Question 1

When should a variance be investigated?

Accepted Answer

Random variations around the standard are expected. When variances are within this range, they are assumed to be caused by random factors. When a variance falls outside of this range, the deviation is likely to be caused by nonrandom factors, either factors that managers can control or factors they cannot control. However, investigating the cause of variances and taking corrective action have a cost associated with them. As a general principle, an investigation should be undertaken only if the anticipated benefits are greater than the expected costs. Assessing the costs and benefits of a variance investigation is not an easy task, however.
Many firms adopt the general guideline of investigating variances only if they fall outside of an acceptable range. They are not investigated unless they are large enough to be of concern. They must be large enough to be caused by something other than random factors and large enough (on average) to justify the costs of investigating and taking corrective action.

Question 2

Figure 18-3
Pippen Company's activity-based performance report revealed that actual inspection costs totaled £100,000 at an actual activity level of 50 inspections. Further analysis of inspection costs revealed the following:   Fixed inspection costs consist of the salaries of two inspectors, who are paid £14,250. Each inspector is capable of efficiently conducting inspections of 30 batches.
Variable inspection costs consist of materials used during the inspections.
-Refer to Figure 18-3. The fixed spending variance is

Accepted Answer

A)  £1,500 U. 
B)  £1,500 F. 
C)  £2,100 U. 
D)  £2,100 F. 
A)  £1,500 U. 
B)  £1,500 F. 
C)  £2,100 U. 
D)  £2,100 F. A

Question 3

Figure 18-2
Allende Company has developed capacity standards. Information is as follows for a value-added activity:  
-Refer to Figure 18-2. The unused capacity variance is

Accepted Answer

A)  £20,000 favourable. 
B)  £40,000 favourable. 
C)  £60,000 favourable. 
D)  There is no variance. 
A)  £20,000 favourable. 
B)  £40,000 favourable. 
C)  £60,000 favourable. 
D)  There is no variance. C

Question 4

Figure 18-1
Froelech Company has developed capacity standards. Information is as follows:  
-Refer to Figure 18-1. The unused capacity variance is

Accepted Answer

A)  £20,000 favourable. 
B)  £30,000 favourable. 
C)  £50,000 favourable. 
D)  There is no variance. 
A)  £20,000 favourable. 
B)  £30,000 favourable. 
C)  £50,000 favourable. 
D)  There is no variance.

Question 5

Figure 18-3
Pippen Company's activity-based performance report revealed that actual inspection costs totaled £100,000 at an actual activity level of 50 inspections. Further analysis of inspection costs revealed the following:   Fixed inspection costs consist of the salaries of two inspectors, who are paid £14,250. Each inspector is capable of efficiently conducting inspections of 30 batches.
Variable inspection costs consist of materials used during the inspections.
-Refer to Figure 18-3. The volume variance is

Accepted Answer

A)  £26,250 U. 
B)  £26,250 F. 
C)  £28,500 U. 
D)  £28,500 F. 
A)  £26,250 U. 
B)  £26,250 F. 
C)  £28,500 U. 
D)  £28,500 F.

Question 6

Figure 18-4
Regis Ltd. uses two materials in the production of its product. The materials, X and Y, have the following standards:   During April, the following actual production information was provided:  
-Refer to Figure 18-4. What is the materials usage variance?

Accepted Answer

A)  £10,000 (U) 
B)  £ 8,000 (U) 
C)  £ 8,000 (F) 
D)  £18,000 (U) 
A)  £10,000 (U) 
B)  £ 8,000 (U) 
C)  £ 8,000 (F) 
D)  £18,000 (U)

Question 7

Roberts Company uses a standard costing system. The following information pertains to direct materials for the month of July:   Roberts Company reports its material price variances at the time of purchase. What is the journal entry to record material purchases?

Accepted Answer

The answer of Roberts Company uses a standard costing system....

Question 8

When should variances be investigated?

Accepted Answer

A)  when they fall out of the accepted range or the control limit 
B)  when the variances are unfavourable 
C)  when the variances are over £10,000 
D)  All variances should be investigated. 
A)  when they fall out of the accepted range or the control limit 
B)  when the variances are unfavourable 
C)  when the variances are over £10,000 
D)  All variances should be investigated.

Question 9

Figure 18-1
Froelech Company has developed capacity standards. Information is as follows:  
-Refer to Figure 18-1. The volume variance is

Accepted Answer

A)  £20,000 unfavourable. 
B)  £30,000 unfavourable. 
C)  £50,000 unfavourable. 
D)  There is no variance. 
A)  £20,000 unfavourable. 
B)  £30,000 unfavourable. 
C)  £50,000 unfavourable. 
D)  There is no variance.

