Question 1

If the total sales-activity variance and the static-budget variance are equal,there is no flexible budget variance.

Accepted Answer

A) True 
 B)False

Question 2

In the relevant range,fixed overhead costs do not vary with cost driver activity.

Accepted Answer

A) True 
 B)False

Question 3

Oroz Company had the following information available:
Expected Costs and Selling Price Based on 5,000 units:
$\begin{array} { l  }
 \text {Variable manufacturing costs per unit  }&\$32 \
 \text {Fixed manufacturing costs per unit  }&\$20 \
 \text { Selling price per unit}&\$70 \
\end{array}$

$\begin{array} { l  }
 \text { Expected production level}& \text {5,000 unite }\
\end{array}$

In the flexible budget at 10,000 units,what is the total manufacturing cost?

Accepted Answer

A)  $250,000 
B)  $420,000 
C)  $520,000 
D)  $700,000 
A)  $250,000 
B)  $420,000 
C)  $520,000 
D)  $700,000

Question 4

The Matthew Company makes tables for which the following standards have been developed:
$\begin{array}{lll}&\text { Standard Inputs Expected }&\text { Standard Price }\
\text { Expected }&\text { For Each Unit of Output }&\text { Per Unit of Input }\\hline
\text { Direct Materials } & 7 \text { ounces } & \$5.20 \text { per ounce } \
\text { Direct Labor } & 3 \text { hours } & \$ 16 \text { per hour }
\end{array}$
Production of 200 tables was expected in May,but 220 tables were actually completed.Direct materials purchased and used were 2,100 pounds at an actual price of $4.40 per pound.Direct labor cost for the month was $10,620,and the actual pay per hour was $18.00.What is the direct labor price variance for the month of May?

Accepted Answer

A)  $1,180 Favorable 
B)  $1,180 Unfavorable 
C)  $1,200 Favorable 
D)  $1,200 Unfavorable 
A)  $1,180 Favorable 
B)  $1,180 Unfavorable 
C)  $1,200 Favorable 
D)  $1,200 Unfavorable

Question 5

The Tulip Company makes mugs for which the following standards have been developed:
$\begin{array}{lll}&\text { Standard Inputs Expected }&\text { Standard Price }\
\text { Expected }&\text { For Each Unit of Output }&\text { Per Unit of Input }\\hline
\text { Direct Materials } & 5 \text { ounces } & \$ 2 \text { per ounce } \
\text { Direct Labor } & 2.5 \text { hours } & \$ 8 \text { per hour }
\end{array}$
Production of 400 mugs was expected in August,but 440 mugs were actually completed.Direct materials purchased and used were 2,100 ounces at an actual price of $2.20 per ounce.Direct labor cost for the month was $5,310,and the actual pay per hour was $9.00.What is the direct labor price variance for August?

Accepted Answer

A)  $420 Favorable 
B)  $420 Unfavorable 
C)  $590 Favorable 
D)  $590 Unfavorable 
A)  $420 Favorable 
B)  $420 Unfavorable 
C)  $590 Favorable 
D)  $590 Unfavorable

Question 6

Which of the following is used to develop flexible budgets?

Accepted Answer

A)  fixed overhead variances 
B)  static budget variances 
C)  flexible budget variances 
D)  cost functions 
A)  fixed overhead variances 
B)  static budget variances 
C)  flexible budget variances 
D)  cost functions

Question 7

Unfavorable variances ________ represent bad decisions made by managers.

Accepted Answer

A)  always 
B)  sometimes 
C)  never 
D)  none of the above 
A)  always 
B)  sometimes 
C)  never 
D)  none of the above

Question 8

For fixed overhead costs,the spending variance is ________ equal to the flexible-budget variance.

Accepted Answer

A)  always 
B)  sometimes 
C)  never 
D)  indeterminate 
A)  always 
B)  sometimes 
C)  never 
D)  indeterminate

Question 9

Potter Company has the following information:
$\begin{array}{ll}
\text { Actual operating loss at 5,000 units } & \$(11,000) \
\text { Budgeted operating income at 5,000 units } & \$ 5,000 \
\text { Budgeted operating income at 10,000 units } & \$ 12,000 \
\text { Planned level of operations } & 10,000 \text { units } \
\text { Actual level of operations } & 5,000 \text { units }
\end{array}$
Assume the cost driver of product costs is units of production.What is the flexible budget variance for operating income?

Accepted Answer

A)  $5,000 Unfavorable 
B)  $11,000 Unfavorable 
C)  $16,000 Unfavorable 
D)  $16,000 Favorable 
A)  $5,000 Unfavorable 
B)  $11,000 Unfavorable 
C)  $16,000 Unfavorable 
D)  $16,000 Favorable

Question 10

The flexible budget variance for direct labor equals the labor price variance plus the labor quantity variance.

Accepted Answer

A) True 
 B)False

Question 11

The efficiency variance for fixed overhead costs ________.

Accepted Answer

A)  is greater than the flexible budget variance for fixed overhead costs 
B)  is greater than the spending variance for fixed overhead costs 
C)  is greater than the flexible budget variance for variable overhead costs 
D)  does not exist 
A)  is greater than the flexible budget variance for fixed overhead costs 
B)  is greater than the spending variance for fixed overhead costs 
C)  is greater than the flexible budget variance for variable overhead costs 
D)  does not exist

Question 12

At 60,000 machine hours,Norwall Company's static budget for variable overhead costs is $180,000.At 60,000 machine hours,the company's static budget for fixed overhead costs is $300,000.Machine hours are the cost driver of all overhead costs.The static budget is based on 60,000 machine hours.At 60,000 machine hours,the company produces 40,000 units.The following data is available:
$\begin{array} { l  }
 \text {Actual units produced and sold }&42,000 \
 \text {Actual machine hours }&64,000 \
 \text {Actual variable overhead costs }& \$185,600\
 \text {Actual fixed overhead costs }&\$302,400 \
\end{array}$

What is the variable overhead spending variance?

Accepted Answer

A)  $6,400 Unfavorable 
B)  $6,400 Favorable 
C)  $1,000 Favorable 
D)  $1,000 Unfavorable 
A)  $6,400 Unfavorable 
B)  $6,400 Favorable 
C)  $1,000 Favorable 
D)  $1,000 Unfavorable

Question 13

As the terms are used in the budgeting process,it is possible for a company to be efficient at the same time it is ineffective.

Accepted Answer

A) True 
 B)False

Question 14

Dooley Company has the following information available for variable overhead costs.Direct labor hours are the cost driver for variable overhead costs.
$\begin{array}{ll}
\text { Actual variable overhead costs } & \$ 4,700 \
\text { Standard variable overhead costs } & \$ 1.20 \text { per hou1 } \
\text { Actual direct labor hours } & 3,750 \text { hours } \
\text { Standard direct labor hours per unit } & 5 \text { hours } \
\text { Units produced } & 700
\end{array}$
What is the variable overhead efficiency variance?

Accepted Answer

A)  $300 Favorable 
B)  $300 Unfavorable 
C)  $500 Favorable 
D)  $500 Unfavorable 
A)  $300 Favorable 
B)  $300 Unfavorable 
C)  $500 Favorable 
D)  $500 Unfavorable

Question 15

A company that has an activity-based costing system with multiple cost drivers will prepare a(n)________ budget.

Accepted Answer

A)  financial planning 
B)  short-range planning 
C)  activity-based flexible 
D)  strategic 
A)  financial planning 
B)  short-range planning 
C)  activity-based flexible 
D)  strategic

Question 16

Conner Company has the following information:
$\begin{array}{ll}
\text { Actual operating loss at 5,000 units } & \$(11,000) \
\text { Budgeted operating income at 5,000 units } & \$ 5,000 \
\text { Budgeted operating income at 10,000 units } & \$ 12,000 \
\text { Planned level of operations } & 10,000 \text { units } \
\text { Actual level of operations } & 5,000 \text { units }
\end{array}$
Assume units of output are the cost driver for product costs.What is the static budget variance for operating income?

Accepted Answer

A)  $11,000 Unfavorable 
B)  $12,000 Unfavorable 
C)  $23,000 Unfavorable 
D)  $23,000 Favorable 
A)  $11,000 Unfavorable 
B)  $12,000 Unfavorable 
C)  $23,000 Unfavorable 
D)  $23,000 Favorable

Question 17

Brad Company planned to produce 12,000 units.This level of production required 20 setups at a cost of $18,000 plus $500 per setup.Actual production was 10,000 units,requiring 15 setups.Actual setup cost was $26,000.What is the static budget variance for setup costs?

