Question 1

A variance is the difference between the actual cost for the current and previous year.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is TRUE about favourable direct manufacturing labour efficiency variances?
Variant question

Accepted Answer

A) Debited to the Work-in-Process Control account 
B) Always credits 
C) Always debits 
D) Debited to the Wages Payable Control account 
A) Debited to the Work-in-Process Control account 
B) Always credits 
C) Always debits 
D) Debited to the Wages Payable Control account

Question 3

When benchmarking,it is best when management accountants simply analyse the costs and allow management to provide the insight as to why the revenues and costs differ between companies.

Accepted Answer

A) True 
 B)False

Question 4

Answer the following questions using the information below:
Cootamundra Industries (CI),developed standard costs for direct material and direct labour.In 2018,CI estimated the following standard costs for one of their major products,the 30-litre heavy-duty plastic container.
 $$\begin{array} { l l l } 
& \text { Budgeted quantity } & \text { Budgeted price } \
\text { Direct materials } & 0.20 \mathrm {~kg} & \$ 26 \text { per } \mathrm { kg } \
\text { Direct labour } & 0.10 \text { hours } & \$ 14 \text { per hour }
\end{array}$$ During July,CI produced and sold 10 000 containers using 2200 kg of direct materials at an average cost per kg of $24 and 1050 direct manufacturing labour hours at an average wage of $14.75 per hour.
-July's direct manufacturing labour price variance is:

Accepted Answer

A) $700.00 unfavourable. 
B) $787.50 unfavourable. 
C) $1487.50 favourable. 
D) None of these answers are correct. 
A) $700.00 unfavourable. 
B) $787.50 unfavourable. 
C) $1487.50 favourable. 
D) None of these answers are correct.

Question 5

Unfavourable variances occur when costs are higher,or revenues lower,than budget.

Accepted Answer

A) True 
 B)False

Question 6

Sunshine Coast Corporation currently produces sun hats in an automated process.Expected production per month is 20 000 units,direct material costs are $3.00 per unit,and manufacturing overhead costs are $46 000 per month.Manufacturing overhead is allocated based on units of production.What is the flexible budget for 10 000 and 20 000 units,respectively?

Accepted Answer

A) $53 000;$83 000 
B) $53 000;$106 000 
C) $76 000;$106 000 
D) None of these answers are correct. 
A) $53 000;$83 000 
B) $53 000;$106 000 
C) $76 000;$106 000 
D) None of these answers are correct.

Question 7

Variance analysis should be a tool to 'play the blame game.'

Accepted Answer

A) True 
 B)False

Question 8

One advantage of using standard times to develop a budget is they are simple to compile,are based solely on the past actual history,and do not require expected future changes to be taken into account.

Accepted Answer

A) True 
 B)False

Question 9

The sales-quantity variance is favourable when budgeted unit sales exceed actual unit sales.

Accepted Answer

A) True 
 B)False

Question 10

Ballarat Box Corporation currently produces cardboard boxes in an automated process.Expected production per month is 20 000 units,direct-material costs are $0.60 per unit,and manufacturing overhead costs are $9000 per month.Manufacturing overhead is allocated based on units of production.What is the flexible budget for 10 000 and 20 000 units,respectively?

Accepted Answer

A) $10 500;$16 500 
B) $10 500;$21 000 
C) $15 000;$21 000 
D) None of these answers are correct. 
A) $10 500;$16 500 
B) $10 500;$21 000 
C) $15 000;$21 000 
D) None of these answers are correct.

Question 11

The master budget is one type of flexible budget.

Accepted Answer

A) True 
 B)False

Question 12

Answer the following questions using the information below:
V8 Engineering Pty used the following data to evaluate their current operating system.The company sells items for $14.50 each and had used a budgeted selling price of $15 per unit.
 $$\begin{array} { l r r } 
& \text { Actual } & \text { Budgeted } \
\text { Units sold } & 206000 \text { units } & 200000 \text { units } \
\text { Variable costs } & \$ 965000 & \$ 950000 \
\text { Fixed costs } & \$ 53000 & \$ 50000
\end{array}$$
-What is the static-budget variance of variable costs?

Accepted Answer

A) $13 000 unfavourable 
B) $15 000 favourable 
C) $13 000 favourable 
D) $15 000 unfavourable 
A) $13 000 unfavourable 
B) $15 000 favourable 
C) $13 000 favourable 
D) $15 000 unfavourable

Question 13

The master budget is called a static budget because it is developed around a several planned output levels and the standard costs found in the standard cost sheet.

Accepted Answer

A) True 
 B)False

Question 14

Answer the following questions using the information below:
Hunter Valley Orchards (HVO),developed standard costs for direct material and direct labour.In 2018,HVO estimated the following standard costs for one of their most well-loved products,the HVO classic Grandma's large apple pie which had a brown sugar coating on the top of the crust as well as including cranberry and mince ingredients in addition to the apples.
 $$\begin{array} { l l l } 
& \text { Budgeted quantity } & \text { Budgeted price } \
\text { Direct materials } & 1.5 \mathrm {~kg} & \$ 7.25 \text { per } \mathrm { kg } \
\text { Direct labour } & 0.25 \text { hours } & \$ 14.00 \text { per hour }
\end{array}$$ During September,HVO produced and sold 1200 pies using 1875 kg of direct materials at an average cost per kg of $7.00 and 280 direct labour hours at an average wage of $14.25 per hour.
-September's direct material flexible-budget variance is:

Accepted Answer

A) $100.00 favourable. 
B) $100.00 unfavourable. 
C) $75.00 unfavourable. 
D) None of these answers are correct. 
A) $100.00 favourable. 
B) $100.00 unfavourable. 
C) $75.00 unfavourable. 
D) None of these answers are correct.

Question 15

Answer the following questions using the information below:
As part of the budgeting process,Garden Gnomes Incorporated had developed the following static budget for the third quarter.Garden Gnomes is in the process of preparing the flexible budget and understanding the results.The actual information relates to the third quarter.
 $\begin{array}{lrlr}
&\text { Actual } & \text { Flexible } & \text { Static } \
&\text { Results } & \text { Budget } & \text { Budget }\
\text { Sales volume (in units) } & 13000 & \underline{\quad\quad} & 12000 \
& & & \
\text { Sales revenues } & \$ 257500 & \$ &\$ 250000  \
\text { Variable costs } & 154000 & \$\underline{\quad\quad} &\underline{180000} \ 
& & & \
\text { Contribution margin } & 103500 & \$ & 70000 \
& & & \
\text { Fixed costs } & 50500 & \$\underline{\quad\quad}  & 49500 \
\text { Operating profit } & \$ 53000 & \$\underline{\quad\quad}  & \$ 20500
\end{array}$

-The flexible budget will report ________ for the fixed costs.

Accepted Answer

A) $49 500 favourable 
B) $1000 unfavourable 
C) $49 500 
D) $50 500 
A) $49 500 favourable 
B) $1000 unfavourable 
C) $49 500 
D) $50 500

Question 16

An efficiency variance reflects the difference between an actual quantity used and the quantity expected to be used,given the level of production.

Accepted Answer

A) True 
 B)False

Question 17

For any actual level of output,the efficiency variance is the difference between actual quantity of input used and the budgeted quantity of input allowed to produce actual output,multiplied by the actual price.

Accepted Answer

A) True 
 B)False

Question 18

What does an unfavourable variance indicate?
Variant question

Accepted Answer

A) The actual amount decreased operating profit relative to the budgeted amount 
B) Actual costs are less than budgeted costs 
C) Actual revenues exceed budgeted revenues 
D) All of these answers are correct. 
A) The actual amount decreased operating profit relative to the budgeted amount 
B) Actual costs are less than budgeted costs 
C) Actual revenues exceed budgeted revenues 
D) All of these answers are correct.

Question 19

To make sure that managers interpret variances correctly and make appropriate decisions based on them,managers need to recognise that variances cannot have multiple causes.

