Question 1

Who is usually responsible for sales activity variances for income?

Accepted Answer

A)  operating managers in factory 
B)  marketing managers 
C)  research and development function 
D)  product design function 
A)  operating managers in factory 
B)  marketing managers 
C)  research and development function 
D)  product design function

Question 2

The Savage Company makes mugs for which the following standards have been developed:
$\begin{array}{lll}&\text { Standard Inputs Expected }&\text { Standard Price }\
\text { Expected }&\text { For Each Unit of Output }&\text { Per Unit of Input }\\hline
\text { Direct Materials } & 5 \text { ounces } & \$2 \text { per ounce } \
\text { Direct Labor } & 1.5 \text { hours } & \$ 8 \text { per hour }
\end{array}$
Production of 400 mugs was expected in July,but 440 mugs were actually completed.Direct materials purchased and used were 2,100 ounces at an actual price of $2.20 per ounce.Direct labor cost for the month was $5,310,and the actual pay per hour was $9.00.What is the direct material quantity variance for July?

Accepted Answer

A)  $200 Favorable 
B)  $200 Unfavorable 
C)  $220 Favorable 
D)  $220 Unfavorable 
A)  $200 Favorable 
B)  $200 Unfavorable 
C)  $220 Favorable 
D)  $220 Unfavorable

Question 3

Favorable flexible budget variances are always good news.

Accepted Answer

A) True 
 B)False

Question 4

In which of the following scenarios can Eastman Company NOT have favorable flexible budget variance for direct materials?: When direct material price variance is ________,and when direct material quantity variance is ________,

Accepted Answer

A)  favorable; unfavorable 
B)  unfavorable; favorable 
C)  unfavorable; unfavorable 
D)  favorable; favorable 
A)  favorable; unfavorable 
B)  unfavorable; favorable 
C)  unfavorable; unfavorable 
D)  favorable; favorable

Question 5

Sloth Company reports the following information for the last year of operations:
$\begin{array} { l  }
 \text {Actual fixed overhead $ \operatorname{costs}(7,000 $ units) }&\$77,000 \
 \text {Budgeted fixed overhead costs(10,000 units) }&80,000 \
 \text { Planued level of operations(in units)}&10,000 \
 \text {Actual level of operations(in units) }&7,000 \
\end{array}$

What is the fixed overhead spending variance?

Accepted Answer

A)  $3,000 Favorable 
B)  $21,000 Unfavorable 
C)  $24,000 Unfavorable 
D)  $30,000 Favorable 
A)  $3,000 Favorable 
B)  $21,000 Unfavorable 
C)  $24,000 Unfavorable 
D)  $30,000 Favorable

Question 6

The variable overhead efficiency variance depends on whether the quantity of the cost driver used is more or less than ________.

Accepted Answer

A)  the standard amount of output for the expected amount of output 
B)  the quantity allowed for the expected amount of output 
C)  the quantity allowed for the static budget amount of output 
D)  the standard quantity allowed for the actual output 
A)  the standard amount of output for the expected amount of output 
B)  the quantity allowed for the expected amount of output 
C)  the quantity allowed for the static budget amount of output 
D)  the standard quantity allowed for the actual output

Question 7

If the flexible budget variance was $6,000 Favorable and the sales activity variance was $3,000 Favorable,then the static budget variance was ________.

Accepted Answer

A)  $3,000 Favorable 
B)  $3,000 Unfavorable 
C)  $9,000 Favorable 
D)  $9,000 Unfavorable 
A)  $3,000 Favorable 
B)  $3,000 Unfavorable 
C)  $9,000 Favorable 
D)  $9,000 Unfavorable

Question 8

A budget prepared for one expected level of activity is called a ________.

Accepted Answer

A)  flexible budget 
B)  static budget 
C)  variable budget 
D)  rolling budget 
A)  flexible budget 
B)  static budget 
C)  variable budget 
D)  rolling budget

Question 9

Which of the following is NOT an example of efficient performance?

