Question

Chapter 8. Flexible Budgets, Standard Costs, and Variance Analysis...answer them all.

8–7 What does a flexible budget enable that a simple comparison of the planning budget to actual results does not do?

8–9 What is a quantity standard? What is a price standard?

8–10 Why are separate price and quantity variances computed?

8–11 Who is generally responsible for the materials price variance? The materials quantity variance? The labor efficiency variance?

8–12 The materials price variance can be computed at what two different points in time? Which point is better? Why?

Answer 1

As per our guidelines,we must answer only maximum 4 sub-parts and in absence of any indication we must answer only first four.Hope you understand.

Answer for 8-7)

Not every thing can be perfectly anticipated by the Managers who prepare budget.Hence,simple comparison of planning budget expected sales units may be less than actual sales or more than actual.Hence,it is better to prepare a flexible budget at different level of capacity in accordance with actual sales for providing more accurate variance.

Answer for 8-9)

Quantity standard is what quantity of input is used to produce the desired quantity of output.

Price standard is how much does the input should cost.

Answer for 8-10)

Separate price and quantity variances are measured to find what is the price is price charged above or below than estimated and quantity per unit used is above or below than estimated.

Answer for 8-11)

Purchase manager will be held responsible for material price variance as he is the one in general deal with purchases of rawmarerial and determine standard price and orders the marials and negotiate the price.

Production manager will be held responsible for quantity variances and labour efficiency varince as he is the person who is responsible for production activities.