Accepted Answer

A) True 
 B)False

Question 20

Answer the following questions using the information below:
Some of Bondi Appliances financial data has been misplaced.Use the following information to replace the lost data:
 $\begin{array}{|c|c|c|c|c|c|}
\hline &\text { Actual } & \text { Flexible-Budget } & \text { Flexible } & \text { Sales-Volume } & \text { Static } \
&\text { Results } & \text { Variances } & \text { Budget } & \text { Variances } & \text { Budget }\
\hline \text { Units sold } & 225000 & & 225000 & & 206250 \
\hline \text { Revenues } & \$ 84160 & \$ 2000 \mathrm{~F} & \text { (A) } & \$ 2800 \mathrm{U} & (B)\
\hline \begin{array}{l}
\text { Variable } \
\text {costs }
\end{array} & \text { (C) } & \$ 400 \mathrm{U} & \$ 31720 & \$ 4680 \mathrm{~F} & \$ 36400 \
\hline \text { Fixed costs } & \$ 16560 & \$ 1720 \mathrm{~F} & \$ 18280 & 0 & \$ 18 280\
\hline \begin{array}{l}
\text { Operating } \
\text { profit }
\end{array} & \$ 354 & \text { (D) } & 332160 & \text { (E) } & \$20280\
\hline
\end{array}$

-What is the total sales-volume variance (E)?

Accepted Answer

A) $7480 favourable 
B) $1880 favourable 
C) $2800 unfavourable 
D) $7480 unfavourable 
A) $7480 favourable 
B) $1880 favourable 
C) $2800 unfavourable 
D) $7480 unfavourable

A variance is the difference between the actual cost for the current and previous year.

Which of the following is TRUE about favourable direct manufacturing labour efficiency variances? Variant question

When benchmarking,it is best when management accountants simply analyse the costs and allow management to provide the insight as to why the revenues and costs differ between companies.

Unfavourable variances occur when costs are higher,or revenues lower,than budget.

Variance analysis should be a tool to 'play the blame game.'

One advantage of using standard times to develop a budget is they are simple to compile,are based solely on the past actual history,and do not require expected future changes to be taken into account.

The sales-quantity variance is favourable when budgeted unit sales exceed actual unit sales.

The master budget is one type of flexible budget.

The master budget is called a static budget because it is developed around a several planned output levels and the standard costs found in the standard cost sheet.

An efficiency variance reflects the difference between an actual quantity used and the quantity expected to be used,given the level of production.

For any actual level of output,the efficiency variance is the difference between actual quantity of input used and the budgeted quantity of input allowed to produce actual output,multiplied by the actual price.

What does an unfavourable variance indicate? Variant question

To make sure that managers interpret variances correctly and make appropriate decisions based on them,managers need to recognise that variances cannot have multiple causes.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

Exam 12: Flexible Budgets, Direct Cost Variances and Management Control

A variance is the difference between the actual cost for the current and previous year.

Which of the following is TRUE about favourable direct manufacturing labour efficiency variances? Variant question

When benchmarking,it is best when management accountants simply analyse the costs and allow management to provide the insight as to why the revenues and costs differ between companies.

Unfavourable variances occur when costs are higher,or revenues lower,than budget.

Variance analysis should be a tool to 'play the blame game.'

One advantage of using standard times to develop a budget is they are simple to compile,are based solely on the past actual history,and do not require expected future changes to be taken into account.

The sales-quantity variance is favourable when budgeted unit sales exceed actual unit sales.

The master budget is one type of flexible budget.

The master budget is called a static budget because it is developed around a several planned output levels and the standard costs found in the standard cost sheet.

An efficiency variance reflects the difference between an actual quantity used and the quantity expected to be used,given the level of production.

For any actual level of output,the efficiency variance is the difference between actual quantity of input used and the budgeted quantity of input allowed to produce actual output,multiplied by the actual price.

What does an unfavourable variance indicate? Variant question

To make sure that managers interpret variances correctly and make appropriate decisions based on them,managers need to recognise that variances cannot have multiple causes.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters