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1 In analysis of flexible budget variances, direct materials price variance reflects the effects of ________
1
In analysis of flexible budget variances, direct materials price variance reflects the effects of ________.
Select one:
a. changing input prices, holding the quality of outputs constant
b. changing input prices, holding the quantity of inputs constant
c. changing input quantities, holding the input price constant
d. changing input quantities, while changing the input price
2
HELEEN Manufacturing Company prepares master budget for the next year. The company had the following information available: Expected Costs and Selling Price Based on 5,000 units: Variable manufacturing costs per unit $32 Fixed manufacturing costs per unit $20 Selling price per unit $70 Expected production level 5,000 units In the flexible budget at 4,000 units, what is the total manufacturing cost?
Expert Solution
1
Correct Answer is b . changing input prices, holding the quantity of inputs constant
In Direct Material Price variance with the change in input Price variance arises that can be favourable or adverse.
Direct material Price variance is Diffence between Starndard Rate for Actual Quantity Used and Actual rate for Actual Quantity Used.
= (Starndard Rate - Actual Rate ) Actual Quantity of material Used
If actual Material Rate exceeds standard rate, resulting variances are unfavorable and vice versa.
Thus this material price variance is effect of change in Input Price & keeping the input qunatity constant.
2
| Static | Flexible | ||
| Per unit | 5000 units | 4000 units | |
| Sales | 70 | 350,000 | 280,000 |
| Less: Variable Cost | 32 | 160,000 | 128,000 |
| Contribution | 38 | 190,000 | 152,000 |
| Fixed Cost | 5000*20 = 100,000 | 100,000 | |
| Budgeted Operating Income | 90,000 | 52,000 |
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