Accepted Answer

A)  Direct labor hours used per unit were less than expected. 
B)  Direct material used per unit was less than expected. 
C)  More outputs were achieved with less inputs than predicted. 
D)  More outputs were produced than expected. 
A)  Direct labor hours used per unit were less than expected. 
B)  Direct material used per unit was less than expected. 
C)  More outputs were achieved with less inputs than predicted. 
D)  More outputs were produced than expected.

Question 10

Variable overhead efficiency variances are unfavorable when actual cost driver activity exceeds the ________.

Accepted Answer

A)  standard cost-driver activity allowed for the actual output 
B)  activity allowed for the expected output 
C)  activity allowed for the planned output 
D)  activity allowed for last period's output 
A)  standard cost-driver activity allowed for the actual output 
B)  activity allowed for the expected output 
C)  activity allowed for the planned output 
D)  activity allowed for last period's output

Question 11

Corrao Company had a static budgeted operating income of $8.6 million.Actual operating income was $6.4 million.The flexible budget operating income at the actual level of output is $7,000,000.What is the static-budget variance of operating income?

Accepted Answer

A)  $1.6 million Favorable 
B)  $1.6 million Unfavorable 
C)  $2.2 million Favorable 
D)  $2.2 million Unfavorable 
A)  $1.6 million Favorable 
B)  $1.6 million Unfavorable 
C)  $2.2 million Favorable 
D)  $2.2 million Unfavorable

Question 12

The Cornell Company makes tables for which the following standards have been developed:
$\begin{array}{lll}&\text { Standard Inputs Expected }&\text { Standard Price }\
\text { Expected }&\text { For Each Unit of Output }&\text { Per Unit of Input }\\hline
\text { Direct Materials } & 10 \text { ounces } & \$4 \text { per ounce } \
\text { Direct Labor } & 3 \text { hours } & \$ 16 \text { per hour }
\end{array}$
Production of 200 tables was expected in July,but 220 tables were actually completed.Direct materials purchased and used were 2,000 pounds at an actual price of $4.40 per pound.Direct labor cost for the month was $10,620,and the actual pay per hour was $18.00.What is the direct material quantity variance for July?

Accepted Answer

A)  $800 Favorable 
B)  $800 Unfavorable 
C)  $880 Favorable 
D)  $880 Unfavorable 
A)  $800 Favorable 
B)  $800 Unfavorable 
C)  $880 Favorable 
D)  $880 Unfavorable

Question 13

A favorable materials price variance may lead to an unfavorable materials usage variance.

Accepted Answer

Direct material:
Price variance: ($14 -

Question 14

Which is NOT a reason for a static budget variance?

Accepted Answer

A)  Actual sales volume was higher than projected sales volume. 
B)  Actual variable costs were higher than static budget variable costs. 
C)  Actual fixed costs were higher than static budget fixed costs. 
D)  Actual sales volume in current period was higher than projected sales volume in last period. 
A)  Actual sales volume was higher than projected sales volume. 
B)  Actual variable costs were higher than static budget variable costs. 
C)  Actual fixed costs were higher than static budget fixed costs. 
D)  Actual sales volume in current period was higher than projected sales volume in last period.

Question 15

Christian Company reported a flexible budget variance for direct materials costs of $10,000 Favorable for the current year.If the direct materials price variance was $2,000 Favorable,what was the direct materials quantity variance?

Accepted Answer

A)  $8,000 Unfavorable 
B)  $8,000 Favorable 
C)  $12,000 Favorable 
D)  $12,000 Unfavorable 
A)  $8,000 Unfavorable 
B)  $8,000 Favorable 
C)  $12,000 Favorable 
D)  $12,000 Unfavorable

Question 16

Ivanovich Company produces 2,500 units.Each unit was expected to require 2 labor hours at a cost of $10 per hour.Total labor cost was $52,250 for 4,750 hours worked.Direct labor is measured in labor hours.What is the flexible budget variance for direct labor?

Accepted Answer

A)  $2,250 Favorable 
B)  $2,250 Unfavorable 
C)  $7,500 Favorable 
D)  $7,500 Unfavorable 
A)  $2,250 Favorable 
B)  $2,250 Unfavorable 
C)  $7,500 Favorable 
D)  $7,500 Unfavorable

Question 17

Sunday Corporation prepared the following performance report for variable overhead costs for the last quarter of the year.Machine hours are the cost driver for all overhead costs.
 $\begin{array}{|l|r|r|r|}\hline&&\text { Static }\
\text { Cost Driver(Machine Hours) }&\text { Actual }&\text { Budget }\
\text { Variable Overhead Costs: }&38,000&38,000&\text { Variances }\
\hline \text { Utilities } & \$ 15,700 & \$ 14,000 & \$ 1,700 \mathrm{U} \
\hline \text { Indirect Labor } & 86,500 & 80,500 & 6,000 \mathrm{U} \
\hline \text { Supplies } & 26,000 & 21,000 & 5,000 \mathrm{U} \
\hline \text { Maintenance } & \underline{44,900} & \underline{42,000} & \underline{2,900 \mathrm{U}} \
\hline \text { Total Variable Overhead Costs } & \$ 173,100 & \$ 157,500 & \$ 15,600 \mathrm{U} \
\hline
\end{array}$ 
The cost formulas used for the variable overhead costs are:
 $$\begin{array} { | l | c | } 
\hline \text { Variable Overhead Costs } & \text { Cost Formula } \
\hline \text { Utilities } & \$ 0.40 \text { per machine hour } \
\text { Indirect Labor } & \$ 2.30 \text { per machine hour } \
\text { Supplies } & \$ 0.60 \text { per machine hour } \
\text { Maintenance } & \$ 1.20 \text { per machine hour } \
\hline
\end{array}$$ 
Your boss called you into the office and reprimanded you for the unfavorable variances.The boss says you are fired unless you can explain why the variances are all unfavorable.
Required:
Calculate the flexible budget variances and the activity-level variances for each cost.

Accepted Answer

The answer of Sunday Corporation prepared the following performance report...

Question 18

Switsdorf Company has the following information available for variable overhead costs.Direct labor hours are the cost driver for variable overhead costs.
$\begin{array}{ll}
\text { Actual variable overhead costs } & \$ 5,120 \
\text { Standard variable overhead costs } & \$ 3.00 \text { per hour } \
\text { Actual direct labor hours } & 2,000 \text { hours } \
\text { Standard direct labor hours per unit } & 3 \text { hours } \
\text { Units produced } & 1,000
\end{array}$
What is the variable overhead efficiency variance?

Accepted Answer

A)  $1,000 Favorable 
B)  $2,000 Unfavorable 
C)  $2,000 Favorable 
D)  $3,000 Favorable 
A)  $1,000 Favorable 
B)  $2,000 Unfavorable 
C)  $2,000 Favorable 
D)  $3,000 Favorable

Question 19

Sanchez Company planned to produce 12,000 units.This level of activity required 20 setups at a cost of $22,000 plus $500 per setup.Actual production was 10,000 units,requiring 15 setups.Actual setup cost was $26,000.At 10,000 units,what is the flexible budget amount for total setup costs?

Accepted Answer

A)  $7,500 
B)  $22,000 
C)  $26,000 
D)  $29,500 
A)  $7,500 
B)  $22,000 
C)  $26,000 
D)  $29,500

Question 20

The following information is presented for the Maybeel Manufacturing Company.
- Direct labor rate standard is $11.55.
- Direct labor efficiency standard is 2.5 hours per unit.
- Budgeted production is 1,200 units.
- Production required 2,910 direct labor hours at a cost of $33,174.
- Actual production is 1,150 units.
What is the direct labor efficiency variance?

Accepted Answer

A)  $404.25 Favorable 
B)  $404.25 Unfavorable 
C)  $1,039.50 Favorable 
D)  $1,039.50 Unfavorable 
A)  $404.25 Favorable 
B)  $404.25 Unfavorable 
C)  $1,039.50 Favorable 
D)  $1,039.50 Unfavorable

Who is usually responsible for sales activity variances for income?

Favorable flexible budget variances are always good news.

In which of the following scenarios can Eastman Company NOT have favorable flexible budget variance for direct materials?: When direct material price variance is ,and when direct material quantity variance is ,

The variable overhead efficiency variance depends on whether the quantity of the cost driver used is more or less than ________.

If the flexible budget variance was $6,000 Favorable and the sales activity variance was $3,000 Favorable,then the static budget variance was ________.

A budget prepared for one expected level of activity is called a ________.

Which of the following is NOT an example of efficient performance?

Variable overhead efficiency variances are unfavorable when actual cost driver activity exceeds the ________.

Corrao Company had a static budgeted operating income of $8.6 million.Actual operating income was $6.4 million.The flexible budget operating income at the actual level of output is $7,000,000.What is the static-budget variance of operating income?

A favorable materials price variance may lead to an unfavorable materials usage variance.

Which is NOT a reason for a static budget variance?

Christian Company reported a flexible budget variance for direct materials costs of $10,000 Favorable for the current year.If the direct materials price variance was $2,000 Favorable,what was the direct materials quantity variance?

Ivanovich Company produces 2,500 units.Each unit was expected to require 2 labor hours at a cost of $10 per hour.Total labor cost was $52,250 for 4,750 hours worked.Direct labor is measured in labor hours.What is the flexible budget variance for direct labor?

Sanchez Company planned to produce 12,000 units.This level of activity required 20 setups at a cost of $22,000 plus $500 per setup.Actual production was 10,000 units,requiring 15 setups.Actual setup cost was $26,000.At 10,000 units,what is the flexible budget amount for total setup costs?

Managerial Accounting,the Business Organization,and Professional Ethics

Introduction to Cost Behavior and Cost Volume Profit Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus on Pricing Decisions

Relevant Information for Decision Making With a Focus on Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Exam 8: Flexible Budgets and Variance Analysis

Who is usually responsible for sales activity variances for income?

Favorable flexible budget variances are always good news.

In which of the following scenarios can Eastman Company NOT have favorable flexible budget variance for direct materials?: When direct material price variance is ________,and when direct material quantity variance is ________,

The variable overhead efficiency variance depends on whether the quantity of the cost driver used is more or less than ________.

If the flexible budget variance was $6,000 Favorable and the sales activity variance was $3,000 Favorable,then the static budget variance was ________.

A budget prepared for one expected level of activity is called a ________.

Which of the following is NOT an example of efficient performance?

Variable overhead efficiency variances are unfavorable when actual cost driver activity exceeds the ________.

Corrao Company had a static budgeted operating income of $8.6 million.Actual operating income was $6.4 million.The flexible budget operating income at the actual level of output is $7,000,000.What is the static-budget variance of operating income?

A favorable materials price variance may lead to an unfavorable materials usage variance.

Which is NOT a reason for a static budget variance?

Christian Company reported a flexible budget variance for direct materials costs of $10,000 Favorable for the current year.If the direct materials price variance was $2,000 Favorable,what was the direct materials quantity variance?

Ivanovich Company produces 2,500 units.Each unit was expected to require 2 labor hours at a cost of $10 per hour.Total labor cost was $52,250 for 4,750 hours worked.Direct labor is measured in labor hours.What is the flexible budget variance for direct labor?

Sanchez Company planned to produce 12,000 units.This level of activity required 20 setups at a cost of $22,000 plus $500 per setup.Actual production was 10,000 units,requiring 15 setups.Actual setup cost was $26,000.At 10,000 units,what is the flexible budget amount for total setup costs?

Managerial Accounting,the Business Organization,and Professional Ethics

Introduction to Cost Behavior and Cost Volume Profit Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus on Pricing Decisions

Relevant Information for Decision Making With a Focus on Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

In which of the following scenarios can Eastman Company NOT have favorable flexible budget variance for direct materials?: When direct material price variance is ,and when direct material quantity variance is ,