Question 1

A favorable variance has a debit balance and is a contra revenue.

Accepted Answer

A) True 
 B)False

Question 2

A new factory manager was hired for a company that was experiencing slow production rates and lower production volumes than demanded by management. Upon investigation, the manager found that the workers were poorly motivated and not closely supervised. Midway through the quarter, an incentive program was initiated, and cash bonuses were given when workers hit their production targets. Within a short time, production output increased, but the bonuses had to be charged to the direct labor budget. This could produce a(n) ________.

Accepted Answer

A)  unfavorable direct materials cost variance 
B)  unfavorable direct materials efficiency variance 
C)  favorable direct labor efficiency variance 
D)  favorable direct labor cost variance 
A)  unfavorable direct materials cost variance 
B)  unfavorable direct materials efficiency variance 
C)  favorable direct labor efficiency variance 
D)  favorable direct labor cost variance

Question 3

The Crockery Pottery Company completed the flexible budget analysis for the second quarter, which is given below.   Which of the following would be a correct factor to explain the sales volume variance for sales revenue?

Accepted Answer

A)  increase in sales price per unit 
B)  increase in sales volume 
C)  increase in variable cost per unit 
D)  increase in fixed costs 
A)  increase in sales price per unit 
B)  increase in sales volume 
C)  increase in variable cost per unit 
D)  increase in fixed costs

Question 4

A favorable flexible budget variance in sales revenue suggests a(n) ________.

Accepted Answer

A)  increase in sales price per unit 
B)  increase in volume 
C)  decrease in variable cost per unit 
D)  decrease in fixed costs 
A)  increase in sales price per unit 
B)  increase in volume 
C)  decrease in variable cost per unit 
D)  decrease in fixed costs

Question 5

When using management by exception, which of the following variances would NOT affect the production manager?

Accepted Answer

A)  direct materials efficiency 
B)  variable overhead efficiency 
C)  direct labor cost 
D)  direct labor efficiency 
A)  direct materials efficiency 
B)  variable overhead efficiency 
C)  direct labor cost 
D)  direct labor efficiency

Question 6

Palmer Productions uses a standard cost system. On December 31, the account balances include the following:
Sales Revenues: $750,000
Cost of Goods Sold (standard costing): $400,500
Selling & Administrative expenses: $150,000
Variances:
 $$\begin{array} { | l | r | c | } 
\hline \text { Sales revenue variance } & \$ 6,000 & \text { F } \
\hline \text { Direct materials cost variance } & 400 & \text { U } \
\hline \text { Direct materials efficiency variance } & 375 & \text { F } \
\hline \text { Direct labor cost variance } & 675 & \text { U } \
\hline \text { Direct labor efficiency variance } & 150 & \text { F } \
\hline \text { Variable overhead cost variance } & 250 & \text { U } \
\hline \text { Variable overhead efficiency variance } & 800 & \text { F } \
\hline \text { Fixed overhead cost variance } & 420 & \text { U } \
\hline \text { Fixed overhead volume variance } & 100 & \text { F } \
\hline
\end{array}$$ Prepare a multi-step, standard cost income statement.

Accepted Answer

None

Question 7

A favorable direct materials cost variance occurs when the actual direct materials cost incurred is less than the standard direct materials cost.

Accepted Answer

A) True 
 B)False

Question 8

When using management by exception, managers investigate only those variances that are unfavorable.

Accepted Answer

A) True 
 B)False

Question 9

Andrea, a production manager for Akim Manufacturing, is investigating variances that are greater than 10% of the budgeted amounts. Andrea is engaging in ________.

Accepted Answer

A)  management by exception 
B)  benchmarking 
C)  ABC costing 
D)  lean accounting 
A)  management by exception 
B)  benchmarking 
C)  ABC costing 
D)  lean accounting

Question 10

Based on the following, what is the total fixed overhead variance for the total product cost flexible budget variance?

Accepted Answer

A)  $650 F 
B)  $425 F 
C)  $350 U 
D)  $725 U 
A)  $650 F 
B)  $425 F 
C)  $350 U 
D)  $725 U

Question 11

The sales volume variance is the difference between the ________.

Accepted Answer

A)  actual results and the expected results in the flexible budget for the actual units sold 
B)  expected results in the flexible budget for the actual units sold and the static budget 
C)  static budget and actual amounts due to differences in sales price 
D)  flexible budget and static budget due to differences in fixed costs 
A)  actual results and the expected results in the flexible budget for the actual units sold 
B)  expected results in the flexible budget for the actual units sold and the static budget 
C)  static budget and actual amounts due to differences in sales price 
D)  flexible budget and static budget due to differences in fixed costs

Question 12

Home Decor Company manufactures special metallic materials for luxury homes that require highly skilled labor. Home Decor uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 3 pounds per unit; $3 per pound
Direct labor: 4 hours per unit; $16 per hour
Home Decor produced 4000 units during the quarter. At the end of the quarter, an examination of the labor costs records showed that the company used 25,000 direct labor hours and actual total direct labor costs were $372,000. What is the direct labor cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

Accepted Answer

A)  $28,000 Favorable 
B)  $256,000 Favorable 
C)  $256,000 Unfavorable 
D)  $28,000 Unfavorable 
A)  $28,000 Favorable 
B)  $256,000 Favorable 
C)  $256,000 Unfavorable 
D)  $28,000 Unfavorable

Question 13

The following information relates to Tablerock Manufacturing's overhead costs for the month:
 $$\begin{array} { | l | l | } 
\hline \text { Static budget variable overhead } & \$ 14,200 \
\hline \text { Static budget fixed overhead } & \$ 5,600 \
\hline \text { Static budget direct labor hours } & 1,000 \text { hours } \
\hline \text { Static budget number of units } & 5,000 \text { units } \
\hline
\end{array}$$ Tablerock allocates variable manufacturing overhead to production based on standard direct labor hours.
Tablerock reported the following actual results for last month: actual variable overhead, $14,500; actual fixed overhead, $5,400; actual production of 4,700 units at 0.22 direct labor hours per unit. The standard direct labor time is 0.20 direct labor hours per unit.
Compute the variable overhead cost variance. (Round intermediate calculations to two decimal places and the answer to the nearest dollar.)

