Question 1

The fixed overhead volume variance is a volume variance, not a cost variance.

Accepted Answer

A) True 
 B)False

Question 2

Match the variance to the correct definition
-Sales volume variance

Accepted Answer

A) the difference between actual results and expected results in the flexible budget for the actual units sold 
B) measures how well the business keeps unit material and labor costs within standards 
C) the difference between the expected results in the flexible budget for the actual units sold and the static budget 
D) the difference between actual results and the expected results in the static budget 
E) measures how well the business uses its materials or human resources 
A) the difference between actual results and expected results in the flexible budget for the actual units sold 
B) measures how well the business keeps unit material and labor costs within standards 
C) the difference between the expected results in the flexible budget for the actual units sold and the static budget 
D) the difference between actual results and the expected results in the static budget 
E) measures how well the business uses its materials or human resources

Question 3

When investigating variable overhead variances, management needs to determine whether cost increases were controllable or if the cost standard needs to be updated.

Accepted Answer

A) True 
 B)False

Question 4

Trull Company uses a standard cost system. Variable overhead costs are allocated based on direct labor hours. In the first quarter, Trull had a favorable cost 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 5

When using management by exception, the purchasing manager should be questioned for which of the following variances?

Accepted Answer

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

Question 6

Because it is a volume variance, the fixed overhead volume variance explains why fixed overhead is underallocated or overallocated.

Accepted Answer

A) True 
 B)False

Question 7

Setting standard costs is a function of the company's production department and does not require input from other departments.

Accepted Answer

A) True 
 B)False

Question 8

Match the variance to the correct definition
-Efficiency variance

Accepted Answer

A) the difference between actual results and expected results in the flexible budget for the actual units sold 
B) measures how well the business keeps unit material and labor costs within standards 
C) the difference between the expected results in the flexible budget for the actual units sold and the static budget 
D) the difference between actual results and the expected results in the static budget 
E) measures how well the business uses its materials or human resources 
A) the difference between actual results and expected results in the flexible budget for the actual units sold 
B) measures how well the business keeps unit material and labor costs within standards 
C) the difference between the expected results in the flexible budget for the actual units sold and the static budget 
D) the difference between actual results and the expected results in the static budget 
E) measures how well the business uses its materials or human resources

Question 9

The production manager of a company, in an effort to gain a promotion, negotiated a new labor contract with the factory employees that required them to bear a greater percentage of benefit costs than before, thus bringing down the cost of direct labor to the company. Shortly afterward, several experienced and highly skilled workers resigned, and were replaced by new employees whose work was very slow during their training period. At the end of the quarter, the company's profits fell 10%. This would produce a(n) ________.

Accepted Answer

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

Question 10

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

Accepted Answer

A)  increase in actual sales price per unit as compared to budgeted sales price 
B)  increase in number of actual units sold when compared to the expected number of units sold 
C)  increase in actual variable cost per unit as compared to expected variable cost per unit 
D)  decrease in actual fixed costs 
A)  increase in actual sales price per unit as compared to budgeted sales price 
B)  increase in number of actual units sold when compared to the expected number of units sold 
C)  increase in actual variable cost per unit as compared to expected variable cost per unit 
D)  decrease in actual fixed costs

Question 11

Favorable variances are contra expenses and therefore decrease Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 12

The management of Lawnshark Lawnmowers has calculated the following variances: $$\begin{array} { | l | r | } 
\hline \text { Direct materials cost variance } & \$ 11,000 \mathrm { U } \
\hline \text { Direct materials efficiency variance } & 37,000 \mathrm {~F} \
\hline \text { Direct labor cost variance } & 15,000 \mathrm {~F} \
\hline \text { Direct labor efficiency variance } & 13,000 \mathrm { U } \
\hline \text { Variable overhead cost variance } & 2000 \mathrm {~F} \
\hline \text { Variable overhead efficiency variance } & 6000 \mathrm {~F} \
\hline \text { Fixed overhead cost variance } & 4500 \mathrm {~F} \
\hline
\end{array}$$ What is the total variable overhead variance of the company?

Accepted Answer

A)  $4000 F 
B)  $12,500 F 
C)  $8000 F 
D)  $4500 F 
A)  $4000 F 
B)  $12,500 F 
C)  $8000 F 
D)  $4500 F

Question 13

Reflector Glass Company prepared the following static budget for the year: $$\begin{array} { | l | c | r | } 
\hline \text { Static Budget } & & \
\hline \text { Units/Volume } & & 6000 \
\hline& \text { Per Unit } \
\hline \text { Sales Revenue } & \$ 7.00 & \$ 42,000 \
\hline \text { Variable Costs } &  1.50 & \underline { 9000 }  \
\hline \text { Contribution Margin } &&33,500 \
\hline \text { Fixed Costs } & & \underline { 3000 }\
\hline \text { Operating Income/(Loss) } & & \underline { \$30,000 } \
\hline
\end{array}$$
 If a flexible budget is prepared at a volume of 9700 units, calculate the amount of operating income. The production level is within the relevant range.

Accepted Answer

A)  $30,000 
B)  $14,550 
C)  $50,350 
D)  $3000 
A)  $30,000 
B)  $14,550 
C)  $50,350 
D)  $3000

Question 14

What does the fixed overhead volume variance measure?

