Question 1

A favourable direct-labour efficiency variance is created when:

Accepted Answer

A) actual labour hours worked exceed standard hours allowed. 
B) actual hours worked are less than standard hours allowed. 
C) actual wages paid are less than amounts that should have been paid. 
D) actual units produced exceed budgeted production levels. 
E) actual units produced exceed standard hours allowed. 
A) actual labour hours worked exceed standard hours allowed. 
B) actual hours worked are less than standard hours allowed. 
C) actual wages paid are less than amounts that should have been paid. 
D) actual units produced exceed budgeted production levels. 
E) actual units produced exceed standard hours allowed.

Question 2

Venice Corporation manufactures a variety of liquid lawn fertilizers, including a very popular product called Lush 'N Green. Data about Lush 'N Green and Proctol, a major ingredient, follow.
Expected operations:
Proctol is purchased in 55-gallon drums at a cost of $65 per drum. A 2% cash discount is offered by Proctol's manufacturer for prompt payment of invoices, and Venice takes advantage of all discounts offered.
Venice normally purchases 200 drums of Proctol at a time, paying shipping fees of $2,660 per shipment.
Each gallon of Lush 'N Green requires three quarts of Proctol; however, because of evaporation and spills, Venice loses 4% of all Proctol that enters production. (Recall that there are four quarts in a gallon.)
Actual operations:
For the period just ended, Venice purchased 1,500 drums of Proctol at a total cost of $118,100, which reflects discounts and shipping. There was no beginning inventory, but an end-of-period inventory revealed that 30 drums were still on hand.
Manufacturing activity output totalled 104,000 gallons of Lush 'N Green.
Required:
A. Compute the standard purchase price for one gallon of Proctol.
B. Compute the standard quantity of Proctol to be used in producing one gallon of Lush 'N Green. Express your answer in quarts.
C. Compute the direct-material price variance for Proctol.
D. How much Proctol was used in manufacturing activity and how much should have been used? Express your answer in quarts.

Accepted Answer

None

Question 3

The sales-volume variance equals:

Accepted Answer

A) (Actual sales volume - Budgeted sales volume) x Actual sales price. 
B) (Actual sales volume - Budgeted sales volume) x Actual contribution margin. 
C) (Actual sales volume - Budgeted sales volume) x Budgeted sales price. 
D) (Actual sales price - Budgeted sales price) x Budgeted sales volume. 
E) (Actual sales price - Budgeted sales price) x Fixed-overhead volume variance. 
A) (Actual sales volume - Budgeted sales volume) x Actual sales price. 
B) (Actual sales volume - Budgeted sales volume) x Actual contribution margin. 
C) (Actual sales volume - Budgeted sales volume) x Budgeted sales price. 
D) (Actual sales price - Budgeted sales price) x Budgeted sales volume. 
E) (Actual sales price - Budgeted sales price) x Fixed-overhead volume variance.

Question 4

Red Glare Products uses a standard costing system to assist in the evaluation of operations. The company has had considerable employee difficulties in recent months, so much so that management has hired a new production supervisor (John Silver). Silver has been on the job for six months and has seemingly brought order to an otherwise chaotic situation.
The vice-president of manufacturing recently commented that "… Silver has really done the trick. John's team-building/morale-boosting exercises have truly brought things under control." The vice-president's comments were based on both a plant tour, where he observed a contented work force, and review of a performance report that showed a total labour variance of $14,000F. This variance is truly outstanding, given that it is less than 2% of the company's budgeted labour cost. Additional data follow.
Total completed production amounted to 20,000 units.
A review of the firm's standard cost records found that each completed unit requires 2.75 hours of labour at $14 per hour. Red Glare's production actually required 42,000 labour hours at a total cost of $756,000.
Required:
A. As judged by the information contained in the performance report, should the vice-president be concerned about the company's labour variances? Why?
B. Calculate Red Glare's direct-labour variances.
C. On the basis of your answers to requirement "B," should Red Glare be concerned about its labour situation? Why?
D. Briefly analyze and explain the direct-labour variances.

Accepted Answer

A. No. The variance is favourable and sm

Question 5

When considering whether to investigate a variance, managers should consider all of the following except:

Accepted Answer

A) the size of the variance. 
B) the pattern of recurrence of the variance. 
C) a variance's trends over time. 
D) nature of the variance, namely, whether it is favourable or unfavourable. 
E) controllability of the variance. 
A) the size of the variance. 
B) the pattern of recurrence of the variance. 
C) a variance's trends over time. 
D) nature of the variance, namely, whether it is favourable or unfavourable. 
E) controllability of the variance.