Accepted Answer

@#IMG-DLM& 
@#IMG-DLM& 
** 4,700 units produced ×

Question 14

Seaworthy Designs manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Seaworthy uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 4 pounds per unit; $6 per pound
Direct labor: 2 hours per unit; $19 per hour
During the first quarter, Seaworthy produced 2000 units of this product. Actual direct materials and direct labor costs were $66,000 and $326,000, respectively.
For the purpose of preparing the flexible budget, what is the total standard direct labor cost at a production volume of 2000 units?

Accepted Answer

A)  $38,000 
B)  $66,000 
C)  $76,000 
D)  $326,000 
A)  $38,000 
B)  $66,000 
C)  $76,000 
D)  $326,000

Question 15

Marshall Company uses a standard cost system. Variable overhead costs are allocated based on direct labor hours. In the first quarter, Marshall had a favorable efficiency variance for variable overhead costs. Which of the following scenarios is a reasonable explanation for this variance?

Accepted Answer

A)  The actual number of direct labor hours was lower than the budgeted hours. 
B)  The actual variable overhead costs were higher than the budgeted costs. 
C)  The actual variable overhead costs were lower than the budgeted costs. 
D)  The actual number of direct labor hours was higher than the budgeted hours. 
A)  The actual number of direct labor hours was lower than the budgeted hours. 
B)  The actual variable overhead costs were higher than the budgeted costs. 
C)  The actual variable overhead costs were lower than the budgeted costs. 
D)  The actual number of direct labor hours was higher than the budgeted hours.

Question 16

The static budget is used to compute flexible budget variances as well as cost and efficiency variances for direct materials and direct labor.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following best describes a standard?

Accepted Answer

A)  a sales price, cost, or quantity that is expected under normal conditions 
B)  costs incurred to produce a product 
C)  cost variance 
D)  actual sales price, cost, or quantity 
A)  a sales price, cost, or quantity that is expected under normal conditions 
B)  costs incurred to produce a product 
C)  cost variance 
D)  actual sales price, cost, or quantity

Question 18

Unfavorable variances are subtracted from each other to arrive at a favorable variance.

Accepted Answer

A) True 
 B)False

Question 19

A company's production department was experiencing a high defect rate on the assembly line, which was slowing down production and causing a higher waste of valuable direct materials. The production manager decided to recruit some highly skilled production workers from another company to bring down the defect rate. This would produce a(n) ________.

Accepted Answer

A)  unfavorable direct materials cost variance 
B)  unfavorable direct labor cost variance 
C)  unfavorable direct labor efficiency variance 
D)  unfavorable direct materials efficiency variance 
A)  unfavorable direct materials cost variance 
B)  unfavorable direct labor cost variance 
C)  unfavorable direct labor efficiency variance 
D)  unfavorable direct materials efficiency variance

Question 20

The variable overhead cost variance measures how well the business ________.

Accepted Answer

A)  keeps unit costs of variable overhead inputs within standard. 
B)  uses its variable overhead inputs. 
C)  keeps fixed overhead within standard. 
D)  explains why fixed overhead is under allocated or overallocated 
A)  keeps unit costs of variable overhead inputs within standard. 
B)  uses its variable overhead inputs. 
C)  keeps fixed overhead within standard. 
D)  explains why fixed overhead is under allocated or overallocated

Exam 23: Flexible Budgets and Standard Cost Systems

A favorable variance has a debit balance and is a contra revenue.

The Crockery Pottery Company completed the flexible budget analysis for the second quarter, which is given below. Which of the following would be a correct factor to explain the sales volume variance for sales revenue?

A favorable flexible budget variance in sales revenue suggests a(n) ________.

When using management by exception, which of the following variances would NOT affect the production manager?

A favorable direct materials cost variance occurs when the actual direct materials cost incurred is less than the standard direct materials cost.

When using management by exception, managers investigate only those variances that are unfavorable.

Andrea, a production manager for Akim Manufacturing, is investigating variances that are greater than 10% of the budgeted amounts. Andrea is engaging in ________.

Based on the following, what is the total fixed overhead variance for the total product cost flexible budget variance?

The sales volume variance is the difference between the ________.

Marshall Company uses a standard cost system. Variable overhead costs are allocated based on direct labor hours. In the first quarter, Marshall had a favorable efficiency variance for variable overhead costs. Which of the following scenarios is a reasonable explanation for this variance?

The static budget is used to compute flexible budget variances as well as cost and efficiency variances for direct materials and direct labor.

Which of the following best describes a standard?

Unfavorable variances are subtracted from each other to arrive at a favorable variance.

The variable overhead cost variance measures how well the business ________.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based Just-In-Time

Cost Volume Profit Analysis

Variable Costing

Master Budgets

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Understanding Accounting Information Systems and their Components

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