Exam 4: Ch 7, 8

Question 1

The master budget is
a. a flexible budget.
b. a static budget.
c. developed at the end of the period.
d. based on the actual level of output

Answer 1

b. a static budget

Question 2

A flexible budget
a. is another name for management by exception.
b. is developed at the end of the period.
c. is based on the budgeted level of output.
d. provides favorable operating results

Answer 2

b. is developed at the end of the period.

Question 3

44. Management by exception is the practice of concentrating on
    a. the master budget.
    b. areas not operating as anticipated.
    c. favorable variances.
    d. unfavorable variances.

Answer 3

b. areas not operating as anticipated.

Question 4

45. A variance is
    a. the gap between an actual result and a benchmark amount.
    b. the required number of inputs for one standard output.
    c. the difference between an actual result and a budgeted amount.
    d. the difference between a budgeted amount and a standard amount.

Answer 4

c. the difference between an actual result and a budgeted amount

Question 5

46. An unfavorable variance indicates that
    a. actual costs are less than budgeted costs.
    b. actual revenues exceed budgeted revenues.
    c. the actual amount decreased operating income relative to the budgeted amount.
    d. all of the above are true

Answer 5

c. the actual amount decreased operating income relative to the budgeted amount.

Question 6

47. A favorable variance indicates that
    a. budgeted costs are less than actual costs.
    b. actual revenues exceed budgeted revenues.
    c. the actual amount decreased operating income relative to the budgeted amount.
    d. all of the above are true.

Answer 6

b. actual revenues exceed budgeted revenues.

Question 7

54. Regier Company had planned for operating income of $10 million in the master budget but actually achieved operating income of only $7 million.
    a. The static-budget variance for operating income is $3 million favorable.
    b. The static-budget variance for operating income is $3 million unfavorable.
    c. The flexible-budget variance for operating income is $3 million favorable.
    d. The flexible-budget variance for operating income is $3 million unfavorable

Answer 7

b. The static-budget variance for operating income is $3 million unfavorable.

Question 8

55. The flexible budget contains
    a. budgeted amounts for actual output.
    b. budgeted amounts for planned output.
    c. actual costs for actual output.
    d. actual costs for planned output

Answer 8

a. budgeted amounts for actual output.

Question 9

56. The following items are the same for the flexible budget and the master budget EXCEPT
    a. the same variable cost per unit.
    b. the same total fixed costs.
    c. the same units sold.
    d. the same sales price per unit.

Answer 9

c. the same units sold.

Question 10

57. The sales-volume variance is due to
    a. using a different selling price from that budgeted.
    b. inaccurate forecasting of units sold.
    c. poor production performance.
    d. both (a) and (b).

Answer 10

b. inaccurate forecasting of units sold.

Question 11

58. An unfavorable sales-volume variance could result from
    a. decreased demand for the product.
    b. competitors taking market share.
    c. customer dissatisfaction with the product.
    d. all of the above.

Answer 11

d. all of the above

Question 12

59. If a sales-volume variance was caused by poor-quality products, then the

would be in the best position to explain the variance.
a. production manager
b. sales manager
c. purchasing manager
d. management accountant

Answer 12

a. production manager

Question 13

60. The variance that is BEST for measuring operating performance is the
    a. static-budget variance.
    b. flexible-budget variance.
    c. sales-volume variance.
    d. selling-price variance

Answer 13

b. flexible-budget variance

Question 14

61. An unfavorable flexible-budget variance for variable costs may be the result of
    a. using more input quantities than were budgeted.
    b. paying higher prices for inputs than were budgeted.
    c. selling output at a higher selling price than budgeted.
    d. both (a) and (b).

Answer 14

d. both (a) and (b).

Question 15

62. An unfavorable variance
    a. may suggest investigation is needed.
    b. is conclusive evidence of poor performance.
    c. demands that standards be recomputed.
    d. indicates continuous improvement is needed

Answer 15

a. may suggest investigation is needed

Question 16

63. All of the following are needed to prepare a flexible budget EXCEPT
    a. determining the budgeted variable cost per output unit.
    b. determining the budgeted fixed costs.
    c. determining the actual selling price per unit.
    d. determining the actual quantity of output units

Answer 16

c. determining the actual selling price per unit.

Question 17

64. The variance that LEAST affects cost control is the
    a. flexible-budget variance.
    b. direct-material-price variance.
    c. sales-volume variance.
    d. direct manufacturing labor efficiency variance

Answer 17

c. sales-volume variance

Question 18

65. A flexible-budget variance is $800 favorable for unit-related costs. This indicates that
    a. costs were $800 more than the master budget.
    b. costs were $800 less than for the planned level of activity.
    c. costs were $800 more than standard for the achieved level of activity.
    d. costs were $800 less than standard for the achieved level of activity.

Answer 18

d. costs were $800 less than standard for the achieved level of activity

Question 19

83. The flexible-budget variance for direct cost inputs can be further subdivided into
    a. a static-budget variance and a sales-volume variance.
    b. a sales-volume variance and an efficiency variance.
    c. a price variance and an efficiency variance.
    d. a static-budget variance and a price variance.