Question 6

Simms Limited had a favourable direct-labour efficiency variance of $8,000 for the period just ended. The actual wage rate was $0.70 more than the standard rate of $10.00. If the company's standard hours allowed for actual production totalled 10,000, how many hours did the firm actually work?

Accepted Answer

A) 800. 
B) 8,000. 
C) 9,200. 
D) 10,000. 
E) 18,000. 
A) 800. 
B) 8,000. 
C) 9,200. 
D) 10,000. 
E) 18,000.

Question 7

Most companies base the calculation of the direct-material price variance on the:

Accepted Answer

A) number of units purchased. 
B) number of units spoiled. 
C) number of units that should have been used. 
D) number of units actually used. 
E) number of units to be purchased during the next accounting period. 
A) number of units purchased. 
B) number of units spoiled. 
C) number of units that should have been used. 
D) number of units actually used. 
E) number of units to be purchased during the next accounting period.

Question 8

Which of the following variances are most similar with respect to the manner in which they are calculated?

Accepted Answer

A) Direct-labour rate variance and direct-labour efficiency variance. 
B) Direct-material price variance and direct-material quantity variance. 
C) Direct-material price variance, direct-material quantity variance, and total direct-material variance. 
D) Direct-material price variance and direct-labour efficiency variance. 
E) Direct-material quantity variance and direct-labour efficiency variance. 
A) Direct-labour rate variance and direct-labour efficiency variance. 
B) Direct-material price variance and direct-material quantity variance. 
C) Direct-material price variance, direct-material quantity variance, and total direct-material variance. 
D) Direct-material price variance and direct-labour efficiency variance. 
E) Direct-material quantity variance and direct-labour efficiency variance.

Question 9

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as:

Accepted Answer

A) actual hours x a predetermined (standard) overhead rate. 
B) standard allowed hours x a predetermined (standard) overhead rate. 
C) actual hours x an actual overhead rate. 
D) standard allowed hours x an actual overhead rate. 
E) $0 because users of standard costing do not apply overhead to work in process. 
A) actual hours x a predetermined (standard) overhead rate. 
B) standard allowed hours x a predetermined (standard) overhead rate. 
C) actual hours x an actual overhead rate. 
D) standard allowed hours x an actual overhead rate. 
E) $0 because users of standard costing do not apply overhead to work in process.

Question 10

BirdCo.'s master budget shows that the planned activity level for next year is expected to be 20,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected: $\begin{array}{lr}
\text { Indirect labour } & \$ 45,000 \
\text { Factory supplies } & 4,000 \
\text { Indirect materials } & 21,000 \
\text { Amortization on factory building (straight line) } & \underline {15,000}\
\text { Total manufacturing overhead } &\underline { \$85,000}
\end{array}$ If BirdCo. operates at 21,000 machine hours, how much is allowed on a flexible budget for manufacturing overhead costs?

Accepted Answer

A) $48,500. 
B) $69,500. 
C) $73,500. 
D) $88,500. 
E) $89,250. 
A) $48,500. 
B) $69,500. 
C) $73,500. 
D) $88,500. 
E) $89,250.

Question 11

Pricedox Corporation plans to manufacture 10,000 units over the next month at the following costs: direct materials, $520,000; direct labour, $80,000; variable manufacturing overhead, $200,000; and fixed manufacturing overhead, $350,000. The last amount includes $24,000 of straight-line depreciation. This resulted in a total budget of $1,150,000. Shortly after the conclusion of the month, Pricedox reported the following costs: $\begin{array} { l r } 
\text { Direct materials used } & \$ 539,500 \
\text { Direct labour } & 89,600 \
\text { Variable manufacturing overhead } & 152,000 \
\text { Depreciation } & 24,000 \
\text { Other fixed manufacturing overhead } & \underline { 322,000 } \
\text { Total } &\underline {  \$ 1,127,100 }\

\end{array}$ The Plant Manager and his crews turned out 9,200 units-a remarkable feat given that the company's manufacturing plant was closed for several days because of blizzards and impassable roads. The Plant Manager was especially pleased with the fact that total actual costs were less than budget. He was thus very surprised when Pricedox's General Manager expressed unhappiness about the plant's financial performance.
Required:
A. Prepare a performance report that fairly compares budgeted and actual costs for the period just ended-namely, the report that the General Manager likely used when assessing performance.
B. Should the Plant Manager be praised for "having met the budget" or is the General Manager's unhappiness justified?