Accepted Answer

A)  $2,000 Favorable 
B)  $2,000 Unfavorable 
C)  $2,500 Favorable 
D)  $2,500 Unfavorable 
A)  $2,000 Favorable 
B)  $2,000 Unfavorable 
C)  $2,500 Favorable 
D)  $2,500 Unfavorable

Question 18

A company has the following information available about one of its products:
$\begin{array}{ll}
\text { Standard price per pound of input } & ? \
\text { Actual price per pound of input } & \$ 27 \
\text { Standard inputs per unit of output } & 3 \text { pounds } \
\text { Actual units of output } & 3,000 \
\text { Direct Materials Price Variance } & \$ 18,000 \mathrm{~F} \
\text { Actual pounds of input used } & 9,000
\end{array}$
What is the standard price per pound of input?

Accepted Answer

A)  $25 
B)  $27 
C)  $29 
D)  $33 
A)  $25 
B)  $27 
C)  $29 
D)  $33

Question 19

Kilsdonk Company has the following information available:
$\begin{array} { l  }
 \text {Budgeted cost of direct materials at 900,000 units }&\$900,000 \
 \text {Budgeted cost of direct materials at 820,000 units }&\$820,000 \
 \text {Actual cost of direct materials at 820,000 units }&\$840,000 \
 \text {Actual level of output(units) }&820,000 \
 \text {Planned level of output(units) }& 900,000\
\end{array}$

The cost driver of product costs is units of output.What is the static budget variance for direct material costs?

Accepted Answer

A)  $20,000 Unfavorable 
B)  $20,000 Favorable 
C)  $60,000 Favorable 
D)  $60,000 Unfavorable 
A)  $20,000 Unfavorable 
B)  $20,000 Favorable 
C)  $60,000 Favorable 
D)  $60,000 Unfavorable

Question 20

When preparing a flexible budget income statement,________ costs are constant at different levels of activity.

Accepted Answer

A)  variable 
B)  step 
C)  contributed 
D)  fixed 
A)  variable 
B)  step 
C)  contributed 
D)  fixed

If the total sales-activity variance and the static-budget variance are equal,there is no flexible budget variance.

In the relevant range,fixed overhead costs do not vary with cost driver activity.

Which of the following is used to develop flexible budgets?

Unfavorable variances ________ represent bad decisions made by managers.

For fixed overhead costs,the spending variance is ________ equal to the flexible-budget variance.

The flexible budget variance for direct labor equals the labor price variance plus the labor quantity variance.

The efficiency variance for fixed overhead costs ________.

As the terms are used in the budgeting process,it is possible for a company to be efficient at the same time it is ineffective.

A company that has an activity-based costing system with multiple cost drivers will prepare a(n)________ budget.

Brad Company planned to produce 12,000 units.This level of production required 20 setups at a cost of $18,000 plus $500 per setup.Actual production was 10,000 units,requiring 15 setups.Actual setup cost was $26,000.What is the static budget variance for setup costs?

When preparing a flexible budget income statement,________ costs are constant at different levels of activity.

Managerial Accounting,the Business Organization,and Professional Ethics

Introduction to Cost Behavior and Cost Volume Profit Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus on Pricing Decisions

Relevant Information for Decision Making With a Focus on Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Exam 8: Flexible Budgets and Variance Analysis

If the total sales-activity variance and the static-budget variance are equal,there is no flexible budget variance.

In the relevant range,fixed overhead costs do not vary with cost driver activity.

Which of the following is used to develop flexible budgets?

Unfavorable variances ________ represent bad decisions made by managers.

For fixed overhead costs,the spending variance is ________ equal to the flexible-budget variance.

The flexible budget variance for direct labor equals the labor price variance plus the labor quantity variance.

The efficiency variance for fixed overhead costs ________.

As the terms are used in the budgeting process,it is possible for a company to be efficient at the same time it is ineffective.

A company that has an activity-based costing system with multiple cost drivers will prepare a(n)________ budget.

Brad Company planned to produce 12,000 units.This level of production required 20 setups at a cost of $18,000 plus $500 per setup.Actual production was 10,000 units,requiring 15 setups.Actual setup cost was $26,000.What is the static budget variance for setup costs?

When preparing a flexible budget income statement,________ costs are constant at different levels of activity.

Managerial Accounting,the Business Organization,and Professional Ethics

Introduction to Cost Behavior and Cost Volume Profit Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus on Pricing Decisions

Relevant Information for Decision Making With a Focus on Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters