1. The standard quantity allowed for the unit produced was 4,500 pounds, the sta
ID: 2457475 • Letter: 1
Question
1. The standard quantity allowed for the unit produced was 4,500 pounds, the standard price was $2.50 per pound, and the materials usage variance was $475 favorable. Each unit uses 1 pound of materials. How many units were actually produced? 2. Management by exception: a.) causes managers to be buried under voluminous paperwork. b.) means that material differences will be investigated. c.) means that all differences will be investigated. d.) means that only unfavorable differences will be investigated. 3. Management by exception: a.) can only be applied when comparing actual results with the master budget. b.) can be implemented at each level of responsibility within an organization. c.) is the opposite of goal congruence. d.) is most effective at top levels of management.
Explanation / Answer
Answer:
1. Calculation of Actually Produced Units
Material Usage Variance = Standard Price Per Unit (Standard Quantity - Actual Quantity) = $2.50 (4,500 - Actual Quantity) = $475
$11,250 - Actual Quantity x $2.50 = $475
Actual Quantity x $2.50 = $11,250 - $475 = $10,775
Actual Quantity = $10,775 / $2.50 = 4,310 Pounds
Actual Produced Units = 4,310 Units
2. Management by exception ------b) means that material differences will be investigated.
Management is concerned with difference between actual result and planned result in the area where iterms are material and controllable. It is assumed by management that material difference will be investigated by concerned department.
The meaning of Management by exception is that the management will investigate areas where actual results differ from planned results if the items are material and controllable.
3. Management by exception ......b.) can be implemented at each level of responsibility within an organization
Explanation:
Management at higher level, can asked detailed reports / data related to significant variances from lower level of responsibility to identify and investigate the problem / cause of difference and remedies for variances.
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