Accepted Answer

A.
  geate

Question 12

Carleton University operates a motor pool for the convenience of its faculty and staff. The following budget was prepared for an upcoming period: $\begin{array} { l r } 
\text { Gasoline and oil } & \$ 50,000 \
\text { Minor repairs } & 7,000 \
\text { Insurance } & 30,000 \
\text { Office help } & 34,000 \
\text { Depreciation } & \underline { 30,000 } \
\text { Total } & \underline { \$ 151,000}
\end{array}$ The budget was based on the assumptions of 30 vehicles, with each vehicle being driven 5,000 kms. Carleton acquired two additional vehicles early in the period under study. Actual kms driven during the period totalled 170,000.
Discussions with the motor pool manager revealed that pool costs are variable and fixed in nature. The manager believed that kms driven was the most appropriate cost driver for studying gasoline and oil expense. In contrast, the number of vehicles in the pool was the best base to use when studying other selected costs.
Required:
A. Contrast a static budget with a flexible budget.
B. Suppose that Carleton's budget officer desired to prepare a report that compared budgeted and actual costs. Should the report be based on a static budget or a flexible budget? Why?
C. On the basis of the information presented, determine the budgeted amounts for the five preceding costs that would be used in a flexible budget.

Accepted Answer

A. A static budget is based on a single

Question 13

The activity measure selected for use in a variable overhead flexible budget and a fixed overhead flexible budget:

Accepted Answer

A) should be stated in sales dollars. 
B) should be approved by the company's president. 
C) should be one that varies in a similar behaviour pattern to the way that variable overhead varies. 
D) should remain fixed. 
E) should produce the most attractive results for the individual who will use the budget in managerial applications. 
A) should be stated in sales dollars. 
B) should be approved by the company's president. 
C) should be one that varies in a similar behaviour pattern to the way that variable overhead varies. 
D) should remain fixed. 
E) should produce the most attractive results for the individual who will use the budget in managerial applications.

Question 14

Which of the following journal entries definitely contains an error? $\begin{array} { | l | l | r | r | } 
\hline 1 & \text { Raw-Material Inventory } & 200,000 & \
\hline & \text { Direct-Material Price Variance } & 5,000 & \
\hline & \text { Accounts Pavable } & & 205.000 \
\hline 2 & \text { Raw-Material Inventory } & 38,000 & \
\hline & \text { Direct-Material Price Variance } & & 2,000 \
\hline & \text { Accounts Payable } & & 36,000 \
\hline 3 & \text { Raw-Material Inventory } & 156,000 & \
\hline & \text { Direct-Material Price Variance } & & 8.000 \
\hline & \text { Work-in-Process Inventory } & & 148,000 \
\hline 4 & \text { Work-in-Process Inventory } & 67,000 & \
\hline & \text { Direct-Material Quantity Variance } & 3,000 & \
\hline & \text { Raw-Material Inventory } & & 70,000 \
\hline 5 & \text { Work-in-Process Inventory } & 79,000 & \
\hline & \text { Direct-Material Quantity Variance } & & 4,000 \
\hline & \text { Raw-Material Inventory } & & 75,000 \
\hline
\end{array}$

Accepted Answer

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

Question 15

Standard cost systems can have motivational effects; some are desirable, some are not. Consider the following situation:
The materials purchasing manager is paid a salary plus a bonus based on the net favourable materials price variance. Generally, this bonus amounts to 30 - 40% of the manager's total compensation. Due to the bankruptcy of a company in a related field, there is an opportunity to buy a key raw material. The standards for this material call for grade 2A, usually purchased for $56 per ton. Because of the bankruptcy, the company can obtain a higher grade, 4A, for $62 per ton. While the quality of the final product will be the same regardless of the grade of material used, there will be substantial savings in material yield and labour productivity if 4A is used. These savings are expected to be two-to-three times the additional cost of $6 per ton.
Required:
A. How would an unfavourable price variance on a particular purchase affect the overall price variance for the year and the manager's bonus?
B. Would the use of the materials price variance as a basis for the manager's bonus lead to a desirable or undesirable behavioural outcome? Explain, being sure to note whether the manager would likely pursue acquisition of the grade 4A material.

