Question

18) Assume the following information appears in the standard cost card for a company that makes only one product:

	Standard Quantity or hours		Standard Price or Rate			Standard Cost
Direct materials	5	pounds	$	11.70	per pound	$	58.50
Direct labor	2	hours	$	17.00	per hour	$	34.00
Variable manufacturing overhead	2	hours	$	3.00	per hour	$	6.00

During the most recent period, the following additional information was available:

• 20,000 pounds of material was purchased at a cost of $10.50 per pound.
• All of the material that was purchased was used to produce 3,900 units.
• 8,000 direct labor-hours were recorded at a total cost of $132,000.

What is the direct materials spending variance?

A) 5850 U

B) 5850 F

C) 18150 F

D) 18150 U

1) Assume that the cost formula for one of a company’s variable expenses is $5.00 per unit. The company’s planned level of activity was 2,000 units and its actual level of activity was 2,200 units. The actual amount of this expense was $10,050. The spending variance for this expense is:

A) 950F

B) 1550F

C) 2500F

D) 2500U

10) Assume that a company provided the following excerpts of information from its flexible budget performance report:

	Actual Results				Flexible Budget				Planning Budget
Flights (q)		55				?				50
Revenue ($175.00q)	$	11,550			$	?			$	?

What amount of revenue would appear in the company’s flexible budget?

A) 8750

B) 9075

C) 9625

D) 9175

Answer 1

1.In the first question, the following are the variances :

Direct Material cost variance = (SP* Std quantity for acctual output - AP* Actual Quantity Consumed)

= ((11.7*5*3900) - (10.5*20000))

= 228150-210000 = 18150 F

Direct Material spending variance = (SP-AP) * AQ Consumed

= (11.7-10.5) * 20000

= 24000 F

Direct Material Usage (Quantity Varince) = (Std Qty for Actual Output - Actual Quantity) * SP

= (( 3900*5) - 20000) * 11.7

= 5850 U

But in the above options , no option is related to Direct Material Spending Variance.

2. In the given question, there is no information regarding Actual hours consumed for producing 2200 units, it is not possible to calculate Variable overhead spending variance, but we can calculate voh cost/ expenditure variance

VOH cost variance = (Std Overhead per unit * Actual quantity produced) - (Actual VOH * Actual Quantity produced)

= (5*2200) - (10050) = 950 F

3. Flexible Budget Revenue = Acutal No. of flights * Standard Revenue per Flight =  55*175 = $9625

(Hope you will understand this, Please give your valuable feedback)