Question 1

In general,and holding all other things constant,an unfavorable variance decreases operating profits.

Accepted Answer

A) True 
 B)False

Question 2

Al-Shabad Company produces a single product.The company has set the following standards for materials and labor: $$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { Standard quantly or } \
\text { hours per unit }
\end{array} & \begin{array} { c } 
\text { Standard price } \
\text { or rate }
\end{array} \
\hline \text { Direct materials } & \text { ? pounds per unit } & \$ \text { ? per pound } \
\hline \text { Direct labor } & 3.0 \text { hours per unit } & \$ 10 \text { per hour } \
\hline
\end{array}$$ 
During the past month,the company purchased 7,000 pounds of direct materials at a cost of $17,500.All of this material was used in the production of 1,300 units of product.Direct labor cost totaled $36,750 for the month The following variances have been computed:$$\begin{array} { | l | r | } 
\hline \text { Materials quantity variance } & \$ 1,375 \cup \
\hline \text { Total materials variance } & \$ 375 \mathrm {~F} \
\hline \text { Labor efficiency variance } & \$ 4,000 \mathrm {~F} \
\hline
\end{array}$$
Required:
1. For direct materials:
 
 a. Compute the standard price per pound of materials.
 b. Compute the standard quantity allowed for materials for the month's production.
 c. Compute the standard quantity of materials allowed per unit of product.
 
 2. For direct labor:
 
 a. Compute the actual direct labor cost per hour for the month.
 b. Compute the labor rate variance.

Accepted Answer

1. a. Materials Price Variance = AQ(AP -

Question 3

Information for Bonanza Company's direct labor cost for February is as follows:
$$\begin{array} { | l | r | l | } 
\hline \text { Actual direct labor hours } & 69,000 & \
\hline \text { Total direct labor payroll } & \$ 483,000 & \
\hline \text { Efticiency variance } & \$ 6,400 & F \
\hline \text { Rate variance } & \$ 41,400 & \text { U } \
\hline
\end{array}$$ What were the standard direct labor hours for February?

Accepted Answer

A)  70,000. 
B)  69,000. 
C)  72,000. 
D)  71,400. 
A)  70,000. 
B)  69,000. 
C)  72,000. 
D)  71,400.

Question 4

The following information summarizes the standard cost for producing one metal tennis racket frame at Spaulding Industries.In addition,the variances for one month's production are given.Assume that all inventory accounts have zero balances at the beginning of the month.    $$\begin{array}{l}

\begin{array} { | l | l | } 
\hline\text { Variances: }\
\hline \text { Material price } & 244.75 \text { unfavorable } \
\hline \text { Material quantity } & 500.00 \text { unfavorable } \
\hline \text { Labor rate } & 520.00 \text { favorable } \
\hline \text { Labor efficiency } & 2,080.00 \text { unfavorable } \
\hline
\end{array}
\end{array}$$What was the actual quantity of materials used during the month?

Accepted Answer

A)  2,156. 
B)  2,100. 
C)  2,225. 
D)  1,975. 
A)  2,156. 
B)  2,100. 
C)  2,225. 
D)  1,975.

Question 5

A favorable materials price variance coupled with an unfavorable materials usage variance would most likely result from: (CMA adapted)

Accepted Answer

A)  machine efficiency problems. 
B)  product mix production changes. 
C)  labor efficiency problems. 
D)  the purchase of lower-than-standard-quality materials. 
A)  machine efficiency problems. 
B)  product mix production changes. 
C)  labor efficiency problems. 
D)  the purchase of lower-than-standard-quality materials.

Question 6

In general,the terms favorable and unfavorable are used to describe the effect of a variance on:

Accepted Answer

A)  net income. 
B)  sales revenue. 
C)  production costs. 
D)  operating expenses. 
A)  net income. 
B)  sales revenue. 
C)  production costs. 
D)  operating expenses.

Question 7

The sales price variance is the actual selling price per unit times the difference between budgeted number of units and the actual number of units sold..

Accepted Answer

A) True 
 B)False

Question 8

Information on Kimble Company's direct labor costs for the month of January is as follows:
$$\begin{array} { | l | r | } 
\hline \text { Actual direct labor hours } & 34,500 \
\hline \text { Standard direct labor hours } & 35,000 \
\hline \text { Total direct labor payroll } & \$ 241,500 \
\hline \text { Direct labor efficiency variance-favorable } & \$ 3,200 \
\hline
\end{array}$$ What is Kimble's direct labor price (rate)variance?

Accepted Answer

A)  $17,250. 
B)  $20,700. 
C)  $18,750. 
D)  $21,000. 
A)  $17,250. 
B)  $20,700. 
C)  $18,750. 
D)  $21,000.

