Question 1

A standard cost system may be used in: (CPA adapted)

Accepted Answer

A)  job-order costing but not process costing. 
B)  either job-order costing or process costing. 
C)  process costing but not job-order costing. 
D)  neither process costing nor job-order costing. 
A)  job-order costing but not process costing. 
B)  either job-order costing or process costing. 
C)  process costing but not job-order costing. 
D)  neither process costing nor job-order costing.

Question 2

The budget (or spending)variance for fixed production costs is the difference between the actual fixed costs and the budgeted fixed costs on the master budget.

Accepted Answer

A) True 
 B)False

Question 3

Horton Company adopted a standard cost system several years ago.The standard costs for the prime costs of its single product are as follows: $$\begin{array} { | l | l | } 
\hline \text { Material: } 8 \text { klograms } @ \$ 5 \text { per kilogram } & \$ 40.00 \
\hline \text { Labor: } 6 \text { hours } @ \$ 8.20 \text { per hour } & \$ 49.20 \
\hline
\end{array}$$
The following operating data were taken from the records for November:$$\begin{array} { | l | l | } 
\hline \text { Units completed } & 5,600 \text { units } \
\hline \text { Budgeted output } & 6,000 \text { units } \
\hline \text { Purchase of materials } & 50,000 \text { kilograms } \
\hline \text { Total actual labor costs } & \$ 300,760 \
\hline \text { Actual labor hours } & 36,500 \text { hours } \
\hline \text { Material efficiency (quantity) variance } & \$ 1,500 \text { unfavorable } \
\hline \text { Total material variance } & \$ 750 \text { unfavorable } \
\hline
\end{array}$$
 Required:
(Be sure to indicate whether the variances are favorable or unfavorable. )
a.What is the direct labor price (rate)variance for November?
b.What is the direct labor efficiency variance for November?
c.What is the actual kilograms of material used in the production process during November?
d.Assume the purchasing department is responsible for the material price variance,what is the actual price paid per kilogram of material during November (assume no increase/decrease in inventory during the month)?

Accepted Answer

a.$1,460 unfavorable
b.$23,780 unfavora

Question 4

Explain the difference between the sales volume variance and the production volume variance.

Accepted Answer

The sales activity or sales volume varia

Question 5

The slope of the flexible budget-line is the:

Accepted Answer

A)  selling price per unit. 
B)  variable cost per unit. 
C)  fixed cost per unit. 
D)  contribution margin per unit. 
A)  selling price per unit. 
B)  variable cost per unit. 
C)  fixed cost per unit. 
D)  contribution margin per unit.

Question 6

Which of the following statements is not true regarding the fixed production cost variance?

Accepted Answer

A)  The fixed production cost variance is the difference between actual and bud­geted costs. 
B)  With respect to this variance,fixed costs are affected by activity levels within a relevant range. 
C)  The flexible budget's fixed costs equal the master budget's fixed costs. 
D)  Fixed costs are treated as period costs for purposes of this variance. 
A)  The fixed production cost variance is the difference between actual and bud­geted costs. 
B)  With respect to this variance,fixed costs are affected by activity levels within a relevant range. 
C)  The flexible budget's fixed costs equal the master budget's fixed costs. 
D)  Fixed costs are treated as period costs for purposes of this variance.

Question 7

Which of the following statements is(are)true regarding the sales activity variance? (A)The sales activity variance is the actual selling price per unit times the difference between the budgeted units and actual units.(B)If the sales activity variance for sales revenue is unfavorable,then the contribution margin sales activity variance will be unfavorable.

Accepted Answer

A)  Only A is true. 
B)  Only B is true. 
C)  Neither A and B is true. 
D)  Both A and B are true. 
A)  Only A is true. 
B)  Only B is true. 
C)  Neither A and B is true. 
D)  Both A and B are true.

Question 8

What is the fixed overhead spending (budget)variance? $$\begin{array} { l | r | } 
\hline \text { Actual machine hours } & 840 \
\hline \text { Standard machine hours allowed } & 900 \
\hline \text { Denominator activity (machine hours) } & 1,000 \
\hline \text { Actual fixed overhead costs } & \$ 3,800 \
\hline \text { Budgeted fixed overhead costs } & \$ 4,000 \
\hline \text { Predetermined overhead rate ( } \$ 1 \text { variable } + \$ 4 & \$ 5 \
\text { fixed) } & \
\hline
\end{array}$$

Accepted Answer

A)  $200. 
B)  $400. 
C)  $300. 
D)  $240. 
A)  $200. 
B)  $400. 
C)  $300. 
D)  $240.

Question 9

The standard cost for a unit of output is the standard price per unit of input times the standard number of inputs per one unit of output.

Accepted Answer

A) True 
 B)False

Question 10

The sales price variance is the difference between the actual sales revenues and the:

Accepted Answer

A)  budgeted selling price multiplied by the budgeted number of units sold. 
B)  budgeted selling price multiplied by the actual number of units sold. 
C)  actual selling price multiplied by the budgeted number of units sold. 
D)  actual selling price multiplied by the actual number of units solD.
The sales price variance is derived from the difference between the actual revenue and budgeted selling price multiplied by the actual number of units solD. 
A)  budgeted selling price multiplied by the budgeted number of units sold. 
B)  budgeted selling price multiplied by the actual number of units sold. 
C)  actual selling price multiplied by the budgeted number of units sold. 
D)  actual selling price multiplied by the actual number of units solD.
The sales price variance is derived from the difference between the actual revenue and budgeted selling price multiplied by the actual number of units solD.

Question 11

The following information summarizes the standard cost for producing one metal tennis racket frame at Spaulding Industries.In addition,the variances for one month's production are given.Assume that all inventory accounts have zero balances at the beginning of the month. $\begin{array}{|l|r|r|}
\hline & \begin{array}{r}
\text { Standard } \
\text { Cost } \
\text { Per Unit }
\end{array} & \begin{array}{r}
\text { Standard } \
\text { Monthy } \
\text { Costs }
\end{array} \
\hline \text { Materials } & \$ 4.00 & \$ 8,400 \
\hline \begin{array}{l}
\text { Direct Labor 2 hrs. } \
\$ 2.60
\end{array} & 5.20 & 10,920 \
\hline \text { Factory Overhead: } & 1.80 & 3,780 \
\hline \text { Variable } &\underline{ 5.00 }& \underline{10,500} \
\hline \text { Fixed } &\underline{ \$ 16.00} &\underline{ \$ 33,600 }\
\hline
\end{array}$   $$\begin{array}{l}

\begin{array} { | l | l | } 
\hline \text { Variances: }\
\hline \text { Material price } & 244.75 \text { unfavorable } \
\hline \text { Material quantity } & 500.00 \text { unfavorable } \
\hline \text { Labor rate } & 520.00 \text { favorable } \
\hline \text { Labor efficiency } & 2,080.00 \text { unfavorable } \
\hline
\end{array}
\end{array}$$What were the actual direct labor hours worked during the month?

Accepted Answer

A)  5,000. 
B)  4,800. 
C)  4,200. 
D)  4,000. 
A)  5,000. 
B)  4,800. 
C)  4,200. 
D)  4,000.

Question 12

Which of the following is not an alternative name for the production volume variance?

Accepted Answer

A)  Capacity variance. 
B)  Idle capacity variance. 
C)  Denominator variance. 
D)  Fixed overhead efficiency variance. 
A)  Capacity variance. 
B)  Idle capacity variance. 
C)  Denominator variance. 
D)  Fixed overhead efficiency variance.

Question 13

The Elon Company had great difficulty in controlling overhead costs.At a recent convention,the president heard about a control device for overhead costs known as a flexible budget and she has hired you to implement this budgeting program.After some effort,you develop the following cost formulas for the company's machining department.These costs are based on a normal operating range of 15,000 to 23,000 machine-hours per month: $$\begin{array} { | l | l | } 
\hline \text { Machine setup } & \$ 0.20 \text { per machine-hour } \
\hline \text { Lubricants } & \$ 1.00 \text { per machine-hour plus } \$ 8,000 \text { per month } \
\hline \text { Utilities } & \$ 0.70 \text { per machine-hour } \
\hline \text { Indirect labor } & \$ 0.60 \text { per machine-hour plus } \$ 20,000 \text { per month } \
\hline \text { Depreciation } & \$ 32,000 \text { per month } \
\hline
\end{array}$$
During March,the first month after your preparation of the above data,the machining department worked 18,000 machine-hours and produced 9,000 units of product.The actual costs of this production were:$$\begin{array} { | l | r | } 
\hline \text { Machine set-up } & \$ 4,800 \
\hline \text { Lubricants } & 24,500 \
\hline \text { Utilities } & 12,000 \
\hline \text { Indirect labor } &\underline{ 32,500} \
\hline \text { Depreciation } & 32,500 \
\hline & \$ 106,300 \
\hline
\end{array}$$ 
 The department had originally been budgeted to work 19,000 machine-hours during March.Required:
Prepare a performance report for the machining department for the month of March including columns for the (a)actual results, (b)flexible budget, (c)flexible budget variance, (d)master budget,and (e)sales activity variance.

