Exam 16: Fundamentals of Variance Analysis

In general,and holding all other things constant,an unfavorable variance decreases operating profits.Just as a favorable variance increases profits,an unfavorable variance decreases profits.

Which of the following variances will always be favorable when actual sales exceeds budgeted sales?

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

It is possible to have a favorable direct material price variance and an unfavorable direct material efficiency variance.Purchasing a lower quality material will yield a favorable price variance (since it is less costly)but may result in an unfavorable efficiency because of higher than expected waste due to poor quality.

Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost.Arrow has established the following standards for the prime costs of one unit of product. During November,Arrow 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.Arrow 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 efficiency (quantity)variance for November?

The direct labor efficiency variance can be the result of poor supervision or poor scheduling by divisional managers.Poor scheduling may cause wasted time.

The flexible and master budget amounts are the same for fixed marketing and administrative costs.Fixed costs do not change with changes in activity level within the relevant range.

Which department is customarily held responsible for an unfavorable materials quantity variance?

Which of the following statements is (are)true regarding the sales activity variance? (A)The sales activity variance is the actual selling price per unit times the difference between the budgeted units and actual units.(B)If the sales activity variance for sales revenue is unfavorable,then the contribution margin sales activity variance will be unfavorable.

The Redrock Company uses flexible budgeting for cost control.Redrock produced 10,800 units of product during October,incurring indirect material costs of $13,000.Its master budget for the reflected indirect material costs of $180,000 at a production volume of 144,000 units.What was the flexible budget variance for the indirect material costs in October?

What is the activity variance for the variable manufacturing costs?

In the general model,a price variance is calculated as:

What is the production volume variance for May?

The variable overhead price variance is due to:

The following information summarizes the standard cost for producing one metal tennis racket frame.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. What were the actual direct labor hours worked during the month?

What is the fixed overhead spending (budget)variance?

The standard unit cost is used in the calculation of which of the following variances? (CPA adapted)

Tub Company uses a standard cost system.The following information pertains to direct labor for product B for the month of October: What were the actual hours worked for the month of October?

The purpose of the flexible budget is to:

Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost.Arrow has established the following standards for the prime costs of one unit of product. During November,Arrow 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.Arrow 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 labor efficiency variance for November?