Question 1

A flexible budget summarizes revenues and costs for various levels of sales volume within a relevant range.

Accepted Answer

A) True 
 B)False

Question 2

Define variance.What is the difference between a favorable and an unfavorable variance?

Accepted Answer

A variance is the difference between an

Question 3

In a standard costing system,each input of direct materials,direct labor,and manufacturing overhead has a cost standard and an efficiency standard.

Accepted Answer

A) True 
 B)False

Question 4

An efficiency variance measures how well a company keeps unit costs of material and labor inputs within standards.

Accepted Answer

A) True 
 B)False

Question 5

Mermaid Outfitters projected sales of 76,000 units for the year at a unit sales price of $15.00.Actual sales for the year were 73,000 units at $15.00 per unit.Variable costs were budgeted at $4.25 per unit,and the actual variable cost was $4.80 per unit.Budgeted fixed costs totaled $377,000,while actual fixed costs amounted to $400,000.What is the sales volume variance for operating income?

Accepted Answer

A)  $30,900 unfavorable 
B)  $32,250 unfavorable 
C)  $32,250 favorable 
D)  $63,150 unfavorable 
A)  $30,900 unfavorable 
B)  $32,250 unfavorable 
C)  $32,250 favorable 
D)  $63,150 unfavorable

Question 6

The Carolina Rubber Products Company completed the flexible budget analysis for the second quarter,which is given below.   Which of the following would be a correct analysis of the sales volume variance for sales revenue?

Accepted Answer

A)  increase in sales price per unit 
B)  increase in sales volume 
C)  increase in variable cost per unit 
D)  increase in fixed costs 
A)  increase in sales price per unit 
B)  increase in sales volume 
C)  increase in variable cost per unit 
D)  increase in fixed costs

Question 7

Horizon Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Horizon uses standard costs to prepare its flexible budget.For the first quarter of the year,direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 4 pounds per unit; $3 per pound
Direct labor: 5 hours per unit; $15 per hour
Horizon produced 5,000 units during the quarter.At the end of the quarter,an examination of the labor costs records showed that the direct labor cost variance was $5,000 F.Which of the following is a logical explanation for this variance?

Accepted Answer

A)  The company used fewer labor hours than allowed by the standards. 
B)  The company paid a lower cost per hour for labor than allowed by the standards. 
C)  The company used a lower quantity of direct materials than allowed by the standards. 
D)  The company paid a lower cost for the direct materials than allowed by the standards. 
A)  The company used fewer labor hours than allowed by the standards. 
B)  The company paid a lower cost per hour for labor than allowed by the standards. 
C)  The company used a lower quantity of direct materials than allowed by the standards. 
D)  The company paid a lower cost for the direct materials than allowed by the standards.

Question 8

The Maryland Cheese Company completed the flexible budget analysis for the second quarter,which is given below.   Which of the following statements would be a correct analysis of the flexible budget variance for fixed expenses?

Accepted Answer

A)  decrease in sales price per unit 
B)  increase in variable cost per unit 
C)  increase in sales volume 
D)  increase in fixed costs 
A)  decrease in sales price per unit 
B)  increase in variable cost per unit 
C)  increase in sales volume 
D)  increase in fixed costs

Question 9

A direct labor efficiency variance is favorable if laborers actually work more hours than the flexible budget calls for to produce the actual quantity of output .

