Question 1

A flexible budget is a budget based on the budgeted sales volume at the beginning of the period.

Accepted Answer

A) True 
 B)False

Question 2

The fixed overhead spending variance is the difference between actual fixed overhead cost and budgeted fixed overhead cost.

Accepted Answer

A) True 
 B)False

Question 3

Assembly line workers at Thompson Manufacturing worked a total of 8,800 direct labor hours to produce 36,000 units. The standard for producing one unit is 15 minutes at a wage rate of $10. If the actual wage rate was $10.50 per direct labor hour, Thompson’s direct labor efficiency variance is

Accepted Answer

A)  $2,000 favorable 
B)  $2,000 unfavorable 
C)  $2,100 favorable 
D)  $2,100 unfavorable 
A)  $2,000 favorable 
B)  $2,000 unfavorable 
C)  $2,100 favorable 
D)  $2,100 unfavorable

Question 4

Which of the following is not a factor that managers use in deciding whether to investigate a variance?

Accepted Answer

A) Materiality. 
B) The existence of a trend. 
C) Whether combining several accounts with large offsetting variances results in a small variance. 
D) All of these ans choices are correct.. 
A) Materiality. 
B) The existence of a trend. 
C) Whether combining several accounts with large offsetting variances results in a small variance. 
D) All of these ans choices are correct..

Question 5

The master budget is an example of a

Accepted Answer

A) Static budget. 
B) Flexible budget. 
C) Pro-forma budget. 
D) Summary budget. 
A) Static budget. 
B) Flexible budget. 
C) Pro-forma budget. 
D) Summary budget.

Question 6

The direct materials price variance is calculated using which of the three amounts?

Accepted Answer

A) Actual quantity purchased,standard quantity purchased,actual price paid 
B) Actual quantity purchased,standard quantity purchased,standard price paid 
C) Standard quantity purchased,actual price paid,standard price paid 
D) Actual quantity purchased,actual price paid,standard price paid 
A) Actual quantity purchased,standard quantity purchased,actual price paid 
B) Actual quantity purchased,standard quantity purchased,standard price paid 
C) Standard quantity purchased,actual price paid,standard price paid 
D) Actual quantity purchased,actual price paid,standard price paid

Question 7

If the actual price of direct materials is $200 and the standard price of the direct materials is $180,

Accepted Answer

A) There will be no direct materials quantity variance 
B) The direct materials quantity variance will be unfavorable 
C) The direct materials price variance will be favorable 
D) The direct materials price variance will be unfavorable 
A) There will be no direct materials quantity variance 
B) The direct materials quantity variance will be unfavorable 
C) The direct materials price variance will be favorable 
D) The direct materials price variance will be unfavorable

Question 8

Variances are labeled as

Accepted Answer

A) Avoidable or unavoidable. 
B) Favorable or unfavorable. 
C) Positive or negative. 
D) Committed or discretionary. 
A) Avoidable or unavoidable. 
B) Favorable or unfavorable. 
C) Positive or negative. 
D) Committed or discretionary.

Question 9

Hobart Company manufactures patio umbrellas.The direct labor standard for each umbrella is 1.25 direct labor hours at a standard rate of $12.00 per hour.During June,Hobart used 36,000 direct labor hours to produce 30,000 umbrellas.Hobart's direct labor payroll totaled $428,400.What is Hobart's direct labor rate variance for November?

Accepted Answer

A)  $3,600 unfavorable 
B)  $3,600 favorable 
C)  $18,000 favorable 
D)  $18,000 unfavorable 
A)  $3,600 unfavorable 
B)  $3,600 favorable 
C)  $18,000 favorable 
D)  $18,000 unfavorable

Question 10

Assume R&N Manufacturing has always used a static budget approach to analyze variances, but the new controller has suggested that the company implement a flexible budget strategy.

Required:

Answer the following questions relating to flexible budget variances.

a.	What are the direct materials and direct labor variances that the controller will be analyzing?

b.	Give an example of what would cause each variance to be favorable.

c.	Give an example of what would cause each variance to be unfavorable.

