Question 1

When the actual cost of direct materials used exceeds the standard cost, the company must have experienced an unfavorable direct materials price variance.

Accepted Answer

A) True 
 B)False

Question 2

Standard costs can be used by management to assess the reasonableness of actual costs incurred.

Accepted Answer

A) True 
 B)False

Question 3

A company uses the following standard costs to produce a single unit of output. $$\begin{array} { l l l } 
\text { Direct materials } & 6 \text { pounds at } \$ 0.90 \text { per pound } & = \$ 5.40 \
\text { Direct labor } & 0.5 \text { hour at } \$ 12.00 \text { per hour } & = \$ 6.00 \
\text { Marnfacturing overhead } & 0.5 \text { hour at } \$ 4.80 \text { per hour } & = \$ 2.40
\end{array}$$ During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the total direct labor cost variance for the month was:

Accepted Answer

A)  $3,650 favorable 
B)  $2,450 favorable 
C)  $1,200 unfavorable 
D)  $1,200 favorable 
E)  $2,450 unfavorable 
A)  $3,650 favorable 
B)  $2,450 favorable 
C)  $1,200 unfavorable 
D)  $1,200 favorable 
E)  $2,450 unfavorable

Question 4

Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?

Accepted Answer

A)  $12,500. 
B)  $25,000. 
C)  $20,000. 
D)  $30,000. 
E)  $35,000. 
A)  $12,500. 
B)  $25,000. 
C)  $20,000. 
D)  $30,000. 
E)  $35,000.

Question 5

Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards.

Accepted Answer

A) True 
 B)False

Question 6

Within the same flexible budget performance report, it is impossible to have both favorable and unfavorable variances.

Accepted Answer

A) True 
 B)False

Question 7

The following information relating to a company's overhead costs is available.   Based on this information, the total variable overhead variance is:

Accepted Answer

A)  $2,000 favorable. 
B)  $6,000 favorable. 
C)  $2,000 unfavorable. 
D)  $6,000 unfavorable. 
E)  $1,000 favorable. 
A)  $2,000 favorable. 
B)  $6,000 favorable. 
C)  $2,000 unfavorable. 
D)  $6,000 unfavorable. 
E)  $1,000 favorable.

Question 8

Regent, Inc. uses the following standard to produce a single unit of its product: overhead $6 (2 hrs. @ $3/hr.). The flexible budget for overhead is $100,000 plus $1 per direct labor hour. Actual data for the month show overhead costs of $150,000, and 24,000 units produced. The overhead volume variance is:

Accepted Answer

A)  $10,000 favorable. 
B)  $12,000 favorable. 
C)  $4,000 unfavorable. 
D)  $16,000 unfavorable. 
E)  $36,000 unfavorable. 
A)  $10,000 favorable. 
B)  $12,000 favorable. 
C)  $4,000 unfavorable. 
D)  $16,000 unfavorable. 
E)  $36,000 unfavorable.

Question 9

A flexible budget performance report compares the differences between:

Accepted Answer

A)  Actual performance and budgeted performance based on actual sales volume. 
B)  Actual performance over several periods. 
C)  Budgeted performance over several periods. 
D)  Actual performance and budgeted performance based on budgeted sales volume. 
E)  Actual performance and standard costs at the budgeted sales volume. 
A)  Actual performance and budgeted performance based on actual sales volume. 
B)  Actual performance over several periods. 
C)  Budgeted performance over several periods. 
D)  Actual performance and budgeted performance based on budgeted sales volume. 
E)  Actual performance and standard costs at the budgeted sales volume.

Question 10

A variable or flexible budget is so named because it only focuses on variable costs.

