Question 1

Management by exception means that managers focus on the most significant differences between actual costs and standard costs.

Accepted Answer

A) True 
 B)False

Question 2

When there is a difference between the actual and the standard capacity, which of the following, based solely on fixed overhead, occurs:

Accepted Answer

A)  Production variance. 
B)  Volume variance. 
C)  Overhead cost variance. 
D)  Quantity variance. 
E)  Controllable variance.

Question 3

An unfavorable variance is recorded with a debit because it reflects additional costs higher than the standard cost.

Accepted Answer

A) True 
 B)False

Question 4

A job was budgeted to require 3 hours of labor per unit at $11.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $269,500. What is the total labor cost variance?

Accepted Answer

A)  $2,000 unfavorable. 
B)  $3,000 unfavorable. 
C)  $5,500 unfavorable. 
D)  $8,000 unfavorable. 
E)  $9,000 unfavorable.

Question 5

A fixed budget performance report never provides useful information for evaluating variances.

Accepted Answer

A) True 
 B)False

Question 6

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 direct materials quantity variance?

Accepted Answer

A)  $47,000 unfavorable. 
B)  $47,000 favorable. 
C)  $50,000 unfavorable. 
D)  $50,000 favorable. 
E)  $3,000 favorable.

Question 7

Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. The direct materials price variance is:

Accepted Answer

A)  $27,500 unfavorable. 
B)  $50,000 unfavorable. 
C)  $50,000 favorable. 
D)  $22,500 unfavorable. 
E)  $22,500 favorable.

Question 8

Fletcher Company collected the following data regarding production of one of its products. Compute the direct materials quantity variance.

Accepted Answer

A)  $2,430 unfavorable. 
B)  $3,570 unfavorable. 
C)  $2,430 favorable. 
D)  $6,000 unfavorable. 
E)  $3,570 favorable.

Question 9

When recording the journal entry for labor, the Work in Process Inventory account is

Accepted Answer

A)  Debited for standard labor cost. 
B)  Debited for actual labor cost. 
C)  Credited for standard labor cost. 
D)  Credited for actual labor cost. 
E)  Not used.

Question 10

Fletcher Company collected the following data regarding production of one of its products. Compute the direct materials price variance.

Accepted Answer

A)  $2,430 unfavorable. 
B)  $3,570 unfavorable. 
C)  $2,430 favorable. 
D)  $6,000 unfavorable. 
E)  $3,570 favorable.

Question 11

A company's flexible budget for the range of 35,000 units to 45,000 units of production showed variable overhead costs of $2 per unit and fixed overhead costs of $72,000. The company incurred total overhead costs of $148,800 while operating at a volume of 40,000 units. The total controllable cost variance is:

Accepted Answer

A)  $6,800 favorable. 
B)  $6,800 unfavorable. 
C)  $3,200 favorable. 
D)  $3,200 unfavorable. 
E)  $10,000 favorable.

Question 12

Explain variance analysis. Describe how variance analysis assists managers.

Accepted Answer

The answer of Explain variance analysis. Describe how variance analysis...

Question 13

Identify the situation below that will result in a favorable variance.

Accepted Answer

A)  Actual revenue is higher than budgeted revenue. 
B)  Actual revenue is lower than budgeted revenue. 
C)  Actual income is lower than expected income. 
D)  Actual costs are higher than budgeted costs. 
E)  Actual expenses are higher than budgeted expenses.

Question 14

Job #411 was budgeted to require 3.5 hours of labor at $11.00 per hour. However, it was completed in 3 hours by a person who worked for $14.00 per hour. What is the total labor cost variance for Job #4115?

Accepted Answer

The answer of Job #411 was budgeted to require 3.5...

Question 15

The following information describes a company's usage of direct labor in a recent period. The direct labor efficiency variance is:

Accepted Answer

A)  $29,000 unfavorable. 
B)  $29,000 favorable. 
C)  $22,500 unfavorable. 
D)  $52,500 favorable. 
E)  $52,500 unfavorable.

Question 16

Standard costs are used in the calculation of:

Accepted Answer

A)  Price and quantity variances. 
B)  Price variances only. 
C)  Quantity variances only. 
D)  Price, quantity, and sales variances. 
E)  Quantity and sales variances.

Question 17

Use the following data to find the direct labor rate 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)  $14,875 favorable.

Question 18

Wren Company determined that in the production of their products last period; they had a favorable price variance and an unfavorable quantity variance for direct materials. What might be the cause(s) of this pattern of variances?

Accepted Answer

The answer of Wren Company determined that in the production...

Question 19

A flexible budget expresses variable costs on a per unit basis and fixed costs on a total basis.

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 labor efficiency variance for the month was:

Accepted Answer

A)  $3,650 favorable 
B)  $2,450 favorable 
C)  $1,200 unfavorable 
D)  $1,200 favorable 
E)  $2,450 unfavorable

Exam 8: Flexible Budgets and Standard Costs

Management by exception means that managers focus on the most significant differences between actual costs and standard costs.

When there is a difference between the actual and the standard capacity, which of the following, based solely on fixed overhead, occurs:

An unfavorable variance is recorded with a debit because it reflects additional costs higher than the standard cost.

A job was budgeted to require 3 hours of labor per unit at $11.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $269,500. What is the total labor cost variance?

A fixed budget performance report never provides useful information for evaluating variances.

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 direct materials quantity variance?

Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. The direct materials price variance is:

Fletcher Company collected the following data regarding production of one of its products. Compute the direct materials quantity variance.

When recording the journal entry for labor, the Work in Process Inventory account is

Fletcher Company collected the following data regarding production of one of its products. Compute the direct materials price variance.

Explain variance analysis. Describe how variance analysis assists managers.

Identify the situation below that will result in a favorable variance.

Job #411 was budgeted to require 3.5 hours of labor at $11.00 per hour. However, it was completed in 3 hours by a person who worked for $14.00 per hour. What is the total labor cost variance for Job #4115?

The following information describes a company's usage of direct labor in a recent period. The direct labor efficiency variance is:

Standard costs are used in the calculation of:

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

Wren Company determined that in the production of their products last period; they had a favorable price variance and an unfavorable quantity variance for direct materials. What might be the cause(s) of this pattern of variances?

A flexible budget expresses variable costs on a per unit basis and fixed costs on a total basis.