B2: Strategic Planning: Techniques for Forecasting, Budgeting, and Analysis Flashcards
How do you calculate the “difference” in variance analysis? “SAD”
Standard - Actual = Difference
What are the 4 main types of variances for DM & DL? “PURE”
Direct Materials =
Price variance
Usage variance
Direct Labor =
Rate variance
Efficiency variance
How do you calculate the variances? “PURE DADS”
Price variance = Difference x Actual
Usage variance = Difference x Standard
Rate variance = Difference x Actual
Efficiency variance = Difference x Standard
The performance measurement tool generally associated with the display of information evaluating multiple dimensions of business outcomes is referred to as the:
Balanced scorecard
The balanced scorecard reports management information regarding organizational performance as defined by “critical success factors.” These critical success factors are often classified as human resource, business process, customer satisfaction, and financial performance, to demonstrate that no single dimension of organizational performance can be relied upon to evaluate success.
Blaster, Inc., a manufacturer of portable radios, purchases the components from subcontractors to use to assemble into a complete radio. Each radio requires three units each of Part XBEZ52, which has a standard cost of $1.45 per unit. During May Year 1, Blaster experienced the following with respect to part XBEZ52.
Purchases ($18,000) 12,000 units
Consumed in Mfg. 10,000 units
Radios Mfg. 3,000 units
During May Year 1, Blaster, Inc. incurred a material efficiency variance of:
PURE DADS = Efficiency = D x S
Standard Mfg. = (3,000 x 3) = 9,000 units
Actual Mfg. = 10,000 units
= 1,000 units unfavorable
1,000 units x $1.45 standard price = ($1,450) Unfavorable material efficiency variance
The variance that arises solely because the quantity actually sold differs from the quantity budgeted to be sold is:
Sales volume variance.
For a company that produces more than one product, the sales volume variance can be divided into which two of the following additional variances?
Sales quantity variance and sales mix variance
ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 units of raw material in inventory were purchased for $105,000, and two units of raw material are required to product one unit of final product. In November, the company produced 12,000 units of product. The standard allowed for material was $60,000, and there was an unfavorable quantity variance of $2,500. ChemKing’s standard price for one unit of material is:
$60,000 standard price / 12,000 actual units produced
= $5 per unit
$5 per unit / 2 units required for one unit of final product
= $2.50
A manufacturing company that produces trivets has established the following standards for the current year:
Standard price per pound: $3
Standard material usage per trivet: $2
During April, the company purchased 10,000 pounds of material for $33,000 and used 9,400 pounds to produce 4,500 trivets. Four thousand trivets were sold during April. What amount should be reported as the materials’ quantity (usage) variance?
Actual quantity used (given) 9,400 x standard price $3 =
$28,200
Standard quantity allowed = 4,500 units produced x 2 units per trivet = 9,000
9,000 standard quantity allowed x $3 standard price =
$27,000
$28,200
- ($27,000)
= ($1,200) unfavorable
In analyzing company operations, the controller of the Jason Corporation found a $250,000 favorable flexible-budget revenue variance. The variance was calculated by comparing the actual results with the flexible budget. This variance can be wholly explained by:
Changes in unit selling prices
Austin Manufacturing, which is subject to an effective income tax rate of 40 percent, had the following operating data for the accounting period just ended.
Selling price per unit: $60
Variable cost per unit: $22
Management plans to improve the quality of its sole product by:
- Replacing a component that costs $3.50 with a higher grade unit that costs $5.50
- Acquiring a $180,000 packing machine
Austin will depreciate the machine over an estimated 10-year life by using the straight-line method. If the company desires to earn after-tax income of $172,800 in the upcoming period, it must sell how many units?
172,800 after-tax income / (1 - 40%) = $288,000 pre-tax profit
$180,000 machine / 10 year life = $18,000 depreciation expense this year.
$504,000 fixed costs + $18,000 depreciation = $522,000
CM per unit = $60 selling - $22 VC - $2 additional expense for higher grade unit = $36 per unit
Pre-tax profit + FC / CM per unit = # of units required
$288,000 + $522,000 = $810,000
$810,000 / $36 per unit = 22,500 units required
Regression analysis:
Estimates the dependent cost variable.
Regression analysis is a statistical model that can estimate the dependent cost variable based on changes in the independent variable
The best basis upon which cost standards should be set to measure controllable production inefficiencies is:
Engineering standards based on attainable performance
The difference between standard hours at standard wage rates and actual hours at standard wage rates is referred to as which of the following types of variances?
Labor usage
Actual Hours / Actual Rate Rate Variance Actual Hours / Standard Rate
Actual Hours / Standard Rate Usage/Efficiency Standard Hours / Standard Rate
