Question 1

Random variances are:

Accepted Answer

A) Often considered as uncontrollable from the standpoint of management. 
B) Likely to recur until corrected. 
C) The result of failing to include all relevant variables in the analysis. 
D) The result of in including wrong or irrelevant variables in the variance-investigation model. 
E) Controlled through the use of six sigma and other techniques from operations management. 
A) Often considered as uncontrollable from the standpoint of management. 
B) Likely to recur until corrected. 
C) The result of failing to include all relevant variables in the analysis. 
D) The result of in including wrong or irrelevant variables in the variance-investigation model. 
E) Controlled through the use of six sigma and other techniques from operations management.

Question 2

"Firms need to use the capacity of the equipment or division that is the 'bottleneck' of the manufacturing process as the denominator volume in setting the fixed overhead allocation rate. In cases where there is more than one 'bottleneck,' the denominator should be the smallest capacity among the bottleneck production processes."
Required:
1. What type of variance is related to this "denominator?" Explain.
2. Define the terms theoretical capacity, practical capacity, and budgeted capacity utilization. Of the three, which is considered most relevant for setting the predetermined overhead application rate for internal reporting purposes, particularly for fixed overhead costs? Explain

Accepted Answer

Answer may vary
Feedback:
1. The "denomi

Question 3

Which one of the following journal entries in a standard cost system is needed to record the completion of production for the period?

Accepted Answer

A) A debit to Work-in-Process Inventory, at standard cost. 
B) A debit to Work-in-Process Inventory, at actual cost. 
C) A credit to Cost of Goods Sold, at standard cost. 
D) A debit to Finished Goods Inventory, at standard cost. 
E) A debit to Finished Goods Inventory, at actual cost. 
A) A debit to Work-in-Process Inventory, at standard cost. 
B) A debit to Work-in-Process Inventory, at actual cost. 
C) A credit to Cost of Goods Sold, at standard cost. 
D) A debit to Finished Goods Inventory, at standard cost. 
E) A debit to Finished Goods Inventory, at actual cost.

Question 4

Proration of manufacturing cost variances among ending inventories and cost of goods sold has the effect of carrying the cost (savings) of inefficient (efficient) operations of a period to:

Accepted Answer

A) Only the balance sheet of the current period. 
B) Only the income statement of the current period. 
C) The balance sheets of future periods only. 
D) The income statement of the current period and the balance sheet of the current period. 
A) Only the balance sheet of the current period. 
B) Only the income statement of the current period. 
C) The balance sheets of future periods only. 
D) The income statement of the current period and the balance sheet of the current period.

Question 5

Which of the following statements is correct?

Accepted Answer

A) Random variances are typically investigated because they can repeat. 
B) Systematic variances are considered uncontrollable. 
C) Most standard cost variances call for investigation and corrective action. 
D) Random variances are typically not investigated. 
E) Most variances from ideal standards will be favorable. 
A) Random variances are typically investigated because they can repeat. 
B) Systematic variances are considered uncontrollable. 
C) Most standard cost variances call for investigation and corrective action. 
D) Random variances are typically not investigated. 
E) Most variances from ideal standards will be favorable.

Question 6

The total overhead flexible-budget (FB) variance for the period is:

Accepted Answer

A) $800 unfavorable. 
B) $1,400 unfavorable. 
C) $2,000 unfavorable. 
D) $2,600 unfavorable. 
E) $3,000 unfavorable. 
A) $800 unfavorable. 
B) $1,400 unfavorable. 
C) $2,000 unfavorable. 
D) $2,600 unfavorable. 
E) $3,000 unfavorable.

Question 7

Under a four-way breakdown (decomposition) of the total overhead variance, what is the variable factory overhead spending variance for Zero Company for December?

Accepted Answer

A) $50 favorable. 
B) $225 favorable. 
C) $425 unfavorable. 
D) $610 unfavorable. 
E) $650 unfavorable. 
A) $50 favorable. 
B) $225 favorable. 
C) $425 unfavorable. 
D) $610 unfavorable. 
E) $650 unfavorable.

Question 8

Among characteristics that distinguish service and manufacturing firms are the:

Accepted Answer

A) Absence of output inventory in service firms. 
B) Existence of labor-intensive products in manufacturing firms. 
C) Rendering of identical services in a service firm. 
D) Capital intensiveness of service firms. 
E) Organizational structure of service firms. 
A) Absence of output inventory in service firms. 
B) Existence of labor-intensive products in manufacturing firms. 
C) Rendering of identical services in a service firm. 
D) Capital intensiveness of service firms. 
E) Organizational structure of service firms.

Question 9

The factory overhead production volume variance in April for Neptune, Inc. is:

Accepted Answer

A) $940 unfavorable. 
B) $1,040 favorable. 
C) $1,980 favorable. 
D) $2,160 favorable. 
E) $3,200 favorable. 
A) $940 unfavorable. 
B) $1,040 favorable. 
C) $1,980 favorable. 
D) $2,160 favorable. 
E) $3,200 favorable.

