Question 1

For critical items such as product defects,a small variance may prompt investigation.

Accepted Answer

A) True 
 B)False

Question 2

Possible operational causes of an unfavorable direct materials efficiency variance include poor design of products or processes.

Accepted Answer

A) True 
 B)False

Question 3

Answer the following questions using the information below:
Lander Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and used a budgeted selling price of $18 per unit.
 $$\begin{array} { l r r } &\text { Actual } &\text { Budgeted }\

\text { Units sold }& 41,000 \text { units } & 40,000 \text { units } \
\text { Variable costs }  & \$ 164,000 & \$ 156,000 \
\text { Fixed costs }&\$ 46,000 & \$ 48,000
\end{array}$$
-What is the static-budget variance of operating income?

Accepted Answer

A)  $10,000 favorable 
B)  $10,000 unfavorable 
C)  $12,000 favorable 
D)  $12,000 unfavorable 
A)  $10,000 favorable 
B)  $10,000 unfavorable 
C)  $12,000 favorable 
D)  $12,000 unfavorable

Question 4

Answer the following questions using the information below:
Berman's Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
 $\begin{array}{lrrr} &\text { Flexible }&\text { Variances }\
& \text { Budget } & \text { Price } & \text { Efficiency } \
\text { Material A } & \$ 40,000 & \$ 1,000 \mathrm{~F} & \$ 3,000 \mathrm{U} \
\text { Material B } & 60,000 & 500 \mathrm{U} & 1,500 \mathrm{~F} \
\text { Direct manufacturing labor } & 80,000 & 500 \mathrm{U} & 2,500 \mathrm{~F}
\end{array}$
-The actual amount spent for direct manufacturing labor was ________.

Accepted Answer

A)  $80,000 
B)  $83,000 
C)  $82,000 
D)  $78,000 
A)  $80,000 
B)  $83,000 
C)  $82,000 
D)  $78,000

Question 5

A standard price is the minimum price a company will have to pay for a unit of input.

Accepted Answer

A) True 
 B)False

Question 6

Answer the following questions using the information below:
These questions refer to flexible-budget variance formulas with the following descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity.
-The flexible-budget variance for materials is $5,000 (U).The sales-volume variance is $13,000 (U).The price variance for material is $31000 (F).The efficiency variance for direct manufacturing labor is $7,000 (F).Calculate the efficiency variance for materials.

Accepted Answer

A)  $36,000 favorable 
B)  $13,000 unfavorable 
C)  $6,000 favorable 
D)  $36,000 unfavorable 
A)  $36,000 favorable 
B)  $13,000 unfavorable 
C)  $6,000 favorable 
D)  $36,000 unfavorable

Question 7

Demizio Valley Orchards, Inc. (DVO), developed standard costs for direct material and direct labor. In 2015, DVO estimated the following standard costs for one of their most well loved products, the DVO classic Grandma's large apple pie which had a brown sugar coating on the top of the crust as well as including cranberry and mince ingredients in addition to the apples.
 $\begin{array}{lll}&\text { Budgeted quantity  } &\text {Budgeted price }\
\text { Direct materials } & 2.0 \text { pounds } & \$ 6.25 \text { per pound } \
\text { Direct labor } & 0.20 \text { hours } & \$ 13.00 \text { per hour }
\end{array}$ During September, DVO produced and sold 1,100 pies using 2,300 pounds of direct materials at an average cost per pound of $6.00 and 200 direct labor hours at an average wage of $13.25 per hour.
-The direct material efficiency variance during September is ________.

Accepted Answer

A)  $575 favorable 
B)  $575 unfavorable 
C)  $625 favorable 
D)  $625 unfavorable 
A)  $575 favorable 
B)  $575 unfavorable 
C)  $625 favorable 
D)  $625 unfavorable

Question 8

Give at least three good reasons why a favorable price variance for direct materials might be reported.

Accepted Answer

Any three of the following:
a.The purcha

Question 9

Wilson's Winter Woolens manufactures jackets and other wool clothing.A certain designed ski parka requires the following:
 Direct materials standard $\quad$ 2 square yards at $\$ 13.50$ per yard
Direct manufacturing labor standard $\quad 1.5$ hours at $\$ 20.00$ per hour During the third quarter,the company made 1,500 parkas and used 3,150 square yards of fabric costing $39,375.Direct labor totaled 2,100 hours for $45,150.
Required:
a.Compute the direct materials price and efficiency variances for the quarter.
b.Compute the direct manufacturing labor price and efficiency variances for the quarter.

Accepted Answer

The answer of Wilson's Winter Woolens manufactures jackets and other...

Question 10

Explain the difference between a static budget and a flexible budget.Explain what is meant by a static budget variance and a flexible budget variance.

Accepted Answer

A static budget is one based on the leve

Question 11

The only difference between the static budget and flexible budget is that the static budget is prepared using planned output.

Accepted Answer

A) True 
 B)False

Question 12

A variance within an acceptable range is considered to be an "in-control occurrence" and calls for no investigation or action by managers.

Accepted Answer

A) True 
 B)False

Question 13

The textbook discusses three levels of variances,Level 0,Level 1,Level 2,and Level 3.Briefly explain the meaning of each of those levels and provide an example of a variance at each of those levels.

