Question 1

A favorable variance results when actual costs exceed budgeted costs.

Accepted Answer

A) True 
 B)False

Question 2

Answer the following questions using the information below:
Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII estimated the following standard costs for one of their major products, the 10-gallon plastic container.
   During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25 per hour.
-June's direct material price variance is:

Accepted Answer

A) $1,960 unfavorable 
B) $600 favorable 
C) $1,360 favorable 
D) None of these answers are correct. 
A) $1,960 unfavorable 
B) $600 favorable 
C) $1,360 favorable 
D) None of these answers are correct.

Question 3

The only difference between the static budget and flexible budget is that the static budget is prepared using planned output.

Accepted Answer

A) True 
 B)False

Question 4

When standards are used to develop a budget:

Accepted Answer

A) past inefficiencies are excluded 
B) benchmarking must also be used 
C) information is available at a low cost 
D) flexible-budget amounts are difficult to determine 
A) past inefficiencies are excluded 
B) benchmarking must also be used 
C) information is available at a low cost 
D) flexible-budget amounts are difficult to determine

Question 5

Answer the following questions using the information below:
Sawyer Industries, Inc. (SII), developed standard costs for direct material and direct labor. In 2011, SII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container.
   During July, SII produced and sold 5,000 containers using 1,100 pounds of direct materials at an average cost per pound of $24 and 525 direct manufacturing labor hours at an average wage of $14.75 per hour.
-July's direct manufacturing labor efficiency variance is:

Accepted Answer

A) $375.00 unfavorable 
B) $131.25 favorable 
C) $243.75 favorable 
D) None of these answers are correct. 
A) $375.00 unfavorable 
B) $131.25 favorable 
C) $243.75 favorable 
D) None of these answers are correct.

Question 6

Variances often affect each other.

Accepted Answer

A) True 
 B)False

Question 7

Answer the following questions using the information below:
Hector'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.
  
-The actual amount spent for Material B was:

Accepted Answer

A) $29,700 
B) $30,800 
C) $30,500 
D) $30,300 
A) $29,700 
B) $30,800 
C) $30,500 
D) $30,300

Question 8

An unfavorable efficiency variance for direct manufacturing labor might indicate that:

Accepted Answer

A) work was efficiently scheduled 
B) machines were not properly maintained 
C) budgeted time standards are too lax 
D) more higher-skilled workers were scheduled than planned 
A) work was efficiently scheduled 
B) machines were not properly maintained 
C) budgeted time standards are too lax 
D) more higher-skilled workers were scheduled than planned

Question 9

Answer the following questions using the information below:
The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Wooden Figurines Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results.
        
-The flexible-budget variance for variable costs is:

Accepted Answer

A) $21,000 favorable 
B) $13,583 unfavorable 
C) $35,583 unfavorable 
D) $35,583 favorable 
A) $21,000 favorable 
B) $13,583 unfavorable 
C) $35,583 unfavorable 
D) $35,583 favorable

Question 10

A particular variance generally signals one particular problem.

Accepted Answer

A) True 
 B)False

Question 11

Nicholas Company manufacturers TVs. Some of the company's data was misplaced. Use the following information to replace the lost data:
   Required:
a. What are the respective flexible-budget revenues (A)?
b. What are the static-budget revenues (B)?
c. What are the actual variable costs (C)?
d. What is the total flexible-budget variance (D)?
e. What is the total sales-volume variance (E)?
f. What is the total static-budget variance?

Accepted Answer

a. $42,080 - $1,000 = $41,080
b. $41,080

Question 12

Answer the following questions using the information below:
Everclean Filter Corporation used the following data to evaluate their current operating system. The company sells items for $10 each and had used a budgeted selling price of $11 per unit.
  
-What is the static-budget variance of revenues?

Accepted Answer

A) $60,000 favorable 
B) $240,000 favorable 
C) $240,000 unfavorable 
D) $6,000 favorable 
A) $60,000 favorable 
B) $240,000 favorable 
C) $240,000 unfavorable 
D) $6,000 favorable

Question 13

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.
  