Accepted Answer

A) True 
 B)False

Question 11

Overhead cost variance is:

Accepted Answer

A)  The difference between the overhead costs actually incurred and the overhead budgeted at the actual operating level. 
B)  The difference between the actual overhead incurred during a period and the standard overhead applied. 
C)  The difference between actual and budgeted cost caused by the difference between the actual price per unit and the budgeted price per unit. 
D)  The costs that should be incurred under normal conditions to produce a specific product (or component) or to perform a specific service. 
E)  The difference between the total overhead cost that would have been expected if the actual operating volume had been accurately predicted and the amount of overhead cost that was allocated to products using the standard overhead rate. 
A)  The difference between the overhead costs actually incurred and the overhead budgeted at the actual operating level. 
B)  The difference between the actual overhead incurred during a period and the standard overhead applied. 
C)  The difference between actual and budgeted cost caused by the difference between the actual price per unit and the budgeted price per unit. 
D)  The costs that should be incurred under normal conditions to produce a specific product (or component) or to perform a specific service. 
E)  The difference between the total overhead cost that would have been expected if the actual operating volume had been accurately predicted and the amount of overhead cost that was allocated to products using the standard overhead rate.

Question 12

Claymore Corp. has the following information about its standards and production activity for September. The volume variance is:

Accepted Answer

A)  $1,295U. 
B)  $1,295F. 
C)  $2,400U. 
D)  $2,400F. 
E)  $3,695U. 
A)  $1,295U. 
B)  $1,295F. 
C)  $2,400U. 
D)  $2,400F. 
E)  $3,695U.

Question 13

When computing a price variance, the price is held constant.

Accepted Answer

A) True 
 B)False

Question 14

Jake Co. has prepared the following fixed budget for the year, assuming production and sales of 30,000 units. This level of production represents 80% of capacity.
 $\text { Take Co. Fixed Budget for Year Ending December } 31$
$\begin{array}{|l|r|r|}
  \hline \text { Sales } &&\$1,500,000\
\hline  \text {  Cost of goods sold:} &\
\hline  \text { Direct materials } &\$540,000\
 \hline \text {  Direct labor} &300,000\
 \hline \text {  Indirect materials (variable)} &15,000\
\hline  \text { Indirect labor (variable) } &21,000\
\hline   \text { Depreciation } &180,000\
\hline  \text {Salaries  } &90,000\
 \hline \text {  Utilities ( $ 80 \% $ fixed)} &54,000\
\hline  \text { 
Maintenance (40\% variable) } &\underline{33,000}&\underline{1,233,000}\
 \hline \text {Gross profit  } &&\$267,000\
\hline  \text { Operating expenses: } &\
\hline   \text { Commissions. } &\$45,000\
\hline \text {Advertising (fixed)  } &60,000\
\hline \text { Wages (variable) } &15,000\
\hline \text { Rent } &\underline{30,000}\
\hline \text {Total operating expenses  } &&\underline{150,000}\
\hline \text { Income from operations} &&\underline{\$117,000}\
\hline 
\end{array}$
 Calculate the following flexible budget amounts at the indicated levels of capacity:
 $$\begin{array} { | l | l | l | l | } 
\hline & \begin{array} { l } 
\text { Operations at } \
60 \% \text { of Capacity }
\end{array} & & \begin{array} { l } 
\text { Operations at } \
75 \% \text { of Capacity }
\end{array} \
\hline \text { Sales } & & & \
\hline \text { Total variable costs } & & & \
\hline \text { Total fixed costs } & & & \
\hline \text { Income from operations } & & & \
\hline
\end{array}$$

Accepted Answer

Capacity = 30,000 units/80% = 37,500 uni

Question 15

Identify the situation below that will result in a favorable variance.

Accepted Answer

A)  Actual revenue is higher than budgeted revenue. 
B)  Actual revenue is lower than budgeted revenue. 
C)  Actual income is lower than expected income. 
D)  Actual costs are higher than budgeted costs. 
E)  Actual expenses are higher than budgeted expenses. 
A)  Actual revenue is higher than budgeted revenue. 
B)  Actual revenue is lower than budgeted revenue. 
C)  Actual income is lower than expected income. 
D)  Actual costs are higher than budgeted costs. 
E)  Actual expenses are higher than budgeted expenses.

Question 16

The following company information is available. The direct materials quantity variance is: $$\begin{array} { l c } 
\text { Direct materials used for production } & 36,000 \text { gallons } \
\text { Stardard quantity for units produced } & 34,400 \text { gallons } \
\text { Stardard cost per gallon of direct material } & \$ 6.00 \
\text { Actual cost per gallon of direct material } & \$ 6.10
\end{array}$$

Accepted Answer

A)  $10,000 unfavorable. 
B)  $13,200 unfavorable. 
C)  $9,600 unfavorable. 
D)  $10,000 favorable. 
E)  $13,200 favorable. 
A)  $10,000 unfavorable. 
B)  $13,200 unfavorable. 
C)  $9,600 unfavorable. 
D)  $10,000 favorable. 
E)  $13,200 favorable.

