Question 1

A standard cost:

Accepted Answer

A) is the "true" cost of a unit of production. 
B) is a budget for the production of one unit of a product or service. 
C) can be useful in calculating equivalent units. 
D) is normally the average cost within an industry. 
E) is almost always the actual cost from previous years. 
A) is the "true" cost of a unit of production. 
B) is a budget for the production of one unit of a product or service. 
C) can be useful in calculating equivalent units. 
D) is normally the average cost within an industry. 
E) is almost always the actual cost from previous years.

Question 2

The budget variance arises from a comparison of:

Accepted Answer

A) budgeted fixed overhead expenditures with budgeted fixed overhead costs. 
B) actual fixed overhead costs with budgeted fixed overhead costs. 
C) actual variable overhead expenditures with budgeted variable overhead costs. 
D) variable overhead costs with budgeted fixed overhead costs. 
E) static-budget amounts with flexible-budget amounts. 
A) budgeted fixed overhead expenditures with budgeted fixed overhead costs. 
B) actual fixed overhead costs with budgeted fixed overhead costs. 
C) actual variable overhead expenditures with budgeted variable overhead costs. 
D) variable overhead costs with budgeted fixed overhead costs. 
E) static-budget amounts with flexible-budget amounts.

Question 3

Silver Manufacturing Company has a standard variable overhead rate of $4 per machine hour, with each completed unit expected to take three machine hours to produce. A review of Silver's accounting records found the following: Actual variable overhead: $210,000
Variable-overhead efficiency variance: $18,000U
Variable-overhead spending variance: $30,000F
How many units did Silver actually produce during the period?

Accepted Answer

A) 13,500. 
B) 16,500. 
C) 18,500. 
D) 21,500. 
E) 52,500. 
A) 13,500. 
B) 16,500. 
C) 18,500. 
D) 21,500. 
E) 52,500.

Question 4

Moose Company recently produced 60,000 units of a product that was expected to consume 3 litres of direct material per finished unit. The standard price of the direct material was $8.00 per litre. If the firm purchased and consumed 186,000 litres in manufacturing (cost = $1,534,500), the direct-material quantity variance would be:

Accepted Answer

A) $6,000U. 
B) $46,500F. 
C) $46,500U. 
D) $48,000F. 
E) $48,000U. 
A) $6,000U. 
B) $46,500F. 
C) $46,500U. 
D) $48,000F. 
E) $48,000U.

Question 5

Sitka Insurance uses budgets to forecast and monitor overhead throughout the organization. The following budget formula relates to the processing of applications for automobile policies in any given month: Total overhead $ =\$ 6.80 \mathrm{APH}+\$ 13.500 $
where $ \mathrm{APH}= $ application processing hours The typical automobile insurance policy has an estimated processing time of 1.5 hours.
During June, management originally anticipated that 320 applications would be processed. Activity was lower than expected, with only 280 applications completed by month-end, and the following costs were incurred: variable overhead, $2,950; fixed overhead, $13,700.
Required:
A. What volume level of applications and processing hours would have been used if Sitka had constructed a static budget?
B. Construct a flexible budget that shows the expected monthly variable and fixed overhead costs of processing 270, 300, and 330 applications.
C. From a cost perspective, did the company perform better or worse than anticipated in June? Show calculations to support your

Accepted Answer

A. The static budget would have been bas

Question 6

Townsend Incorporated has set the following standards for one unit of product:
Direct material
Quantity: 8.2 pounds per unit
Price: $12.50 per pound
Direct labour
Quantity: 8 hours per unit
Rate: $25 per hour
Actual costs incurred in the production of 3,000 units were as follows
Direct material: $246,000 ($12.00 per pound)
Direct labour: $454,500 ($22.50 per hour)
All materials purchased were consumed during the period.
Required:
Calculate the direct-material price and quantity variances, and the direct-labour rate and efficiency variances. Indicate whether each variance is favourable or unfavourable.

Accepted Answer

The answer of Townsend Incorporated has set the following standards...