Question 10

In framing the decision whether to investigate the cause of a reported standard cost (or revenue) variance, which of the following tools would management find most useful?

Accepted Answer

A) Linear regression analysis. 
B) Payoff table. 
C) Differential calculus. 
D) Linear optimization analysis. 
E) Nonlinear optimization analysis. 
A) Linear regression analysis. 
B) Payoff table. 
C) Differential calculus. 
D) Linear optimization analysis. 
E) Nonlinear optimization analysis.

Question 11

Which of the following is not a plausible cause of a systematic variance?

Accepted Answer

A) Prediction error. 
B) Modeling error. 
C) Implementation error. 
D) Measurement error. 
E) Random error 
A) Prediction error. 
B) Modeling error. 
C) Implementation error. 
D) Measurement error. 
E) Random error

Question 12

What is the variable overhead efficiency variance for the period?

Accepted Answer

A) $600 favorable. 
B) $800 unfavorable. 
C) $1,200 unfavorable. 
D) $1,400 unfavorable. 
E) $2,000 unfavorable. 
A) $600 favorable. 
B) $800 unfavorable. 
C) $1,200 unfavorable. 
D) $1,400 unfavorable. 
E) $2,000 unfavorable.

Question 13

What is the variable overhead (VOH) spending variance for Terry Company for the period?

Accepted Answer

A) $600 favorable. 
B) $800 unfavorable. 
C) $1,000 unfavorable. 
D) $1,400 favorable. 
E) $1,400 unfavorable. 
A) $600 favorable. 
B) $800 unfavorable. 
C) $1,000 unfavorable. 
D) $1,400 favorable. 
E) $1,400 unfavorable.

Question 14

If inventories in a business using a standard cost system are insignificant, the firm would be justified (in a practical sense) by disposing of variances each year:

Accepted Answer

A) As an adjustment to the finished goods inventory only. 
B) As an adjustment to cost of goods sold only. 
C) As adjustments to both inventory accounts and the cost of goods sold for the period. 
D) As a special item (gain or loss) on the income statement for the period. 
E) As an adjustment to the work-in-process (WIP) inventory only. 
A) As an adjustment to the finished goods inventory only. 
B) As an adjustment to cost of goods sold only. 
C) As adjustments to both inventory accounts and the cost of goods sold for the period. 
D) As a special item (gain or loss) on the income statement for the period. 
E) As an adjustment to the work-in-process (WIP) inventory only.

Question 15

In a standard cost system, when production is greater than the denominator volume level, there will be:

Accepted Answer

A) An unfavorable production-volume variance. 
B) An unfavorable total spending variance. 
C) A favorable production-volume variance. 
D) A favorable sales-volume variance. 
E) A favorable overhead budget variance. 
A) An unfavorable production-volume variance. 
B) An unfavorable total spending variance. 
C) A favorable production-volume variance. 
D) A favorable sales-volume variance. 
E) A favorable overhead budget variance.

Question 16

All of the following choices exist for defining the denominator volume (denominator activity level) for assigning fixed overhead costs in a standard cost system, except:

Accepted Answer

A) Budgeted capacity utilization. 
B) Actual capacity utilization. 
C) Theoretical capacity. 
D) Practical capacity. 
E) Normal capacity. 
A) Budgeted capacity utilization. 
B) Actual capacity utilization. 
C) Theoretical capacity. 
D) Practical capacity. 
E) Normal capacity.

Question 17

Which of the following would not be considered a possible cause of a controllable (i.e., a systematic) variance?

Accepted Answer

A) Implementation error. 
B) Random error. 
C) Modeling error. 
D) Prediction error. 
E) Measurement error. 
A) Implementation error. 
B) Random error. 
C) Modeling error. 
D) Prediction error. 
E) Measurement error.

Question 18

Which of the following would not likely be useful for addressing the variance-investigation decision under uncertainty?

Accepted Answer

A) The use of payoff tables. 
B) Linear optimization analysis. 
C) Calculating the indifference probability. 
D) Knowing, or having a good estimate of, the probability of a nonrandom variance. 
E) The value of perfect information. 
A) The use of payoff tables. 
B) Linear optimization analysis. 
C) Calculating the indifference probability. 
D) Knowing, or having a good estimate of, the probability of a nonrandom variance. 
E) The value of perfect information.

Question 19

Which one of the following factory overhead variances reflects the effect of deviation in input quantities only if the cost driver for applying variable overhead is a perfect predictor of variable overhead cost?

Accepted Answer

A) Total variable overhead variance. 
B) Variable overhead rate variance. 
C) Variable overhead spending variance. 
D) Variable overhead flexible-budget variance. 
E) Variable overhead efficiency variance. 
A) Total variable overhead variance. 
B) Variable overhead rate variance. 
C) Variable overhead spending variance. 
D) Variable overhead flexible-budget variance. 
E) Variable overhead efficiency variance.

Question 20

What is the total factory overhead flexible-budget variance for Gerhan Company in May?

Accepted Answer

A) $380 unfavorable. 
B) $680 unfavorable. 
C) $860 unfavorable. 
D) $1,160 unfavorable. 
E) $1,360 unfavorable. 
A) $380 unfavorable. 
B) $680 unfavorable. 
C) $860 unfavorable. 
D) $1,160 unfavorable. 
E) $1,360 unfavorable.

Random variances are:

Which one of the following journal entries in a standard cost system is needed to record the completion of production for the period?

Proration of manufacturing cost variances among ending inventories and cost of goods sold has the effect of carrying the cost (savings) of inefficient (efficient) operations of a period to:

Which of the following statements is correct?

The total overhead flexible-budget (FB) variance for the period is:

Under a four-way breakdown (decomposition) of the total overhead variance, what is the variable factory overhead spending variance for Zero Company for December?

Among characteristics that distinguish service and manufacturing firms are the:

The factory overhead production volume variance in April for Neptune, Inc. is:

In framing the decision whether to investigate the cause of a reported standard cost (or revenue) variance, which of the following tools would management find most useful?

Which of the following is not a plausible cause of a systematic variance?

What is the variable overhead efficiency variance for the period?

What is the variable overhead (VOH) spending variance for Terry Company for the period?

If inventories in a business using a standard cost system are insignificant, the firm would be justified (in a practical sense) by disposing of variances each year:

In a standard cost system, when production is greater than the denominator volume level, there will be:

All of the following choices exist for defining the denominator volume (denominator activity level) for assigning fixed overhead costs in a standard cost system, except:

Which of the following would not be considered a possible cause of a controllable (i.e., a systematic) variance?

Which of the following would not likely be useful for addressing the variance-investigation decision under uncertainty?

Which one of the following factory overhead variances reflects the effect of deviation in input quantities only if the cost driver for applying variable overhead is a perfect predictor of variable overhead cost?

What is the total factory overhead flexible-budget variance for Gerhan Company in May?

Cost Management and Strategy

Implementing Strategy: the Value Chain, the Balanced Scorecard, and the Strategy Map

Basic Cost Management Concepts

Job Costing

Activity-Based Costing and Customer Profitability Analysis

Process Costing

Cost Allocation: Departments, Joint Products, and By-Products

Cost Estimation

Short-Term Profit Planning: Cost-Volume-Profit Cvp Analysis

Strategy and the Master Budget

Decision Making With a Strategic Emphasis

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Further Analysis of Productivity and Sales

The Management and Control of Quality

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers and Transfer Pricing

Management Compensation, Business Analysis, and Business Valuation

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Exam 15: Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

Random variances are:

Which one of the following journal entries in a standard cost system is needed to record the completion of production for the period?

Proration of manufacturing cost variances among ending inventories and cost of goods sold has the effect of carrying the cost (savings) of inefficient (efficient) operations of a period to:

Which of the following statements is correct?

The total overhead flexible-budget (FB) variance for the period is:

Under a four-way breakdown (decomposition) of the total overhead variance, what is the variable factory overhead spending variance for Zero Company for December?

Among characteristics that distinguish service and manufacturing firms are the:

The factory overhead production volume variance in April for Neptune, Inc. is:

In framing the decision whether to investigate the cause of a reported standard cost (or revenue) variance, which of the following tools would management find most useful?

Which of the following is not a plausible cause of a systematic variance?

What is the variable overhead efficiency variance for the period?

What is the variable overhead (VOH) spending variance for Terry Company for the period?

If inventories in a business using a standard cost system are insignificant, the firm would be justified (in a practical sense) by disposing of variances each year:

In a standard cost system, when production is greater than the denominator volume level, there will be:

All of the following choices exist for defining the denominator volume (denominator activity level) for assigning fixed overhead costs in a standard cost system, except:

Which of the following would not be considered a possible cause of a controllable (i.e., a systematic) variance?

Which of the following would not likely be useful for addressing the variance-investigation decision under uncertainty?

Which one of the following factory overhead variances reflects the effect of deviation in input quantities only if the cost driver for applying variable overhead is a perfect predictor of variable overhead cost?

What is the total factory overhead flexible-budget variance for Gerhan Company in May?

Cost Management and Strategy

Implementing Strategy: the Value Chain, the Balanced Scorecard, and the Strategy Map

Basic Cost Management Concepts

Job Costing

Activity-Based Costing and Customer Profitability Analysis

Process Costing

Cost Allocation: Departments, Joint Products, and By-Products

Cost Estimation

Short-Term Profit Planning: Cost-Volume-Profit Cvp Analysis

Strategy and the Master Budget

Decision Making With a Strategic Emphasis

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Further Analysis of Productivity and Sales

The Management and Control of Quality

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers and Transfer Pricing

Management Compensation, Business Analysis, and Business Valuation

Filters