Question 17

If ending variance account balances are immaterial, they can be closed directly to Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 18

Regarding overhead costs, as volume increases:

Accepted Answer

A)  Total fixed cost increases, total variable cost remains constant. 
B)  Total fixed cost remains constant, total variable cost increases. 
C)  Total variable cost decreases, total fixed cost remains constant. 
D)  Both total fixed cost and total variable cost increase. 
E)  Both total fixed cost and total variable cost remain constant. 
A)  Total fixed cost increases, total variable cost remains constant. 
B)  Total fixed cost remains constant, total variable cost increases. 
C)  Total variable cost decreases, total fixed cost remains constant. 
D)  Both total fixed cost and total variable cost increase. 
E)  Both total fixed cost and total variable cost remain constant.

Question 19

Sales variance analysis is used by managers for:

Accepted Answer

A)  Planning purposes only. 
B)  Budgeting purposes only. 
C)  Control purposes only. 
D)  Planning and control purposes. 
E)  Planning and budgeting purposes. 
A)  Planning purposes only. 
B)  Budgeting purposes only. 
C)  Control purposes only. 
D)  Planning and control purposes. 
E)  Planning and budgeting purposes.

Question 20

What are the four steps in the effective management of variance analysis?

Accepted Answer

The four steps are: (1) prepar

When the actual cost of direct materials used exceeds the standard cost, the company must have experienced an unfavorable direct materials price variance.

Standard costs can be used by management to assess the reasonableness of actual costs incurred.

Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?

Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards.

Within the same flexible budget performance report, it is impossible to have both favorable and unfavorable variances.

The following information relating to a company's overhead costs is available. Based on this information, the total variable overhead variance is:

A flexible budget performance report compares the differences between:

A variable or flexible budget is so named because it only focuses on variable costs.

Overhead cost variance is:

Claymore Corp. has the following information about its standards and production activity for September. The volume variance is:

When computing a price variance, the price is held constant.

Identify the situation below that will result in a favorable variance.

The following company information is available. The direct materials quantity variance is: Direct materials used for production 36,000 gallons Stardard quantity for units produced 34,400 gallons Stardard cost per gallon of direct material \ 6.00 Actual cost per gallon of direct material \ 6.10

If ending variance account balances are immaterial, they can be closed directly to Cost of Goods Sold.

Regarding overhead costs, as volume increases:

Sales variance analysis is used by managers for:

What are the four steps in the effective management of variance analysis?

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Cost Behavior Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Analyzing for Business Transactions

Partnership Accounting

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Exam 8: Flexible Budgets and Standard Costs

When the actual cost of direct materials used exceeds the standard cost, the company must have experienced an unfavorable direct materials price variance.

Standard costs can be used by management to assess the reasonableness of actual costs incurred.

Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?

Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards.

Within the same flexible budget performance report, it is impossible to have both favorable and unfavorable variances.

The following information relating to a company's overhead costs is available. Based on this information, the total variable overhead variance is:

A flexible budget performance report compares the differences between:

A variable or flexible budget is so named because it only focuses on variable costs.

Overhead cost variance is:

Claymore Corp. has the following information about its standards and production activity for September. The volume variance is:

When computing a price variance, the price is held constant.

Identify the situation below that will result in a favorable variance.

The following company information is available. The direct materials quantity variance is: Direct materials used for production 36,000 gallons Stardard quantity for units produced 34,400 gallons Stardard cost per gallon of direct material \ 6.00 Actual cost per gallon of direct material \ 6.10

If ending variance account balances are immaterial, they can be closed directly to Cost of Goods Sold.

Regarding overhead costs, as volume increases:

Sales variance analysis is used by managers for:

What are the four steps in the effective management of variance analysis?

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Cost Behavior Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Analyzing for Business Transactions

Partnership Accounting

Filters