Question 1

A deviation from standard that occurs during operations as a result of operator errors is an example of a(n):

Accepted Answer

A) Random error. 
B) Prediction error. 
C) Implementation error. 
D) Modeling error. 
E) Accounting error

Question 2

In terms of allocating fixed overhead cost to products, generally accepted accounting principles:

Accepted Answer

A) Require that such allocations be based on normal capacity. 
B) Allow for the use of either practical capacity or theoretical capacity. 
C) Don't apply since the resulting data are used only internally (for control purposes). 
D) Specify only that such costs be "reasonably allocated" to outputs. 
E) Require that these costs be expensed in the period incurred.

Question 3

Which of the following statements about the standard variable factory overhead application rate is true?

Accepted Answer

A) The rate is a function of the denominator volume chosen. 
B) The rate is used for cost-control, but not product-costing purposes. 
C) The rate is used for product-costing, but not cost-control purposes. 
D) The same rate is used for both product-costing and cost-control purposes. 
E) Generally speaking, the rate will be independent of the allocation base chosen to apply overhead.

Question 4

Under a two-variance breakdown (decomposition) of the total factory overhead variance, the factory overhead controllable variance (i.e., total flexible-budget variance) is:

Accepted Answer

A) $400 favorable. 
B) $600 unfavorable. 
C) $1,400 favorable. 
D) $1,400 unfavorable. 
E) $2,000 favorable.

Question 5

Some accountants would argue that any variances from standard costs, when such standards are current, should be written off to cost of goods sold. The principal rationale for this treatment is:

Accepted Answer

A) This is the treatment required currently under generally accepted accounting principles. 
B) To allocate such variances implies that asset values on the balance sheet (i.e., inventories0 contain the cost of inefficiencies. 
C) The negligible effect this treatment has on total cost of goods sold for the period. 
D) Consistency with current income tax provisions.

Question 6

Factors contributing to the fixed factory overhead spending variance can include all except:

Accepted Answer

A) Inaccurate budget estimates for these costs. 
B) Inadequate control of fixed overhead costs. 
C) Misclassification of cost items by the accounting system. 
D) Operating inefficiency. 
E) Unanticipated increases in costs such as factory insurance.

Question 7

In terms of the variance-investigation decision under uncertainty, which of the following items contains a cross-listing of costs associated with two states of nature (random vs. nonrandom variance) and management actions (investigate the variance vs. do not investigate the variance)?

Accepted Answer

A) Indifference probability chart. 
B) Statistical control chart. 
C) Run chart. 
D) Variance control chart. 
E) Payoff table.

Question 8

All of the following choices exist for defining the denominator volume (denominator activity level) for assigning fixed overhead costs in a standard cost system, except:

Accepted Answer

A) Budgeted capacity utilization. 
B) Actual capacity utilization. 
C) Theoretical capacity. 
D) Practical capacity. 
E) Normal capacity.

Question 9

Which of the following is a characteristic of calculating standard cost variances for manufacturing overhead costs under an activity-based cost (ABC) system?

Accepted Answer

A) Only non-volume-related cost drivers are used in the cost-allocation process. 
B) An ABC system would likely have a greater number of standard cost variances reported each period. 
C) Fewer variances need to be reported, compared to the number of overhead variances calculated under a traditional cost system. 
D) Flexible budgets are used for planning but not cost-control purposes. 
E) The flexible-budget variance will be the same under both a traditional cost system and an ABC system.

Question 10

What were the total actual direct hours worked by Oslund Company during the past month?

Accepted Answer

A) 1,200. 
B) 3,000. 
C) 4,800. 
D) 6,000. 
E) 7,200.

Question 11

The variable overhead efficiency variance in 2013 for Bluecap Co. is:

Accepted Answer

A) $3,440 favorable. 
B) $8,000 unfavorable. 
C) $9,200 favorable. 
D) $11,440 unfavorable. 
E) $17,200 unfavorable.

Question 12

Assuming a four-variance breakdown (decomposition) of the total overhead variance, what is the fixed factory overhead efficiency variance for the period?

Accepted Answer

A) N/A-this variance does not exist. 
B) $225 favorable. 
C) $425 unfavorable. 
D) $650 unfavorable.

Question 13

The fixed overhead spending variance for Megan, Inc. for the month is:

Accepted Answer

A) $0. 
B) $3,000 unfavorable. 
C) $5,000 unfavorable. 
D) $17,000 unfavorable. 
E) $25,000 unfavorablE.Fixed OH spending variance = actual fixed OH - budgeted (lump-sum) fixed FOH = $123,000 (given) - $120,000 (given) = $3,000 unfavorable

Question 14

The factory overhead spending variance in 2013, based on a three-variance breakdown (decomposition) of the total overhead variance for Bluecap Co., is:

Accepted Answer

A) $3,200 favorable. 
B) $11,440 unfavorable. 
C) $15,040 favorable. 
D) $17,280 favorable. 
E) $17,440 unfavorable.

Question 15

The factory overhead production volume variance is:

Accepted Answer

A) $600 unfavorable. 
B) $1,000 favorable. 
C) $1,400 unfavorable. 
D) $1,500 favorable. 
E) $2,100 favorable.

Question 16

Under a three-variance breakdown (decomposition) of the total factory overhead variance, the factory overhead production volume variance is:

Accepted Answer

A) $400 favorable. 
B) $600 unfavorable. 
C) $1,400 favorable. 
D) $1,400 unfavorable. 
E) $2,000 favorable.

Question 17

The difference between the standard variable overhead cost for the actual quantity of the cost driver used for applying variable overhead and the standard variable overhead cost for the units manufactured during the period is the:

Accepted Answer

A) Total variable overhead variance. 
B) Variable overhead spending variance. 
C) Variable overhead rate variance. 
D) Variable overhead efficiency variance. 
E) Variable overhead flexible-budget variance.

Question 18

Which one of the following characteristics is associated with standard cost variance analysis for manufacturing overhead under a traditional versus an activity-based cost (ABC) system?

Accepted Answer

A) The total manufacturing overhead variance will be the same under either system. 
B) The traditional cost system does not meet the current International Financial Reporting Standards for internal control and product costing. 
C) The traditional system, but not the ABC system, is acceptable for income tax purposes. 
D) Cost variances under an ABC system must be closed to cost of goods sold (CGS), while those calculated under a traditional system can also be prorated (allocated) to CGS and inventory accounts. 
E) Under both cost systems a flexible budget (F
B)  is used for control purposes.

Question 19

If I = the cost of conducting an investigation, C = the estimated cost to correct the cause of a variance, and L = loss associated with not investigating a variance, what is the formula for determining the indifference probability, p?

Accepted Answer

A) p = I/(L + 
C) . 
B) p = (L - 
C) /I. 
C) p = (L + 
C) /I. 
D) p = I/(L - 
C) .

Question 20

The difference between budgeted fixed factory overhead for a period and the amount of the fixed factory overhead applied to production during the period is the:

Accepted Answer

A) Fixed factory overhead efficiency variance. 
B) Fixed factory overhead production-volume variance. 
C) Fixed factory overhead spending variance. 
D) Fixed factory overhead sales-volume variance. 
E) Fixed factory overhead flexible budget variance.

Exam 15: Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

A deviation from standard that occurs during operations as a result of operator errors is an example of a(n) :