Question 1

At the end of the accounting period, immaterial variances are closed to ________.

Accepted Answer

The answer of At the end of the accounting period,...

Question 2

Summerlin Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units. What is the direct materials quantity variance?

Accepted Answer

A)  $400 unfavorable. 
B)  $450 unfavorable. 
C)  $2,500 unfavorable. 
D)  $2,550 unfavorable. 
E)  $2,950 unfavorable.

Question 3

A company's flexible budget for 12,000 units of production showed total contribution margin of $24,000 and fixed costs, $16,000. The operating income expected if the company produces and sells 15,000 units is:

Accepted Answer

A)  $34,000. 
B)  $10,000. 
C)  $18,667. 
D)  $8,000. 
E)  $14,000.

Question 4

Hatter, Inc. allocates fixed overhead at a rate of $17 per direct labor hour. This amount is based on 90% of capacity or 3,600 direct labor hours for 6,000 units. During July, Hatter produced 5,500 units. Budgeted fixed overhead is $66,000, and overhead incurred was $67,000.
Required: Determine the volume variance for July.

Accepted Answer

The answer of Hatter, Inc. allocates fixed overhead at a...

Question 5

Standard costs are:

Accepted Answer

A)  Actual costs incurred to produce a specific product or perform a service. 
B)  Preset costs for delivering a product or service under normal conditions. 
C)  Established by the IMA. 
D)  Rarely achieved. 
E)  Uniform among companies within an industry.

Question 6

Jake Co. has prepared the following fixed budget for the year, assuming production and sales of 30,000 units. This level of production represents 80% of capacity.
  Calculate the following flexible budget amounts at the indicated levels of capacity:

Accepted Answer

The answer of Jake Co. has prepared the following fixed...

Question 7

Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead efficiency variance.

Accepted Answer

A)  $14,300 unfavorable. 
B)  $21,450 favorable. 
C)  $4,000 unfavorable. 
D)  $4,000 favorable. 
E)  $21,450 unfavorable.

Question 8

A company's flexible budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units?

Accepted Answer

The answer of A company's flexible budget for 60,000 units...

Question 9

What is the overhead volume variance? What would be the cause of a favorable volume variance?

Accepted Answer

The answer of What is the overhead volume variance? What...

Question 10

The standard materials cost to produce 1 unit of Product R is 6 pounds of material at a standard price of $50 per pound. In manufacturing 8,000 units, 47,000 pounds of material were used at a cost of $51 per pound. What is the total direct materials cost variance?

Accepted Answer

A)  $48,000 unfavorable. 
B)  $51,000 favorable. 
C)  $51,000 unfavorable. 
D)  $3,000 favorable. 
E)  $3,000 unfavorable.

Question 11

Use the following data to find the direct labor efficiency variance if the company produced 3,500 units during the period.

Accepted Answer

A)  $6,125 unfavorable. 
B)  $7,000 unfavorable. 
C)  $7,000 favorable. 
D)  $21,000 favorable. 
E)  $6,125 favorable.

Question 12

Variable budget is another name for:

Accepted Answer

A)  Cash budget. 
B)  Flexible budget. 
C)  Fixed budget. 
D)  Manufacturing budget. 
E)  Rolling budget.

Question 13

Claymore Corp. has the following information about its standards and production activity for September. The controllable variance is:

Accepted Answer

A)  $1,295U. 
B)  $1,295F. 
C)  $2,400U. 
D)  $2,400F. 
E)  $3,695U.

Question 14

Hassock Corp. produces woven wall hangings. It takes 2 hours of direct labor to produce a single wall hanging. Hassock's standard labor cost is $12 per hour. During August, Hassock produced 10,000 units and used 21,040 hours of direct labor at a total cost of $250,376. What is Hassock's labor rate variance for August?

Accepted Answer

A)  $2,000 favorable. 
B)  $2,104 unfavorable. 
C)  $2,104 favorable. 
D)  $4,160 favorable. 
E)  $2,000 unfavorable.

Question 15

A company's flexible budget for 36,000 units of production showed variable overhead costs of $54,000 and fixed overhead costs of $50,000. The company actually incurred total overhead costs of $95,300 while operating at a volume of 32,000 units. What is the controllable variance?

Accepted Answer

The answer of A company's flexible budget for 36,000 units...

Question 16

Maxwell Co. collected the following information about its production activities for the current year.
a. Compute the direct materials price and quantity variances and indicate whether each is favorable or unfavorable.
b. Prepare the journal entry to record the issuance of direct materials into production.
Actual costs and quantities:
Direct materials used 95,000 lbs. @ $6.30 per lb.
Units completed during the year, 50,000 units
Standard costs and quantities:
Price per lb. of direct material, $6.05
Two lbs. of direct material per unit

Accepted Answer

The answer of Maxwell Co. collected the following information about...

Question 17

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of fixed costs for 20,000 units would be:

Accepted Answer

A)  $99,000. 
B)  $90,000. 
C)  $66,000. 
D)  $30,000. 
E)  $150,000.

Question 18

A company's flexible budget for 10,000 units of production reflects sales of $200,000; variable costs of $40,000; and fixed costs of $75,000. Calculate the expected level of operating income if the company produces and sells 13,000 units.

Accepted Answer

A)  $110,500. 
B)  $85,000. 
C)  $133,000. 
D)  $100,000. 
E)  $50,500.

Question 19

One possible explanation for direct labor rate and efficiency variances is the use of workers with different skill levels.

Accepted Answer

A) True 
 B)False

Question 20

A company uses the following standard costs to produce a single unit of output.  During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct materials price variance for the month was:

Accepted Answer

A)  $6,000 unfavorable 
B)  $1,800 favorable 
C)  $1,000 favorable 
D)  $5,800 unfavorable 
E)  $1,800 unfavorable

Exam 8: Flexible Budgets and Standard Costs