Question 1

Efficiency is ________.

Accepted Answer

A)  the degree to which a predetermined objective or target is met 
B)  the difference between an actual input quantity and a budgeted input quantity 
C)  the continuous process of comparing a firm's performance levels against the best levels of performance in competing companies 
D)  the relative amount of inputs used to achieve a given output level

Question 2

Classic Products Company manufactures colonial style desks. Some of the company's data was misplaced. Use the following information to replace the lost data:

What amounts are reported for revenues in the flexible-budget (A) and the static-budget (B), respectively?

Accepted Answer

A)  $192,250; $175,990 
B)  $182,250; $188,510 
C)  $187,250; $185,990 
D)  $180,990; $188,510

Question 3

The only difference between the static budget and flexible budget is that the static budget is prepared using actual prices charged and costs per units incurred.

Accepted Answer

A) True 
 B)False

Question 4

Continuous improvement through the use of standard costs is the process of repeatedly identifying the causes of variances, taking corrective actions, and evaluating results.

Accepted Answer

A) True 
 B)False

Question 5

Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container.

During June, Heavy Products produced and sold 25,000 containers using 23,000 pounds of direct materials at an average cost per pound of $75 and 17,500 direct manufacturing labor-hours at an average wage of $35.75 per hour.
The direct material price variance during June is ________.

Accepted Answer

A)  $115,000 unfavorable 
B)  $500,000 favorable 
C)  $500,000 unfavorable 
D)  $13,125 favorable

Question 6

Which of the following information is needed to prepare a flexible budget?

Accepted Answer

A)  actual units sold 
B)  actual variable cost 
C)  actual selling price per unit 
D)  actual fixed cost

Question 7

Better Products Inc. planned to use $43 of material per unit but actually used $32 of material per unit, and planned to make 1,510 units but actually made 1,340 units.
The flexible-budget amount for materials is ________.

Accepted Answer

A)  $57,620 
B)  $64,930 
C)  $48,320 
D)  $42,880

Question 8

Midend's Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.

The explanation that lower-quality materials were purchased is most likely for ________.

Accepted Answer

A)  Material A 
B)  Material B 
C)  Material C 
D)  both Material A and C

Question 9

A flexible-budget variance is $600 favorable for unit-related costs. This indicates that costs were ________.

Accepted Answer

A)  $600 more than the master budget 
B)  $600 less than for the planned level of activity 
C)  $600 more than standard for the achieved level of activity 
D)  $600 less than standard for the achieved level of activity

Question 10

The goal of variance analysis is for managers to understand why variances arise, to learn, and to improve future performance.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following can be a reason for a favorable price variance for direct materials?

Accepted Answer

A)  a decrease in the price of materials due to an oversupply of materials 
B)  an unexpected increase in the price of materials 
C)  less amount of material used during production than planned for actual output 
D)  workers taking less time to produce the products

Question 12

A difference between the static-budget and the flexible-budget amounts is called the sales-volume variance.

Accepted Answer

A) True 
 B)False

Question 13

A favorable price variance for direct manufacturing labor might indicate that ________.

Accepted Answer

A)  employees were paid more than planned 
B)  unexpected increase in direct labor rates 
C)  underskilled employees are being hired 
D)  congestion due to scheduling problems

Question 14

If a sales-volume variance was caused by poor-quality products, then the ________ would be in the best position to explain the variance.

Accepted Answer

A)  production manager 
B)  sales supervisor 
C)  financial supervisor 
D)  logistic manager

Question 15

The textbook discusses three levels of variances, Level 0, Level 1, Level 2, and Level 3. Briefly explain the meaning of each of those levels and provide an example of a variance at each of those levels.

Accepted Answer

The answer of The textbook discusses three levels of variances,...

Question 16

An unfavorable variance indicates that ________.

Accepted Answer

A)  the actual costs are less than the budgeted costs 
B)  the actual revenues exceed the budgeted revenues 
C)  the actual units sold are less than the budgeted units 
D)  the budgeted contribution margin is more than the actual amount

Question 17

Studies show that variance analysis is no longer a popular tool of corporate managers as they have adopted various other forms of performance evaluation.

Accepted Answer

A) True 
 B)False

Question 18

Zebra Corporation currently produces baseball caps in an automated process. Expected production per month is 17,000 units, direct material costs are $7.50 per unit, and manufacturing overhead costs are $60,000 per month. Manufacturing overhead is entirely fixed costs. What is the flexible budget for 11,000 and 17,000 units, respectively?

Accepted Answer

A)  $60,000; $187,500 
B)  $60,000; $105,000 
C)  $142,500; $187,500 
D)  $142,500; $105,000

Question 19

Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container.

During June, Heavy Products produced and sold 15,000 containers using 25,000 pounds of direct materials at an average cost per pound of $64 and 12,000 direct manufacturing labor-hours at an average wage of $21.56 per hour.
June's direct material flexible-budget variance is ________.

Accepted Answer

A)  $60,000 unfavorable 
B)  $100,000 favorable 
C)  $880,000 unfavorable 
D)  $18,720 favorable

Question 20

Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2017, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container.

During July, GII produced and sold 4,000 containers using 1,000 pounds of direct materials at an average cost per pound of $37 and 475 direct manufacturing labor hours at an average wage of $18.75 per hour.
The direct material efficiency variance during July is ________.

Accepted Answer

A)  $5,000 unfavorable 
B)  $7,400 favorable 
C)  $8,000 unfavorable 
D)  $5,000 favorable

Exam 7: Flexible Budgets, Direct-Cost Variances, and Management Control

Efficiency is ________.

Classic Products Company manufactures colonial style desks. Some of the company's data was misplaced. Use the following information to replace the lost data: What amounts are reported for revenues in the flexible-budget (A) and the static-budget (B) , respectively?

The only difference between the static budget and flexible budget is that the static budget is prepared using actual prices charged and costs per units incurred.

Continuous improvement through the use of standard costs is the process of repeatedly identifying the causes of variances, taking corrective actions, and evaluating results.

Which of the following information is needed to prepare a flexible budget?

Better Products Inc. planned to use $43 of material per unit but actually used $32 of material per unit, and planned to make 1,510 units but actually made 1,340 units. The flexible-budget amount for materials is ________.

Midend's Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. The explanation that lower-quality materials were purchased is most likely for ________.

A flexible-budget variance is $600 favorable for unit-related costs. This indicates that costs were ________.

The goal of variance analysis is for managers to understand why variances arise, to learn, and to improve future performance.

Which of the following can be a reason for a favorable price variance for direct materials?

A difference between the static-budget and the flexible-budget amounts is called the sales-volume variance.

A favorable price variance for direct manufacturing labor might indicate that ________.

If a sales-volume variance was caused by poor-quality products, then the ________ would be in the best position to explain the variance.

The textbook discusses three levels of variances, Level 0, Level 1, Level 2, and Level 3. Briefly explain the meaning of each of those levels and provide an example of a variance at each of those levels.

An unfavorable variance indicates that ________.

Studies show that variance analysis is no longer a popular tool of corporate managers as they have adopted various other forms of performance evaluation.