Question 1

Which of the following will result in an unfavorable direct labor cost variance?

Accepted Answer

A) when actual direct labor hours exceed standard direct labor hours 
B) when actual direct labor hours are less than standard direct labor hours 
C) when the actual direct labor rate exceeds the standard direct labor rate 
D) when the actual direct labor rate is less than the standard direct labor rate 
A) when actual direct labor hours exceed standard direct labor hours 
B) when actual direct labor hours are less than standard direct labor hours 
C) when the actual direct labor rate exceeds the standard direct labor rate 
D) when the actual direct labor rate is less than the standard direct labor rate

Question 2

A company is setting its direct materials and direct labor standards for its leading product. Materials cost from the supplier are $5 per square foot, net of purchase discount. Freight-in amounts to $0.10 per square foot. Basic wages of the assembly line personnel are $10 per hour. Payroll taxes are approximately 20% of wages. How much is the direct labor cost standard (per hour)?

Accepted Answer

A) $2 per hour 
B) $10 per hour 
C) $12 per hour 
D) $17 per hour 
A) $2 per hour 
B) $10 per hour 
C) $12 per hour 
D) $17 per hour

Question 3

A favorable variance has a debit balance and is a contra-revenue.

Accepted Answer

A) True 
 B)False

Question 4

A standard is a price, cost, or quantity that is expected under normal conditions.

Accepted Answer

A) True 
 B)False

Question 5

From the following particulars of Rose Mary Company, calculate the total manufacturing overhead variance for the total production cost flexible budget variance.

Accepted Answer

A) $725 F 
B) $350 U 
C) $725 U 
D) $425 F 
A) $725 F 
B) $350 U 
C) $725 U 
D) $425 F

Question 6

Which of the following is one of the reasons why companies use standard costs?

Accepted Answer

A) to enhance customer loyalty 
B) to set performance targets 
C) to share best practices with other companies 
D) to ensure the accuracy of the financial records 
A) to enhance customer loyalty 
B) to set performance targets 
C) to share best practices with other companies 
D) to ensure the accuracy of the financial records

Question 7

Atlas Inc. uses a standard costing system. Atlas's year ending balances at December 31, 2015 are shown here:   Calculate standard net operating income of the company for the year ended.

Accepted Answer

A) $8,780 
B) $6,290 
C) $8,470 
D) $7,530 
A) $8,780 
B) $6,290 
C) $8,470 
D) $7,530

Question 8

Sales volume variance is the difference between the:

Accepted Answer

A) actual amounts and the flexible budget due to differences in price and costs. 
B) expected results in the flexible budget for the actual units sold and the static budget. 
C) static budget and actual amounts due to differences in selling price. 
D) flexible budget and static budget due to differences in fixed costs. 
A) actual amounts and the flexible budget due to differences in price and costs. 
B) expected results in the flexible budget for the actual units sold and the static budget. 
C) static budget and actual amounts due to differences in selling price. 
D) flexible budget and static budget due to differences in fixed costs.

Question 9

The difference between the expected results in the flexible budget for the actual units sold and the static budget is called the sales volume variance.

Accepted Answer

A) True 
 B)False

Question 10

A favorable sales volume variance in variable expenses suggests a(n):

Accepted Answer

A) increase in number of actual units sold. 
B) decrease in number of actual units sold when compared to the expected number of units sold. 
C) increase in variable expenses per unit. 
D) decrease in fixed costs. 
A) increase in number of actual units sold. 
B) decrease in number of actual units sold when compared to the expected number of units sold. 
C) increase in variable expenses per unit. 
D) decrease in fixed costs.

Question 11

From the following particulars of Rose Mary Company, calculate the total direct materials variance.

Accepted Answer

A) $150 U 
B) $300 F 
C) $150 F 
D) $300 U 
A) $150 U 
B) $300 F 
C) $150 F 
D) $300 U

Question 12

Ibis Company prepared the following static budget for the month of November, 2015:   If a flexible budget was prepared at a volume of 13,000 units, calculate the operating income at 13,000 units of production.

Accepted Answer

A) $22,000 
B) $17,500 
C) $14,000 
D) $26,000 
A) $22,000 
B) $17,500 
C) $14,000 
D) $26,000

Question 13

If both favorable and unfavorable variances exist, then the variance is determined to be favorable or unfavorable based on which one is the larger amount.

Accepted Answer

A) True 
 B)False

Question 14

Melissa Company has collected the following data for one of its products:   How much is the direct materials efficiency variance?

Accepted Answer

A) $18,000 U 
B) $10,000 F 
C) $10,000 U 
D) $18,000 F 
A) $18,000 U 
B) $10,000 F 
C) $10,000 U 
D) $18,000 F

Question 15

A material cost variance measures the difference in quantities of actual input used and the standard quantity of input allowed for the actual number of units produced.

Accepted Answer

A) True 
 B)False

Question 16

A favorable flexible budget variance in sales revenues suggests a(n):

Accepted Answer

A) increase in selling price. 
B) increase in volume. 
C) decrease in variable costs per unit. 
D) decrease in fixed costs. 
A) increase in selling price. 
B) increase in volume. 
C) decrease in variable costs per unit. 
D) decrease in fixed costs.

Question 17

The sales volume variance is a result of the difference between the actual selling price and the budgeted selling price.

Accepted Answer

A) True 
 B)False

Question 18

An unfavorable sales volume variance in operating income suggests a(n):

Accepted Answer

A) increase in number of actual units sold. 
B) decrease in number of actual units sold when compared to the expected number of units sold. 
C) increase in variable expenses per unit. 
D) decrease in fixed costs. 
A) increase in number of actual units sold. 
B) decrease in number of actual units sold when compared to the expected number of units sold. 
C) increase in variable expenses per unit. 
D) decrease in fixed costs.

Question 19

Faas Marine Stores Company manufactures decorative fittings for luxury yachts that require highly skilled labor, and special metallic materials. Faas uses standard costs to prepare its flexible budget. For the first quarter of 2011, direct material and direct labor standards for one of their popular products were as follows: Materials: 1.5 pounds per unit; $4.00 per pound
Labor: 2.0 hours per unit; $18.00 per hour
During the first quarter, Faas produced 5,000 units of this product. At the end of the quarter, an examination of the materials records showed that the company used 7,000 pounds of materials and the direct materials cost variance was $1,750 U. Which of the following would be a logical explanation for this variance?

Accepted Answer

A) The company used more labor hours than allowed by the standards. 
B) The company paid a higher rate for labor than allowed by the standards. 
C) The company used greater quantity of materials than allowed by the standards. 
D) The company paid a higher price for the materials than allowed by the standards. 
A) The company used more labor hours than allowed by the standards. 
B) The company paid a higher rate for labor than allowed by the standards. 
C) The company used greater quantity of materials than allowed by the standards. 
D) The company paid a higher price for the materials than allowed by the standards.

Question 20

Emerald Marine Stores Company manufactures decorative fittings for luxury yachts that require highly skilled labor, and special metallic materials. Emerald uses standard costs to prepare its flexible budget. For the first quarter of 2015, direct material and direct labor standards for one of their popular products were as follows: Direct materials: 3 pounds per unit; $4 per pound
Direct labor: 4 hours per unit; $20 per hour
Emerald produced 5,000 units during the quarter. At the end of the quarter, an examination of the labor costs records showed that the company used 25,000 direct labor hours and actual total direct labor costs were $375,000. Calculate the direct labor cost variance.

Accepted Answer

A) $125,000 Favorable 
B) $300,000 Favorable 
C) $300,000 Unfavorable 
D) $125,000 Unfavorable 
A) $125,000 Favorable 
B) $300,000 Favorable 
C) $300,000 Unfavorable 
D) $125,000 Unfavorable

Exam 23: Flexible Budgets and Standard Cost Systems

Which of the following will result in an unfavorable direct labor cost variance?

A favorable variance has a debit balance and is a contra-revenue.

A standard is a price, cost, or quantity that is expected under normal conditions.

From the following particulars of Rose Mary Company, calculate the total manufacturing overhead variance for the total production cost flexible budget variance.

Which of the following is one of the reasons why companies use standard costs?

Atlas Inc. uses a standard costing system. Atlas's year ending balances at December 31, 2015 are shown here: Calculate standard net operating income of the company for the year ended.

Sales volume variance is the difference between the:

The difference between the expected results in the flexible budget for the actual units sold and the static budget is called the sales volume variance.

A favorable sales volume variance in variable expenses suggests a(n):

From the following particulars of Rose Mary Company, calculate the total direct materials variance.

Ibis Company prepared the following static budget for the month of November, 2015: If a flexible budget was prepared at a volume of 13,000 units, calculate the operating income at 13,000 units of production.

If both favorable and unfavorable variances exist, then the variance is determined to be favorable or unfavorable based on which one is the larger amount.

Melissa Company has collected the following data for one of its products: How much is the direct materials efficiency variance?

A material cost variance measures the difference in quantities of actual input used and the standard quantity of input allowed for the actual number of units produced.

A favorable flexible budget variance in sales revenues suggests a(n):

The sales volume variance is a result of the difference between the actual selling price and the budgeted selling price.

An unfavorable sales volume variance in operating income suggests a(n):

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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