BEC 4: Operations Management - Planning Techniques

Question 1

how do you solve for material price variance when given the budget quantity, actual quantity, actual cost per material and budgeted (standard) price per material?

Answer 1

material variance = actual quantity x (actual quantity - standard)

Question 2

the use of standard costs in the budgeting process signifies that an organization has most likely implemented a:

Answer 2

flexible budget; standard costs usually means that a flexible budget is being used. standard costs per unit can be used to adjust the flexible budget to the actual volume.

Question 3

what is the direct materials usage variance formula?

Answer 3

direct materials usage variance = standard price x (actual quantity used - standard quantity allowed [aka budgeted amount of material expected to be used])

Question 4

what’s the contribution margin per unit?

Answer 4

contribution margin per unit = selling price - variable unit cost

Question 5

The selling price is $9 and the variable cost per unit is $6.50, what is the contribution margin per unit?

Answer 5

9 - 6.50 = 2.50

Question 6

what is the formula for the break even volume?

Answer 6

break even volume = fixed costs / contribution margin per unit

Question 7

fixed costs is $5,000, selling price is $9, and variable cost per unit is $6.50, what is the break even volume?

Answer 7

fixed costs / contribution margin per unit = 5,000 / (9 - 6.50) = 5,000 / 2.5 = 2,000

Question 8

break even occurs where sales = costs, what is the breakeven formula?

Answer 8

selling price x units = fixed costs + units x (variable costs [direct labor + direct materials])

Question 9

in joint-product costing and analysis, what is used to sell a product to maximize its profits?

Answer 9

separable costs after the split-off point because costs after split-off and revenues are relevant to maximize profits.

Question 10

the use of standard costs in the budgeting process signifies that an organization has most likely implemented a:

Answer 10

flexible budget

Question 11

how is the selling price variance computed?

Answer 11

selling price variance = (actual SP/unit - budgeted SP/unit) x actual sold

Question 12

what is the maximum benefit foregone by using a scarce resource for a given purpose; the benefit provided by the next best use of that resource?

Answer 12

opportunity cost - key words: best alternative use

Question 13

once the breakeven level has been reached and surpassed, what calculation can be used to get profit amount?

Answer 13

by multiplying contribution margin per unit by the excess in unit sales above breakeven sales