Question 1

One feature of a standard cost system is that it:

Accepted Answer

A)  makes the record keeping process more complex and difficult. 
B)  never requires updating if standard costs have been carefully determined. 
C)  reduces the amount of information available to a manager. 
D)  simplifies the record keeping process by allowing amounts to be carried at standard cost rather than actual cost in the accounting records. 
A)  makes the record keeping process more complex and difficult. 
B)  never requires updating if standard costs have been carefully determined. 
C)  reduces the amount of information available to a manager. 
D)  simplifies the record keeping process by allowing amounts to be carried at standard cost rather than actual cost in the accounting records.

Question 2

Which of the following statements is(are)false?
 (A)All variances should be prorated to inventories and cost of goods sold at the end of the accounting period.
(B)If the number of units produced exceeds the number of units sold,the full-absorption operating profit will be lower than variable costing operating profit.

Accepted Answer

A)  Only A is false. 
B)  Only B is false. 
C)  Both A and B are false. 
D)  Neither A nor B is false. 
A)  Only A is false. 
B)  Only B is false. 
C)  Both A and B are false. 
D)  Neither A nor B is false.

Question 3

Harrison Company uses machine hours to allocate its fixed overhead costs.Mr.Alvarez,the production manager has been told that his fixed overhead variances for the past month were as follows:
Fixed overhead budget variance: $2,000 F
Fixed overhead volume variance: $20,000 U
The production V.P.has asked Mr.Alvarez to account for his underutilization of capacity for the month.Required:
Explain the meaning of the two variances and Mr.Alvarez's responsibility for them.

Accepted Answer

The fixed overhead budget variance compa

Question 4

Ingredient A12H is a raw material used to make Calvin Corporation's major product.The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output.Data concerning the compound for October appear below: 
$$\begin{array} { | l | r | } 
\hline \text { Cost of material purchased in October, per ounce } & \$ 23.10 \
\hline \text { Material purchased in October, ounces } & 2,300 \
\hline \text { Material used in production in October, ounces } & 2,120 \
\hline \text { Actual output in October, units } & 600 \
\hline
\end{array}$$The raw material was purchased on account.The debit to the Raw Materials account for October would total:

Accepted Answer

A)  $52,900. 
B)  $52,440. 
C)  $48,760. 
D)  $53,130. 
A)  $52,900. 
B)  $52,440. 
C)  $48,760. 
D)  $53,130.

Question 5

The only variances that should be investigated are those for which the expected benefits of correction exceed the costs of investigating and correcting.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following factors should not be considered when deciding whether to investigate a variance?

Accepted Answer

A)  Absolute or relative magnitude of the variance. 
B)  Trend or pattern of the variance over time. 
C)  Chance that an "out-of-control" situation can be corrected. 
D)  Whether the variance is favorable or unfavorable. 
A)  Absolute or relative magnitude of the variance. 
B)  Trend or pattern of the variance over time. 
C)  Chance that an "out-of-control" situation can be corrected. 
D)  Whether the variance is favorable or unfavorable.

Question 7

The Morton Company gathered the following information for the year. $$\begin{array} { | l | r | r | r | } 
\hline & \begin{array} { r } 
\text { Procuct } \
\text { Product }
\end{array} & \text { Total } \
\hline \begin{array} { l } 
\text { Budgeted sales mix (units) }
\end{array} & 40 \% & 60 \% & 100 \% \
\hline \begin{array} { l } 
\text { Budgeted and actual sales } \
\text { price }
\end{array} & \$ 48 & \$ 36 & \
\hline \begin{array} { l } 
\text { Budgeted variable cost per } \
\text { unit }
\end{array} & \$ 32 & \$ 24 & \
\hline \text { Actual sales (units) } & & & 126,000 \
\hline \text { Actual sales mix } & 60 \% & 40 \% & 100 \% \
\hline \text { Fixed costs } & & & \$ 80,000 \
\hline
\end{array}$$What is the total sales mix variance?

Accepted Answer

A)  $705,600. 
B)  $403,200. 
C)  $302,400. 
D)  $100,800. 
A)  $705,600. 
B)  $403,200. 
C)  $302,400. 
D)  $100,800.

Question 8

The budget for a given cost during a given period was $80,000.The actual cost for the period was $72,000.Considering these facts,the plant manager has done a better-than-expected job in controlling the cost if: (CPA adapted)

Accepted Answer

A)  the cost is variable and actual production was 90% of budgeted production. 
B)  the cost is variable and actual production equals budgeted production. 
C)  the cost is variable and actual production was 80% of budgeted production. 
D)  the cost is a discretionary fixed cost and actual production equals budgeted production. 
A)  the cost is variable and actual production was 90% of budgeted production. 
B)  the cost is variable and actual production equals budgeted production. 
C)  the cost is variable and actual production was 80% of budgeted production. 
D)  the cost is a discretionary fixed cost and actual production equals budgeted production.