Accepted Answer

The fixed overhead volume variance measu

Question 15

Delicious Food Products is famous for its trail mix. The main ingredient of the trail mix is dried fruit, which Delicious purchases by the pound. In addition, the production requires a certain amount of direct labor. Delicious uses a standard cost system, and at the end of the first quarter, there was an unfavorable direct materials efficiency variance. Which of the following is a logical explanation for that variance?

Accepted Answer

A)  The production manager negotiated a lower wage package for production staff, bringing direct labor costs down. 
B)  The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of dried fruits during their training period. 
C)  The purchasing manager was able to secure a volume discount on dried fruit, purchasing the fruit for less than the amount set by standard. 
D)  The production staff changed the work flow process so that production required fewer direct labor hours. 
A)  The production manager negotiated a lower wage package for production staff, bringing direct labor costs down. 
B)  The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of dried fruits during their training period. 
C)  The purchasing manager was able to secure a volume discount on dried fruit, purchasing the fruit for less than the amount set by standard. 
D)  The production staff changed the work flow process so that production required fewer direct labor hours.

Question 16

The fixed overhead volume variance is a cost variance that explains why fixed overhead is overallocated or underallocated.

Accepted Answer

A) True 
 B)False

Question 17

The following information relates to Thomas Manufacturing's overhead costs for the month:
 $$\begin{array} { | l | l | } 
\hline \text { Static budget variable overhead } & \$ 14,200 \
\hline \text { Static budget fixed overhead } & \$ 5,600 \
\hline \text { Static budget direct labor hours } & 1,000 \text { hours } \
\hline \text { Static budget number of units } & 5,000 \text { units } \
\hline
\end{array}$$ Thomas allocates manufacturing overhead to production based on standard direct labor hours.
Thomas 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 fixed overhead volume variance.

Accepted Answer

@#IMG-DLM& * Allocated FOH = $5.60** per

Question 18

Which of the following statements about management by exception is incorrect?

Accepted Answer

A)  Managers concentrate on results that are outside the accepted parameters. 
B)  There is no need to investigate variances that are less than 20% of the budgeted amount. 
C)  Exceptions can be expressed as a percentage of a budgeted amount or a dollar amount. 
D)  Many companies use a combination of percentages and dollar amounts. 
A)  Managers concentrate on results that are outside the accepted parameters. 
B)  There is no need to investigate variances that are less than 20% of the budgeted amount. 
C)  Exceptions can be expressed as a percentage of a budgeted amount or a dollar amount. 
D)  Many companies use a combination of percentages and dollar amounts.

Question 19

Midnight Sun Outfitters projected sales of 76,000 units for the year at a unit sales price of $12.00. Actual sales for the year were 72,000 units at $15.00 per unit. Variable costs were budgeted at $4.50 per unit, and the actual variable cost was $4.75 per unit. Budgeted fixed costs totaled $378,000, while actual fixed costs amounted to $410,000. What is the sales volume variance for operating income?

Accepted Answer

A)  $136,000 unfavorable 
B)  $30,000 unfavorable 
C)  $30,000 favorable 
D)  $166,000 unfavorable 
A)  $136,000 unfavorable 
B)  $30,000 unfavorable 
C)  $30,000 favorable 
D)  $166,000 unfavorable

Question 20

Hercules Sports Equipment Company projected sales of 80,000 units at a unit sales price of $12 for the year. Actual sales for the year were 77,000 units at $15 per unit. Variable costs were budgeted at $2 per unit, and the actual amount was $5 per unit. Budgeted fixed costs totaled $388,000, while actual fixed costs amounted to $436,000. What is the flexible budget variance for variable costs?

Accepted Answer

A)  $240,000 unfavorable 
B)  $231,000 unfavorable 
C)  $231,000 favorable 
D)  $240,000 favorable 
A)  $240,000 unfavorable 
B)  $231,000 unfavorable 
C)  $231,000 favorable 
D)  $240,000 favorable

The fixed overhead volume variance is a volume variance, not a cost variance.

Match the variance to the correct definition -Sales volume variance

When investigating variable overhead variances, management needs to determine whether cost increases were controllable or if the cost standard needs to be updated.

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

When using management by exception, the purchasing manager should be questioned for which of the following variances?

Because it is a volume variance, the fixed overhead volume variance explains why fixed overhead is underallocated or overallocated.

Setting standard costs is a function of the company's production department and does not require input from other departments.

Match the variance to the correct definition -Efficiency variance

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

Favorable variances are contra expenses and therefore decrease Cost of Goods Sold.

What does the fixed overhead volume variance measure?

The fixed overhead volume variance is a cost variance that explains why fixed overhead is overallocated or underallocated.

Which of the following statements about management by exception is incorrect?

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

Filters

Exam 23: Flexible Budgets and Standard Cost Systems

The fixed overhead volume variance is a volume variance, not a cost variance.

Match the variance to the correct definition -Sales volume variance

When investigating variable overhead variances, management needs to determine whether cost increases were controllable or if the cost standard needs to be updated.

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

When using management by exception, the purchasing manager should be questioned for which of the following variances?

Because it is a volume variance, the fixed overhead volume variance explains why fixed overhead is underallocated or overallocated.

Setting standard costs is a function of the company's production department and does not require input from other departments.

Match the variance to the correct definition -Efficiency variance

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

Favorable variances are contra expenses and therefore decrease Cost of Goods Sold.

What does the fixed overhead volume variance measure?

The fixed overhead volume variance is a cost variance that explains why fixed overhead is overallocated or underallocated.

Which of the following statements about management by exception is incorrect?

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

Filters