Question 1

Miami Fashions uses standard costs for their manufacturing division.From the following data,calculate the fixed overhead allocated to production based on direct labor hours (DLHr). $$\begin{array} { | l | r | } 
\hline \text { Actual fixed overhead } & \$ 34,000 \
\hline \text { Budgeted fixed overhead } & \$ 21,000 \
\hline \text { Standard overhead allocation rate } & \$ 9 \
\hline \text { Standard direct labor hours per unit } & 3 \text { DLHr } \
\hline \text { Actual output } & 2,000 \text { units } \
\hline
\end{array}$$

Accepted Answer

A)  $21,000 
B)  $54,000 
C)  $34,000 
D)  $18,000

Question 2

The static budget,at the beginning of the month,for Onyx Décor Company,follows: Static budget:
Sales volume: 1,100 units; Sales price: $70.00 per unit
Variable costs: $32.00 per unit; Fixed costs: $38,000 per month
Operating income: $3,800
Actual results,at the end of the month,follows:
Actual results:
Sales volume: 980 units; Sales price: $75.00 per unit
Variable costs: $35.00 per unit; Fixed costs: $34,200 per month
Operating income: $5,000
Calculate the flexible budget variance for sales revenue.

Accepted Answer

A)  $5,760 U 
B)  $5,760 F 
C)  $4,900 U 
D)  $4,900 F

Question 3

Which of the following is the correct formula for measuring a cost variance?

Accepted Answer

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

Question 4

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing wastage of valuable direct materials.The production manager decided to purchase a higher grade of materials that would be more reliable,but he was worried that the cost of the new materials might negatively affect operating income.This would produce 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 5

Lewis Marine Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Lewis 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: 4 pounds per unit; $6 per pound
Direct labor: 2 hours per unit; $19 per hour
During the first quarter,Lewis produced 5,000 units of this product.Actual direct materials and direct labor costs were $65,000 and $331,000,respectively.
For the purpose of preparing the flexible budget,what is the total standard direct labor cost at a production volume of 5,000 units?

Accepted Answer

A)  $95,000 
B)  $65,000 
C)  $190,000 
D)  $331,000

Question 6

List the direct labor variances and briefly describe each.

Accepted Answer

The answer of List the direct labor variances and briefly...

Question 7

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

Accepted Answer

A)  The production manager negotiated a lower wage package for production staff, bringing direct labor costs down. 
B)  The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of dried fruits 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 8

Allen Boating Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Allen 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: 1 pound per unit; $11 per pound
Direct labor: 2 hours per unit; $18 per hour
Allen produced 2,000 units during the quarter.At the end of the quarter,an examination of the direct materials records showed that the company used 6,500 pounds of direct materials and actual total materials costs were $99,600.
What is the direct materials efficiency variance?

Accepted Answer

A)  $22,000 U 
B)  $49,500 U 
C)  $22,000 F 
D)  $49,500 F

Question 9

When using management by exception,the purchasing manager should be questioned for which of the following variances?

Accepted Answer

A)  direct materials efficiency 
B)  variable overhead efficiency 
C)  direct materials cost 
D)  direct labor efficiency

Question 10

If both favorable and unfavorable variances exist,the variances are subtracted from each other.The variance is determined to be favorable or unfavorable based on which one is the larger amount.

Accepted Answer

A) True 
 B)False

Question 11

What do cost variances measure?

Accepted Answer

A)  the difference between the cost the company pays and the cost its competitors pay 
B)  the change in costs over time 
C)  how well the business keeps unit costs of material and labor inputs within standards 
D)  the volume discounts companies receive when ordering direct materials in large quantities

Question 12

Based on the following,what is the total manufacturing overhead variance for the total production cost flexible budget variance?