Question 9

Danner Fashions sells a line of women's dresses.Danner's performance report for November is shown below: (CMA adapted) The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.T
$$\begin{array} { | l | r | r | } 
\hline & \text { Actual } & \text { Budget } \
\hline \text { Dresses sold } & 5,000 & 6,000 \
\hline \text { Sales } & \$ 235,000 & \$ 300,000 \
\hline \text { Variable costs } & \underline { ( 145,000 ) } & \underline { ( 180,000 ) } \
\hline \text { Contribution margin } & \$ 90,000 & 120,000 \
\hline \text { Fixed Costs } & \underline { ( 84,000 ) } & \underline { ( 80,000 ) } \
\hline \text { Operating inc ome } & \underline { \$ 6,000 }&\underline { \$ 40,000} \
\hline
\end{array}$$he variable cost flexible budget variance for November is:

Accepted Answer

A)  $5,000 favorable. 
B)  $5,000 unfavorable. 
C)  $4,000 favorable. 
D)  $4,000 unfavorable. 
A)  $5,000 favorable. 
B)  $5,000 unfavorable. 
C)  $4,000 favorable. 
D)  $4,000 unfavorable.

Question 10

Ingredient B4376 is used to make Razor Corporation's major product.The standard cost of Ingredient B4376 is $24.50 per ounce and the standard quantity is 6.1 ounces per unit of output.In the most recent month,5,030 ounces of the compound were used to make 700 units of the output.When recording the use of materials in production,Raw Materials would be:

Accepted Answer

A)  credited for $123,235. 
B)  debited for $123,235. 
C)  debited for $104,615. 
D)  credited for $104,615. 
A)  credited for $123,235. 
B)  debited for $123,235. 
C)  debited for $104,615. 
D)  credited for $104,615.

Question 11

Malloy Corporation has provided the following data concerning its most important raw material,compound I51D:
. $$\begin{array} { | l | r | } 
\hline \text { Standard cost, per liter } & \$ 30.50 \
\hline \text { Standard quantity, liters per unit of output } & 4.6 \
\hline \text { Cost of material purchased in October, per liter } & \$ 30.70 \
\hline \text { Material purchased in October, liters } & 4,000 \
\hline \text { Material used in production in October, liters } & 3,580 \
\hline \text { Actual output in October, units } & 800 \
\hline
\end{array}$$The raw material was purchased on account.Required:
a.Record the purchase of the raw material in a journal entry.b.Record the use of the raw material in production in a journal entry

Accepted Answer

a.Entry to record purchase of materials:

Question 12

A machine distributor sells two models,basic and deluxe.The following information relates to its master budget.Actual sales were 7,000 basic models and 2,800 deluxe models.The actual sales prices were the same as the budgeted sales prices for both models.$$\begin{array} { | l | r | r | } 
\hline & \text { Basic } & \text { Deluse } \
\hline \text { Sales (units) } & 8,000 & 2,000 \
\hline \text { Sales price per unit } & \$ 8,000 & \$ 12,000 \
\hline \text { Variable costs per unit } & \$ 6,400 & \$ 9,000 \
\hline
\end{array}$$What is the sales mix variance for the deluxe model based?

Accepted Answer

A)  $1,176,000. 
B)  $1,344,000. 
C)  $2,400,000. 
D)  $2,520,000. 
A)  $1,176,000. 
B)  $1,344,000. 
C)  $2,400,000. 
D)  $2,520,000.

Question 13

Fremont,Inc. ,builds storage boxes to custom order.Materials include 20 board feet of lumber at $1.25/board foot.Standards call for 2 hours of labor at $15/hr.During March,4,200 boxes were built.Materials purchased totaled $103,890 for 86,300 board feet of lumber.Actual lumber usage in production was 82,310 board feet.The March payroll was $139,360 for 9,150 hours.Required:
(Be sure to indicate whether the variance is favorable or unfavorable. )
a.Compute the direct material price variance.b.Compute the direct material quantity variance.c.Compute the direct labor rate variance.d.Compute the direct labor efficiency variance.

Accepted Answer

a.$3,985 F
b.$2,112.50 F
c.$2,110 U
d.$1

Question 14

There are several reasons why actual results differ from standards.Which of the following does not represent a reason why a variance might occur?

Accepted Answer

A)  Inaccurate information from the accounting system. 
B)  Increasing the accuracy of a variance report by decreasing its timeliness. 
C)  Standards which do not reflect the current economic conditions. 
D)  Operating conditions that are consistently inefficient. 
A)  Inaccurate information from the accounting system. 
B)  Increasing the accuracy of a variance report by decreasing its timeliness. 
C)  Standards which do not reflect the current economic conditions. 
D)  Operating conditions that are consistently inefficient.

