Question 1

A favorable flexible-budget variance for variable costs may be the result of using more input quantities than were budgeted.

Accepted Answer

A) True 
 B)False

Question 2

Favorable direct manufacturing labor efficiency variances are ________.

Accepted Answer

A)  always credits 
B)  always debits 
C)  debited to the Work-in-Process Control account 
D)  debited to the Wages Payable Control account

Question 3

A favorable efficiency variance for direct manufacturing labor indicates that ________.

Accepted Answer

A)  a lower wage rate than planned was paid for direct labor 
B)  a higher wage rate than planned was paid for direct labor 
C)  less direct manufacturing labor-hours were used during production than planned for actual output 
D)  more direct manufacturing labor-hours were used during production than planned for actual output

Question 4

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 5

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

Accepted Answer

A)  number of square yards of cloth used to produce 1,000 jackets 
B)  direct manufacturing labor efficiency variance 
C)  the percentage of jackets started and completed without requiring any rework 
D)  quality of direct material

Question 6

Answer the following questions using the information below:
Coroid Corporation used the following data to evaluate their current operating system. The company sells items for $11 each and had used a budgeted selling price of $12 per unit.
 $$\begin{array} { l r r } 
 & \underline { \text { Actual } } & \text { Budgeted } \
\text { Units sold } & 280,000 \text { units } & 275,000 \text { units } \
\text { Variable costs } & \$ 900,000 & \$ 885,000 \
\text { Fixed costs } & \$ 55,000 & \$ 52,000
\end{array}$$
-What is the static-budget variance of variable costs?

Accepted Answer

A)  $12,000 favorable 
B)  $12,000 unfavorable 
C)  $15,000 favorable 
D)  $15,000 unfavorable

Question 7

Which of the following information is needed to prepare a flexible budget?

Accepted Answer

A)  actual units sold 
B)  actual variable cost 
C)  actual selling price per unit 
D)  actual fixed cost

Question 8

Answer the following questions using the information below:
Lander 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.
 $$\begin{array} { l r r } &\text { Actual } &\text { Budgeted }\

\text { Units sold }& 41,000 \text { units } & 40,000 \text { units } \
\text { Variable costs }  & \$ 164,000 & \$ 156,000 \
\text { Fixed costs }&\$ 46,000 & \$ 48,000
\end{array}$$
-What is the static-budget variance of revenues?

Accepted Answer

A)  $18,000 favorable 
B)  $18,000 unfavorable 
C)  $6,000 favorable 
D)  $4,000 unfavorable

Question 9

Answer the following questions using the information below:
Midend's Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
 $\begin{array}{lrrr} &\text { Flexible }&\text { Variances }\
& \text { Budget } & \text { Price } & \text { Efficiency } \
\text { Material A } & \$ 25,000 & \$ 1,500 \mathrm{U} & \$ 1,800 \mathrm{~F} \
\text { Material B } & 32,000 & 600 \mathrm{~F} & 900 \mathrm{U} \
\text { Material C } & 42,000 & 1,300 \mathrm{U} & 900 \mathrm{~F}
\end{array}$
-The actual amount spent for Material A was ________.

Accepted Answer

A)  $28,300 
B)  $25,300 
C)  $24,700 
D)  $21,700

Question 10

Answer the following questions using the information below:
Berman's Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
 $\begin{array}{lrrr} &\text { Flexible }&\text { Variances }\
& \text { Budget } & \text { Price } & \text { Efficiency } \
\text { Material A } & \$ 40,000 & \$ 1,000 \mathrm{~F} & \$ 3,000 \mathrm{U} \
\text { Material B } & 60,000 & 500 \mathrm{U} & 1,500 \mathrm{~F} \
\text { Direct manufacturing labor } & 80,000 & 500 \mathrm{U} & 2,500 \mathrm{~F}
\end{array}$
-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 11

Which of the following is a disadvantage of using the standards developed by a firm itself to develop a budget?

Accepted Answer

A)  A firm's inefficiencies will be part of the data. 
B)  They are not based on realized benchmarks. 
C)  The expected future changes are not included in the standards. 
D)  The flexible-budget amounts are difficult to determine.

Question 12

An efficiency variance reflects the difference between ________.

Accepted Answer

A)  actual input quantities used last period and current period 
B)  an actual input quantity and a budgeted input quantity 
C)  an actual input quantity used in a company and its main competitor's 
D)  a standard input quantity in a company and its main competitor's

Question 13

When considered in isolation,a favorable variance decreases operating income relative to the budgeted amount.