Accepted Answer

A)  $725 F 
B)  $350 U 
C)  $725 U 
D)  $425 F

Question 13

Caterlebe Productions uses a standard cost system.On December 31,the account balances include the following:
Sales Revenues: $750,000
Cost of Goods Sold (standard costing): $400,500
Selling & Admin expenses: $150,000
Variances:
 $$\begin{array} { | l | r | c | } 
\hline \text { Sales revenue variance } & \$ 6,000 & \text { F } \
\hline \text { Direct materials cost variance } & 400 & \text { U } \
\hline \text { Direct materials efficiency variance } & 375 & \text { F } \
\hline \text { Direct labor cost variance } & 675 & \text { U } \
\hline \text { Direct labor efficiency variance } & 150 & \text { F } \
\hline \text { Variable overhead cost variance } & 250 & \text { U } \
\hline \text { Variable overhead efficiency variance } & 800 & \text { F } \
\hline \text { Fixed overhead cost variance } & 420 & \text { U } \
\hline \text { Fixed overhead volume variance } & 100 & \text { F } \
\hline
\end{array}$$ Prepare a standard cost income statement.

Accepted Answer

The answer of Caterlebe Productions uses a standard cost system.On...

Question 14

Maroon,Inc.uses a standard cost system.On December 31,the last day of the accounting period,the account balances include the following:  What is the standard net operating income of the company for the year ended December 31?

Accepted Answer

A)  $8,780 
B)  $6,290 
C)  $8,470 
D)  $7,530

Question 15

When a manufacturing company uses a standard cost system,an unfavorable variance is a contra expense.

Accepted Answer

A) True 
 B)False

Question 16

Melissa Antiques Company has collected the following data for one of its products: $$\begin{array} { | l | r | } 
\hline \text { irect materials standard (4 pounds @ 1//b.) } & \$ 4 \text { per unit } \
\hline \text { Direct materials flexible budget variance - unfavorable } & \$ 14,500 \
\hline \text { Actual direct materials used } & 100,000 \text { pounds } \
\hline \text { Actual units produced } & 19,000 \text { units } \
\hline
\end{array}$$ What is the direct materials efficiency variance?

Accepted Answer

A)  $19,000 U 
B)  $24,000 F 
C)  $24,000 U 
D)  $19,000 F

Question 17

The static budget is used to compute flexible budget variances as well as cost and efficiency variances for direct materials and direct labor.

Accepted Answer

A) True 
 B)False

Question 18

A static budget presents financial data at multiple levels of sales volume.

Accepted Answer

A) True 
 B)False

Question 19

Wood Designs Company,a custom cabinet manufacturing company,is setting standard costs for one of its products.The main material is cedar wood,sold by the square foot.The current cost of cedar wood is $6.00 per square foot from the supplier.Delivery costs are $0.30 per square foot.Carpenters' wages are $20.00 per hour.Payroll costs are $3.00 per hour,and benefits are $6.00 per hour.How much is the direct materials standard cost per square foot?

Accepted Answer

A)  $12.30 
B)  $9.30 
C)  $6.30 
D)  $6.00

Question 20

Companies conduct time-and-motion studies and use benchmarks from other companies when developing standards.

Accepted Answer

A) True 
 B)False

Exam 23: Flexible Budgets and Standard Cost Systems

Which of the following is the correct formula for measuring a cost variance?

List the direct labor variances and briefly describe each.

When using management by exception,the purchasing manager should be questioned for which of the following variances?

If both favorable and unfavorable variances exist,the variances are subtracted from each other.The variance is determined to be favorable or unfavorable based on which one is the larger amount.

What do cost variances measure?

Based on the following,what is the total manufacturing overhead variance for the total production cost flexible budget variance?

Maroon,Inc.uses a standard cost system.On December 31,the last day of the accounting period,the account balances include the following: What is the standard net operating income of the company for the year ended December 31?

When a manufacturing company uses a standard cost system,an unfavorable variance is a contra expense.

The static budget is used to compute flexible budget variances as well as cost and efficiency variances for direct materials and direct labor.

A static budget presents financial data at multiple levels of sales volume.

Companies conduct time-and-motion studies and use benchmarks from other companies when developing standards.