Question 1

Flexible budgets may be prepared before or after an actual period of activity.Why would management prepare such budgets at differing time frames?

Accepted Answer

Flexible budgets are prepared prior to activities to allow management to see possible predicted outcomes.The different levels often include both a best-case and worst-case scenario.They are prepared after a period to better compare expected results at the actual level of sales or other activity with the actual results to determine relevant and meaningful variances.

Question 2

When recording the journal entry for labor,the Work in Process Inventory account is

Accepted Answer

A) Debited for standard labor cost. 
B) Debited for actual labor cost. 
C) Credited for standard labor cost. 
D) Credited for actual labor cost. 
E) Not used. 
A) Debited for standard labor cost. 
B) Debited for actual labor cost. 
C) Credited for standard labor cost. 
D) Credited for actual labor cost. 
E) Not used. A

Question 3

A product has a sales price of $20.Based on a 15,000-unit production level,the variable costs are $12 per unit and the fixed costs are $6 per unit.Using a flexible budget for an actual production and sales level of 18,000 units,what is the budgeted operating income?

Accepted Answer

The answer of A product has a sales price of...

Question 4

Maxwell Co.collected the following information about its production activities for the current year.
a.Compute the direct materials price and quantity variances and indicate whether each is favorable or unfavorable.
b.Prepare the journal entry to record the issuance of direct materials into production.
Actual costs and quantities:
Direct materials used 95,000 lbs.@ $6.30 per lb.
Units completed during the year,50,000 units
Standard costs and quantities:
Price per lb.of direct material,$6.05
Two lbs.of direct material per unit

Accepted Answer

The answer of Maxwell Co.collected the following information about its...

Question 5

Gala Enterprises reports the following information regarding the production of one of its products for the month.Compute the total direct materials cost variance,the direct materials price variance,the direct materials quantity variance and identify each as either favorable or unfavorable.

Accepted Answer

Direct materials cost variance:
Actual u

Question 6

________ are preset costs for delivering a product or service under normal conditions.

Accepted Answer

The answer of ________ are preset costs for delivering a...

Question 7

A cost variance is the difference between actual cost and standard cost.

Accepted Answer

A) True 
 B)False

Question 8

Use the following data to find the total direct labor cost variance if the company produced 3,500 units during the period.

Accepted Answer

A) $6,125 unfavorable. 
B) $7,000 unfavorable. 
C) $7,000 favorable. 
D) $21,000 favorable. 
E) $14,875 favorable. 
A) $6,125 unfavorable. 
B) $7,000 unfavorable. 
C) $7,000 favorable. 
D) $21,000 favorable. 
E) $14,875 favorable.

Question 9

Variable budget is another name for:

Accepted Answer

A) Cash budget. 
B) Flexible budget. 
C) Fixed budget. 
D) Manufacturing budget. 
E) Rolling budget. 
A) Cash budget. 
B) Flexible budget. 
C) Fixed budget. 
D) Manufacturing budget. 
E) Rolling budget.

Question 10

When standard manufacturing costs are recorded in the accounts and the cost variances are immaterial at the end of the accounting period,the cost variances should be:

Accepted Answer

A) Carried forward to the next accounting period. 
B) Allocated between cost of goods sold,finished goods,and work in process. 
C) Closed to cost of goods sold. 
D) Written off as a selling expense. 
E) Ignored. 
A) Carried forward to the next accounting period. 
B) Allocated between cost of goods sold,finished goods,and work in process. 
C) Closed to cost of goods sold. 
D) Written off as a selling expense. 
E) Ignored.

Question 11

The difference between the actual sales and the flexible budget sales is called the ________ variance.

Accepted Answer

The answer of The difference between the actual sales and...

Question 12

The overhead cost variance is:

Accepted Answer

A) The difference between the overhead costs actually incurred and the overhead budgeted at the actual operating level. 
B) The difference between the actual overhead incurred during a period and the standard overhead applied. 
C) The difference between actual and budgeted cost caused by the difference between the actual price per unit and the budgeted price per unit. 
D) The costs that should be incurred under normal conditions to produce a specific product (or component)or to perform a specific service. 
E) The difference between the total overhead cost that would have been expected if the actual operating volume had been accurately predicted and the amount of overhead cost that was allocated to products using the standard overhead rate. 
A) The difference between the overhead costs actually incurred and the overhead budgeted at the actual operating level. 
B) The difference between the actual overhead incurred during a period and the standard overhead applied. 
C) The difference between actual and budgeted cost caused by the difference between the actual price per unit and the budgeted price per unit. 
D) The costs that should be incurred under normal conditions to produce a specific product (or component)or to perform a specific service. 
E) The difference between the total overhead cost that would have been expected if the actual operating volume had been accurately predicted and the amount of overhead cost that was allocated to products using the standard overhead rate.

