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Exam 13: Budgeting and Standard Cost Systems

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Question 41

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Using a standard costing system for nonmanufacturing expenses is easily administered because the expenses generally relate to a repetitive, measurable output.

A) True
B) False

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Question 42

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The production budget is the starting point for preparation of the direct labor cost budget.

A) True
B) False

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Question 43

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The standard costs and actual costs for direct materials for the manufacture of 2,500 actual units of product are as follows: $\begin{array}{ll}\text { StandardCosts } \\1.04 \text { kilograms } @ \$ 8.75 & \text { Direct materials (per completed unit) } \\\\\text { Actual Costs } \\2,500 \text { kilograms } @ \$ 8 & \text { Direct materials }\end{array}$ The amount of direct materials price variance is:

Supervisor salaries, maintenance, and indirect factory wages would normally appear in the factory overhead cost budget.

The variable factory overhead controllable variance measures:

Currently attainable standards allow for unreasonable production difficulties.

Standard costs serve as a device for measuring efficiency.

Standards are more widely used for nonmanufacturing expenses than for manufacturing costs.

Production estimates for July are as follows: $\begin{array}{ll}650 & \text { Estimated inventory (units) , July 1 } \\1,050 & \text { Desired inventory (urits) , July 31 } \\7,600 & \text { Expected sales volume (units) , July }\end{array}$ For each unit produced 3 hours of direct labor is required. The labor rate per hour is $12. The number of direct labor hours required for July production is:

Standard and actual costs for direct labor for the manufacture of 1,000 units of product were as follows: $\begin{array}{ll}480 \text { hours@ } \$ 18.00 & \text { Actual costs } \\485 \text { hours@ } \$ 17.50 & \text { Standard costs }\end{array}$ Determine the (a) time variance, (b) rate variance, and (c) total direct labor cost variance.

The standard factory overhead rate of Quaker Inc. is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows: $\begin{array}{lll}\$ 250,000 & 25,000 \text { hours at } \$ 10 & \text { Standard } \\202,500 & \text { Variable factory overhead } & \text { Actual: } \\60,000 & \text { Fixed factory overhead } &\end{array}$ Refer to the information provided for Quaker Inc. What is the amount of the variable factory overhead controllable variance?

Since the controllable variance measures the efficiency of using variable overhead resources, if budgeted variable overhead exceeds actual results, the variance is favorable.

Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget.

Standards that represent levels of operation that can be attained with reasonable effort are called:

A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed:

Kohlman Company began its operations on March 31 of the current year. Projected manufacturing costs for the first three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June. Depreciation, insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was paid on March 31, and property taxes will be paid in November. Three-fourths of the remainder of the manufacturing costs are expected to be paid in the month in which they are incurred with the balance to be paid in the following month. Refer to the information provided for Kohlman Company. The cash payments for manufacturing in the month of April are:

If the actual quantity of direct materials used in producing a commodity differs from the standard quantity, the variance is termed:

The capital expenditure budget summarizes future plans for acquisition of fixed assets.

A series of budgets for varying rates of activity is termed a(n) :

The master budget of a small manufacturer would normally include all component budgets that impact the financial statements.