Question 9

If overhead is applied to production using direct labor hours and the direct labor efficiency variance is favorable,then the variable overhead efficiency variance is:

Accepted Answer

A)  favorable. 
B)  unfavorable. 
C)  either favorable or unfavorable. 
D)  neither favorable nor unfavorable. 
A)  favorable. 
B)  unfavorable. 
C)  either favorable or unfavorable. 
D)  neither favorable nor unfavorable.

Question 10

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost.TaskMaster has established the following standards for the prime costs of one unit of product.$$\begin{array} { | r r | r | r | } 
\hline& \text { Standard } & \text { Standard } & \text { Standard } \
&\text { Quantity } & \text { Price } & \text { Cost } \
\hline \text { Direct Materials } & 8 \text { pounds } & \$ 1.80 \text { per pound } & \$ 14.40 \
\hline \text { Direct Labor } & .25 \text { hour } & \$ 8.00 \text { per hour } & 2.00 \
\hline && & \underline{\$ 16.40 }\
\hline
\end{array}$$During November,TaskMaster purchased 160,000 pounds of direct materials at a total cost of $304,000.The total factory wages for November were $42,000,90% of which were for direct labor.TaskMaster manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours.What is the direct materials price variance for November?

Accepted Answer

A)  $14,250. 
B)  $14,400. 
C)  $16,000. 
D)  $17,100. 
A)  $14,250. 
B)  $14,400. 
C)  $16,000. 
D)  $17,100.

Question 11

An operating budget would not include a:

Accepted Answer

A)  cash budget. 
B)  sales budget. 
C)  labor budget. 
D)  production budget. 
A)  cash budget. 
B)  sales budget. 
C)  labor budget. 
D)  production budget.

Question 12

It is possible to have a favorable direct material price variance and an unfavorable direct material efficiency variance.

Accepted Answer

A) True 
 B)False

Question 13

Angler Corporation has provided the following data concerning its direct labor costs for November:$$\begin{array} { | l | r | l | } 
\hline \text { Standard wage rate } & \$ 14.70 & \text { per DLH } \
\hline \text { Standard hours } & 2.4 & \text { DLHs per unit } \
\hline \text { Actual wage rate } & \$ 14.80 & \text { per DLH } \
\hline \text { Actual hours } & 5,990 & \text { DLHs } \
\hline \text { Actual output } & 2,600 & \text { units } \
\hline
\end{array}$$
Required:
Prepare the journal entry to record the incurrence of direct labor costs.

Accepted Answer

\[\begin{array} { | c | c | c | } 
\hl

Question 14

Variances are the difference between actual results and budgeted results.

Accepted Answer

A) True 
 B)False

Question 15

In analyzing company operations,the controller of the Carson Corporation found a $250,000 favorable flexible budget revenue variance.The variance was calculated by comparing the actual results with the flexible budget.This variance can be wholly explained by: (CMA adapted)

Accepted Answer

A)  the total flexible budget variance. 
B)  the total static budget variance. 
C)  changes in unit selling prices. 
D)  changes in the number of units solD.
Since the flexible budget is based on actual output,the variation could only come from the selling price. 
A)  the total flexible budget variance. 
B)  the total static budget variance. 
C)  changes in unit selling prices. 
D)  changes in the number of units solD.
Since the flexible budget is based on actual output,the variation could only come from the selling price.

Question 16

Which of the following statements is(are)true?
 (A)A favorable variance is not necessarily good,and an unfavorable variance is not necessarily bad.
(B)The master budget includes operating budgets (e.g. ,production budget)and financial budgets (e.g. ,cash budget).

Accepted Answer

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

Question 17

The terms "master budget" and "flexible budget" mean the same thing and can be used interchangeably.

Accepted Answer

A) True 
 B)False

Question 18

Data on Gantry Company's direct-labor costs are given below:
$$\begin{array} { | l | r | } 
\hline \text { Standard direct-tabor hours } & 30,000 \
\hline \text { Actual direct-labor hours } & 29,000 \
\hline \text { Direct-labor effic iency variance-favorable } & \$ 4,000 \
\hline \text { Direct-labor rate variance-favorable } & \$ 5,800 \
\hline \text { Total direct labor payroll } & \$ 110,200 \
\hline
\end{array}$$ What was Gantry's standard direct-labor rate?

Accepted Answer

A)  $3.54. 
B)  $3.80. 
C)  $4.00. 
D)  $5.80. 
A)  $3.54. 
B)  $3.80. 
C)  $4.00. 
D)  $5.80.

Question 19

Excess direct labor wages resulting from overtime premium will be disclosed in which type of variance? (CPA adapted)

Accepted Answer

A)  Yield. 
B)  Quantity. 
C)  Labor efficiency. 
D)  Labor rate. 
A)  Yield. 
B)  Quantity. 
C)  Labor efficiency. 
D)  Labor rate.

Question 20

An unfavorable direct labor efficiency variance could be caused by: (CMA adapted)

Accepted Answer

A)  an unfavorable materials quantity variance. 
B)  an unfavorable variable overhead rate variance. 
C)  a favorable materials quantity variance. 
D)  a favorable variable overhead rate variance. 
A)  an unfavorable materials quantity variance. 
B)  an unfavorable variable overhead rate variance. 
C)  a favorable materials quantity variance. 
D)  a favorable variable overhead rate variance.

In general,and holding all other things constant,an unfavorable variance decreases operating profits.

Information for Bonanza Company's direct labor cost for February is as follows: Actual direct labor hours 69,000 Total direct labor payroll \ 483,000 Efticiency variance \ 6,400 F Rate variance \ 41,400 U What were the standard direct labor hours for February?

A favorable materials price variance coupled with an unfavorable materials usage variance would most likely result from: (CMA adapted)

In general,the terms favorable and unfavorable are used to describe the effect of a variance on:

The sales price variance is the actual selling price per unit times the difference between budgeted number of units and the actual number of units sold..

Information on Kimble Company's direct labor costs for the month of January is as follows: Actual direct labor hours 34,500 Standard direct labor hours 35,000 Total direct labor payroll \ 241,500 Direct labor efficiency variance-favorable \ 3,200 What is Kimble's direct labor price (rate)variance?

If overhead is applied to production using direct labor hours and the direct labor efficiency variance is favorable,then the variable overhead efficiency variance is:

An operating budget would not include a:

It is possible to have a favorable direct material price variance and an unfavorable direct material efficiency variance.

Variances are the difference between actual results and budgeted results.

In analyzing company operations,the controller of the Carson Corporation found a $250,000 favorable flexible budget revenue variance.The variance was calculated by comparing the actual results with the flexible budget.This variance can be wholly explained by: (CMA adapted)

Which of the following statements is(are)true? (A)A favorable variance is not necessarily good,and an unfavorable variance is not necessarily bad. (B)The master budget includes operating budgets (e.g. ,production budget)and financial budgets (e.g. ,cash budget).

The terms "master budget" and "flexible budget" mean the same thing and can be used interchangeably.

Excess direct labor wages resulting from overtime premium will be disclosed in which type of variance? (CPA adapted)

An unfavorable direct labor efficiency variance could be caused by: (CMA adapted)

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

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters

Exam 16: Fundamentals of Variance Analysis

In general,and holding all other things constant,an unfavorable variance decreases operating profits.

Information for Bonanza Company's direct labor cost for February is as follows: Actual direct labor hours 69,000 Total direct labor payroll \ 483,000 Efticiency variance \ 6,400 F Rate variance \ 41,400 U What were the standard direct labor hours for February?

A favorable materials price variance coupled with an unfavorable materials usage variance would most likely result from: (CMA adapted)

In general,the terms favorable and unfavorable are used to describe the effect of a variance on:

The sales price variance is the actual selling price per unit times the difference between budgeted number of units and the actual number of units sold..

Information on Kimble Company's direct labor costs for the month of January is as follows: Actual direct labor hours 34,500 Standard direct labor hours 35,000 Total direct labor payroll \ 241,500 Direct labor efficiency variance-favorable \ 3,200 What is Kimble's direct labor price (rate)variance?

If overhead is applied to production using direct labor hours and the direct labor efficiency variance is favorable,then the variable overhead efficiency variance is:

An operating budget would not include a:

It is possible to have a favorable direct material price variance and an unfavorable direct material efficiency variance.

Variances are the difference between actual results and budgeted results.

In analyzing company operations,the controller of the Carson Corporation found a $250,000 favorable flexible budget revenue variance.The variance was calculated by comparing the actual results with the flexible budget.This variance can be wholly explained by: (CMA adapted)

Which of the following statements is(are)true? (A)A favorable variance is not necessarily good,and an unfavorable variance is not necessarily bad. (B)The master budget includes operating budgets (e.g. ,production budget)and financial budgets (e.g. ,cash budget).

The terms "master budget" and "flexible budget" mean the same thing and can be used interchangeably.

Excess direct labor wages resulting from overtime premium will be disclosed in which type of variance? (CPA adapted)

An unfavorable direct labor efficiency variance could be caused by: (CMA adapted)

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

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters