Question 1

A percentage of products started and completed without requiring any rework is an example of nonfinancial performance measure.

Accepted Answer

A) True 
 B)False

Question 2

For any actual level of output, the efficiency variance is the difference between actual quantity of input used and the budgeted quantity of input allowed to produce actual output, multiplied by the budgeted price.

Accepted Answer

A) True 
 B)False

Question 3

The sales-volume variance is sometimes due to ________.

Accepted Answer

A)  the difference between selling price and budgeted selling price 
B)  quality problems leading to customer dissatisfaction 
C)  unexpected increase in manufacturing labor time 
D)  unexpected increase in the use of quantities of inputs of raw material

Question 4

Waddell Productions makes separate journal entries for all cost accounting-related activities. It uses a standard cost system for all manufacturing items. For the month of June, the following activities have taken place:
  
Required:
Record the necessary journal entries to close the accounts for the month.

Accepted Answer

The answer of Waddell Productions makes separate journal entries for...

Question 5

Fine Lumber Inc. mills and finishes furniture kits. A certain kit requires the following:
Direct materials standard2 square yards at $13.50 per yard
Direct manufacturing labor standard1.5 hours at $20.00 per hour
During the third quarter, the company made 1,500 kits and used 3,150 square yards of wood costing $42,600. Direct labor totaled 2,100 hours for $46,150.
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 Fine Lumber Inc. mills and finishes furniture...

Question 6

The president of the company, Peter Francis, has come to you for help. Use the following data to prepare a flexible budget for possible sales/production levels of 10,000, 15,000, and 20,000 units. Show the contribution margin at each activity level.

Accepted Answer

The answer of The president of the company, Peter Francis,...

Question 7

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

Accepted Answer

The answer of Give at least three good reasons why...

Question 8

Bennett Street Table Company manufactures tables for schools. The 2018 operating budget is based on sales of 45,000 units at $55 per table. Operating income is anticipated to be $240,000. Budgeted variable costs are $35 per unit, while fixed costs total $660,000.
Actual income for 2018 was a surprising $569,000 on actual sales of 46,000 units at $60 each. Actual variable costs were $34 per unit and fixed costs totaled $627,000.
Required:
Prepare a variance analysis report with both flexible-budget and sales-volume variances.

Accepted Answer

The answer of Bennett Street Table Company manufactures tables for...

Question 9

An unfavorable efficiency variance for direct manufacturing labor might indicate that ________.

Accepted Answer

A)  there is unexpected increase in direct labor rates 
B)  work is scheduled inefficiently 
C)  lower-quality materials were purchased 
D)  more higher-skilled workers were scheduled than planned

Question 10

Which of the following is an example of nonfinancial performance measure?

Accepted Answer

A)  percentage of products started and completed without requiring any rework 
B)  direct manufacturing labor efficiency variance 
C)  direct materials price variance 
D)  quantity discounts obtained on order of large quantity

Question 11

With a direct materials price variance of $40,000 F and direct materials efficiency, direct manufacturing labor price, and direct labor efficiency variances of $60,000 U, 20,000 U, and 15,000 U, the write-off to cost of goods sold if these are deemed immaterial would be a debit of $55,000.

Accepted Answer

A) True 
 B)False

Question 12

If management experiences an unfavorable direct materials efficiency variance, which of the following would not be the possible corrective action?

Accepted Answer

A)  Improve the design of the product 
B)  Provide additional training for the direct laborers 
C)  Purchase higher quality materials 
D)  Negotiate lower prices for material acquisition

Question 13

Handley Manufacturing Company has prepared the following flexible budget for August and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.

The most likely explanation of the above direct manufacturing labor variances is that ________.

Accepted Answer

A)  the average wage rate paid to employees was less than expected 
B)  employees did not work as efficiently as expected to accomplish the job 
C)  the company may have assigned more experienced employees this month than originally planned 
D)  management may have a problem with budget slack and might be using lax standards for both labor-wage rates and expected efficiency

Question 14

A favorable efficiency variance for direct materials might indicate that ________.

Accepted Answer

A)  lower-quality materials were purchased 
B)  work is scheduled efficiently 
C)  there is an unexpected increase in direct labor rates 
D)  management hired underskilled workers

Question 15

Coast to Coast Bus Lines acquired the following data about the operating cost of three of its top competitors.
Operating cost per seat per mile
Competitor A $.11
Competitor B $.15
Competitor C $.16
Management decides to use the average operating cost per seat per mile as a mark. Coast to Coast per seat is 12.5 cents per mile.

Accepted Answer

A)  It is equal to the mark 
B)  It compares favorably 
C)  It compares unfavorably 
D)  It compares favorably to the best performing competitor

Question 16

Daniels Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and had used a budgeted selling price of $19 per unit.

What is the static-budget variance of operating income?

Accepted Answer

A)  $325,000 favorable 
B)  $325,000 unfavorable 
C)  $316,000 favorable 
D)  $316,000 unfavorable

Question 17

When using variance analysis for performance evaluation, managers often focus on effectiveness and efficiency as two of the common attributes used in comparing expected results with actual results.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is true about analyzing a single variance?

Accepted Answer

A)  It should be overemphasized to take proper decision. 
B)  It should be evaluated in isolation from other variances. 
C)  It can lead to different other variances. 
D)  It should be used for quality evaluation.

Question 19

Lincoln 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.

What is the static-budget variance of operating income?

Accepted Answer

A)  $164,000 favorable 
B)  $164,000 unfavorable 
C)  $181,000 favorable 
D)  $181,000 unfavorable

Question 20

Harland Corporation currently produces cardboard boxes in an automated process. Expected production per month is 20,000 units, direct material costs are $2.50 per unit, and manufacturing overhead costs are $15,000 per month. Manufacturing overhead is all fixed costs. What are the flexible budget for 14,000 and 20,000 units, respectively?

Accepted Answer

A)  $14,000; $65,000 
B)  $14,000; $30,000 
C)  $50,000; $65,000 
D)  $50,000; $30,000

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

A percentage of products started and completed without requiring any rework is an example of nonfinancial performance measure.

For any actual level of output, the efficiency variance is the difference between actual quantity of input used and the budgeted quantity of input allowed to produce actual output, multiplied by the budgeted price.

The sales-volume variance is sometimes due to ________.

The president of the company, Peter Francis, has come to you for help. Use the following data to prepare a flexible budget for possible sales/production levels of 10,000, 15,000, and 20,000 units. Show the contribution margin at each activity level.

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

An unfavorable efficiency variance for direct manufacturing labor might indicate that ________.

Which of the following is an example of nonfinancial performance measure?

With a direct materials price variance of $40,000 F and direct materials efficiency, direct manufacturing labor price, and direct labor efficiency variances of $60,000 U, 20,000 U, and 15,000 U, the write-off to cost of goods sold if these are deemed immaterial would be a debit of $55,000.

If management experiences an unfavorable direct materials efficiency variance, which of the following would not be the possible corrective action?

A favorable efficiency variance for direct materials might indicate that ________.

Daniels Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and had used a budgeted selling price of $19 per unit. What is the static-budget variance of operating income?

When using variance analysis for performance evaluation, managers often focus on effectiveness and efficiency as two of the common attributes used in comparing expected results with actual results.

Which of the following statements is true about analyzing a single variance?

Lincoln 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. What is the static-budget variance of operating income?