1. Explain how a flexible budget differs from a master budget.

2. Assume you are the production manager for a manufacturing company that anticipated selling 40,000 units of product for the master budget and actually sold 50,000 units. Why would you prefer to be evaluated using a flexible budget for direct labor rather than the master budget?

3. What is a standard cost, and how does it differ from a budgeted cost?

4. How are standards established for direct materials, direct labor, and variable manufacturing overhead?

5. Explain what management is trying to evaluate in reviewing the materials price variance and materials quantity variance. Be sure to include the formula for each variance in your explanation.

6. Explain what management is trying to evaluate in reviewing the labor rate variance and labor efficiency variance. Be sure to include the formula for each variance in your explanation.

7. Explain how an unfavorable labor rate variance might cause a favorable labor efficiency variance and favorable materials quantity variance.

8. The production manager just received a report indicating an unfavorable labor rate variance. Further investigation reveals that the sales department accepted a large rush order. Who should be held responsible for the unfavorable variance? Explain.