Standard Costing

a. A(n) _____ standard allows for normal and efficient operations and takes into consideration typical production problems.

b. A budget for a single unit of product is referred to as a(n) _____.

c. Managers must compare actual and budgeted results to control operations. This comparison process is generally called ____.

d. The ____ indicates how much a company should generally pay for the materials, labor, or overhead for a single unit of product.

e. _____ is often the key to effective variance analysis.

Complete the preceding incomplete statements with the correct term from the following list of terms provided (note that not all terms will be used): variance analysis, ideal standard, practical standard, standard cost, standard price, management by exception, task analysis.

Using Variance Analysis

a. Variance analysis has a number of ____ when it is used in a modern manufacturing environment.

b. The focus of traditional variance analysis is _____ rather than on customer service, delivery time, and other nonfinancial measures.

c. Management by exception suggests that it is ____ necessary to investigate all variances.

d. ____ is a likely result of using ideal standards when managers continually face infavorable variances.

e. In order to interpret variances, the ____ must be determined.

Complete the preceding incomplete statements with the correct term from the following list of terms provided (note that not all terms will be used): absolutely, advantages, competition, cost control, drawbacks, not, product quality, resentment, under-lying cause.

Flexible Budget

Gordon knits wool caps for sale at the local ski resorts. He prepared a budget for the production and sale of 150 wool caps. Unfortunately, Gordon fell ill with a bad case of the flu and was able to make and sell only 125 wool caps. Here is Gordon's budget:

Sales Revenue	$1,500.00
Variable Costs:
Direct Materials (yarn)	375.00
Direct Labor	750.00
Commission To Resort	112.50
Fixed Costs	75.00
Net Income	$ 187.50

Prepare a flexable budget for Gordon based on the production and sale of 125 wool caps.

Sales Price Variance

The Quick Brick Shop has an unfavorable sales price variance of $150. The budgeted selling price was $10 per unit and 50 bricks were sold.

What was the actual selling price of Quick Brick's bricks?

Direct Materials Price and Usage Variances

The Woods Enterprises prepared the following standard costs for the production of the one stuffed bear:

Direct Materials	1.5 pounds of stuffing @ $2 per lb
Direct Labor	2 hours of assembly @ $15 per hr

Actual production costs for the production of 1,000 stuffed bears required 1,750 pounds of stuffing at a cost of $1.95 per pound and 1,950 labor hours at $15.25 per hour.

A. Calculate the direct material price variance.

B. Calculate the direct material usage variance.