Accepted Answer

a.	The direct materials variances are th

Question 11

Backyard Creations purchased 7,200 feet of copper tubing at a price of $2.60 per foot and used 7,500 feet during the period.The standard price of the copper tubing was $2.70 per foot.What is Backyard Creations' direct materials price variance for the period?

Accepted Answer

A)  $720 favorable 
B)  $720 unfavorable 
C)  $750 favorable 
D)  $750 unfavorable 
A)  $720 favorable 
B)  $720 unfavorable 
C)  $750 favorable 
D)  $750 unfavorable

Question 12

Why is the direct materials price variance based on the quantity of materials purchased,but the direct materials quantity variance on the quantity of materials used?

Accepted Answer

A) Managers need to isolate variances and take corrective action as soon as possible. 
B) Production managers are only interested in the quantity purchased. 
C) It is a simpler process to calculate the quantity variance on what is purchased. 
D) All of these ans choices are correct. 
A) Managers need to isolate variances and take corrective action as soon as possible. 
B) Production managers are only interested in the quantity purchased. 
C) It is a simpler process to calculate the quantity variance on what is purchased. 
D) All of these ans choices are correct.

Question 13

Normally,managers will not see many fixed overhead spending variances because

Accepted Answer

A) Many fixed costs are contracted for or known ahead of time. 
B) Fixed costs vary in proportion to activity,so differences do not normally arise. 
C) Most fixed costs are allocated such as depreciation,so no differences occur. 
D) None of these ans choices are correct. 
A) Many fixed costs are contracted for or known ahead of time. 
B) Fixed costs vary in proportion to activity,so differences do not normally arise. 
C) Most fixed costs are allocated such as depreciation,so no differences occur. 
D) None of these ans choices are correct.

Question 14

Which of the following is not an explanation for a favorable variable overhead spending variance?

Accepted Answer

A) Paid less than expected for indirect material 
B) Used variable overhead items efficiently 
C) Paid less than expected for indirect labor 
D) Efficient use of the activity base 
A) Paid less than expected for indirect material 
B) Used variable overhead items efficiently 
C) Paid less than expected for indirect labor 
D) Efficient use of the activity base

Question 15

The flexible budget breaks down into the rate and efficiency variances for direct labor.
a.List two reasons why actual wage rates might differ from standard wage rates,resulting in a direct labor rate variance.
b.List two reasons why actual labor hours might differ from standard labor hours,resulting in a direct labor efficiency variance.

Accepted Answer

a.Direct labor rate variances can be cau

Question 16

The difference between actual sales volume and budgeted sales volume has an effect on

Accepted Answer

A) Price variance. 
B) Quantity variance. 
C) Both the price and the quantity variance. 
D) None of these ans choices are correct. 
A) Price variance. 
B) Quantity variance. 
C) Both the price and the quantity variance. 
D) None of these ans choices are correct.

Question 17

Adobe Company produces electric lawn mowers suitable for home and industrial use.During the year Adobe produced 54,000 mowers,using 163,000 direct labor hours.Adobe's fixed overhead rate is $12 per direct labor hour and the company budgeted 166,500 direct labor hours.Actual fixed overhead for the year was $1,996,000.What is Adobe's fixed overhead spending variance?

Accepted Answer

A)  $2,000 unfavorable 
B)  $2,000 favorable 
C)  $40,000 favorable 
D)  $42,000 favorable 
A)  $2,000 unfavorable 
B)  $2,000 favorable 
C)  $40,000 favorable 
D)  $42,000 favorable

Question 18

The direct labor rate variance is part of the direct labor flexible budget variance that arises when the actual wage rate differs from the standard wage rate.

Accepted Answer

A) True 
 B)False

Question 19

Assume you have been assigned to a team responsible for using the flexible budget to assist in determining managers' bonuses.When you approach the production manager about some variances,he says,"I don't know why your team can't just use the budget we developed at the beginning of the year.It was based on last year's actual numbers which seems reasonable.I don't understand this 'flexible budget' stuff.When I compare my actual results with our beginning of the year budget I have beat the budget,so that should be sufficient.That will save us all a lot of time and effort." Explain to the sales manager why a flexible budget is better than a static budget and its use in evaluating performance.

