Flexible Budgets and
Standard
Cost Systems
Chapter 23
Exercises
Flexible Budgets

In-Class Exercises:
Exercise No.
E23-15
Page
1451
Flexible Budget
(Use the format, as reflected on the next slide, to
complete the exercise)
Flexible Budget
Exercise
E23-15
Page
1451
Flexible Budget
Flexible Budget
OfficePlus sells its main product, ergonomic mouse pads and provides
the following information:
(1) Selling price of each pad…..$12.00
(2) Variable cost per pat………..$ 5.20
(3) Fixed costs up to 65,000 pads……$205,000
(4) Fixed costs above 65,000 pads…..$280,000
Prepare a monthly flexible budget for the product, showing sales revenue, variable
costs, fixed costs, and income for volume levels of 45,000, 55,000, and 75,000 pads.
Flexible Budget
Compute the Sales Revenue:
45,000 x $12 = $540,000
Flexible Budget
Flexible Budget
Flexible Budget
Flexible Budget
First two volume levels have
the same fixed costs.
Flexible Budget
Fixed costs increase at the
75,000 volume level.
Flexible Budget
Flexible Budget
End of Exercise
Material & Labor Variances

In-Class Exercises:
Exercise No.
E23-19
Page
1452
Material & Labor Variances
Material & Labor Variances
Exercise E23-19:
Great Fender uses a standard cost accounting system and manufactures
boat fenders. The following data is presented for 2014.
(1) Manufactured 20,000 boat fenders.
(2) Used 144,000 square feet of extruded vinyl, purchased at $1.05 per
square foot.
(3) Production required 420 direct labor hours at $13.50 per hour.
(4) The direct materials standard was 7 sq. ft. of vinyl per fender, at a
standard cost of $1.10 per sq. ft.
(5) The labor standard was 0.025 direct labor hour per fender, at a
standard cost of $12.50 per hour.
Use this information to compute the cost and efficiency variances for
direct materials and direct labor.
Material & Labor Variances
Direct Material Variances
Direct Material Variances
Preliminary data/computations:
(1) Actual quantity…………144,000 sq ft (given)
(2) Standard quantity…….. 20,000units x 7 sq ft/unit = 140,000 sq ft
(3) Actual price…………….. $1.05/sq ft (given)
(4) Standard price…………. $1.10/sq ft (given)
Direct Material Variances
Preliminary data/computations:
(1) Actual quantity…………144,000 sq ft (given)
(2) Standard quantity…….. 20,000units x 7 sq ft/unit = 140,000 sq ft
(3) Actual price…………….. $1.05/sq ft (given)
(4) Standard price…………. $1.10/sq ft (given)
This item requires a computation based on the
data presented.
(20,000 units produced requiring 7 sq ft each)
Direct Material Variances
Preliminary data/computations:
(1) Actual quantity…………144,000 sq ft (given)
(2) Standard quantity…….. 20,000units x 7 sq ft/unit = 140,000 sq ft
(3) Actual price…………….. $1.05/sq ft (given)
(4) Standard price…………. $1.10/sq ft (given)
Direct Material Variances
Preliminary data/computations:
(1) Actual quantity…………144,000 sq ft (given)
(2) Standard quantity…….. 20,000units x 7 sq ft/unit = 140,000 sq ft
(3) Actual price…………….. $1.05/sq ft (given)
(4) Standard price…………. $1.10/sq ft (given)
Direct Material Variances
General Model Method
Direct Material Variances
Direct Material Variances
Formula Method
Direct Material Variances
Material & Labor Variances
Direct Labor Variances
Material & Labor Variances
Exercise E23-19:
Great Fender uses a standard cost accounting system and manufactures
boat fenders. The following data is presented for 2014.
(1) Manufactured 20,000 boat fenders.
(2) Used 144,000 square feet of extruded vinyl, purchased at $1.05 per
square foot.
(3) Production required 420 direct labor hours at $13.50 per hour.
(4) The direct materials standard was 7 sq. ft. of vinyl per fender, at a
standard cost of $1.10 per sq. ft.
(5) The labor standard was 0.025 direct labor hour per fender, at a
standard cost of $12.50 per hour.
Use this information to compute the cost and efficiency variances for
direct materials and direct labor.
Direct Labor Variances
Preliminary data/computations:
(1) Actual quantity……… 420 hours (given)
(2) Standard quantity….. 20,000 units x .025 hours/unit = 500 hours
(3) Actual price…………. $13.50/hour (given)
(4) Standard price……… $12.50/hour (given)
Direct Labor Variances
Preliminary data/computations:
(1) Actual quantity……… 420 hours (given)
(2) Standard quantity….. 20,000 units x .025 hours/unit = 500 hours
(3) Actual price…………. $13.50/hour (given)
(4) Standard price……… $12.50/hour (given)
This item requires a computation based on the
data presented.
(20,000 units produced using .025 hours each)
Direct Labor Variances
Preliminary data/computations:
(1) Actual quantity……… 420 hours (given)
(2) Standard quantity….. 20,000 units x .025 hours/unit = 500 hours
(3) Actual price…………. $13.50/hour (given)
(4) Standard price……… $12.50/hour (given)
Direct Labor Variances
Preliminary data/computations:
(1) Actual quantity……… 420 hours (given)
(2) Standard quantity….. 20,000 units x .025 hours/unit = 500 hours
(3) Actual price…………. $13.50/hour (given)
(4) Standard price……… $12.50/hour (given)
Direct Labor Variances
General Model Method
Direct Labor Variances
Direct Labor Variances
Formula Method
Direct Labor Variances
Direct Labor Variances
End of Exercise