Accepted Answer

@#IMG-DLM& \[\begin{array} { | l | r | r | r | r |

Question 14

The condensed flexible budget of the Texas Company for the year is given as $160,000 + $1.25/direct labor hour.The company produces a single product that requires 2.5 direct labor-hours to complete.Assume that the company chooses 100,000 direct labor-hours as the denominator level of activity,but actually worked 96,000 hours during the year producing 37,000 units.Actual overhead costs for the year are:$$\begin{array} { | l | r | } 
\hline \text { Variable costs } & \$ 124,800 \
\hline \text { Fixed costs } & \underline { 158,800} \
\hline \text { Total overhead costs } &  \underline {\$ 283,600 }\
\hline
\end{array}$$
Required:
(Be sure to indicate whether the variances are favorable or unfavorable. )
a.Compute the variable overhead price variance and the variable overhead efficiency variance.b.Compute the fixed overhead spending (budget)variance and the production volume variance.

Accepted Answer

a.Price: $4,800 unfavorable;efficiency:

Question 15

The production volume variance must be computed when a company uses:

Accepted Answer

A)  activity-based costing. 
B)  process costing. 
C)  job-order costing. 
D)  full-absorption costing. 
A)  activity-based costing. 
B)  process costing. 
C)  job-order costing. 
D)  full-absorption costing.

Question 16

Danske Company had total underapplied overhead of $15,000.Additional information is as follows: $$\begin{array} { | l | r | } 
\hline \text { Denominator hours for May } & 15,000 \
\hline \text { Actual hours worked during May } & 14,000 \
\hline \text { Standard hours allowed for May } & 12,000 \
\hline \text { Flexible budget fixed overhead cost } & \$ 45,000 \
\hline \text { Actual fixed overhead costs for May } & \$ 48,000 \
\hline
\end{array}$$
$\begin{array}{|l|l|}
\hline \text { Variable Overheact } & \
\hline \begin{array}{l}
\text { Applied based on standard direct labor hours } \
\text { allowed }
\end{array} & \$ 42,000 \
\hline \begin{array}{l}
\text { Budgeted based on standard direct labor hours }
\end{array} & 38,000 \
\hline \text { Fixed Overhead: } & \
\hline \begin{array}{l}
\text { Applied based on standard direct labor hours } \
\text { allowed }
\end{array} & \$ 30,000 \
\hline \begin{array}{l}
\text { Budgeted based on standard direct labor hours }
\end{array} & 27,000 \
\hline
\end{array}$  What is the production volume variance for May?

Accepted Answer

A)  $2,000. 
B)  $3,000. 
C)  $6,000. 
D)  $9,000. 
A)  $2,000. 
B)  $3,000. 
C)  $6,000. 
D)  $9,000.

Question 17

When using a flexible budget,what will happen to variable costs on a per-unit basis as production increases within the relevant range?

Accepted Answer

A)  Decrease. 
B)  Increase. 
C)  Remain unchanged. 
D)  Fixed costs are not considered in flexible budgeting. 
A)  Decrease. 
B)  Increase. 
C)  Remain unchanged. 
D)  Fixed costs are not considered in flexible budgeting.

Question 18

The purpose of the flexible budget is to:

Accepted Answer

A)  allow management some latitude in meeting goals. 
B)  eliminate cyclical fluctuations in production reports by ignoring variable costs. 
C)  compare actual and budgeted results at virtually any level of production. 
D)  reduce the total time in preparing the annual budget. 
A)  allow management some latitude in meeting goals. 
B)  eliminate cyclical fluctuations in production reports by ignoring variable costs. 
C)  compare actual and budgeted results at virtually any level of production. 
D)  reduce the total time in preparing the annual budget.

