Question 1

An unfavorable sales volume variance in operating income suggests a(n)________.

Accepted Answer

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

Question 2

Based on the following,what is the total direct labor variance?

Accepted Answer

A) $50 F 
B) $450 U 
C) $500 F 
D) $50 U 
A) $50 F 
B) $450 U 
C) $500 F 
D) $50 U

Question 3

Companies conduct time-and-motion studies and use benchmarks from other companies when developing standards.

Accepted Answer

A) True 
 B)False

Question 4

Mermaid Outfitters projected sales of 78,000 units for the year at a unit sales price of $15.00.Actual sales for the year were 70,000 units at $15.00 per unit.Variable costs were budgeted at $4.50 per unit,and the actual variable cost was $4.80 per unit.Budgeted fixed costs totaled $376,000,while actual fixed costs amounted to $400,000.What is the sales volume variance for operating income?

Accepted Answer

A) $39,000 unfavorable 
B) $84,000 unfavorable 
C) $84,000 favorable 
D) $45,000 unfavorable 
A) $39,000 unfavorable 
B) $84,000 unfavorable 
C) $84,000 favorable 
D) $45,000 unfavorable

Question 5

The efficiency variance measures ________.

Accepted Answer

A) the difference between the quantity used by the company and the quantity used by its competitors 
B) the change in quantities used over time 
C) how well the business uses its materials or human resources 
D) how quickly direct materials are processed into finished goods 
A) the difference between the quantity used by the company and the quantity used by its competitors 
B) the change in quantities used over time 
C) how well the business uses its materials or human resources 
D) how quickly direct materials are processed into finished goods

Question 6

The purchasing manager was able to bring down the cost of direct materials by purchasing direct materials of a slightly lower grade quality than the company had used previously.The lower grade of direct materials,however,meant a higher defect rate on the assembly line and higher wastage of direct materials during production,which in turn lowered operating income.This would have led to 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 7

A company is analyzing its month-end results by comparing it to both static and flexible budgets.During the previous month,the actual fixed costs were lower than the expected fixed costs as per the static budget.This difference results in a(n)________.

Accepted Answer

A) unfavorable flexible budget variance for fixed costs 
B) favorable sales volume variance for fixed costs 
C) favorable flexible budget variance for fixed costs 
D) unfavorable sales volume variance for fixed costs 
A) unfavorable flexible budget variance for fixed costs 
B) favorable sales volume variance for fixed costs 
C) favorable flexible budget variance for fixed costs 
D) unfavorable sales volume variance for fixed costs

Question 8

Which of the following is an example of a direct materials cost standard?

Accepted Answer

A) $40 per direct labor hour 
B) 50 square feet per unit 
C) $0.95 per square foot 
D) 6 direct labor hours per unit 
A) $40 per direct labor hour 
B) 50 square feet per unit 
C) $0.95 per square foot 
D) 6 direct labor hours per unit

Question 9

The static budget,at the beginning of the month,for Redwyne Company follows: Static budget:
Sales volume: 2,000 units; Sales price: $\$ 50.00$ per unit 
Variable costs: $\$ 14.00$ per unit; Fixed costs: $\$ 25,000$ per month 
Operating income: $\$ 47,000$

Actual results, at the end of the month, follows:
Actual results:
Sales volume: 1,900 units; Sales price: $\$ 58.50$ per unit 
Variable costs: $\$ 16.00$ per unit; Fixed costs: $\$ 33,000$ per month 
Operating income: $\$ 47,750$
Calculate the flexible budget variance for variable costs.

Accepted Answer

A) $30,400 U 
B) $4,350 U 
C) $3,800 U 
D) $26,600 F 
A) $30,400 U 
B) $4,350 U 
C) $3,800 U 
D) $26,600 F

Question 10

When recording direct materials usage,what does an unfavorable direct materials efficiency variance represent? Will this variance have a debit or credit balance?

Accepted Answer

An unfavorable direct materials efficien

Question 11

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing wastage of valuable direct materials.The production manager decided to recruit some highly skilled production workers from another company to bring down the defect rate but was worried that the higher wages of these workers might negatively affect operating income.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 12

Clement Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Clement 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; $4 per pound
Direct labor: 4 hours per unit; $17 per hour
Clement produced 5,000 units during the quarter.At the end of the quarter,an examination of the labor costs records showed that the company used 23,000 direct labor hours and actual total direct labor costs were $390,000.The direct labor efficiency variance was $51,000 U.Which of the following is a logical explanation for this variance?

Accepted Answer

A) The company used more labor hours than allowed by the standards. 
B) The company paid a higher cost per hour for labor than allowed by the standards. 
C) The company used a higher quantity of direct materials than allowed by the standards. 
D) The company paid a higher cost for the direct materials than allowed by the standards. 
A) The company used more labor hours than allowed by the standards. 
B) The company paid a higher cost per hour for labor than allowed by the standards. 
C) The company used a higher quantity of direct materials than allowed by the standards. 
D) The company paid a higher cost for the direct materials than allowed by the standards.

Question 13

Which of the following is the correct formula for measuring a cost variance?

Accepted Answer

A) Cost Variance = (Actual Cost + Standard Cost)/ Actual Quantity 
B) Cost Variance = (Actual Cost - Standard Cost)× Actual Quantity 
C) Cost Variance = (Actual Cost + Standard Cost)+ Actual Quantity 
D) Cost Variance = (Actual Cost - Standard Cost)- Actual Quantity 
A) Cost Variance = (Actual Cost + Standard Cost)/ Actual Quantity 
B) Cost Variance = (Actual Cost - Standard Cost)× Actual Quantity 
C) Cost Variance = (Actual Cost + Standard Cost)+ Actual Quantity 
D) Cost Variance = (Actual Cost - Standard Cost)- Actual Quantity

Question 14

The Maine Oyster Company completed the flexible budget analysis for the second quarter,which is given below.   Which of the following statements would be a correct analysis of the flexible budget variance for sales revenue?

Accepted Answer

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

Question 15

Melissa Antiques Company has collected the following data for one of its products: $$\begin{array} { | l | l | } 
\hline \text { Direct materials standard (3 pounds @ 1/lb.) } & \$ 3 \text { per unit } \
\hline \text { Direct materials flexible budget variance - unfavorable } & \$ 15,500 \
\hline \text { Actual direct materials used } & 101,000 \text { pounds } \
\hline \text { Actual units produced } & 18,000 \text { units } \
\hline
\end{array}$$ What is the direct materials efficiency variance?

Accepted Answer

A) $18,000 U 
B) $47,000 F 
C) $47,000 U 
D) $18,000 F 
A) $18,000 U 
B) $47,000 F 
C) $47,000 U 
D) $18,000 F

Question 16

To compute the variable overhead cost variance,first compute the difference between actual cost and standard cost.Then,multiple this difference by standard quantity.

Accepted Answer

A) True 
 B)False

Question 17

A static budget presents financial data at multiple levels of sales volume.

Accepted Answer

A) True 
 B)False

Question 18

For each of the following variances,state which manager is most likely to be responsible for the variance.
 $$\begin{array} { | l | l | } 
\hline \text { Variance } & \text { Responsible Manager } \
\hline \text { Direct Materials Efficiency } & \
\hline \text { Direct Labor Cost } & \
\hline \text { Variable Overhead } & \
\text { Efficiency } & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline \t

Question 19

Under a standard cost system,the journal entry to record direct labor includes ________.

Accepted Answer

A) a debit for standard direct labor quantity for actual production times standard direct labor cost per hour 
B) a credit for standard quantity usage for actual production times actual cost per hour 
C) a debit for actual quantity times standard cost per hour 
D) a credit for standard quantity for actual production times standard cost per hour 
A) a debit for standard direct labor quantity for actual production times standard direct labor cost per hour 
B) a credit for standard quantity usage for actual production times actual cost per hour 
C) a debit for actual quantity times standard cost per hour 
D) a credit for standard quantity for actual production times standard cost per hour

Question 20

Sinclair Manufacturing uses a standard cost system.The T-account for manufacturing overhead is shown below:
 $$\begin{array} { c } 
\text { Manufacturing overhead } \
\hline\begin{array}{l|l}
95,000 \
&93,000
\end{array}\end{array}$$ In addition to the above,Sinclair calculated the following overhead variances:
Variable overhead cost variance: $5,000 F
Variable overhead efficiency variance: $4,850 U
Fixed overhead cost variance: $1,200 F
Fixed overhead volume variance: $3,350 U
Prepare the journal entry to close the manufacturing overhead account and record the overhead variances.

Accepted Answer

\[\begin{array} { | l | r | r | } 
\hlin

An unfavorable sales volume variance in operating income suggests a(n)________.

Based on the following,what is the total direct labor variance?

Companies conduct time-and-motion studies and use benchmarks from other companies when developing standards.

The efficiency variance measures ________.

A company is analyzing its month-end results by comparing it to both static and flexible budgets.During the previous month,the actual fixed costs were lower than the expected fixed costs as per the static budget.This difference results in a(n)________.

Which of the following is an example of a direct materials cost standard?

When recording direct materials usage,what does an unfavorable direct materials efficiency variance represent? Will this variance have a debit or credit balance?

Which of the following is the correct formula for measuring a cost variance?

The Maine Oyster Company completed the flexible budget analysis for the second quarter,which is given below. Which of the following statements would be a correct analysis of the flexible budget variance for sales revenue?

To compute the variable overhead cost variance,first compute the difference between actual cost and standard cost.Then,multiple this difference by standard quantity.

A static budget presents financial data at multiple levels of sales volume.

For each of the following variances,state which manager is most likely to be responsible for the variance. Variance Responsible Manager Direct Materials Efficiency Direct Labor Cost Variable Overhead Efficiency

Under a standard cost system,the journal entry to record direct labor includes ________.

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, and Quality Management Systems

Cost-Volume-Profit Analysis

Variable Costing

Master Budgets

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Accounting Information Systems

Filters

Exam 23: Flexible Budgets and Standard Cost Systems

An unfavorable sales volume variance in operating income suggests a(n)________.

Based on the following,what is the total direct labor variance?

Companies conduct time-and-motion studies and use benchmarks from other companies when developing standards.

The efficiency variance measures ________.

A company is analyzing its month-end results by comparing it to both static and flexible budgets.During the previous month,the actual fixed costs were lower than the expected fixed costs as per the static budget.This difference results in a(n)________.

Which of the following is an example of a direct materials cost standard?

When recording direct materials usage,what does an unfavorable direct materials efficiency variance represent? Will this variance have a debit or credit balance?

Which of the following is the correct formula for measuring a cost variance?

The Maine Oyster Company completed the flexible budget analysis for the second quarter,which is given below. Which of the following statements would be a correct analysis of the flexible budget variance for sales revenue?

To compute the variable overhead cost variance,first compute the difference between actual cost and standard cost.Then,multiple this difference by standard quantity.

A static budget presents financial data at multiple levels of sales volume.

For each of the following variances,state which manager is most likely to be responsible for the variance. Variance Responsible Manager Direct Materials Efficiency Direct Labor Cost Variable Overhead Efficiency

Under a standard cost system,the journal entry to record direct labor includes ________.

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, and Quality Management Systems

Cost-Volume-Profit Analysis

Variable Costing

Master Budgets

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Accounting Information Systems

Filters