Question 1

Which of the following is a reason companies use standard costs?

Accepted Answer

A) to enhance customer loyalty 
B) to set sales prices of products and services 
C) to share best practices with other companies 
D) to ensure the accuracy of the financial records 
A) to enhance customer loyalty 
B) to set sales prices of products and services 
C) to share best practices with other companies 
D) to ensure the accuracy of the financial records

Question 2

Which of the following is an example of a direct materials efficiency 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 3

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

Accepted Answer

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

Question 4

The static budget,at the beginning of the month,for Bob's Deep Sea Fishing Company follows:Static budget:
Sales volume: 2,000 units; Sales price: $\$ 50.00$ per unit
Variable costs: $\$ 14.00$ per unit; Fixed costs: $\$ 25,200$ per month
Operating income: $\$ 46,800$

Actual results, at the end of the month, follows:
Actual results:
Sales volume: 1,900 units; Sales price: $\$ 59.00$ per unit
Variable costs: $\$ 16$ per unit; Fixed costs: $\$ 34,300$ per month
Operating income: $\$ 47,400$
Calculate the flexible budget variance for operating income.

Accepted Answer

A) $3,600 U 
B) $3,600 F 
C) $4,200 F 
D) $17,100 F 
A) $3,600 U 
B) $3,600 F 
C) $4,200 F 
D) $17,100 F

Question 5

The management of Drum Lawnmowers has calculated the following variances: $$\begin{array} { | l | r | } 
\hline \text { Direct materials cost variance } & \$ 10,000 \mathrm { U } \
\hline \text { Direct materials efficiency variance } & 35,000 \mathrm {~F} \
\hline \text { Direct labor cost variance } & 16,000 \mathrm {~F} \
\hline \text { Direct labor efficiency variance } & 12,000 \mathrm { U } \
\hline \text { Variable overhead cost variance } & 3,000 \mathrm {~F} \
\hline \text { Variable overhead efficiency variance } & 6,500 \mathrm {~F} \
\hline \text { Fixed overhead cost variance } & 4,000 \mathrm {~F} \
\hline
\end{array}$$ When determining the total production cost flexible budget variance,what is the total fixed overhead variance of the company?

Accepted Answer

A) $6,500 F 
B) $4,000 F 
C) $10,500 F 
D) $5,500 F 
A) $6,500 F 
B) $4,000 F 
C) $10,500 F 
D) $5,500 F

Question 6

In a standard cost system,the standard overhead allocation rate replaces the predetermined
overhead allocation rate but the concept is the same.

Accepted Answer

A) True 
 B)False

Question 7

Alpine Productions uses a standard cost system for recording transactions.Alpine reported the following data for the year ended December 31: Sales revenues: $800,000
Cost of goods sold (standard costing): $382,000
Selling & admin expenses: $105,000
Variances:
$$\begin{array} { | l | r | c | } 
\hline \text { Sales revenue variance } & \$ 4,100 & \mathrm {~F} \
\hline \text { Direct materials cost variance } & 30 & \mathrm { U } \
\hline \text { Direct materials efficiency variance } & 300 & \mathrm {~F} \
\hline \text { Direct labor cost variance } & 65 & \mathrm { U } \
\hline \text { Direct labor efficiency variance } & 10 & \mathrm {~F} \
\hline \text { Variable overhead cost variance } & 300 & \mathrm { U } \
\hline \text { Variable overhead efficiency variance } & 80 & \mathrm {~F} \
\hline \text { Fixed overhead cost variance } & 430 & \mathrm { U } \
\hline \text { Fixed overhead volume variance } & 100 & \mathrm {~F} \
\hline
\end{array}$$ What is the standard net operating income?

Accepted Answer

A) $312,665 
B) $316,765 
C) $421,765 
D) $313,000 
A) $312,665 
B) $316,765 
C) $421,765 
D) $313,000

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

List three ways in which using a standard cost system helps managers.

Accepted Answer

1.Prepare the master budget.
2

Question 10

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 11

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

Accepted Answer

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

Question 12

Which of the following will result in an unfavorable direct materials efficiency variance?

Accepted Answer

A) when the actual cost per unit of direct materials exceeds the standard cost of direct materials 
B) when the actual cost per unit of direct materials is less than the standard cost per unit of direct materials 
C) when the actual quantity of direct materials used per unit exceeds the standard quantity of direct materials allowed per unit 
D) when the actual quantity of direct materials used per unit is less than the standard quantity of direct materials allowed per unit 
A) when the actual cost per unit of direct materials exceeds the standard cost of direct materials 
B) when the actual cost per unit of direct materials is less than the standard cost per unit of direct materials 
C) when the actual quantity of direct materials used per unit exceeds the standard quantity of direct materials allowed per unit 
D) when the actual quantity of direct materials used per unit is less than the standard quantity of direct materials allowed per unit

Question 13

A company is analyzing its month-end results by comparing it to both static and flexible budgets.During the previous month,the actual sales volume was lower than the expected sales volume as per the static budget.This difference results in an unfavorable ________.

Accepted Answer

A) flexible budget variance for variable costs 
B) sales volume variance for variable costs 
C) flexible budget variance for sales revenue 
D) sales volume variance for sales revenue 
A) flexible budget variance for variable costs 
B) sales volume variance for variable costs 
C) flexible budget variance for sales revenue 
D) sales volume variance for sales revenue

Question 14

An unfavorable flexible budget variance in operating income might be due to a(n)________.

Accepted Answer

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

Question 15

A favorable sales volume variance in variable costs 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 16

Managers should look at any variance that is significant.

Accepted Answer

A) True 
 B)False

Question 17

Discount Sales Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Discount Sales 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 18

Fisher Manufacturing uses a standard cost system.Data on standard costs and actual costs are as follows:
 $$\begin{array} { l l l } 
\text { Direct materials: } & \text { Standard } & \text { Actual } \
\text { Direct materials units per unit of output } & 2 . 0 & 3 . 3 \
\text { Sales price per unit of direct materials } & \$ 5.00 & \$ 4.80 \
\text { Direct materials cost per unit } & \$ 10.00 & \$ 16.00 \
\text { Number of units } & 3 , 0 0 0  &  3 , 0 0 0  \
\text { Direct materials cost } & \$ 30,000 & \$ 48,000
\end{array}$$ $\begin{array}{lll}
\text { Direct labor: } & \text { Standard } & \text { Actual } \
\text { Hours per unit } & 0.5 & 0.4 \
\text { Cost per hour } & \$ 18.00 & \$ 20.00 \
\text { Labor cost per unit } & \$ 9.00 & \$ 8.00 \
\text { Number of units } & 3,000 & 3,000 \
\text { Direct labor cost } & \$ 27,000 & \$ 24,000
\end{array}$
 $$\begin{array} { l l l } 
\text { Variable overhead* } & \text { Standard } & \text { Actual } \
\text { Hours per unit } & 0 . 5  &  0 . 4  \
\text { Cost per hour } & \$ 30.00 & \$ 29.00 \
\text { Variable overhead cost per unit } & \$ 15.00 & \$ 11.60 \
\text { Number of units } & 3 , 0 0 0& 3 , 0 0 0\
\text { Variable overhead cost } & \$ 45,000 & \$ 34,800
\end{array}$$ *allocated based on direct labor hours
 $$\begin{array} { l l l } 
\text { Fixed overhead* } & \text { Standard } & \text { Actual } \
\text { Hours per unit } & 0.5 & 0.4 \
\text { Cost per hour } & \$ 10.00 & \$ 9.00 \
\text { Fixed overhead cost per unit } & \$ 5.00 & \$ 3.60 \
\text { Number of units } & 3 , 0 0 0  & 3 , 0 0 0 \
\text { Fixed overhead cost } & \$ 15,000 & \$ 10,000
\end{array}$$ *allocated on the basis of direct labor hours
Give the journal entry to transfer the cost of units from Work-in-Process Inventory to Finished Goods Inventory.

Accepted Answer

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

Question 19

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 10%. 
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 10%. 
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 20

The total fixed overhead variance is the total of the variable overhead cost variance and fixed overhead volume variance.

Accepted Answer

A) True 
 B)False

Exam 23: Flexible Budgets and Standard Cost Systems

Which of the following is a reason companies use standard costs?

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

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

In a standard cost system,the standard overhead allocation rate replaces the predetermined overhead allocation rate but the concept is the same.

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

List three ways in which using a standard cost system helps managers.

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

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

Which of the following will result in an unfavorable direct materials efficiency variance?

A company is analyzing its month-end results by comparing it to both static and flexible budgets.During the previous month,the actual sales volume was lower than the expected sales volume as per the static budget.This difference results in an unfavorable ________.

An unfavorable flexible budget variance in operating income might be due to a(n)________.

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

Managers should look at any variance that is significant.

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

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

The total fixed overhead variance is the total of the variable overhead cost variance and fixed overhead volume variance.

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