Question 1

Nantucket, Inc.uses a standard cost system in which direct materials are carried at standard cost.Standards for one unit of product are: standard quantity of 2 feet, standard price $1.50 per foot.During May, Nantucket purchased 16,000 feet of direct material at a cost of $30,000 and used 15,500 feet in production of 7,500 units.
Required:
Calculate the direct materials price and quantity variances and indicate whether the variances are favorable or unfavorable.

Accepted Answer

The answer of Nantucket, Inc.uses a standard cost system in...

Question 2

Which of the following employees is typically held accountable for the direct materials price variance?

Accepted Answer

A) Controller 
B) Purchasing manager 
C) Production manager 
D) Engineering department manager

Question 3

The actual sales volume is 69,000 units and the budgeted sales volume is 70,000 units.If the actual sales price is $6 and the budgeted sales price is $6.50, what is the sales volume variance for sales revenue?

Accepted Answer

A) $6,500 unfavorable 
B) $6,500 favorable 
C) $6,000 unfavorable 
D) $6,000 favorable

Question 4

Amos, Inc.uses a standard cost system in which direct materials are carried at standard cost.Standards for one unit of product are: standard quantity of 8½ gallons and standard price $1.85 per gallon.During March, Amos purchased 150,000 gallons of direct materials at a cost of $300,000 and used 150,500 gallons in production of 18,000 units.
Required:
Calculate the direct materials price and quantity variances and indicate whether each variance is favorable or unfavorable.

Accepted Answer

The answer of Amos, Inc.uses a standard cost system in...

Question 5

Adobe Company produces electric lawn mowers suitable for home and industrial use.During the year Adobe produced 54,000 mowers, using 163,000 direct labor hours.Adobe's fixed overhead rate is $12 per direct labor hour and the company budgeted 166,500 direct labor hours.Actual fixed overhead for the year was $1,996,000.What is Adobe's fixed overhead spending variance?

Accepted Answer

A) $2,000 unfavorable 
B) $2,000 favorable 
C) $40,000 favorable 
D) $42,000 favorable

Question 6

The direct labor flexible budget variance is due to

Accepted Answer

A) what the company pays for labor and how efficiently employees work. 
B) what the company pays for labor and how management allocates the labor rate. 
C) how efficiently employees work and how management allocates the workers to products. 
D) solely due to what the company pays for labor.

Question 7

The variable overhead spending variance is calculated as

Accepted Answer

A) Actual cost − (actual quantity × standard price). 
B) Actual cost − (standard quantity × standard price). 
C) Standard cost − (actual quantity × actual price). 
D) Actual results minus the variable overhead flexible budget amount.

Question 8

All differences between the flexible budget and actual performance result from selling prices and costs, rather than from differences in sales volume.

Accepted Answer

A) True 
 B)False

Question 9

The flexible budget variance for direct labor is separated into two components: a direct labor rate variance and a direct labor price variance.

Accepted Answer

A) True 
 B)False

Question 10

Materiality can be measured in terms of

Accepted Answer

A) absolute dollars. 
B) whether favorable or unfavorable. 
C) type of variance. 
D) efficiency.

Question 11

Which of the following is a factor that could influence worker productivity?

Accepted Answer

A) The level of skill and training workers possess will affect their productivity 
B) Workers' level of fatigue 
C) The quality of direct material used 
D) All of these answer choices are correct.

Question 12

A flexible budget is a budget based on the budgeted sales volume at the beginning of the period.

Accepted Answer

A) True 
 B)False

Question 13

All differences between the flexible budget and actual performance result from

Accepted Answer

A) sales. 
B) operations. 
C) differences in quantities. 
D) differences in costs.

Question 14

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements, and after discussions with the sales and production managers, the CEO determines that the best alternative is to base the budget on a sales volume of 30,000 units.  Actual results for the year were 28,000 units, reflected in the following income statement:  What is the flexible budget variance for variable overhead?

Accepted Answer

A) $5,600 favorable 
B) $5,600 unfavorable 
C) $30,400 favorable 
D) $34,000 unfavorable

Question 15

Suppose you are investigating direct materials variances.You find that the direct materials price variance is favorable, but the direct materials quantity variance is unfavorable.Assuming that the quantity purchased and used were equal, what circumstances could explain both variances?

Accepted Answer

The answer of Suppose you are investigating direct materials variances.You...

Question 16

Morgan's, Inc.has provided you with the following financial information:  Required:
Prepare a static budget.

Accepted Answer

The answer of Morgan's, Inc.has provided you with the following...

Question 17

Nantucket, Inc.uses a standard cost system with the following labor standards for one unit of product: standard hours, 12 minutes, and standard wage rate, $10.During December, Nantucket incurred 3,500 hours of direct labor and paid $34,000 in wages in production of 18,000 units.
Required:
Calculate the direct labor rate and efficiency variances and indicate whether the variances are favorable or unfavorable.

Accepted Answer

The answer of Nantucket, Inc.uses a standard cost system with...

Question 18

The direct materials quantity variance is calculated using which three amounts?

Accepted Answer

A) Actual quantity used, standard quantity allowed for actual production, actual price paid 
B) Actual quantity used, standard quantity allowed for actual production, standard price allowed 
C) Standard quantity used, actual price paid, standard price paid 
D) Actual quantity used, actual price paid, standard price paid

Question 19

Normally, managers will not see many fixed overhead spending variances because

Accepted Answer

A) many fixed costs are contracted for or known ahead of time. 
B) fixed costs vary in proportion to activity, so differences do not normally arise. 
C) most fixed costs are allocated (such as depreciation), so no differences occur. 
D) actual fixed costs rarely differ from budgeted fixed costs.

Question 20

Which of the following is not a reason wage rates may vary from the standard?

Accepted Answer

A) To get a job done on time, a manager may need to use more highly skilled, higher-paid workers than prescribed by the standard. 
B) If a manager must pay overtime to meet production requirements, a direct labor rate variance will likely result. 
C) At the time standards are set, managers generally do not have a good idea of the wage rates they will need to pay. 
D) Managers may request a raise for efficient employees.

Exam 6: Performance Evaluation: Variance Analysis

Which of the following employees is typically held accountable for the direct materials price variance?

The actual sales volume is 69,000 units and the budgeted sales volume is 70,000 units.If the actual sales price is $6 and the budgeted sales price is $6.50, what is the sales volume variance for sales revenue?

The direct labor flexible budget variance is due to

The variable overhead spending variance is calculated as

All differences between the flexible budget and actual performance result from selling prices and costs, rather than from differences in sales volume.

The flexible budget variance for direct labor is separated into two components: a direct labor rate variance and a direct labor price variance.

Materiality can be measured in terms of

Which of the following is a factor that could influence worker productivity?

A flexible budget is a budget based on the budgeted sales volume at the beginning of the period.

All differences between the flexible budget and actual performance result from

Suppose you are investigating direct materials variances.You find that the direct materials price variance is favorable, but the direct materials quantity variance is unfavorable.Assuming that the quantity purchased and used were equal, what circumstances could explain both variances?

Morgan's, Inc.has provided you with the following financial information: Required: Prepare a static budget.

The direct materials quantity variance is calculated using which three amounts?

Normally, managers will not see many fixed overhead spending variances because

Which of the following is not a reason wage rates may vary from the standard?