-The actual amount spent for direct manufacturing labor was:

Accepted Answer

A) $80,000 
B) $83,000 
C) $82,000 
D) $78,000 
A) $80,000 
B) $83,000 
C) $82,000 
D) $78,000

Question 14

Describe the purpose of variance analysis.

Accepted Answer

Variance analysis should help

Question 15

The flexible-budget variance for direct-cost inputs is subdivided into two detailed variances, the efficiency variance and the price variance.

Accepted Answer

A) True 
 B)False

Question 16

A company would NOT need to use a flexible budget if it had perfect foresight about actual output units.

Accepted Answer

A) True 
 B)False

Question 17

An unfavorable variance is conclusive evidence of poor performance.

Accepted Answer

A) True 
 B)False

Question 18

Decreasing demand for a product may create a favorable sales-volume variance.

Accepted Answer

A) True 
 B)False

Question 19

Answer the following questions using the information below:
The actual information pertains to the month of September. As part of the budgeting process, Kriger Fencing Company developed the following static budget for September. Kriger is in the process of preparing the flexible budget and understanding the results.
        
-The flexible budget will report ________ for the fixed costs.

Accepted Answer

A) $229,000 
B) $225,000 
C) $180,000 
D) $286,250 
A) $229,000 
B) $225,000 
C) $180,000 
D) $286,250

Question 20

Answer the following questions using the information below:
Caan Corporation used the following data to evaluate their current operating system. The company sells items for $20 each and used a budgeted selling price of $20 per unit.
  
-What is the static-budget variance of variable costs?

Accepted Answer

A) $200,000 favorable 
B) $50,000 unfavorable 
C) $250,000 favorable 
D) $250,000 unfavorable 
A) $200,000 favorable 
B) $50,000 unfavorable 
C) $250,000 favorable 
D) $250,000 unfavorable

A favorable variance results when actual costs exceed budgeted costs.

The only difference between the static budget and flexible budget is that the static budget is prepared using planned output.

When standards are used to develop a budget:

Variances often affect each other.

An unfavorable efficiency variance for direct manufacturing labor might indicate that:

A particular variance generally signals one particular problem.

Answer the following questions using the information below: Everclean Filter Corporation used the following data to evaluate their current operating system. The company sells items for $10 each and had used a budgeted selling price of $11 per unit. -What is the static-budget variance of revenues?

Describe the purpose of variance analysis.

The flexible-budget variance for direct-cost inputs is subdivided into two detailed variances, the efficiency variance and the price variance.

A company would NOT need to use a flexible budget if it had perfect foresight about actual output units.

An unfavorable variance is conclusive evidence of poor performance.

Decreasing demand for a product may create a favorable sales-volume variance.

Answer the following questions using the information below: Caan Corporation used the following data to evaluate their current operating system. The company sells items for $20 each and used a budgeted selling price of $20 per unit. -What is the static-budget variance of variable costs?

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

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

A favorable variance results when actual costs exceed budgeted costs.

The only difference between the static budget and flexible budget is that the static budget is prepared using planned output.

When standards are used to develop a budget:

Variances often affect each other.

An unfavorable efficiency variance for direct manufacturing labor might indicate that:

A particular variance generally signals one particular problem.

Answer the following questions using the information below: Everclean Filter Corporation used the following data to evaluate their current operating system. The company sells items for $10 each and had used a budgeted selling price of $11 per unit. -What is the static-budget variance of revenues?

Describe the purpose of variance analysis.

The flexible-budget variance for direct-cost inputs is subdivided into two detailed variances, the efficiency variance and the price variance.

A company would NOT need to use a flexible budget if it had perfect foresight about actual output units.

An unfavorable variance is conclusive evidence of poor performance.

Decreasing demand for a product may create a favorable sales-volume variance.

Answer the following questions using the information below: Caan Corporation used the following data to evaluate their current operating system. The company sells items for $20 each and used a budgeted selling price of $20 per unit. -What is the static-budget variance of variable costs?

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters