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Chapter 23: Q20RQ (page 1305)
Question:What is a standard cost income statement?
Answer
The standard cost income statement focuses on variances for the management
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Question:Mills, Inc. is a competitor of Murry, Inc. from Exercise E2318. Mills also uses a standard cost system and provides the following information:
Static budget variable overhead \( 1,200
Static budget fixed overhead \) 1,600
Static budget direct labor hours 800 hours
Static budget number of units 400 units
Standard direct labor hours 2 hours per unit
Mills allocates manufacturing overhead to production based on standard direct labor hours. Mills reported the following actual results for 2018: actual number of units produced, 1,000; actual variable overhead, \(4,000; actual fixed overhead, \)3,100; actual direct labor hours, 1,600.
Requirements
1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances.
2. Explain why the variances are favorable or unfavorable
Calculating flexible budget variances
Complete the flexible budget variance analysis by filling in the blanks in the partialflexible budget performance report for 9,000 travel locks for Grant, Inc.
GRANT, INC. | |||||
Flexible Budget Performance Report (partial) | |||||
For the Month Ended April 30, 2018 | |||||
| ActualResults | Flexible Budget Variance | Flexible Budget | |||
| Units | 9,000 | (a) | 9,000 | ||
Sales Revenue | \(126,000 | (b) | (c) | \)108,000 | |
Variable Costs | \(52,300 | (d) | (e) | \)50,300 | |
Contribution Margin | \(73,700 | (f) | (g) | \)57,700 | |
Fixed Costs | \(16,100 | (h) | (i) | \)14,900 | |
Operating Income | \(57,600 | (j) | (k) | \)42,800 | |
Preparing a standard cost income statement Review your results from Problem P2333B.
Middleton’s actual and standard sales price per mug is $5. Prepare the standard cost income statement for July 2018.
Matching terms
Match each term to the correct definition.
Terms Definitions
a. Benchmarking
b. Efficiency variance
c. Cost variance
d. Standard
1. Measures whether the quantity of materials or laborused to make the actual number of outputs is within thestandard allowed for the number of outputs.
2. Uses standards based on best practice.
3. Measures how well the business keeps unit costs ofmaterials and labor inputs within standards.
4. A price, cost, or quantity that is expected under normalconditions.
Question:How does the static budget affect the cost and efficiency variances?
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