Question 7

The following data relate to Logan Corporation's only product: Direct material standard: 4 square feet at $1.50 per square foot
Direct material purchased: 20,000 square feet at $1.60 per square foot
Direct material consumed: 19,200 square feet
Manufacturing activity: 4,600 units completed
The direct-material price variance is:

Accepted Answer

A) $1,920F. 
B) $1,920U. 
C) $2,000F. 
D) $2,000U. 
E) $2,880U. 
A) $1,920F. 
B) $1,920U. 
C) $2,000F. 
D) $2,000U. 
E) $2,880U.

Question 8

Jefferson Corporation uses a standard cost system, applying manufacturing overhead on the basis of machine hours. The company's overhead standards per unit are as follows: (i) variable overhead: 4 hours at $9 per hour (ii) fixed overhead at $6* per hour. The fixed overhead is based upon a planned monthly activity of 120,000 machine hours. Actual data for May were:
Number of units produced: 29,000
Number of machine hours worked: 125,000
Variable overhead costs incurred: $ \$ 1,085,000 $
Fixed overhead costs incurred: $ \$ 755,000 $ Required:
A. Calculate the spending and efficiency variances for variable overhead.
B. Calculate the budget and volume variances for fixed overhead.

Accepted Answer

A. Spending variance: $1,085,000 - (125,

Question 9

Justin Company recently purchased materials from a new supplier at a very attractive price. The materials were found to be of poor quality, and the company's labourers struggled significantly as they shaped the materials into finished product. In a desperation move to make up for some of the time lost, the manufacturing supervisor brought in more senior employees from another part of the plant. Which of the following variances would have a low probability of arising from this situation?

Accepted Answer

A) Material price variance, favourable. 
B) Material quantity variance, unfavourable. 
C) Labour rate variance, unfavourable. 
D) Labour efficiency variance, unfavourable. 
E) Fixed overhead volume variance. 
A) Material price variance, favourable. 
B) Material quantity variance, unfavourable. 
C) Labour rate variance, unfavourable. 
D) Labour efficiency variance, unfavourable. 
E) Fixed overhead volume variance.

Question 10

What is the primary difference between a static budget and a flexible budget?

Accepted Answer

A) The static budget contains only fixed costs, while the flexible budget contains only variable costs. 
B) The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels. 
C) The flexible budget is prepared for a single level of activity, while a static budget is adjusted for different activity levels. 
D) The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management. 
E) The flexible budget is constructed using input from only upper level management, while a static budget obtains input from all levels of management. 
A) The static budget contains only fixed costs, while the flexible budget contains only variable costs. 
B) The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels. 
C) The flexible budget is prepared for a single level of activity, while a static budget is adjusted for different activity levels. 
D) The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management. 
E) The flexible budget is constructed using input from only upper level management, while a static budget obtains input from all levels of management.

Question 11

Smithville uses labour hours to apply variable overhead to production. If the company's workers were very inefficient during the period, which of the following statements would be true about the variable-overhead efficiency variance?

Accepted Answer

A) The variance would be favourable. 
B) The variance would be unfavourable. 
C) The nature of the variance (favourable or unfavourable) would be unknown based on the facts presented. 
D) The variance would be the same amount as the labour efficiency variance. 
E) The variance would be the same amount as the fixed overhead volume variance. 
A) The variance would be favourable. 
B) The variance would be unfavourable. 
C) The nature of the variance (favourable or unfavourable) would be unknown based on the facts presented. 
D) The variance would be the same amount as the labour efficiency variance. 
E) The variance would be the same amount as the fixed overhead volume variance.

Question 12

Stevenson Enterprises recently used 16,000 labour hours to produce 8,500 completed units. According to manufacturing specifications, each unit is anticipated to take two hours to complete. The company's actual payroll cost amounted to $165,300. If the standard labour cost per hour is $12, Stevenson's labour efficiency variance is:

Accepted Answer

A) $10,331F. 
B) $10,331U. 
C) $12,000F. 
D) $12,000U. 
E) 26,700U. 
A) $10,331F. 
B) $10,331U. 
C) $12,000F. 
D) $12,000U. 
E) 26,700U.

Question 13

Which of the following choices correctly notes the use of the standard price per unit of direct material when calculating the direct-material price variance and the direct-material quantity variance? $\begin{array} { | l | c | l | } 
\hline & \text { Price Variance } & \text { Quantity Variance } \
\hline 1 & \text { Used } & \text { Always used } \
\hline 2 & \text { Used } & \text { Occasionally used } \
\hline 3 & \text { Used } & \text { Not used } \
\hline 4 & \text { Not used } & \text { Always used } \
\hline 5 & \text { Not used } & \text { Not used } \
\hline
\end{array}$

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) 5 
A) 1 
B) 2 
C) 3 
D) 4 
E) 5

Question 14

The gears department of Cycle Company has budgeted monthly manufacturing overhead cost of $40,000 plus $5 per direct labour hour. The flexible budget report reflects $120,000 for total budgeted manufacturing cost for the month. What is the actual level of activity achieved during the month?

Accepted Answer

A) 16,000 direct labour hours. 
B) 22,400 direct labour hours. 
C) 24,000 direct labour hours. 
D) 32,000 direct labour hours. 
E) 120,000 direct labour hours. 
A) 16,000 direct labour hours. 
B) 22,400 direct labour hours. 
C) 24,000 direct labour hours. 
D) 32,000 direct labour hours. 
E) 120,000 direct labour hours.

Question 15

The individual generally responsible for the direct-material price variance is the:

Accepted Answer

A) sales manager. 
B) production supervisor. 
C) purchasing manager. 
D) finance manager. 
E) head of the human resources department. 
A) sales manager. 
B) production supervisor. 
C) purchasing manager. 
D) finance manager. 
E) head of the human resources department.

Question 16

Hope Corporation recently purchased 30,000 metres of direct material at $6.60 per metre. Usage by the end of the period amounted to 28,000 metres. If the standard cost is $7.00 per metre and the company believes in computing variances at the earliest point possible, the direct-material price variance would be calculated as:

Accepted Answer

A) $800F. 
B) $11,200F. 
C) $11,200U. 
D) $12,000F. 
E) $12,000U 
A) $800F. 
B) $11,200F. 
C) $11,200U. 
D) $12,000F. 
E) $12,000U

Question 17

Assume that machine hours is the cost driver for overhead. The difference between the actual variable overhead incurred and the applied variable overhead is the:

Accepted Answer

A) volume variance. 
B) production variance. 
C) efficiency variance. 
D) sum of the spending and efficiency variances. 
E) spending variance. 
A) volume variance. 
B) production variance. 
C) efficiency variance. 
D) sum of the spending and efficiency variances. 
E) spending variance.

Question 18

Master Products has the following information for the year just ended: $\begin{array} { | l | r | r | r | } 
\hline & \text { Budget } && \text { Actual } \
\hline \text { Sales in units } & \underline { 15,000 } & &\underline {  14,000}\
\hline \text { Sales } & \$ 150,000 & & \$ 147,000 \
\hline \text { Less: Variable expenses } & \underline { 90,000} & & \underline { 82,600 }\
\hline \text { Contribution margin } & \mathrm { S } 60,000 & & \$ 64,400 \
\hline \text { Less: Fixed expenses } & \underline { 3 5 , 0 0 0 } & & \underline { 40,000} \
\hline \text { Operating income } & \mathrm { S }\underline {  25,000} && \underline { \$ 24,400} \
\hline
\end{array}$ The company's sales-volume variance is:

Accepted Answer

A) $3,000 unfavourable. 
B) $4,000 unfavourable. 
C) $4,400 favourable. 
D) $10,000 unfavourable. 
E) $10,000 favourable. 
A) $3,000 unfavourable. 
B) $4,000 unfavourable. 
C) $4,400 favourable. 
D) $10,000 unfavourable. 
E) $10,000 favourable.

Question 19

Consider the seven statements that follow.
1. An analysis of fixed overhead will typically result in the computation of the fixed-overhead spending variance and the fixed-overhead volume variance.
2. The standard rate for fixed overhead is computed by dividing a company's budgeted fixed overhead for the period by the planned manufacturing activity.
3. A company uses direct labour hours to apply manufacturing overhead to units of production. If the company reports an unfavourable labour efficiency variance, that same firm might report a favourable variable-overhead efficiency variance in the same accounting period.
4. The amount of actual fixed overhead for an accounting period is used to compute the fixed-overhead volume variance.
5. If a company's standard hours allowed for the manufacturing activity attained exceeds the planned manufacturing activity, the firm will report a favourable fixed-overhead volume variance.
6. The amount of fixed overhead that a company has budgeted for an accounting period will increase or decrease with the actual number of units produced.
7. The fixed-overhead volume variance indicates whether the level of production activity attained is higher or lower than the level originally anticipated.
Required:
Determine whether the preceding statements are true or false. If a statement is false, briefly explain why it is false.