Question 15

The next year's budget for Trend,Inc. ,a multi-product company,is given below: $$\begin{array} { | l | r | r | } 
\hline & \text { Product } A & \text { Product B } \
\hline \text { Sales } & \$ 1,890,000 & \$ 1,377,000 \
\hline \text { Variable costs } & 926,100 & 596,700 \
\hline \text { Fixed costs } & 500,000 & 500,000 \
\hline \text { Net income } & \underline{463,900} & \underline{280,300} \
\hline \text { Units } & 252,000 & 108,000 \
\hline
\end{array}$$At the end of the year,the total fixed costs and the variable costs per unit were exactly as budgeted,but the following units per product line were sold.Trend,Inc.analyzes the effects its sales variances have on the profitability of the company.

$$\begin{array} { | c | c | r | } 
\hline \text { Product Lines } & \text { Units } & \text { Sales } \
\hline \text { A } & 253,230 & \$ 1,848,579 \
\hline \text { B } & 113,770 & \$ 1,479,010 \
\hline
\end{array}$$ What is the total sales price variance?

Accepted Answer

A)  $22,203.50. 
B)  $28,442.50. 
C)  $50,646.50. 
D)  $79,088.50. 
A)  $22,203.50. 
B)  $28,442.50. 
C)  $50,646.50. 
D)  $79,088.50.

Question 16

Olsen Company uses a standard cost system for its only product.The bickering between purchasing and production that occurs every month after the material variances are developed has the production vice president,Mr.Becker,at his wits end.He has checked the job descriptions of the individuals involved and notes that the purchasing department is responsible for the price at which materials and supplies are purchased and the manufacturing department is responsible for the quantity of material used.This seems very clear cut to him so he has gone to the cost accountant for some additional help.Required:
As the cost accountant,explain to Mr.Becker why,or why not,this division of duties solves the conflict between price and quantity variances.

Accepted Answer

The stated responsibilities reduce the c

Question 17

The production mix variance measures the impact of substituting one material for another material during the production process.

Accepted Answer

A) True 
 B)False

Question 18

A machine distributor sells two models,basic and deluxe.The following information relates to its master budget.Actual sales were 7,000 basic models and 2,800 deluxe models.The actual sales prices were the same as the budgeted sales prices for both models.$$\begin{array} { | l | r | r | } 
\hline & \text { Basic } & \text { Deluse } \
\hline \text { Sales (units) } & 8,000 & 2,000 \
\hline \text { Sales price per unit } & \$ 8,000 & \$ 12,000 \
\hline \text { Variable costs per unit } & \$ 6,400 & \$ 9,000 \
\hline
\end{array}$$What is the sales activity variance for the basic model?

Accepted Answer

A)  $1,280,000. 
B)  $1,600,000. 
C)  $11,200,000. 
D)  $12,800,000. 
A)  $1,280,000. 
B)  $1,600,000. 
C)  $11,200,000. 
D)  $12,800,000.

Question 19

The data below relate to a product of Bullfrog Company. Required:
(Be sure to indicate whether the variance is favorable or unfavorable. )
a.Compute the direct material price variance.b.Compute the direct material quantity variance.c.Compute the direct labor rate variance.d.Compute the direct labor efficiency variance.

Accepted Answer

a.$1,600 F
b.$600 U
c.$5,180 U
d.$6,600

Question 20

Delaware Corporation has provided the following data for February. Required:
a.Compute the budget variance for February.Show your work!
b.Compute the volume variance for February.Show your work!

Accepted Answer

a.Budget variance = Actual fixed overhea

One feature of a standard cost system is that it:

The only variances that should be investigated are those for which the expected benefits of correction exceed the costs of investigating and correcting.

Which of the following factors should not be considered when deciding whether to investigate a variance?

The budget for a given cost during a given period was $80,000.The actual cost for the period was $72,000.Considering these facts,the plant manager has done a better-than-expected job in controlling the cost if: (CPA adapted)

There are several reasons why actual results differ from standards.Which of the following does not represent a reason why a variance might occur?

The production mix variance measures the impact of substituting one material for another material during the production process.

Delaware Corporation has provided the following data for February.Required: a.Compute the budget variance for February.Show your work! b.Compute the volume variance for February.Show your work!

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Performance Measurement to Support Business Strategy

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Exam 17: Additional Topics in Variance Analysis

One feature of a standard cost system is that it:

The only variances that should be investigated are those for which the expected benefits of correction exceed the costs of investigating and correcting.

Which of the following factors should not be considered when deciding whether to investigate a variance?

The budget for a given cost during a given period was $80,000.The actual cost for the period was $72,000.Considering these facts,the plant manager has done a better-than-expected job in controlling the cost if: (CPA adapted)

There are several reasons why actual results differ from standards.Which of the following does not represent a reason why a variance might occur?

The production mix variance measures the impact of substituting one material for another material during the production process.

Delaware Corporation has provided the following data for February.Required: a.Compute the budget variance for February.Show your work! b.Compute the volume variance for February.Show your work!

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Performance Measurement to Support Business Strategy

Filters