Question 1

The process of calculating variances and analyzing the reasons they occurred is called:

Accepted Answer

A) Variance analysis 
B) Budget analysis 
C) Historical analysis 
D) Activity-based analysis

Question 2

Variance analysis involves the steps listed below. In which order should the steps be performed? 1. Calculate variances
2) Choose variances for further investigation
3) Draw conclusions and take action
4) Identify reasons for variances

Accepted Answer

A) 1, 2, 3, 4 
B) 2, 1, 3, 4 
C) 2, 1, 4, 3 
D) 1, 2, 4, 3

Question 3

The total direct labour variance can be broken down into two components: the efficiency variance and the price variance.

Accepted Answer

A) True 
 B)False

Question 4

Standard costs are used to:

Accepted Answer

A) Allocate support department overhead 
B) Compare to actual costs for evaluation purposes 
C) Compare to expected costs for evaluation purposes 
D) Determine quality levels

Question 5

Variable overhead spending variances can result from unattainable variable allocation rates. In turn, those rates may be caused by:
I. Inappropriate allocation bases
II. Poor estimates of total overhead costs
III. Change in estimated life of amortizable assets

Accepted Answer

A) I only 
B) I and II only 
C) I and III only 
D) I, II, and III

Question 6

Variance analysis includes which of the following processes?
I. Calculating variances
II. Analyzing the reasons variances occurred
III. Predicting variances in future periods

Accepted Answer

A) I and II only 
B) I and III only 
C) II and III only 
D) I, II, and III

Question 7

The standard labour price is $10 per hour. The standard labour hours required per unit are 3. Last month 400 units were produced and 1,500 hours were used. Actual labour cost was $15,750. What are the direct labour price and efficiency variances? Price variance Efficiency variance

Accepted Answer

A) $3,000 U $750 U 
B) $750 U $3,000 U 
C) $750 F $3,000 F 
D) $3,000 F $750 F

Question 8

Bellingham, Inc. incurred the following during a recent period: Actual Standard
Machine hours 1,350 1,425
Units produced 570 570
Variable overhead costs $2,775 $2,850
The variable overhead spending variance equals:

Accepted Answer

A) $75 Favourable 
B) $150 Favourable 
C) $0 
D) $75 Unfavourable

Question 9

Baldwin, Inc uses a standard job cost system and purchased 25,000 kg. of material at $6 per kg., and used it all. The standard amount allowed for the output achieved is 22,500 kg, and the standard price is $6.50 per kg. The company also incurred 37,500 direct labour hours for $450,000. The standard hourly price was $11 per hour, and 39,000 hours were allowed at standard. Assuming all variances are immaterial, answer the following questions: The entry to record the direct material price variance will include a:

Accepted Answer

A) Debit to materials inventory for $150,000 
B) Debit to account payable for $162,500 
C) Credit to the price variance for $12,500 
D) Debit to the price variance for $16,250

Question 10

At the end of 20x1, ELM Corporation's production manager estimated direct labour overtime hours at 200 for the first quarter of 20x2. At the end of the first quarter, actual overtime hours totalled 180. This difference is most likely to lead to:

Accepted Answer

A) Favourable variable overhead spending variance 
B) Unfavourable production volume variance 
C) Favourable labour efficiency variance 
D) Unfavourable labour efficiency variance

Question 11

The cost categories that are measured and monitored in a given organization depend, in part, on the costs that managers consider important.

Accepted Answer

A) True 
 B)False

Question 12

Paris Perfumery sells two perfumes, L'Amour and Plaisir. The expected sales mix is one bottle of L'Amour to five bottles of Plaisir. Planned sales and variable costs for last period were as follows: L'Amour Plaisir Total
Sales (10,000 units)$600,000 (50,000 units)$400,000 $1,000,000
Variable costs 200,000 230,000 430,000
Contribution Margin $400,000 $170,000 $ 570,000
During the period there was an economic downturn. Sales of L'Amour dropped off, so Paris reduced its price. Actual sales were as follows:
L'Amour Plaisir Total
Sales (7,500 @ $45)$337,500 (36,000 @ $8)$288,000 $625,500
Variable costs 165,000 153,000 318,000
Contribution Margin $172,500 $135,000 $307,500
(Appendix 11A)The revenue sales quantity variance for L'Amour was:

Accepted Answer

A) $150,000 U 
B) $150,000 F 
C) $262,500 U 
D) $112,000 U

Question 13

Accountants investigate manufacturing overhead spending variances to determine:

Accepted Answer

A) Which specific overhead costs differ from expectations, and whether corrections are needed 
B) Which specific direct costs differ from expectations, and whether corrections are needed 
C) Which specific marketing costs differ from expectations, and whether corrections are needed 
D) Whether the variance is material

Question 14

Match between columns
                        Premises: Unreasonable standard allocation
Outsourcing hourly equipment maintenance services
Poor cost estimates
Improved production processes
Errors in the accounting records
Change in amortization method for plant assets
Fluctuation in efficiency of the allocation base
Change in wage rates for indirect labour
Changes in normal spoilage

Accepted Answer

The Answer of Fixed overhead production volume variance and Does is...