Accepted Answer

A. An unfavourable price variance reduce

Question 16

Alexander Corporation applies fixed manufacturing overhead to production on the basis of machine hours worked. The following data relate to the month just ended: Actual fixed overhead incurred: $ \$ 1,245,000 $
Budgeted fixed overhead: $ \$ 1,200,000 $
Anticipated machine hours: 240,000
Standard machine hours per finished unit: 8
Actual finished units completed: 31,250 Required:
A. Compute Alexander's standard fixed-overhead rate per machine hour.
B. Determine Alexander's fixed-overhead budget variance and fixed-overhead volume variance.
C. Calculate the amount of fixed overhead applied to production.
D. Consider the two events that follow and determine whether the event will affect the fixed-overhead budget variance, the fixed-overhead volume variance, both variances, or neither variance. Assume that Alexander has not yet revised its standards to reflect these events if a revision is warranted.
1. A raw material shortage halted production for two days.
2. An additional assembly-line supervisor was hired at the beginning of the month.

Accepted Answer

A. Budgeted fixed overhead ($1,200,000)

Question 17

A flexible budget for 20,000 hours revealed variable manufacturing overhead of $120,000 and fixed manufacturing overhead of $140,000. The budget for 35,000 hours would reveal total overhead costs of:

Accepted Answer

A) $140,000. 
B) $260,000. 
C) $270,000. 
D) $350,000. 
E) $365,000. 
A) $140,000. 
B) $260,000. 
C) $270,000. 
D) $350,000. 
E) $365,000.

Question 18

Which of the following should have the strongest cause and effect relationship with overhead costs?

Accepted Answer

A) Cost followers. 
B) Non-value-added costs. 
C) Cost drivers. 
D) Value-added costs. 
E) Units of output. 
A) Cost followers. 
B) Non-value-added costs. 
C) Cost drivers. 
D) Value-added costs. 
E) Units of output.

Question 19

Which of the following variances cannot occur together during the same period?

Accepted Answer

A) Unfavourable direct-labour rate variance and favourable direct-labour efficiency variance. 
B) Unfavourable direct-labour efficiency variance and favourable direct-material quantity variance. 
C) Favourable direct-labour rate variance and unfavourable total direct-labour variance. 
D) Favourable direct-labour efficiency variance and favourable material quantity variance. 
E) Favourable direct-labour efficiency variance and an unfavourable fixed-overhead efficiency variance. 
A) Unfavourable direct-labour rate variance and favourable direct-labour efficiency variance. 
B) Unfavourable direct-labour efficiency variance and favourable direct-material quantity variance. 
C) Favourable direct-labour rate variance and unfavourable total direct-labour variance. 
D) Favourable direct-labour efficiency variance and favourable material quantity variance. 
E) Favourable direct-labour efficiency variance and an unfavourable fixed-overhead efficiency variance.

A favourable direct-labour efficiency variance is created when:

The sales-volume variance equals:

When considering whether to investigate a variance, managers should consider all of the following except:

Simms Limited had a favourable direct-labour efficiency variance of $8,000 for the period just ended. The actual wage rate was $0.70 more than the standard rate of $10.00. If the company's standard hours allowed for actual production totalled 10,000, how many hours did the firm actually work?

Most companies base the calculation of the direct-material price variance on the:

Which of the following variances are most similar with respect to the manner in which they are calculated?

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as:

The activity measure selected for use in a variable overhead flexible budget and a fixed overhead flexible budget:

A flexible budget for 20,000 hours revealed variable manufacturing overhead of $120,000 and fixed manufacturing overhead of $140,000. The budget for 35,000 hours would reveal total overhead costs of:

Which of the following should have the strongest cause and effect relationship with overhead costs?

Which of the following variances cannot occur together during the same period?

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 favourable direct-labour efficiency variance is created when:

The sales-volume variance equals:

When considering whether to investigate a variance, managers should consider all of the following except:

Simms Limited had a favourable direct-labour efficiency variance of $8,000 for the period just ended. The actual wage rate was $0.70 more than the standard rate of $10.00. If the company's standard hours allowed for actual production totalled 10,000, how many hours did the firm actually work?

Most companies base the calculation of the direct-material price variance on the:

Which of the following variances are most similar with respect to the manner in which they are calculated?

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as:

The activity measure selected for use in a variable overhead flexible budget and a fixed overhead flexible budget:

A flexible budget for 20,000 hours revealed variable manufacturing overhead of $120,000 and fixed manufacturing overhead of $140,000. The budget for 35,000 hours would reveal total overhead costs of:

Which of the following should have the strongest cause and effect relationship with overhead costs?

Which of the following variances cannot occur together during the same period?

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