Accepted Answer

A Level 0 variance is simply the differe

Question 14

A favorable variance can be automatically interpreted as "good news."

Accepted Answer

A) True 
 B)False

Question 15

A price variance reflects the difference between ________.

Accepted Answer

A)  a standard input price in a company and its competitor 
B)  an actual input price used last period and current period 
C)  an actual input price used in a company and its competitor 
D)  an actual input price and a budgeted input price 
A)  a standard input price in a company and its competitor 
B)  an actual input price used last period and current period 
C)  an actual input price used in a company and its competitor 
D)  an actual input price and a budgeted input price

Question 16

It is best to rely totally on financial performance measures rather than using a combination of financial and nonfinancial performance measures.

Accepted Answer

A) True 
 B)False

Question 17

Answer the following questions using the information below:
The actual information pertains to the month of September. As a part of the budgeting process, Twilith Fencing Company developed the following static budget for September. Twilith is in the process of preparing the flexible budget and understanding the results.
 $\begin{array}{lrrr}&\begin{array}{r}
\text { Actual } \
\text { Results }
\end{array} & \begin{array}{r}
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array}{r}
\text { static } \
\text { Budget }
\end{array}\
\text { Sales volume (in units) } & 12,000 & & 15,000 \
\text { Sales revenues } & \$ 600,000 & \$ & \$ 750,000 \
\text { Variable costs } & 307,200 & \$ & 360,000\
\text { Contribution margin }&292,800&\$&7390,000\\text { Fixed costs } & 274,800& \$ & 270,000 \
\text { Operating profit } & \$ 18,000 & \$ & \$ 120,000

\end{array}$
-The flexible budget will report ________ for variable costs.

Accepted Answer

A)  $245,760 
B)  $360,000 
C)  $288,000 
D)  $384,000 
A)  $245,760 
B)  $360,000 
C)  $288,000 
D)  $384,000

Question 18

Direct manufacturing labor efficiency variance is likely to be unfavorable if underskilled workers are put on a job.

Accepted Answer

A) True 
 B)False

Question 19

Cost reductions can be the result of ________.

Accepted Answer

A)  price increments 
B)  congestion due to scheduling a large number of rush orders 
C)  producing products faster and more efficiently 
D)  inappropriate assignment of labor or machines to specific jobs 
A)  price increments 
B)  congestion due to scheduling a large number of rush orders 
C)  producing products faster and more efficiently 
D)  inappropriate assignment of labor or machines to specific jobs

Question 20

An unfavorable sales-volume variance could result from ________.

Accepted Answer

A)  an inappropriate assignment of labor or machines to specific jobs 
B)  competitors taking market share 
C)  an inefficiency of a purchasing manager in bargaining with suppliers 
D)  a decrease in actual selling price compared to anticipated selling price 
A)  an inappropriate assignment of labor or machines to specific jobs 
B)  competitors taking market share 
C)  an inefficiency of a purchasing manager in bargaining with suppliers 
D)  a decrease in actual selling price compared to anticipated selling price

For critical items such as product defects,a small variance may prompt investigation.

Possible operational causes of an unfavorable direct materials efficiency variance include poor design of products or processes.

A standard price is the minimum price a company will have to pay for a unit of input.

Give at least three good reasons why a favorable price variance for direct materials might be reported.

Explain the difference between a static budget and a flexible budget.Explain what is meant by a static budget variance and a flexible budget variance.

The only difference between the static budget and flexible budget is that the static budget is prepared using planned output.

A variance within an acceptable range is considered to be an "in-control occurrence" and calls for no investigation or action by managers.

The textbook discusses three levels of variances,Level 0,Level 1,Level 2,and Level 3.Briefly explain the meaning of each of those levels and provide an example of a variance at each of those levels.

A favorable variance can be automatically interpreted as "good news."

A price variance reflects the difference between ________.

It is best to rely totally on financial performance measures rather than using a combination of financial and nonfinancial performance measures.

Direct manufacturing labor efficiency variance is likely to be unfavorable if underskilled workers are put on a job.

Cost reductions can be the result of ________.

An unfavorable sales-volume variance could result from ________.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 7: Flexible Budgets, direct-Cost Variances, and Management Control

For critical items such as product defects,a small variance may prompt investigation.

Possible operational causes of an unfavorable direct materials efficiency variance include poor design of products or processes.

A standard price is the minimum price a company will have to pay for a unit of input.

Give at least three good reasons why a favorable price variance for direct materials might be reported.

Explain the difference between a static budget and a flexible budget.Explain what is meant by a static budget variance and a flexible budget variance.

The only difference between the static budget and flexible budget is that the static budget is prepared using planned output.

A variance within an acceptable range is considered to be an "in-control occurrence" and calls for no investigation or action by managers.

The textbook discusses three levels of variances,Level 0,Level 1,Level 2,and Level 3.Briefly explain the meaning of each of those levels and provide an example of a variance at each of those levels.

A favorable variance can be automatically interpreted as "good news."

A price variance reflects the difference between ________.

It is best to rely totally on financial performance measures rather than using a combination of financial and nonfinancial performance measures.

Direct manufacturing labor efficiency variance is likely to be unfavorable if underskilled workers are put on a job.

Cost reductions can be the result of ________.

An unfavorable sales-volume variance could result from ________.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters