Question 1

When the quantity of materials purchased and materials used is different, which of the following is more relevant for the purpose of calculating the direct materials usage variance?

Accepted Answer

A)  Actual quantity purchased 
B)  Actual quantity used 
C)  The lower of standard quantity allowed and actual quantity purchased 
D)  The lower of actual quantity used and actual quantity purchased

Question 2

JAX Inc. In early 2012, JAX Inc. had budgeted for the production and sales of 5,000 units at a sales price of $15 per unit. The following information is available regarding the standard cost for each unit:
 Actual results for 2012 were determined to be as follows:
 Refer to the JAX Inc. information above. What was JAX Inc.'s direct materials usage variance for 2012?

Accepted Answer

A)  $2,800 F 
B)  $2,800 U 
C)  $2,688 F 
D)  $2,688 U

Question 3

Moreland Manufacturing Inc. Moreland Manufacturing Inc. produces and sells stainless steel faucets. In the current year, the company had budgeted for the production and sale of 6,000 faucets but, due to unexpected demand, 7,000 faucets were actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40 per ounce and 15 minutes of assembly time at a cost of $.20 per minute. Actual costs for the production of 7,000 faucets were $41,359.50 for materials (106,050 ounces purchased and used @ $.39 per ounce) and $21,560 for labor (98,000 minutes @ $.22 per minute).
Refer to the Moreland Manufacturing Inc. information above. Moreland's direct labor efficiency variance is:

Accepted Answer

A)  $1,600 U. 
B)  $1,400 F. 
C)  $2,100 U. 
D)  $2,100 F.

Question 4

The type of budget that consider standard costs for the actual volume of production is a:

Accepted Answer

A)  standard budget. 
B)  static budget. 
C)  flexible budget. 
D)  fixed budget.

Question 5

What is "task analysis" and how is it used in the context of variance analysis?

Accepted Answer

The answer of What is "task analysis" and how is...

Question 6

Paw-Paw Products Paw-Paw Products produces and sells flannel covered dogbeds. In the current year, Paw-Paw had expected to sell 8,000 beds but actually produced and sold 8,500 beds. The following information is available regarding the standard cost to produce a single dogbed:
 In the current year, 44,000 yards of material were purchased and used at a cost of $1.60 per yard and 365,500 direct labor minutes were incurred at a cost of $.23 per minute.
Refer to the Paw-Paw Products information above. The company's direct material usage variance for the current year is:

Accepted Answer

A)  $3,750 U. 
B)  $2,250 U. 
C)  $6,000 U. 
D)  $6,650 U.

Question 7

As a manager, how would you determine the standard price and quantity of materials, labor, and overhead for a particular product?

Accepted Answer

The answer of As a manager, how would you determine...

Question 8

JAX Inc. In early 2012, JAX Inc. had budgeted for the production and sales of 5,000 units at a sales price of $15 per unit. The following information is available regarding the standard cost for each unit:
 Actual results for 2012 were determined to be as follows:
 Refer to the JAX Inc. information above. What was JAX Inc.'s sales price variance for 2012?

Accepted Answer

A)  $15,000 F 
B)  $15,000 U 
C)  $16,800 F 
D)  $16,800 U

Question 9

Chilé Products Ltd. Chilé Products Ltd. bottles and sells hot pepper sauce. In 2012, the company had expected to sell 65,000 bottles but actually bottled and sold 80,000 bottles. The standard direct materials cost for each bottle is $.24 comprised of .60 ounces at a cost of $.40 per ounce. During 2012, 52,000 ounces of material were purchased out of which 46,000 ounces were used at a cost of $.37 per ounce.
Refer to the Chilé Products Ltd. information above. The direct materials price variance for 2012 was:

Accepted Answer

A)  $1,560 F. 
B)  $1,560 U. 
C)  $1,380 F. 
D)  $1,380 U.

Question 10

Miller Company has an unfavorable materials price variance. Which of the following would be the least likely reason for this variance?

Accepted Answer

A)  The company purchased a higher quality material than was budgeted. 
B)  The company could not take advantage of quantity discounts. 
C)  The company used more material than was budgeted for in each unit. 
D)  The company under budgeted the standard price for materials.

Question 11

Lukey Products has an unfavorable materials usage variance. Which of the following would be the most likely reason for this variance?

Accepted Answer

A)  The company under budgeted the quantity of material to be used for each unit. 
B)  The company purchased material at a price for less than what was expected. 
C)  The company budgeted for a lower sales volume than what actually occurred. 
D)  The company did not use up all the material that had been purchased.

Question 12

Moreland Manufacturing Inc. Moreland Manufacturing Inc. produces and sells stainless steel faucets. In the current year, the company had budgeted for the production and sale of 6,000 faucets but, due to unexpected demand, 7,000 faucets were actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40 per ounce and 15 minutes of assembly time at a cost of $.20 per minute. Actual costs for the production of 7,000 faucets were $41,359.50 for materials (106,050 ounces purchased and used @ $.39 per ounce) and $21,560 for labor (98,000 minutes @ $.22 per minute).
Refer to the Moreland Manufacturing Inc. information above. Moreland's direct materials usage variance is:

Accepted Answer

A)  $ 420 U. 
B)  $ 420 F. 
C)  $6,420 U. 
D)  $6,420 F.

Question 13

A(n) ____ is attainable only when near-perfect conditions exist.

Accepted Answer

A)  practical standard 
B)  ideal standard 
C)  static budget 
D)  flexible budget

Question 14

Meow Products Ltd. Meow Products Ltd. produces and sells scratching posts for cats. In the current year, the company had expected to sell 12,000 posts but actually produced and sold 10,000 posts. The following information is available regarding the standard cost to produce a single post:
 In the current year, 38,000 feet of material were purchased out of which 35,000 feet were used at a cost of $1.55 per foot, and 160,000 direct labor minutes were incurred at a cost of $.32 per minute.
Refer to the Meow Products Ltd. information above. The company's direct labor rate variance for the current year is:

Accepted Answer

A)  $ 200 F. 
B)  $ 200 U. 
C)  $3,200 F. 
D)  $3,200 U.

Question 15

Atkinson Landscaping Atkinson Landscaping applies variable overhead based on direct labor hours. At the beginning of the current year, Atkinson had estimated the following:
 During the year, 11,000 units were produced using a total of 27,200 direct labor hours and actual overhead costs were $60,000.
Refer to the Atkinson Landscaping information above. Atkinson's variable overhead spending variance for the year is:

Accepted Answer

A)  $ 672 F. 
B)  $ 928 F. 
C)  $4,000 U. 
D)  $ 145 U.

Question 16

Taylor Products Inc. has an $5,000 unfavorable flexible budget variance for October. Which of the following statements is true, if October's flexible budget net operating income was $175,000?

Accepted Answer

A)  Taylor's static budget must have showed a net operating income of $180,000. 
B)  Taylor's static budget must have showed a net operating income of $170,000. 
C)  Taylor's actual net operating income must have been $180,000. 
D)  Taylor's actual net operating income must have been $170,000.

Question 17

Carlton Corporation Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for the production and sale of 1,000 handbags; however, 900 handbags were actually produced and sold. Each bag has a standard requiring two yards of material at a cost of $4.00 per yard and 1 hour of assembly time at a cost of $9.50 per hour. Actual costs for the production of 900 bags were $7,215 for materials (1,850 yards purchased and used @ $3.90 per yard) and $10,125 for labor (1,125 hours @ $9.00 per hour).
Refer to the Carlton Corporation information above. Carlton's direct materials usage variance is:

Accepted Answer

A)  $585 U. 
B)  $600 U. 
C)  $195 
D)  $200 U.

Question 18

When managers apply the process of "management by exception":

Accepted Answer

A)  they take action when there is a significant variance between planned and actual results. 
B)  they take action when there is a variance of any size or amount between planned and actual results. 
C)  they are allowed to use standard costs rather than actual costs on financial statements issued to decision makers. 
D)  they are not required to compute the standard cost of making a product.

Question 19

Mary's Fine Fashions Mary's Fine Fashions manufactures and sells various types of women's clothing. At the end of 2011, Mary had estimated for the production and sale of 25,000 short-sleeve shirts. Each shirt has a standard calling for 2.5 yards of direct material at a standard rate of $1.25 per yard and 12 minutes of direct labor time at a standard rate of $.20 per minute. During 2012, the company actually produced and sold 23,000 shirts. These 23,000 shirts had an actual direct materials cost of $77,142 (59,340 yards at $1.30 per yard) and an actual direct labor cost of $63,250 (253,000 minutes at $.25 per minute). Each shirt sells for $20.
Refer to the Mary's Fine Fashions information above. What is Mary's net operating income based on a flexible budget?

Accepted Answer

A)  $332,925 
B)  $361,875 
C)  $347,400 
D)  $307,400

Question 20

Dorffman Inc. has a $18,000 favorable flexible budget variance for May. Which of the following statements is true, if May's actual net operating income was $72,000?

Accepted Answer

A)  Dorffman's static budget must have showed a net operating income of $54,000. 
B)  Dorffman's static budget must have showed a net operating income of $90,000. 
C)  Dorffman's flexible budget must have showed a net operating income of $54,000. 
D)  Dorffman's flexible budget must have showed a net operating income of $90,000.

Exam 10: Variance Analysis A Tool for Cost Control and Performance Evaluation