Question 1

Which of the following amounts of a flexible budget remains constant,within the specified relevant range,when the sales volume changes?

Accepted Answer

A)  total contribution margin 
B)  total fixed costs 
C)  total variable costs 
D)  total sales revenue 
A)  total contribution margin 
B)  total fixed costs 
C)  total variable costs 
D)  total sales revenue

Question 2

Marlin Manufacturing uses a standard cost system.Data on standard costs and actual costs are as follows:
 $$\begin{array} { l l l } 
\text { Direct materials: } & \text { Standard } & \text { Artual } \
\text { Direct materials units per unit of output } &2 . 0 & 3 . 3  \
\text { Cost per unit of direct materials } & \$ 5.00 & \$ 4.80 \
\text { Direct materials cost per unit } & \$ 10.00 & \$ 16.00 \
\text { Number of units } &3 , 0 0 0 & 3 , 0 0 0\
\text { Direct materials cost } & \$ 30,000 & \$ 48,000
\end{array}$$ $\begin{array}{lll}
\text { Direct labor: } & \text { Standard } & \text { Actual } \
\text { Hours per unit } & 0.5 & 0.4 \
\text { Cost per hour } & \$ 18.00 & \$ 20.00 \
\text { Labor cost per unit } & \$ 9.00 & \$ 8.00 \
\text { Number of units } & 3,000 & 3,000 \
\text { Direct laborcost } & \$ 27.000 & \$ 24.00
\end{array}$ $\begin{array}{lll}
\text { Variable overhead } & \text { Standard } & \text { Actual } \
\text { Hours per unit } & 0.5 & 0.4 \
\text { Cost per hour } & \$ 30.00 & \$ 29.00 \
\text { Variable overhead cost per unit } & \$ 15.00 & \$ 11.60 \
\text { Number of units } & 3,000 & 3,000 \
\text { Variable overhead cost } & \$ 45,000 & \$ 34,800
\end{array}$ *allocated based on direct labor hours
 $\begin{array}{lll}
\text { Fixed overhead } & \text { Standard } & \text { Actual } \
\text { Hours per unit } & 0.5 & 0.4 \
\text { Cost per hour } & \$ 10.00 & \$ 9.00 \
\text { Fixed overhead cost per unit } & \$ 5.00 & \$ 3.60 \
\text { Number of units } & 3,000 & 3,000 \
\text { Fixed overhead cost } & \$ 15,000 & \$ 10,800
\end{array}$ *allocated on the basis of direct labor hours
Give the journal entry to transfer the cost of units from Work-in-Process Inventory to Finished Goods Inventory.Omit explanation.

Accepted Answer

\[\begin{array} { | c | r | r

Question 3

The static budget is used to compute flexible budget variances as well as cost and efficiency variances for direct materials and direct labor.

Accepted Answer

A) True 
 B)False

Question 4

What does the fixed overhead volume variance measure?

Accepted Answer

The fixed overhead volume variance measu

Question 5

The following information relates to Turpin Manufacturing's overhead costs for the month:
 $$\begin{array} { | l | l | } 
\hline \text { Static budget variable overhead } & \$ 14,200 \
\hline \text { Static budget fixed overhead } & \$ 5,600 \
\hline \text { Static budget direct labor hours } & 1,000 \text { hours } \
\hline \text { Static budget number of units } & 5,000 \text { units } \
\hline
\end{array}$$ Turpin allocates manufacturing overhead to production based on standard direct labor hours.
Turpin reported the following actual results for last month: actual variable overhead,$14,500; actual fixed overhead,$5,400; actual production of 4,700 units at 0.22 direct labor hours per unit.The standard direct labor time is 0.20 direct labor hours per unit.
Compute the fixed overhead cost variance.

Accepted Answer

cost variance @#LAT-DLM& Actual @#LAT-DLM& Budgete

Question 6

Which of the following is NOT a benefit of a static budget performance report?

Accepted Answer

A)  It is useful in evaluating a manager's effectiveness when actual sales approximate budgeted amounts. 
B)  It is useful in evaluating a manager's control over fixed costs. 
C)  It is useful in evaluating a manager's control over variable costs. 
D)  It is useful in evaluating a manager's control over fixed selling and administrative expenses. 
A)  It is useful in evaluating a manager's effectiveness when actual sales approximate budgeted amounts. 
B)  It is useful in evaluating a manager's control over fixed costs. 
C)  It is useful in evaluating a manager's control over variable costs. 
D)  It is useful in evaluating a manager's control over fixed selling and administrative expenses.

Question 7

The total product cost flexible budget variance is obtained by adding direct labor efficiency variance and fixed overhead volume variance.

Accepted Answer

A) True 
 B)False

Question 8

Marshall Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Marshall had a favorable efficiency 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 9

A static budget is prepared for only one level of sales volume.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Because it is a cost variance,the fixed overhead volume variance explains why fixed overhead is underallocated or overallocated.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  increase in actual sales price per unit as compared to budgeted sales price 
B)  increase in number of actual units sold when compared to the expected number of units sold 
C)  increase in actual variable cost per unit as compared to expected variable cost per unit 
D)  decrease in actual fixed costs 
A)  increase in actual sales price per unit as compared to budgeted sales price 
B)  increase in number of actual units sold when compared to the expected number of units sold 
C)  increase in actual variable cost per unit as compared to expected variable cost per unit 
D)  decrease in actual fixed costs

Question 13

The fixed overhead cost variance measures how well the business ________.

Accepted Answer

A)  keeps costs of variable overhead inputs within standard 
B)  uses its variable overhead inputs 
C)  keeps fixed overhead within standard 
D)  explains why fixed overhead is under allocated or overallocate 
A)  keeps costs of variable overhead inputs within standard 
B)  uses its variable overhead inputs 
C)  keeps fixed overhead within standard 
D)  explains why fixed overhead is under allocated or overallocate

Question 14

When using management by exception,managers investigate only those variances that are unfavorable.

Accepted Answer

A) True 
 B)False

Question 15

The management of Watchdog Security Systems has calculated the following variances: $$\begin{array} { | l | r | } 
\hline \text { Direct materials cost variance } & \$ 8000 \mathrm { U } \
\hline \text { Direct materials efficiency variance } & 40,000 \mathrm {~F} \
\hline \text { Direct labor cost variance } & 15,000 \mathrm {~F} \
\hline \text { Direct labor efficiency variance } & 13,500 \mathrm { U } \
\hline \text { Total variable overhead variance } & 8500 \mathrm {~F} \
\hline \text { Total fixed overhead variance } & 3500 \mathrm {~F} \
\hline
\end{array}$$ What is the total direct labor variance of the company?

Accepted Answer

A)  $15,000 F 
B)  $12,000 F 
C)  $28,500 F 
D)  $1500 F 
A)  $15,000 F 
B)  $12,000 F 
C)  $28,500 F 
D)  $1500 F

Question 16

Based on the following,what is the total product cost flexible budget variance?

Accepted Answer

A)  $925 F 
B)  $450 U 
C)  $725 F 
D)  $725 U 
A)  $925 F 
B)  $450 U 
C)  $725 F 
D)  $725 U

Question 17

When evaluating variances,exceptions can be expressed as a percentage of a budgeted amount or a dollar amount.

Accepted Answer

A) True 
 B)False

Question 18

Aunt Emily's Food Products is famous for its frosted fruit cake.The main ingredient of the cake is dried fruit,which Aunt Emily's purchases by the pound.In addition,the production requires a certain amount of direct labor.Aunt Emily's uses a standard cost system,and at the end of the first quarter,there was a favorable direct materials cost variance.Which of the following is a logical explanation for that variance?

Accepted Answer

A)  The production manager negotiated a lower wage package for production staff, bringing direct labor costs down. 
B)  The factory lost two experienced workers at the beginning of the quarter, and their replacements worked at a much slower pace during their training period. 
C)  The purchasing manager was able to secure a volume discount on dried fruit, purchasing the fruit for less than the amount set by standard. 
D)  The production staff changed the work flow process so that there was less wastage of direct materials during production. 
A)  The production manager negotiated a lower wage package for production staff, bringing direct labor costs down. 
B)  The factory lost two experienced workers at the beginning of the quarter, and their replacements worked at a much slower pace during their training period. 
C)  The purchasing manager was able to secure a volume discount on dried fruit, purchasing the fruit for less than the amount set by standard. 
D)  The production staff changed the work flow process so that there was less wastage of direct materials during production.

Question 19

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

Accepted Answer

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

Question 20

Cake Lady Bakery is famous for its pound cakes.The main ingredient of the cakes is flour,which Cake Lady purchases by the pound.In addition,the production requires a certain amount of direct labor.Cake Lady uses a standard cost system,and at the end of the first quarter,there was an unfavorable direct labor cost variance.Which of the following is a logical explanation for that variance?

Accepted Answer

A)  The cost of workers' medical insurance plans jumped up dramatically during the quarter. 
B)  The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of direct materials during their training period. 
C)  The purchasing manager was able to secure a volume discount on flour, purchasing the flour for less than the amount set by standard. 
D)  The production staff changed the work flow process so that production required fewer direct labor hours. 
A)  The cost of workers' medical insurance plans jumped up dramatically during the quarter. 
B)  The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of direct materials during their training period. 
C)  The purchasing manager was able to secure a volume discount on flour, purchasing the flour for less than the amount set by standard. 
D)  The production staff changed the work flow process so that production required fewer direct labor hours.

Exam 23: Flexible Budgets and Standard Cost Systems

Which of the following amounts of a flexible budget remains constant,within the specified relevant range,when the sales volume changes?

The static budget is used to compute flexible budget variances as well as cost and efficiency variances for direct materials and direct labor.

What does the fixed overhead volume variance measure?

Which of the following is NOT a benefit of a static budget performance report?

The total product cost flexible budget variance is obtained by adding direct labor efficiency variance and fixed overhead volume variance.

Marshall Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Marshall had a favorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

A static budget is prepared for only one level of sales volume.

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

Because it is a cost variance,the fixed overhead volume variance explains why fixed overhead is underallocated or overallocated.

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

The fixed overhead cost variance measures how well the business ________.

When using management by exception,managers investigate only those variances that are unfavorable.

Based on the following,what is the total product cost flexible budget variance?

When evaluating variances,exceptions can be expressed as a percentage of a budgeted amount or a dollar amount.

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

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The Adjusting Process

Completing the Accounting Cycle

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Receivables

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The Statement of Cash Flows

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Introduction to Managerial Accounting

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Master Budgets

Cost Allocation and Responsibility Accounting

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