Question 15

Paris Perfumery sells two perfumes, L'Amour and Plaisir. The expected sales mix is one bottle of L'Amour to five bottles of Plaisir. Planned sales and variable costs for last period were as follows: L'Amour Plaisir Total
Sales (10,000 units)$600,000 (50,000 units)$400,000 $1,000,000
Variable costs 200,000 230,000 430,000
Contribution Margin $400,000 $170,000 $ 570,000
During the period there was an economic downturn. Sales of L'Amour dropped off, so Paris reduced its price. Actual sales were as follows:
L'Amour Plaisir Total
Sales (7,500 @ $45)$337,500 (36,000 @ $8)$288,000 $625,500
Variable costs 165,000 153,000 318,000
Contribution Margin $172,500 $135,000 $307,500
(Appendix 11A)The sales price variance for L'Amour was:

Accepted Answer

A) $172,500 F 
B) $172,500 U 
C) $0 
D) $112,500 U

Question 16

Burkett Company uses a standard cost system. Indirect costs were budgeted at $200,000 plus $15 per direct labour hour. The overhead rate is based on 10,000 hours. Actual results were: Standard direct labour hours 9,000
Actual direct labour hours 10,000
Fixed overhead $190,000
Variable overhead $185,000
The over- or underapplied overhead was:

Accepted Answer

A) $50,000 under 
B) $10,000 over 
C) $60,000 under 
D) $20,000 over

Question 17

(Appendix 11A)Why would managers want to develop and monitor standards for expected contribution margins?

Accepted Answer

The answer of (Appendix 11A)Why would managers want to develop...

Question 18

Which of the following is not a typical step in variance analysis?

Accepted Answer

A) Calculate variances 
B) Identify reasons for variances 
C) Report variances in financial statements 
D) Draw conclusions and take action

Question 19

The direct materials efficiency variance tells managers about the efficiency of the purchasing process.

Accepted Answer

A) True 
 B)False

Question 20

Old Rose Nursery sells over 100 varieties of floribunda and hybrid tea roses. Old Rose's accountant, Cynthia, recently calculated several variances for the nursery. Results are shown below:
Direct materials price variance $500 unfavourable
Direct materials efficiency variance 300 favourable
Direct labour price variance 800 favourable
Direct labour efficiency variance 250 favourable
Variable overhead efficiency variance 150 favourable
Variable overhead price variance 230 unfavourable
Fixed overhead spending variance 120 unfavourable
Fixed overhead production volume variance 130 favourable
a)Prior to calculating variances, Cynthia had to establish standard costs for each rose in the nursery. List three types of information she would need to calculate the direct labour efficiency variance. Also identify one reason why each type of information could vary over time.
b)Even though Cynthia carefully developed standards and monitored performance, Old Rose could still experience poor profitability. Give two reasons why this could happen.
c)Describe one way that Cynthia could use the direct labour efficiency variance to improve operations at the nursery.
d)Some of the variances in the table are related to one another. For example, a favourable direct labour efficiency variance and a favourable direct materials efficiency variance could indicate that skilled workers worked more quickly and used less direct material than was budgeted. Identify one other possible relationship between variances in the table.

Accepted Answer

The answer of Old Rose Nursery sells over 100 varieties...

Exam 11: Standard Costs and Variance Analysis

The process of calculating variances and analyzing the reasons they occurred is called:

Variance analysis involves the steps listed below. In which order should the steps be performed? 1. Calculate variances 2) Choose variances for further investigation 3) Draw conclusions and take action 4) Identify reasons for variances

The total direct labour variance can be broken down into two components: the efficiency variance and the price variance.

Standard costs are used to:

Variable overhead spending variances can result from unattainable variable allocation rates. In turn, those rates may be caused by: I. Inappropriate allocation bases II. Poor estimates of total overhead costs III. Change in estimated life of amortizable assets

Variance analysis includes which of the following processes? I. Calculating variances II. Analyzing the reasons variances occurred III. Predicting variances in future periods

The standard labour price is $10 per hour. The standard labour hours required per unit are 3. Last month 400 units were produced and 1,500 hours were used. Actual labour cost was $15,750. What are the direct labour price and efficiency variances? Price variance Efficiency variance

Bellingham, Inc. incurred the following during a recent period: Actual Standard Machine hours 1,350 1,425 Units produced 570 570 Variable overhead costs $2,775 $2,850 The variable overhead spending variance equals:

At the end of 20x1, ELM Corporation's production manager estimated direct labour overtime hours at 200 for the first quarter of 20x2. At the end of the first quarter, actual overtime hours totalled 180. This difference is most likely to lead to:

The cost categories that are measured and monitored in a given organization depend, in part, on the costs that managers consider important.

Accountants investigate manufacturing overhead spending variances to determine:

(Appendix 11A)Why would managers want to develop and monitor standards for expected contribution margins?

Which of the following is not a typical step in variance analysis?

The direct materials efficiency variance tells managers about the efficiency of the purchasing process.