Accepted Answer

A) True 
 B)False

Question 14

To prepare budgets based on actual data from past periods is preferred since past inefficiencies are EXCLUDED.

Accepted Answer

A) True 
 B)False

Question 15

Employees logging in to production floor terminals and other modern technologies greatly facilitate the use of a standard costing system.

Accepted Answer

A) True 
 B)False

Question 16

A variance is ________.

Accepted Answer

A)  the difference between actual fixed cost per unit and standard variable cost per unit 
B)  the standard units of inputs for one output 
C)  the difference between an actual result and a budgeted performance 
D)  the difference between actual variable cost per unit and standard fixed cost per unit

Question 17

Littrell Company produces chairs and has determined the following direct cost categories and budgeted amounts:
 $\begin{array}{lrr}& \text { Standard Inputs } & \text { Standard Cost } \
\text { Category } & \text { for 1 output } & \text { per input } \
\text { Direct Materials } & 1.00 & \$ 7.50 \
\text { Direct Labor } & 0.30 & 9.00 \
\text { Direct Marketing } & 0.50 & 3.00
\end{array}$ Actual performance for the company is shown below:
 $\begin{array}{lr}
\text { Actual output: (in units) } & \underline{4,000} \
\text { Direct Materials: } & \
\text { Materials costs } & \$ 30,225 \
\text { Input purchased and used } & 3,900 \
\text { Actual price per input } & \$ 7.75\\text { Direct Manufacturing Labor: }\
\text { Labor costs }&\$11.470\
\text { Labor-hours of input } & 1,240 \
\text { Actual price per hour } & \$ 9.25\\text { Direct Marketing Labor: }\
\text { Labor costs }&\$5,880\
\text { Labor-hours of input } & 2,100 \
\text { Actual price per hour } & \$ 2.80
\end{array}$ Required:
a.What is the combined total of the flexible-budget variances?
b.What is the price variance of the direct materials?
c.What is the price variance of the direct manufacturing labor and the direct marketing labor,respectively?
d.What is the efficiency variance for direct materials?
e.What are the efficiency variances for direct manufacturing labor and direct marketing labor,respectively?

Accepted Answer

The answer of Littrell Company produces chairs and has determined...

Question 18

Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2015, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container.
 $\begin{array}{lll}&\text { Budgeted quantity }&\text { Budgeted price }\
\text { Direct materials } & 0.30 \text { pounds } & \$ 20 \text { per pound } \
\text { Direct labor } & 0.20 \text { hours } & \$ 12 \text { per hour }
\end{array}$ During July, GII produced and sold 3,000 containers using 1,000 pounds of direct materials at an average cost per pound of $19 and 625 direct manufacturing labor hours at an average wage of $11.75 per hour.
-The direct manufacturing labor flexible-budget variance during July is ________.

Accepted Answer

A)  $375.00 unfavorable 
B)  $131.25 favorable 
C)  $143.75 unfavorable 
D)  $1,000 favorable

Question 19

From the perspective of control,the direct materials price variance should be isolated at the time of sales.

Accepted Answer

A) True 
 B)False

Question 20

Madzinga's Draperies manufactures curtains.A certain window requires the following:
 Direct materials standard $\quad 10$ square yards at $\$ 5$ per yard
Direct manufacturing labor standard $\quad 5$ hours at $\$ 10$ During the second quarter,the company made 1,500 curtains and used 14,000 square yards of fabric costing $68,600.Direct labor totaled 7,600 hours for $79,800.
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 Madzinga's Draperies manufactures curtains.A certain window requires...

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

A favorable flexible-budget variance for variable costs may be the result of using more input quantities than were budgeted.

Favorable direct manufacturing labor efficiency variances are ________.

A favorable efficiency variance for direct manufacturing labor indicates that ________.

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 is an example of financial performance measure?

Which of the following information is needed to prepare a flexible budget?

Which of the following is a disadvantage of using the standards developed by a firm itself to develop a budget?

An efficiency variance reflects the difference between ________.

When considered in isolation,a favorable variance decreases operating income relative to the budgeted amount.

To prepare budgets based on actual data from past periods is preferred since past inefficiencies are EXCLUDED.

Employees logging in to production floor terminals and other modern technologies greatly facilitate the use of a standard costing system.

A variance is ________.

From the perspective of control,the direct materials price variance should be isolated at the time of sales.