Accepted Answer

A flexible budget is a budget that is pr

Question 20

R&N Manufacturing produces music boxes.This year's budget was based on the production of 3,000 music boxes using a standard of 3 direct labor hours per music box and $4 variable overhead per direct labor hour.R&N incurred 9,200 hours to produce 2,950 music boxes.If actual variable overhead for the year is $32,000,what is R&N's variable overhead spending variance?

Accepted Answer

A)  $4,000 favorable 
B)  $4,000 unfavorable 
C)  $4,800 favorable 
D)  $4,800 unfavorable 
A)  $4,000 favorable 
B)  $4,000 unfavorable 
C)  $4,800 favorable 
D)  $4,800 unfavorable

A flexible budget is a budget based on the budgeted sales volume at the beginning of the period.

The fixed overhead spending variance is the difference between actual fixed overhead cost and budgeted fixed overhead cost.

Assembly line workers at Thompson Manufacturing worked a total of 8,800 direct labor hours to produce 36,000 units. The standard for producing one unit is 15 minutes at a wage rate of $10. If the actual wage rate was $10.50 per direct labor hour, Thompson’s direct labor efficiency variance is

Which of the following is not a factor that managers use in deciding whether to investigate a variance?

The master budget is an example of a

The direct materials price variance is calculated using which of the three amounts?

If the actual price of direct materials is $200 and the standard price of the direct materials is $180,

Variances are labeled as

Backyard Creations purchased 7,200 feet of copper tubing at a price of $2.60 per foot and used 7,500 feet during the period.The standard price of the copper tubing was $2.70 per foot.What is Backyard Creations' direct materials price variance for the period?

Why is the direct materials price variance based on the quantity of materials purchased,but the direct materials quantity variance on the quantity of materials used?

Normally,managers will not see many fixed overhead spending variances because

Which of the following is not an explanation for a favorable variable overhead spending variance?

The difference between actual sales volume and budgeted sales volume has an effect on

The direct labor rate variance is part of the direct labor flexible budget variance that arises when the actual wage rate differs from the standard wage rate.

Accounting As a Tool for Management

Cost Behavior and Cost Estimation Summary of Questions by Objectives and Blooms Taxonomy

Cost-Volume-Profit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting

Activity-Based Costing and Activity Based Management

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralizing and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

Statement of Cash Flows

Topic Focus: Process Costing

Topic Focus Variable and Absorption Costing

Topic Focus Standard Costing Systems

Topic Focus Customer Profitability

Filters

Exam 6: Performance Evaluation: Variance Analysis

A flexible budget is a budget based on the budgeted sales volume at the beginning of the period.

The fixed overhead spending variance is the difference between actual fixed overhead cost and budgeted fixed overhead cost.

Assembly line workers at Thompson Manufacturing worked a total of 8,800 direct labor hours to produce 36,000 units. The standard for producing one unit is 15 minutes at a wage rate of $10. If the actual wage rate was $10.50 per direct labor hour, Thompson’s direct labor efficiency variance is

Which of the following is not a factor that managers use in deciding whether to investigate a variance?

The master budget is an example of a

The direct materials price variance is calculated using which of the three amounts?

If the actual price of direct materials is $200 and the standard price of the direct materials is $180,

Variances are labeled as

Backyard Creations purchased 7,200 feet of copper tubing at a price of $2.60 per foot and used 7,500 feet during the period.The standard price of the copper tubing was $2.70 per foot.What is Backyard Creations' direct materials price variance for the period?

Why is the direct materials price variance based on the quantity of materials purchased,but the direct materials quantity variance on the quantity of materials used?

Normally,managers will not see many fixed overhead spending variances because

Which of the following is not an explanation for a favorable variable overhead spending variance?

The difference between actual sales volume and budgeted sales volume has an effect on

The direct labor rate variance is part of the direct labor flexible budget variance that arises when the actual wage rate differs from the standard wage rate.

Accounting As a Tool for Management

Cost Behavior and Cost Estimation Summary of Questions by Objectives and Blooms Taxonomy

Cost-Volume-Profit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting

Activity-Based Costing and Activity Based Management

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralizing and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

Statement of Cash Flows

Topic Focus: Process Costing

Topic Focus Variable and Absorption Costing

Topic Focus Standard Costing Systems

Topic Focus Customer Profitability

Filters