Question 13

Standard costs are used in the calculation of:

Accepted Answer

A) Price and quantity variances. 
B) Price variances only. 
C) Quantity variances only. 
D) Price,quantity,and sales variances. 
E) Quantity and sales variances. 
A) Price and quantity variances. 
B) Price variances only. 
C) Quantity variances only. 
D) Price,quantity,and sales variances. 
E) Quantity and sales variances.

Question 14

The purchasing department is responsible for the price paid for materials.

Accepted Answer

A) True 
 B)False

Question 15

Fixed budget performance reports compare actual results with the results expected under a fixed budget.

Accepted Answer

A) True 
 B)False

Question 16

A fixed budget performance report never provides useful information for evaluating variances.

Accepted Answer

A) True 
 B)False

Question 17

A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased inferior materials.

Accepted Answer

A) True 
 B)False

Question 18

A company's flexible budget for 12,000 units of production showed sales,$48,000; variable costs,$18,000; and fixed costs,$16,000.The fixed costs expected if the company produces and sells 16,000 units is:

Accepted Answer

A) $16,000. 
B) $64,000. 
C) $48,000. 
D) $24,000. 
E) $18,000. 
A) $16,000. 
B) $64,000. 
C) $48,000. 
D) $24,000. 
E) $18,000.

Question 19

The following information relating to a company's overhead costs is available.   Based on this information,the total overhead variance is:

Accepted Answer

A) $7,000 favorable. 
B) $6,000 favorable. 
C) $1,000 unfavorable. 
D) $6,000 unfavorable. 
E) $1,000 favorable. 
A) $7,000 favorable. 
B) $6,000 favorable. 
C) $1,000 unfavorable. 
D) $6,000 unfavorable. 
E) $1,000 favorable.

Question 20

The following information describes a company's usage of direct labor in a recent period.The direct labor rate variance is:

Accepted Answer

A) $29,000 favorable. 
B) $29,000 unfavorable. 
C) $22,500 unfavorable. 
D) $52,500 favorable. 
E) $52,500 unfavorable. 
A) $29,000 favorable. 
B) $29,000 unfavorable. 
C) $22,500 unfavorable. 
D) $52,500 favorable. 
E) $52,500 unfavorable.

Exam 21: Flexible Budgets and Standard Costs

Flexible budgets may be prepared before or after an actual period of activity.Why would management prepare such budgets at differing time frames?

When recording the journal entry for labor,the Work in Process Inventory account is

A product has a sales price of $20.Based on a 15,000-unit production level,the variable costs are $12 per unit and the fixed costs are $6 per unit.Using a flexible budget for an actual production and sales level of 18,000 units,what is the budgeted operating income?

Gala Enterprises reports the following information regarding the production of one of its products for the month.Compute the total direct materials cost variance,the direct materials price variance,the direct materials quantity variance and identify each as either favorable or unfavorable.

________ are preset costs for delivering a product or service under normal conditions.

A cost variance is the difference between actual cost and standard cost.

Use the following data to find the total direct labor cost variance if the company produced 3,500 units during the period.

Variable budget is another name for:

When standard manufacturing costs are recorded in the accounts and the cost variances are immaterial at the end of the accounting period,the cost variances should be:

The difference between the actual sales and the flexible budget sales is called the ________ variance.

The overhead cost variance is:

Standard costs are used in the calculation of:

The purchasing department is responsible for the price paid for materials.

Fixed budget performance reports compare actual results with the results expected under a fixed budget.

A fixed budget performance report never provides useful information for evaluating variances.

A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased inferior materials.

A company's flexible budget for 12,000 units of production showed sales,$48,000; variable costs,$18,000; and fixed costs,$16,000.The fixed costs expected if the company produces and sells 16,000 units is:

The following information relating to a company's overhead costs is available. Based on this information,the total overhead variance is:

The following information describes a company's usage of direct labor in a recent period.The direct labor rate variance is:

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