Question 1

A static budget is prepared for only one level of sales volume.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

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

Question 3

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: $33.00 per unit; Fixed costs: $36,500 per month
Operating income: $500
Actual results,at the end of the month,follows:
Actual results:
Sales volume: 980 units; Sales price: $74.00 per unit
Variable costs: $35.50 per unit; Fixed costs: $34,100 per month
Operating income: $3,630
Calculate the flexible budget variance for fixed costs.

Accepted Answer

A)  $2,400 U 
B)  $2,400 F 
C)  $0 
D)  $3,870 F 
A)  $2,400 U 
B)  $2,400 F 
C)  $0 
D)  $3,870 F

Question 4

A new factory manager was hired for a company that was experiencing slow production rates and lower production volumes than demanded by management.Upon investigation,the manager found that the workers were poorly motivated and not closely supervised.Midway through the quarter,an incentive program was initiated,and cash bonuses were given when workers hit their production targets.Within a short time,production output increased,but the bonuses had to be charged to the direct labor budget,and the manager was worried about the impact of these costs on operating income.This could produce a(n)________.

Accepted Answer

A)  unfavorable direct materials cost variance 
B)  unfavorable direct materials efficiency variance 
C)  favorable direct labor efficiency variance 
D)  favorable direct labor cost variance 
A)  unfavorable direct materials cost variance 
B)  unfavorable direct materials efficiency variance 
C)  favorable direct labor efficiency variance 
D)  favorable direct labor cost variance

Question 5

A new factory manager was hired for a company that was experiencing slow production rates and lower production volumes than demanded by management.Upon investigation,the manager found that the workers were poorly motivated and not closely supervised.Midway through the quarter,an incentive program was initiated,and cash bonuses were given when workers hit their production targets.Within a short time,production output increased,but the bonuses had to be charged to the direct labor budget,and the manager was worried about the impact of these costs on operating income.This could produce a(n)________.

Accepted Answer

A)  unfavorable direct materials cost variance 
B)  unfavorable direct materials efficiency variance 
C)  unfavorable direct labor efficiency variance 
D)  unfavorable direct labor cost variance 
A)  unfavorable direct materials cost variance 
B)  unfavorable direct materials efficiency variance 
C)  unfavorable direct labor efficiency variance 
D)  unfavorable direct labor cost variance

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

Cheapo Sales Company uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Cheapo Sales had a favorable efficiency 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 8

Managers should look at any variance that is significant.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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: $13.00 per unit; Fixed costs: $25,200 per month
Operating income: $48,800
Actual results,at the end of the month,follows:
Actual results:
Sales volume: 1,800 units; Sales price: $58.00 per unit
Variable costs: $16.00 per unit; Fixed costs: $33,600 per month
Operating income: $42,000
Calculate the flexible budget variance for variable costs.

Accepted Answer

A)  $28,800 U 
B)  $600 U 
C)  $5,400 U 
D)  $23,400 F 
A)  $28,800 U 
B)  $600 U 
C)  $5,400 U 
D)  $23,400 F

Question 11

Kevin Couriers Company prepared the following static budget for the year: $$\begin{array} { | l | c | r | } 
\hline \text { Static Budget } & & \
\hline \text { Units/Volume } & & 5,000 \
\hline  & \text { Per Unit } & \
\hline\text { Sales Revenue } & \$ 7.00 & \$ 35,000 \
\hline \text { Variable Costs } & 1.50 & \underline { 7,500 } \
\hline \text { Contribution Margin } & & 27,500 \
\hline \text { Fixed Costs } & & \underline { 4,000 } \
\hline\text { Operating Income/(Loss) } & & \$ 23, 500 \
\hline 
\end{array}$$ If a flexible budget is prepared at a volume of 7,500,calculate the amount of operating income.The production level is within the relevant range.

Accepted Answer

A)  $37,250 
B)  $23,500 
C)  $11,250 
D)  $4,000 
A)  $37,250 
B)  $23,500 
C)  $11,250 
D)  $4,000

Question 12

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 13

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 14

A favorable direct materials cost variance occurs when the actual direct materials cost incurred is greater than the standard direct materials cost.

Accepted Answer

A) True 
 B)False

Question 15

Based on the following,what is the total production cost flexible budget variance?

Accepted Answer

A)  $925 F 
B)  $450 U 
C)  $725 F 
D)  $725 U 
A)  $925 F 
B)  $450 U 
C)  $725 F 
D)  $725 U

Question 16

What does the fixed overhead volume variance measure?

Accepted Answer

The fixed overhead volume vari

Question 17

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 18

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 19

An efficiency variance measures how well the business uses its materials or human resources.

Accepted Answer

A) True 
 B)False

Question 20

The fixed overhead cost variance measures the difference between actual fixed overhead and allocated fixed overhead.

Accepted Answer

A) True 
 B)False

A static budget is prepared for only one level of sales volume.

For each of the following efficiency standards,indicate which parties are responsible for the standard and list one factor that should be used in setting the standard. Efficiency standard Responsible party Factor used in setting the standard Direct materials Direct labor

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

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

Managers should look at any variance that is significant.

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

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 ________.

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)________.

A favorable direct materials cost variance occurs when the actual direct materials cost incurred is greater than the standard direct materials cost.

Based on the following,what is the total production cost flexible budget variance?

What does the fixed overhead volume variance measure?

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

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

An efficiency variance measures how well the business uses its materials or human resources.

The fixed overhead cost variance measures the difference between actual fixed overhead and allocated fixed overhead.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 23: Flexible Budgets and Standard Cost Systems

A static budget is prepared for only one level of sales volume.

For each of the following efficiency standards,indicate which parties are responsible for the standard and list one factor that should be used in setting the standard. Efficiency standard Responsible party Factor used in setting the standard Direct materials Direct labor

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

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

Managers should look at any variance that is significant.

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

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 ________.

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)________.

A favorable direct materials cost variance occurs when the actual direct materials cost incurred is greater than the standard direct materials cost.

Based on the following,what is the total production cost flexible budget variance?

What does the fixed overhead volume variance measure?

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

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

An efficiency variance measures how well the business uses its materials or human resources.

The fixed overhead cost variance measures the difference between actual fixed overhead and allocated fixed overhead.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters