Question 1

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 2

Which of the following should be considered when analyzing manufacturing overhead variances?

Accepted Answer

A) whether costs incurred are product costs or period costs 
B) whether direct materials costs are higher than standard costs 
C) whether certain manufacturing overhead costs are controllable 
D) whether direct labor costs can be reduced 
A) whether costs incurred are product costs or period costs 
B) whether direct materials costs are higher than standard costs 
C) whether certain manufacturing overhead costs are controllable 
D) whether direct labor costs can be reduced

Question 3

Kevin Couriers Company prepared the following static budget for the year: $$\begin{array} { | l | r | r | } 
\hline \text { Static Budget } & & \
\hline \text { Units/Volume } & & 5,000 \
\hline \text { Sales Revenue } & \text { Per Unit } & \
\hline \text { Variable Costs } & \$ 7.00 & \$ 35,000 \
\hline \text { Contribution Margin } & 1.00 & \underline { 5,000 } \
\hline \text { Fixed Costs } & & 30,000 \
\hline \text { Operating Income/(Loss) } & & \$ , \$ 27,000 \
\hline
\end{array}$$ If a flexible budget is prepared at a volume of 7,800,calculate the amount of operating income.The production level is within the relevant range.

Accepted Answer

A) $43,800 
B) $27,000 
C) $7,800 
D) $3,000 
A) $43,800 
B) $27,000 
C) $7,800 
D) $3,000

Question 4

A variance is the difference between an actual amount and the budgeted amount.

Accepted Answer

A) True 
 B)False

Question 5

Delicious Food Products is famous for its frosted fruit cake.The main ingredient of the cake 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 a favorable direct materials cost 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 worked at a much slower pace 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 there was less wastage of direct materials during production. 
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 worked at a much slower pace 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 there was less wastage of direct materials during production.

Question 6

The static budget,at the beginning of the month,for Singleton Company follows: Static budget:
Sales volume: 1,000 units; Sales price: $\$ 70.00$ per unit
Variable costs: $\$ 32.00$ per unit; Fixed costs: $\$ 35,500$ per month 
Operating income: $\$ 2,500$

Actual results, at the end of the month, follows:
Actual results:
Sales volume: 980 units; Sales price: $\$ 74.00$ per unit
 Variable costs: $\$ 35.00$ per unit; Fixed costs: $\$ 33,300$ per month 
Operating income: $\$ 4,920$

Calculate the flexible budget variance for fixed costs.

Accepted Answer

A) $2,200 U 
B) $2,200 F 
C) $0 
D) $3,180 F 
A) $2,200 U 
B) $2,200 F 
C) $0 
D) $3,180 F

Question 7

Allen Company manufactures staplers.The budgeted sales price is $14.00 per stapler,the variable costs are $3.00 per stapler,and budgeted fixed costs are $10,000.What is the budgeted operating income for 4,300 staplers?

Accepted Answer

A) $47,300 
B) $37,300 
C) $60,200 
D) $12,900 
A) $47,300 
B) $37,300 
C) $60,200 
D) $12,900

Question 8

A standard cost system helps management set performance standards.

Accepted Answer

A) True 
 B)False

Question 9

An unfavorable flexible budget variance in variable costs suggests 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 10

Cedar Designs Company,a custom cabinet manufacturing company,is setting standard costs for one of its products.The main material is cedar wood,sold by the square foot.The current cost of cedar wood is $4.00 per square foot from the supplier.Delivery costs are $0.20 per square foot.Carpenters' wages are $20.00 per hour.Payroll costs are $3.00 per hour,and benefits are $6.00 per hour.How much is the direct labor standard cost per hour?

Accepted Answer

A) $20.00 
B) $9.00 
C) $23.00 
D) $29.00 
A) $20.00 
B) $9.00 
C) $23.00 
D) $29.00

Question 11

In a standard cost system,the manufacturing overhead allocated to production equals the standard overhead allocation rate multiplied by the standard quantity of the allocation base allowed for expected output.

Accepted Answer

A) True 
 B)False

Question 12

Austin Brands Company uses standard costs for its manufacturing division.Standards specify 0.1 direct labor hours per unit of product.At the beginning of the year,the static budget for variable overhead costs included the following data: $$\begin{array} { | l | l | } 
\hline \text { Production volume } & 6,300 \text { units } \
\hline \text { Budgeted variable overhead costs } & \$ 15,000 \
\hline \text { Budgeted direct labor hours } & 630 \text { hours } \
\hline
\end{array}$$ At the end of the year,actual data were as follows:
$$\begin{array} { | l | l | } 
\hline \text { Production volume } & 4,200 \text { units } \
\hline \text { Actual variable overhead costs } & \$ 15,000 \
\hline \text { Actual direct labor hours } & 480 \text { hours } \
\hline
\end{array}$$ What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )

Accepted Answer

A) $15,000 U 
B) $15,000 F 
C) $3,571 U 
D) $4,687 F 
A) $15,000 U 
B) $15,000 F 
C) $3,571 U 
D) $4,687 F

Question 13

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

Accepted Answer

An unfavorable direct material

Question 14

Developing efficiency standards based on best practices is called benchmarking.

Accepted Answer

A) True 
 B)False

Question 15

What do cost variances measure?

Accepted Answer

A) the difference between the cost the company pays and the cost its competitors pay 
B) the change in costs over time 
C) how well the business keeps unit costs of material and labor inputs within standards 
D) the volume discounts companies receive when ordering direct materials in large quantities 
A) the difference between the cost the company pays and the cost its competitors pay 
B) the change in costs over time 
C) how well the business keeps unit costs of material and labor inputs within standards 
D) the volume discounts companies receive when ordering direct materials in large quantities

Question 16

For each of the following cost standards,indicate which manager is responsible for the standard,and list one factor that should be used in setting the standard.
 $$\begin{array} { | l | l | l | } 
\hline \text { Cost standard } & \text { Responsible manager } & \text { Factor used in setting the standard } \
\hline \text { Direct materials } & & \& & \
\hline \text { Direct labor } & & \
& & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following cost standards,indicate...

Question 17

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 18

The total variable overhead variance is obtained by adding variable overhead cost variance and ________.

Accepted Answer

A) total manufacturing overhead variance 
B) total direct labor variance 
C) fixed overhead cost variance 
D) variable overhead efficiency variance 
A) total manufacturing overhead variance 
B) total direct labor variance 
C) fixed overhead cost variance 
D) variable overhead efficiency variance

Question 19

An unfavorable variance means more cost has been incurred than planned.

Accepted Answer

A) True 
 B)False

Question 20

Emerald Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Emerald 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; $17 per hour
During the first quarter,Emerald produced 4,000 units of this product.Actual direct materials and direct labor costs were $65,000 and $329,000,respectively.
For the purpose of preparing the flexible budget,calculate the total standard direct materials cost at a production volume of 4,000 units.

Accepted Answer

A) $96,000 
B) $65,000 
C) $16,000 
D) $24,000 
A) $96,000 
B) $65,000 
C) $16,000 
D) $24,000

Exam 23: Flexible Budgets and Standard Cost Systems

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

Which of the following should be considered when analyzing manufacturing overhead variances?

A variance is the difference between an actual amount and the budgeted amount.

Allen Company manufactures staplers.The budgeted sales price is $14.00 per stapler,the variable costs are $3.00 per stapler,and budgeted fixed costs are $10,000.What is the budgeted operating income for 4,300 staplers?

A standard cost system helps management set performance standards.

An unfavorable flexible budget variance in variable costs suggests a(n)________.

In a standard cost system,the manufacturing overhead allocated to production equals the standard overhead allocation rate multiplied by the standard quantity of the allocation base allowed for expected output.

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

Developing efficiency standards based on best practices is called benchmarking.

What do cost variances measure?

For each of the following cost standards,indicate which manager is responsible for the standard,and list one factor that should be used in setting the standard. Cost standard Responsible manager Factor used in setting the standard Direct materials Direct labor

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

The total variable overhead variance is obtained by adding variable overhead cost variance and ________.

An unfavorable variance means more cost has been incurred than planned.

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