Question 1

The sales volume variance is the difference between the expected results in the flexible budget for the actual units sold and the static budget.

Accepted Answer

A) True 
 B)False

Question 2

Sinclair Manufacturing uses a standard cost system.The T-account for manufacturing overhead is shown below:
  In addition to the above,Sinclair calculated the following overhead variances:
Variable overhead cost variance: $5,000 F
Variable overhead efficiency variance: $4,850 U
Fixed overhead cost variance: $1,200 F
Fixed overhead volume variance: $3,350 U
Prepare the journal entry to close the manufacturing overhead account and record the overhead variances.

Accepted Answer

The answer of Sinclair Manufacturing uses a standard cost system.The...

Question 3

The purchasing manager was able to bring down the cost of direct materials by purchasing direct materials of a slightly lower grade quality than the company had used previously.The lower grade of direct materials,however,meant a higher defect rate on the assembly line and higher wastage of direct materials during production,which in turn lowered operating income.This situation would lead to a(n)________.

Accepted Answer

A)  favorable direct materials cost variance 
B)  unfavorable direct labor cost variance 
C)  favorable direct labor efficiency variance 
D)  favorable direct materials efficiency variance

Question 4

Top managers of Marshall Industries predicted annual sales of 23,600 units of its Product at a unit price of $5.00.Actual sales for the year were 22,800 units at $5.50 each.Variable costs were budgeted at $2.45 per unit,and actual variable costs were $2.40 per unit.Actual fixed costs of $45,000 exceeded budgeted fixed costs by $2,000.Prepare Marshall's flexible budget performance report.

Accepted Answer

The answer of Top managers of Marshall Industries predicted annual...

Question 5

Robinson Manufacturing uses a standard cost system.The direct labor cost standard is $18.00 per direct labor hour.The direct labor efficiency standard is 0.5 direct labor hour per unit.Actual direct labor for the month is 1,200 hours for a total cost of $24,000.Production for the month is 3,000 units.Give the journal entry to record direct labor.

Accepted Answer

The answer of Robinson Manufacturing uses a standard cost system.The...

Question 6

A company is analyzing its month-end results by comparing it to both static and flexible budgets.During the previous month,the actual sales price was higher than the expected sales price as per the static budget.This difference results in a(n)________.

Accepted Answer

A)  favorable flexible budget variance for sales revenues 
B)  favorable sales volume variance for sales revenues 
C)  unfavorable flexible budget variance for sales revenues 
D)  unfavorable sales volume variance for sales revenues

Question 7

A standard cost system is an accounting system that uses standards for product costs.

Accepted Answer

A) True 
 B)False

Question 8

The efficiency variance measures ________.

Accepted Answer

A)  the difference between the quantity used by the company and the quantity used by its competitors 
B)  the change in quantities used over time 
C)  how well the business uses its materials or human resources 
D)  how quickly direct materials are processed into finished goods

Question 9

The Washington Fish Company completed the flexible budget analysis for the second quarter,which is given below.  Which of the following statements would be a correct analysis of the sales volume variance for operating income?

Accepted Answer

A)  decrease in sales price per unit 
B)  increase in variable cost per unit 
C)  increase in sales volume 
D)  increase in fixed costs

Question 10

Which of the following is an example of a direct labor efficiency standard?

Accepted Answer

A)  $20 per direct labor hour 
B)  50 square feet per unit 
C)  $0.95 per square foot 
D)  6 direct labor hours per unit

Question 11

Cake Lady Bakery is famous for its frosted fruit cake.The main ingredient of the cake is dried fruit,which Cake Lady purchases by the pound.In addition,the production requires a certain amount of direct labor.Cake Lady uses a standard cost system,and at the end of the first quarter,there was an unfavorable direct labor cost variance.Which of the following is a logical explanation for that variance?

Accepted Answer

A)  The cost of workers' medical insurance plans jumped up dramatically during the quarter. 
B)  The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of direct materials during their training period. 
C)  The purchasing manager was able to secure a volume discount on dried fruit, purchasing the fruit for less than the amount set by standard. 
D)  The production staff changed the work flow process so that production required fewer direct labor hours.