Accepted Answer

A) True 
 B)False

Question 10

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 cost per hour exceeds the standard direct labor cost per hour 
D)  when the actual direct labor cost per hour is less than the standard direct labor cost per hour 
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 cost per hour exceeds the standard direct labor cost per hour 
D)  when the actual direct labor cost per hour is less than the standard direct labor cost per hour

Question 11

Clement Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Clement uses standard costs to prepare its flexible budget.For the first quarter of the year,direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 4 pounds per unit; $3 per pound
Direct labor: 5 hours per unit; $17 per hour
Clement produced 4,000 units during the quarter.At the end of the quarter,an examination of the labor costs records showed that the company used 22,000 direct labor hours and actual total direct labor costs were $390,000.The direct labor efficiency variance was $34,000 U.Which of the following is 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 cost per hour for labor than allowed by the standards. 
C)  The company used a higher quantity of direct materials than allowed by the standards. 
D)  The company paid a higher cost for the direct materials than allowed by the standards. 
A)  The company used more labor hours than allowed by the standards. 
B)  The company paid a higher cost per hour for labor than allowed by the standards. 
C)  The company used a higher quantity of direct materials than allowed by the standards. 
D)  The company paid a higher cost for the direct materials than allowed by the standards.

Question 12

Accurate Tax Returns budgets two direct labor hours for every tax return that it prepares,at a standard cost of $34 an hour.During the most recent year,540 returns were completed with the labor cost totaling $26,000.The actual labor cost was $48.15 per hour during that period.The actual number of labor hours was 1,000.What is the direct labor cost variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

Accepted Answer

A)  $7,640 F 
B)  $34,000 U 
C)  $14,150 U 
D)  $34,000 F 
A)  $7,640 F 
B)  $34,000 U 
C)  $14,150 U 
D)  $34,000 F

Question 13

The sales volume variance is the difference between the ________.

Accepted Answer

A)  actual results and the expected results in the flexible budget for the actual units sold 
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 sales price 
D)  flexible budget and static budget due to differences in fixed costs 
A)  actual results and the expected results in the flexible budget for the actual units sold 
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 sales price 
D)  flexible budget and static budget due to differences in fixed costs

Question 14

Cavalaris Products uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Cavalaris had an unfavorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

Accepted Answer

A)  The actual number of direct labor hours was lower than the budgeted hours. 
B)  The actual variable overhead costs were higher than the budgeted costs. 
C)  The actual variable overhead costs were lower than the budgeted costs. 
D)  The actual number of direct labor hours was higher than the budgeted hours. 
A)  The actual number of direct labor hours was lower than the budgeted hours. 
B)  The actual variable overhead costs were higher than the budgeted costs. 
C)  The actual variable overhead costs were lower than the budgeted costs. 
D)  The actual number of direct labor hours was higher than the budgeted hours.

Question 15

Speedy Bikes Couriers Company prepared the following static budget for the year: $$\begin{array} { | l | c | r | } 
\hline \text { Static Budget } & & \
\hline \text { Units/Volume } & &6,000 \
\hline  & \text { Per Unit } & \
\hline\text { Sales Revenue } & \$ 7.00 & \$ 42,000 \
\hline \text { Variable Costs } & 1.50 & \underline {9,000 } \
\hline \text { Contribution Margin } & &33,000 \
\hline \text { Fixed Costs } & & \underline { 3,000 } \
\hline\text { Operating Income/(Loss) } & & \$ 30, 000 \
\hline 
\end{array}$$ If a flexible budget is prepared at a volume of 8,700,calculate the amount of operating income.The production level is within the relevant range.

Accepted Answer

A)  $30,000 
B)  $13,050 
C)  $44,850 
D)  $3,000 
A)  $30,000 
B)  $13,050 
C)  $44,850 
D)  $3,000

Question 16

Only unfavorable variances should be investigated,if substantial,to determine their causes.

Accepted Answer

A) True 
 B)False

Question 17

A favorable flexible budget variance in sales revenue suggests a(n)________.

Accepted Answer

A)  increase in sales price 
B)  increase in volume 
C)  decrease in variable cost per unit 
D)  decrease in fixed costs 
A)  increase in sales price 
B)  increase in volume 
C)  decrease in variable cost per unit 
D)  decrease in fixed costs

Question 18

Ibis Paper Company prepared the following static budget for November: $$\begin{array} { | l | c | r | } 
\hline \text { Static Budget } & & \
\hline \text { Units/Volume } & & 12,000 \
\hline& \text { Per Unit }\
\hline \text { Sales Revenue }  & \$ 20.00 & \$ 240,000 \
\hline \text { Variable Costs } &  8.00 & \underline { 96,000 }\
\hline \text { Contribution Margin } &&144,000 \
\hline \text { Fixed Costs } & & 13,500 \
\hline \text { Operating Income/(Loss) } & & \underline { \$130,500 } \
\hline
\end{array}$$ If a flexible budget is prepared at a volume of 13,500 units,calculate the operating income at 13,500 units of production.The production level is within the relevant range.

Accepted Answer

A)  $162,000 
B)  $144,000 
C)  $130,500 
D)  $148,500 
A)  $162,000 
B)  $144,000 
C)  $130,500 
D)  $148,500

Question 19

On a standard cost income statement,the variances with debit balances are shown in parentheses because they are contra expenses and therefore decrease the expense Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is an example of a direct materials efficiency standard?

Accepted Answer

A)  $40 per direct labor hour 
B)  50 square feet per unit 
C)  $0.95 per square foot 
D)  6 direct labor hours per unit 
A)  $40 per direct labor hour 
B)  50 square feet per unit 
C)  $0.95 per square foot 
D)  6 direct labor hours per unit

A flexible budget summarizes revenues and costs for various levels of sales volume within a relevant range.

Define variance.What is the difference between a favorable and an unfavorable variance?

In a standard costing system,each input of direct materials,direct labor,and manufacturing overhead has a cost standard and an efficiency standard.

An efficiency variance measures how well a company keeps unit costs of material and labor inputs within standards.

The Carolina Rubber Products Company completed the flexible budget analysis for the second quarter,which is given below. Which of the following would be a correct analysis of the sales volume variance for sales revenue?

The Maryland Cheese Company completed the flexible budget analysis for the second quarter,which is given below. Which of the following statements would be a correct analysis of the flexible budget variance for fixed expenses?

A direct labor efficiency variance is favorable if laborers actually work more hours than the flexible budget calls for to produce the actual quantity of output .

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

The sales volume variance is the difference between the ________.

Cavalaris Products uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Cavalaris had an unfavorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

Only unfavorable variances should be investigated,if substantial,to determine their causes.

A favorable flexible budget variance in sales revenue suggests a(n)________.

On a standard cost income statement,the variances with debit balances are shown in parentheses because they are contra expenses and therefore decrease the expense Cost of Goods Sold.

Which of the following is an example of a direct materials efficiency standard?

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

Filters

Exam 23: Flexible Budgets and Standard Cost Systems

A flexible budget summarizes revenues and costs for various levels of sales volume within a relevant range.

Define variance.What is the difference between a favorable and an unfavorable variance?

In a standard costing system,each input of direct materials,direct labor,and manufacturing overhead has a cost standard and an efficiency standard.

An efficiency variance measures how well a company keeps unit costs of material and labor inputs within standards.

The Carolina Rubber Products Company completed the flexible budget analysis for the second quarter,which is given below. Which of the following would be a correct analysis of the sales volume variance for sales revenue?

The Maryland Cheese Company completed the flexible budget analysis for the second quarter,which is given below. Which of the following statements would be a correct analysis of the flexible budget variance for fixed expenses?

A direct labor efficiency variance is favorable if laborers actually work more hours than the flexible budget calls for to produce the actual quantity of output .

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

The sales volume variance is the difference between the ________.

Cavalaris Products uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Cavalaris had an unfavorable cost variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

Only unfavorable variances should be investigated,if substantial,to determine their causes.

A favorable flexible budget variance in sales revenue suggests a(n)________.

On a standard cost income statement,the variances with debit balances are shown in parentheses because they are contra expenses and therefore decrease the expense Cost of Goods Sold.

Which of the following is an example of a direct materials efficiency standard?

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

Filters