Accepted Answer

1. False-The analysis produces the fixed

Question 20

Which of the following choices correctly notes a characteristic associated with perfection standards and one associated with practical standards? \(\begin{array} { | l | l | l | } 
\hline & { \text { Perfection Standards } } &  { \text { Practical Standards } } \
\hline 1 & \text { Attainable in an ideal environment } & \begin{array} { l } 
\text { Incorporate abnormal occurrences when } \
\text { setting quantity and efficiency targets }
\end{array} \
\hline 2 & \text { Result in many unfavourable variances } & \text { Are often attainable by workers } \
\hline 3 & \begin{array} { l } 
\text { Tend to boost worker morale over the } \
\text { long-run }
\end{array} & \begin{array} { l } 
\text { Generally, are preferred by behavioural } \
\text { scientists }
\end{array} \
\hline 4 & \begin{array} { l } 
\text { Generally, are easily achieved by } \
\text { workers }
\end{array} & \begin{array} { l } 
\text { Result in both favorable and unfavourable } \
\text { variances }
\end{array} \
\hline 5 & \begin{array} { l } 
\text { Generally, are preferred by } \
\text { behavioural scientists }
\end{array} & \begin{array} { l } 
\text { Are casier to achieve than perfection } \
\text { standards }
\end{array} \
\hline
\end{array}\)

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) 5 
A) 1 
B) 2 
C) 3 
D) 4 
E) 5

A standard cost:

The budget variance arises from a comparison of:

What is the primary difference between a static budget and a flexible budget?

Smithville uses labour hours to apply variable overhead to production. If the company's workers were very inefficient during the period, which of the following statements would be true about the variable-overhead efficiency variance?

The gears department of Cycle Company has budgeted monthly manufacturing overhead cost of $40,000 plus $5 per direct labour hour. The flexible budget report reflects $120,000 for total budgeted manufacturing cost for the month. What is the actual level of activity achieved during the month?

The individual generally responsible for the direct-material price variance is the:

Assume that machine hours is the cost driver for overhead. The difference between the actual variable overhead incurred and the applied variable overhead is the:

Master Products has the following information for the year just ended: Budget Actual Sales in units Sales \ 150,000 \ 147,000 Less: Variable expenses Contribution margin 60,000 \ 64,400 Less: Fixed expenses Operating income The company's sales-volume variance is:

The Changing Role of Managerial Accounting

Basic Cost Management Concepts

Product Costing and Cost Accumulation

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behaviour, and Cost Estimation

Cost-Volume-Profit Analysis, Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Cost Management Tools

Responsibility Accounting, Investment Centres, and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

Filters

Exam 9: Standard Costing and Flexible Budgeting

A standard cost:

The budget variance arises from a comparison of:

What is the primary difference between a static budget and a flexible budget?

Smithville uses labour hours to apply variable overhead to production. If the company's workers were very inefficient during the period, which of the following statements would be true about the variable-overhead efficiency variance?

The gears department of Cycle Company has budgeted monthly manufacturing overhead cost of $40,000 plus $5 per direct labour hour. The flexible budget report reflects $120,000 for total budgeted manufacturing cost for the month. What is the actual level of activity achieved during the month?

The individual generally responsible for the direct-material price variance is the:

Assume that machine hours is the cost driver for overhead. The difference between the actual variable overhead incurred and the applied variable overhead is the:

Master Products has the following information for the year just ended: Budget Actual Sales in units Sales \ 150,000 \ 147,000 Less: Variable expenses Contribution margin 60,000 \ 64,400 Less: Fixed expenses Operating income The company's sales-volume variance is:

The Changing Role of Managerial Accounting

Basic Cost Management Concepts

Product Costing and Cost Accumulation

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behaviour, and Cost Estimation

Cost-Volume-Profit Analysis, Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Cost Management Tools

Responsibility Accounting, Investment Centres, and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

Filters