

3. Measures how well the business keeps unit costs ofmaterials and labor inputs within standards.

4. A price, cost, or quantity that is expected under normalconditions.

Short Answer

Expert verified
Terms
Definitions

a

Benchmarking

Uses standards based on best practice.

b

Efficiency variance

Measures whether the quantity of materials or labor used to make the actual number of outputs is within the standard allowed for the number of outputs.

c

Cost variance

Measures how well the business keeps unit costs of materials and labor inputs within standards.

d

Standard

A price, cost, or quantity that is expected under normal conditions.

Step by step solution

01

Introduction to Benchmarking-

Benchmarking is a process of comparing the performance of an organisation to a predetermined goal or number how the organisation's productivity, efficiency, and competitiveness measures up to industry standards.

02

Introduction to Efficiency variance-

Efficiency variance is the distinction between the actual unit utilization and the expected amount. The expected amount is generally the standard quantity of direct labor, machine usage time,direct materials, and etc that is assigned to a product.

03

Introduction to Cost variance-

Cost variance is the distinction between the expense actually incurred and the budgeted amount of expense that ought have been incurred.

04

Introduction to Standard-

Standard costing is the estimated price of a product or service and act of substituting an expected expense for the actual expense of an operation or product.

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Most popular questions from this chapter

Martin, Inc. manufactures lead crystal glasses. The standard direct labor time is 0.5 hours per glass, at a cost of \(18 per hour. The actual results for one month鈥檚 production of 6,500 glasses were 0.2 hours per glass, at a cost of \)11 per hour. Calculate the direct labor cost variance and the direct labor efficiency variance.

Preparing a flexible budget and computing standard cost variances

McKnight Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. McKnight allocates overhead based on yards of direct materials. The company鈥檚 performance report includes the following selected data:

Static Budget (1,025 recliners)

Actual Results (1,005 recliners)

Sales

(1,025 recliners * \(500 each)

\)512,500

(1,005 recliners * \(495 each)

\)497,475

Variable Manufacturing Costs:

Direct Materials

(6,150 yds. @ \(8.50/yard)

52,275

(6,300 yds. @ \)8.30/yard)

52,290

Direct Labor

(10,250 DLHr @ \(9.20/DLHr)

94,300

(9,850 DLHr @ \)9.40/DLHr)

92,590

Variable Overhead

(6,150 yds. @ \(5.10/yard)

31,365

(6,300 yds. @ \)6.50/yard)

40,950

Fixed Manufacturing Costs:

Fixed Overhead

62,730

64,730

Total Cost of Goods Sold

240,670

250,560

Gross Profit

\(271,830

\)246,915

Requirements

1. Prepare a flexible budget based on the actual number of recliners sold.

2. Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead cost, variable overhead efficiency, fixed overhead cost, and fixed overhead volume variances. Round to the nearest dollar.

3. Have McKnight鈥檚 managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?

4. Describe how McKnight鈥檚 managers can benefit from the standard cost system.

Calculating flexible budget variances

Complete the flexible budget variance analysis by filling in the blanks in the partialflexible budget performance report for 9,000 travel locks for Grant, Inc.

GRANT, INC.

Flexible Budget Performance Report (partial)

For the Month Ended April 30, 2018


ActualResults
Flexible Budget Variance
Flexible Budget

Units
9,000
(a)
9,000

Sales Revenue

\(126,000

(b)

(c)

\)108,000

Variable Costs

\(52,300

(d)

(e)

\)50,300

Contribution Margin

\(73,700

(f)

(g)

\)57,700

Fixed Costs

\(16,100

(h)

(i)

\)14,900

Operating Income

\(57,600

(j)

(k)

\)42,800

Murphy Company managers received the following incomplete performance report:

Units Actual Results Flexible Budget Variance Static Budget Flexible Budget Sales Volume Variance Sales Revenue Contribution Margin Fixed Expenses Operating Income 35,000 (a) (b) 5,000 F \( 29,000 \) 14,000 105,000 0 \( 219,000 \) 27,000 F 85,000 13,000 MURPHY COMPANY Flexible Budget Performance Report For the Year Ended July 31, 2018 134,000 14,000 35,000 \( 35,000 100,000 \) 219,000 84,000 135,000 (c) (d) (e) (f) (h) (g) (i) (j) (k) (l)

Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning.

Question:Match the variance to the correct definition.

Variance Definition

2. Cost variance

3. Efficiency variance

4. Flexible budget variance

5. Sales volume variance

6. Static budget variance

a. The difference between the expected results in the flexible budget for the actual units sold and the static budget.

b. The difference between actual results and the expected results in the flexible budget for the actual units sold.

c. Measures how well the business keeps unit costs of material and labor inputs within standards.

d. The difference between actual results and the expected results in the static budget.

e. Measures how well the business uses its materials or human resources
See all solutions

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