Standard Costs and Variance Analysis Paper 2


Jay Company uses a standard cost system. During the past year, the variances from standard were significant. Jay is considering whether to allocate the variances among the appropriate inventory accounts and cost of goods sold or to allocate all of the variances directly to cost of goods sold. Under which one of the following situations would reported net income be largest?


Which one of the following is the least likely reason that variances are computed within a performance monitoring system?


Which one of the following statements about management by exception is least likely to be correct?


A standard cost system is often used in variance analysis because standard costs


Simson Company’s master budget shows straight-line depreciation on factory equipment of $258,000. The master budget was prepared at an annual production volume of 103,200 units of product. This production volume is expected to occur uniformly throughout the year. During September, Simson produced 8,170 units of product, and the accounts reflected actual depreciation on factory machinery of $20,500. Simson controls manufacturing costs with a flexible budget. The flexible budget amount for depreciation on factory machinery for September would be


Barnes Corporation expected to sell 150,000 board games during the month of November, and the company’s master budget contained the following data related to the sale and production of these games:
Revenue $2,400,000
Cost of goods sold:
Direct materials 675,000
Direct labor 300,000
Variable overhead 450,000
Contribution margin $ 975,000
Fixed overhead 250,000
Fixed selling and administration 500,000
Operating income $ 225,000
Actual sales during November were 180,000 games. Using a flexible budget, the company expects the operating income for the month of November to be


A static budget


When preparing a performance report for a cost center using flexible budgeting techniques, the planned cost column should be based on the


Selo Imports uses flexible budgeting for the control of costs. The company’s annual master budget includes $324,000 for fixed production supervisory salaries at a volume of 180,000 units. Supervisory salaries are expected to be incurred uniformly throughout the year. During the month of September, 15,750 units were produced, and production supervisory salaries incurred were $28,000. A performance report for September would reflect a budget variance of


Red Rock Company uses flexible budgeting for cost control. Red Rock produced 10,800 units of product during October, incurring indirect materials costs of $13,000. Its master budget for the year reflected indirect materials costs of $180,000 at a production volume of 144,000 units. A flexible budget for October production would reflect indirect materials costs of


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