Question 12

Lee Maritime Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Lee uses standard costs to prepare its flexible budget.For the first quarter of the year,direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 3 pounds per unit; $4 per pound
Direct labor: 5 hours per unit; $15 per hour
Lee produced 5,000 units during the quarter.At the end of the quarter,an examination of the labor costs records showed that the company used 30,000 direct labor hours and actual total direct labor costs were $378,000.What is the direct labor cost variance? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

Accepted Answer

A)  $72,000 Favorable 
B)  $375,000 Favorable 
C)  $375,000 Unfavorable 
D)  $72,000 Unfavorable

Question 13

A favorable variance has a debit balance and is a contra revenue.

Accepted Answer

A) True 
 B)False

Question 14

The purchasing manager was able to bring down the cost of direct materials by purchasing direct materials of a slightly lower grade quality than the company had used previously.The lower grade of direct materials,however,meant a higher defect rate on the assembly line and higher wastage of direct materials during production,which in turn lowered operating income.This would have led to a(n)________.

Accepted Answer

A)  unfavorable direct materials cost variance 
B)  favorable direct labor cost variance 
C)  favorable direct labor efficiency variance 
D)  unfavorable direct materials efficiency variance

Question 15

When investigating overhead variances,management needs to determine whether cost increases were controllable or if the cost standard needs to be updated.

Accepted Answer

A) True 
 B)False

Question 16

The static budget,at the beginning of the month,for Keats Company follows: Static budget:
Sales volume: 2,000 units; Sales price: $51.00 per unit
Variable costs: $12.50 per unit; Fixed costs: $26,500 per month
Operating income: $50,500
Actual results,at the end of the month,follows:
Actual results:
Sales volume: 1,950 units; Sales price: $60.00 per unit
Variable costs: $16.00 per unit; Fixed cost: $38,000 per month
Operating income: $47,800
Calculate the sales volume variance for operating income.

Accepted Answer

A)  $775 U 
B)  $50 F 
C)  $1,925 U 
D)  $1,925 F

Question 17

Which of the following is not a flexible budget variance?

Accepted Answer

A)  total fixed overhead variance 
B)  total variable overhead variance 
C)  total direct materials variance 
D)  total direct labor variance

Question 18

The total fixed overhead variance is the total of the variable overhead cost variance and fixed overhead volume variance.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is the correct formula for measuring the efficiency variance?

Accepted Answer

A)  Efficiency Variance = (Actual Quantity + Standard Quantity) - Standard Cost 
B)  Efficiency Variance = (Actual Quantity × Standard Quantity) / Standard Cost 
C)  Efficiency Variance = (Actual Quantity / Standard Quantity) × Standard Cost 
D)  Efficiency Variance = (Actual Quantity - Standard Quantity) × Standard Cost

Question 20

For each of the following variances,state which manager is most likely to be responsible for the variance.
 $$\begin{array} { | l | l | } 
\hline \text { Variance } & \text { Responsible Manager } \
\hline \text { Direct Materials Cost } & \
\hline \text { Direct Labor Efficiency } & \
\hline \text { Variable Overhead } & \
\text { Efficiency } & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following variances,state which...

Exam 23: Flexible Budgets and Standard Cost Systems

The sales volume variance is the difference between the expected results in the flexible budget for the actual units sold and the static budget.

A company is analyzing its month-end results by comparing it to both static and flexible budgets.During the previous month,the actual sales price was higher than the expected sales price as per the static budget.This difference results in a(n) ________.

A standard cost system is an accounting system that uses standards for product costs.

The efficiency variance measures ________.

The Washington Fish Company completed the flexible budget analysis for the second quarter,which is given below. Which of the following statements would be a correct analysis of the sales volume variance for operating income?

Which of the following is an example of a direct labor efficiency standard?

A favorable variance has a debit balance and is a contra revenue.

When investigating overhead variances,management needs to determine whether cost increases were controllable or if the cost standard needs to be updated.

Which of the following is not a flexible budget variance?

The total fixed overhead variance is the total of the variable overhead cost variance and fixed overhead volume variance.

Which of the following is the correct formula for measuring the efficiency variance?