Question 19

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours.If the direct labor efficiency variance is unfavorable,the variable overhead efficiency variance will be: (CMA adapted)

Accepted Answer

A)  favorable. 
B)  unfavorable. 
C)  either favorable or unfavorable. 
D)  zero. 
A)  favorable. 
B)  unfavorable. 
C)  either favorable or unfavorable. 
D)  zero.

Question 20

Market Manufacturing Inc.has developed the following standards for one of its products.The materials are not substitutable.T
 $$\begin{array} { | l | r | r | r | } 
\hline \text { Material } 1 & 5 \text { yards } & \$ 6 \text { yard } & \$ 30 \
\hline \text { Material } 2 & 6 \text { pieces } & \$ 5 \text { ipiece } & \$ 30 \
\hline \text { Direct labor } & 3 \text { hours } & \$ 24 \text { hour } & \underline{\$ 72 }\
\hline \text { Total variable cost per unit } & & & \$ 132 \
\hline
\end{array}$$he records for March showed the following actual results:
$$\begin{array} { | l | c | c | } 
\hline \text { Material 1 } & \text { Purchased } & 10,000 \text { yards for } \$ 58,000 \
\hline & \text { Used } & 9,500 \text { yards } \
\hline \text { Material 2 } & \text { Purchased } & 15,000 \text { pieces for } \$ 78,750 \
\hline & \text { Used } & 12,100 \text { pieces } \
\hline \text { Direct labor } & & 5,900 \text { hours for } \$ 147,500 \
\hline \text { Units produced } & & 2,000 \text { units } \
\hline
\end{array}$$ 
 Required:
(1) Calculate the following variances:
 
 (a) Material purchase price variance for material 1.
 (b) Material quantity variance for material 1.
 (c) Material purchase price variance for material 2.
 (d) Material quantity variance for material 2.
 (e) Labor rate variance.
 (f) Labor efficiency variance.
 
 (2) Give at least one possible cause for each of the following variances:
 
 (a) material 2 quantity variance.
 (b) labor rate variance.
 (c) labor efficiency variance.

Accepted Answer

(1)
(a)$2,000 favorable = $58,000 - 10,0

A standard cost system may be used in: (CPA adapted)

The budget (or spending)variance for fixed production costs is the difference between the actual fixed costs and the budgeted fixed costs on the master budget.

Explain the difference between the sales volume variance and the production volume variance.

The slope of the flexible budget-line is the:

Which of the following statements is not true regarding the fixed production cost variance?

What is the fixed overhead spending (budget)variance? Actual machine hours 840 Standard machine hours allowed 900 Denominator activity (machine hours) 1,000 Actual fixed overhead costs \ 3,800 Budgeted fixed overhead costs \ 4,000 Predetermined overhead rate ( \ 1 variable +\ 4 \ 5 fixed)

The standard cost for a unit of output is the standard price per unit of input times the standard number of inputs per one unit of output.

The sales price variance is the difference between the actual sales revenues and the:

Which of the following is not an alternative name for the production volume variance?

The production volume variance must be computed when a company uses:

When using a flexible budget,what will happen to variable costs on a per-unit basis as production increases within the relevant range?

The purpose of the flexible budget is to:

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours.If the direct labor efficiency variance is unfavorable,the variable overhead efficiency variance will be: (CMA adapted)

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters

Exam 16: Fundamentals of Variance Analysis

A standard cost system may be used in: (CPA adapted)

The budget (or spending)variance for fixed production costs is the difference between the actual fixed costs and the budgeted fixed costs on the master budget.

Explain the difference between the sales volume variance and the production volume variance.

The slope of the flexible budget-line is the:

Which of the following statements is not true regarding the fixed production cost variance?

What is the fixed overhead spending (budget)variance? Actual machine hours 840 Standard machine hours allowed 900 Denominator activity (machine hours) 1,000 Actual fixed overhead costs \ 3,800 Budgeted fixed overhead costs \ 4,000 Predetermined overhead rate ( \ 1 variable +\ 4 \ 5 fixed)

The standard cost for a unit of output is the standard price per unit of input times the standard number of inputs per one unit of output.

The sales price variance is the difference between the actual sales revenues and the:

Which of the following is not an alternative name for the production volume variance?

The production volume variance must be computed when a company uses:

When using a flexible budget,what will happen to variable costs on a per-unit basis as production increases within the relevant range?

The purpose of the flexible budget is to:

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours.If the direct labor efficiency variance is unfavorable,the variable overhead efficiency variance will be: (CMA adapted)

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters