Chapter 23 Flexible Budgets and Standard Cost Systems Directed Reading Guide Lo1. How do managers use budgets to control business activities? a) Match the concept (by number) to the correct terminology, 1. Static Budget 2. Budget Performance Report 3. Variance 4. Static Budget Variance 5. Flexible Budget 6. Flexible Budget Variance 7. Sales Volume Variance A budget prepared for various levels of sales volume. The difference between actual results and the expected results in the flexible budget for the actual units sold. The difference between the expected results in the flexible budget for the actual units sold and the static budget. The difference between actual results and the expected results in the static budget. A report that summarizes the actual results, budgeted amounts, and the differences. A budget prepared for only one level of sales volume. The difference between an actual amount and the budgeted amount; labeled as favorable if it increases operating income and unfavorable if it decreases operating income. In My AccountingLab, complete Try It! 23-1 and S23-1 through S23-3. 2. Why do managers use a standard cost system to control business activities? a) Setting standards required and different divisions and functions. among b) Using a standard cost system helps managers: ii) Hii) iv) V) c) The formula for cost variance is: d) The formula for efficiency variance is: In My Accounting Lab, complete Try It! 23-2 and S23-4 and 523-5. 03. How are the standard costs used to determine direct materials and direct labor variances? a) The formula for direct materials cost variance is: b) The formula for direct materials efficiency variance is c) Given the following information, what is the amount of: 1) the direct materials cost variance ii) the direct materials efficiency variance? Actual direct materials cost $1.00 per pound Standard direct materials cost-$1.10 per pound Actual quantity purchased and used - 2,000 pounds Standard quantity that should have been used - 1,800 pounds 1) ii) d) The formula for direct labor cost variance is: e) The formula for direct labor efficiency variance is: f) Given following information, what is the amount of: i) the direct labor cost variance and ii) the direct labor efficiency variance? Actual direct labor cost-$20,00 per hour Standard direct labor cost $21.00 per hour Actual direct labor hours = 200 hours Standard quantity of labor hours that should have been used = 180 hours i) ii) In My AccountingLab, complete Try It! 23-3 and S23-6 through S23-8. 04. How are standard costs used to determine manufacturing overhead variances? a) The formula for variable overhead cost variance is: b) The formula for variable overhead efficiency variance is: c) The formula for fixed overhead cost variance is: d) The formula for fixed overhead volume variance is: In My AccountingLab, complete Try it! 23-4 and S23-9 and S23-10. What is the relationship among the product cost variances, and who is responsible for them? a) In your own words, what is management by exception? b) Which division manager would most likely be responsible for the following variances: i) Workers were paid more than expected. ii) Materials purchases were at a higher cost than standards. iii) Inexperienced workers caused a delay in unit production. In My AccountingLab, complete Try It! 23-5 and S23-11. 6. How do journal entries differ in a standard cost system? a) Journal entries are needed for the following transactions: i) Direct materials purchased iii) iv) V) vi) vii) In My AccountingLab, complete Try It! 23-6 and S23-12 through S23-14