Question 10

Figure 18-4
Regis Ltd. uses two materials in the production of its product. The materials, X and Y, have the following standards:   During April, the following actual production information was provided:  
-Refer to Figure 18-4. What is the materials yield variance?

Accepted Answer

A)  £4,000 (F) 
B)  £8,000 (F) 
C)  £8,000 (U) 
D)  £9,000 (U) 
A)  £4,000 (F) 
B)  £8,000 (F) 
C)  £8,000 (U) 
D)  £9,000 (U)

Question 11

Laune Co.'s standard cost is £200,000, and its allowable deviation is £20,000. Laune's upper and lower control limits are

Accepted Answer

A)  £220,000 and £200,000. 
B)  £200,000 and £180,000. 
C)  £220,000 and £180,000. 
D)  £210,000 and £190,000. 
A)  £220,000 and £200,000. 
B)  £200,000 and £180,000. 
C)  £220,000 and £180,000. 
D)  £210,000 and £190,000.

Question 12

Figure 18-4
Regis Ltd. uses two materials in the production of its product. The materials, X and Y, have the following standards:   During April, the following actual production information was provided:  
-Refer to Figure 18-4. What is the materials mix variance?

Accepted Answer

A)  £5,000 (F) 
B)  £10,000 (U) 
C)  £10,000 (F) 
D)  £15,000 (F) 
A)  £5,000 (F) 
B)  £10,000 (U) 
C)  £10,000 (F) 
D)  £15,000 (F)

When should a variance be investigated?

Figure 18-2 Allende Company has developed capacity standards. Information is as follows for a value-added activity: -Refer to Figure 18-2. The unused capacity variance is

Figure 18-1 Froelech Company has developed capacity standards. Information is as follows: -Refer to Figure 18-1. The unused capacity variance is

Figure 18-4 Regis Ltd. uses two materials in the production of its product. The materials, X and Y, have the following standards: During April, the following actual production information was provided: -Refer to Figure 18-4. What is the materials usage variance?

Roberts Company uses a standard costing system. The following information pertains to direct materials for the month of July: Roberts Company reports its material price variances at the time of purchase. What is the journal entry to record material purchases?

When should variances be investigated?

Figure 18-1 Froelech Company has developed capacity standards. Information is as follows: -Refer to Figure 18-1. The volume variance is

Figure 18-4 Regis Ltd. uses two materials in the production of its product. The materials, X and Y, have the following standards: During April, the following actual production information was provided: -Refer to Figure 18-4. What is the materials yield variance?

Laune Co.'s standard cost is £200,000, and its allowable deviation is £20,000. Laune's upper and lower control limits are

Figure 18-4 Regis Ltd. uses two materials in the production of its product. The materials, X and Y, have the following standards: During April, the following actual production information was provided: -Refer to Figure 18-4. What is the materials mix variance?

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost Assignment

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Pricing Decisions and Profitability Analysis

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

Filters

Exam 18: Standard Costing and Variance Analysis 2: Further Aspects

When should a variance be investigated?

Figure 18-2 Allende Company has developed capacity standards. Information is as follows for a value-added activity: -Refer to Figure 18-2. The unused capacity variance is

Figure 18-1 Froelech Company has developed capacity standards. Information is as follows: -Refer to Figure 18-1. The unused capacity variance is

Figure 18-4 Regis Ltd. uses two materials in the production of its product. The materials, X and Y, have the following standards: During April, the following actual production information was provided: -Refer to Figure 18-4. What is the materials usage variance?

Roberts Company uses a standard costing system. The following information pertains to direct materials for the month of July: Roberts Company reports its material price variances at the time of purchase. What is the journal entry to record material purchases?

When should variances be investigated?

Figure 18-1 Froelech Company has developed capacity standards. Information is as follows: -Refer to Figure 18-1. The volume variance is

Figure 18-4 Regis Ltd. uses two materials in the production of its product. The materials, X and Y, have the following standards: During April, the following actual production information was provided: -Refer to Figure 18-4. What is the materials yield variance?

Laune Co.'s standard cost is £200,000, and its allowable deviation is £20,000. Laune's upper and lower control limits are

Figure 18-4 Regis Ltd. uses two materials in the production of its product. The materials, X and Y, have the following standards: During April, the following actual production information was provided: -Refer to Figure 18-4. What is the materials mix variance?

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost Assignment

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Pricing Decisions and Profitability Analysis

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

Filters