Answer 19

c. a price variance and an efficiency variance.

Question 20

84. Budgeted input quantity information may be obtained from
    a. actual input quantities used last period.
    b. standards developed by your company.
    c. data from other companies that have similar processes.
    d. all of the above.

Answer 20

d. all of the above

Question 21

85. When actual input data from past periods is used to develop a budget
    a. past inefficiencies are excluded.
    b. expected future changes are incorporated.
    c. information is available at a low cost.
    d. audited financial information must be used.

Answer 21

c. information is available at a low cost.

Question 22

86. When standards are used to develop a budget
    a. past inefficiencies are excluded.
    b. benchmarking must also be used.
    c. information is available at a low cost.
    d. flexible-budget amounts are difficult to determine

Answer 22

a. past inefficiencies are excluded

Question 23

87. The term budget indicates
    a. that standards have been used to develop the budget.
    b. that actual input data from past periods have been used to develop the budget.
    c. that engineering studies have been used to develop the budget.
    d. planned amounts for a future accounting period

Answer 23

d. planned amounts for a future accounting period

Question 24

88. A standard input
    a. is a carefully determined price, cost, or quantity.
    b. is usually expressed on a per unit basis.
    c. may be developed using engineering studies.
    d. is all of the above.

Answer 24

d. is all of the above.

Question 25

89. Ideal standards
    a. assume peak operating conditions.
    b. allow for normal machine breakdowns.

c. greatly improve employee motivation and performance.
d. are all of the above.

Answer 25

a. assume peak operating conditions.

Question 26

90. A favorable price variance for direct materials indicates that
    a. a lower price than planned was paid for materials.
    b. a higher price than planned was paid for materials.
    c. less material was used during production than planned for actual output.
    d. more material was used during production than planned for actual output

Answer 26

a. a lower price than planned was paid for materials.

Question 27

91. A favorable efficiency variance for direct manufacturing labor indicates that
    a. a lower wage rate than planned was paid for direct labor.
    b. a higher wage rate than planned was paid for direct labor.
    c. less direct manufacturing labor-hours were used during production than planned for actual output. d. more direct manufacturing labor-hours were used during production than planned for actual output

Answer 27

c. less direct manufacturing labor-hours were used during production than planned for actual output

Question 28

92. An unfavorable price variance for direct materials might indicate
    a. that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory methods.
    b. congestion due to scheduling problems.
    c. that the purchasing manager skillfully negotiated a better purchase price.
    d. that the market had an unexpected oversupply of those materials.

Answer 28

a. that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory methods.

Question 29

93. A favorable efficiency variance for direct materials might indicate
    a. that lower-quality materials were purchased.
    b. an overskilled workforce.
    c. poor design of products or processes.
    d. a lower-priced supplier was used.

Answer 29

b. an overskilled workforce

Question 30

94. A favorable price variance for direct manufacturing labor might indicate that
    a. employees were paid more than planned.
    b. budgeted price standards are too tight.
    c. underskilled employees are being hired.
    d. an efficient labor force

Answer 30

c. underskilled employees are being hired

Question 31

95. An unfavorable efficiency variance for direct manufacturing labor might indicate that
    a. work was efficiently scheduled.
    b. machines were not properly maintained.
    c. budgeted time standards are too lax.
    d. higher-skilled workers were scheduled than planned

Answer 31

b. machines were not properly maintained

Question 32

107. The best label for the formula (AQ — BQ) BP is the
     a. efficiency variance.
     b. price variance.
     c. total flexible-budget variance.
     e. spending variance.

Answer 32

a. efficiency variance.

Question 33

108. The best label for the formula (AP -BP) AQ is the
     a. efficiency variance.
     b. price variance.
     c. total flexible-budget variance.
     d. spending variance.

Answer 33

b. price variance.

Question 34

117. A purchasing manager’s performance is BEST evaluated using the
     a. direct materials price variance.
     b. direct materials flexible-budget variance.
     c. direct manufacturing labor flexible-budget variance.
     d. affect the manager’s action has on total costs for the entire company

Answer 34

d. affect the manager’s action has on total costs for the entire company

Question 35

118. One of the primary reasons for using cost variances is
     a. they diagnose the cause of a problem and what should be done to correct it.
     b. for superiors to communicate expectations to lower-level employees.
     c. to administer appropriate disciplinary action.
     d. for financial control of operating activities and understanding why variances arise

Answer 35

d. for financial control of operating activities and understanding why variances arise

Question 36

119. A favorable cost variance of significant magnitude
     a. is the result of good planning.
     b. if investigated, may lead to improved production methods.
     c. indicates management does not need to be concerned about lax standards.
     d. does not need to be investigated

Answer 36

b. if investigated, may lead to improved production methods

Question 37

120. The variances that should be investigated by management include
     a. only unfavorable variances.
     b. only favorable variances.
     c. all variances, both favorable and unfavorable.
     d. both favorable and unfavorable variances considered significant in amount for the company

Answer 37

d. both favorable and unfavorable variances considered significant in amount for the company

Question 38

121. Typically, managers have the LEAST control over
     a. the direct material price variance.
     b. the direct material efficiency variance.
     c. machine maintenance.
     d. the scheduling of production

Answer 38

a. the direct material price variance

Question 39

122. If manufacturing machines are breaking down more than expected, this will contribute to
     a. a favorable direct manufacturing labor price variance.
     b. an unfavorable direct manufacturing labor price variance.
     c. a favorable direct manufacturing labor efficiency variance.
     d. an unfavorable direct manufacturing labor efficiency variance

Answer 39

d. an unfavorable direct manufacturing labor efficiency variance

Question 39

123. A single variance
     a. signals the cause of a problem.
     b. should be evaluated in isolation from other variances.
     c. may be the result of many different problems.
     d. should be used for performance evaluation

Answer 39

c. may be the result of many different problems.

Question 39

124. Variance analysis should be used
     a. to understand why variances arise.
     b. as the sole source of information for performance evaluation.
     c. to punish employees that do not meet standards.
     d. to encourage employees to focus on meeting standards

Answer 39

a. to understand why variances arise.

Question 39

125. Variances should be investigated
     a. when they are kept below a certain amount.
     b. when there is a small variance for critical items such as product defects.
     c. even though the cost of investigation exceeds the benefit.
     d. when there is an in-control occurrence

Answer 39

b. when there is a small variance for critical items such as product defects.

Question 40

126. When continuous improvement budgeted costing is implemented, cost reductions can result from
     a. price reductions.
     b. reducing materials waste.
     c. producing products faster and more efficiently.
     d. all of the above.

Answer 40

d. all of the above

Question 41

127. Nonfinancial performance measures
     a. are usually used in combination with financial measures for control purposes.
     b. are used to evaluate overall cost efficiency.
     c. allow managers to make informed tradeoffs.
     d. are often the sole basis of a manager’s performance evaluations

Answer 41

a. are usually used in combination with financial measures for control purposes

Question 42

128. Unfavorable direct material price variances are
     a. always credits.
     b. always debits.
     c. credited to the Materials Control account.
     d. credited to the Accounts Payable Control account

Answer 42

b. always debits

Question 43

129. Favorable direct manufacturing labor efficiency variances are
     a. always credits.
     b. always debits.
     c. debited to the Work-in-Process Control account.
     d. debited to the Wages Payable Control account.

Answer 43

a. always credits.

Question 44

130. From the perspective of control, the direct materials efficiency variance should be isolated at the time of
     a. purchase.
     b. use.
     c. completion of the entire product.
     d. sale of the product

Answer 44

b. use

Question 45

131. Standard costing systems are a useful tool when using
     a. just-in-time systems.
     b. total quality management.
     c. computer-integrated manufacturing systems.
     d. all of the above.

Answer 45

d. all of the above.

Question 46

132. Performance variance analysis can be calculated for
     a. output unit-level costs.
     b. batch-level costs.
     c. product-sustaining costs.
     d. all of the above

Answer 46

d. all of the above

Question 47

133. A favorable efficiency variance for material-handling labor-hours per batch could result from
     a. inefficient production-floor layouts compared to those expected when preparing the budget.
     b. materials-handling labor having to wait when picking up materials.
     c. well-trained and experienced material-handling employees.
     d. lower wages than planned for material-handling labor

Answer 47

c. well-trained and experienced material-handling employees

Question 48

134. The process by which a company’s products or services are measured relative to the

best possible levels of performance is known as
a. efficiency.
b. benchmarking.
c. a standard costing system.
d. variance analysis

Answer 48

b. benchmarking

Question 49

135. When benchmarking,
     a. the best levels of performance are usually found in companies that are within different industries.
     b. finding appropriate benchmarks is a minor issue.
     c. comparisons can highlight areas for better future cost management.
     d. both (a) and (c) are true.

Answer 49

c. comparisons can highlight areas for better future cost management

Question 50

136. Ensuring benchmark numbers are comparable can be difficult because differences can exist across companies with
     a. overall company strategy.
     b. depreciation methods.
     c. inventory methods.
     d. all of the above

Answer 50

d. all of the above

Question 51

137. When benchmarking, management accountants are MOST valuable when they
     a. present differences in the benchmarking data to management.
     b. highlight differences in the benchmarking data to management.
     c. provide insight into why costs or revenues differ across companies.

d. provide complex mathematical analysis.

Answer 51

c. provide insight into why costs or revenues differ across companies

Question 52

(T/F) 25. In the journal entry that records overhead variances, the manufacturing overhead allocated accounts are closed

Answer 52

T

Question 53

(T/F) 26. Variance analysis of fixed nonmanufacturing costs, such as distribution costs, can also be useful when planning for capacity.

Answer 53

T

Question 54

(T/F) 27. Variance analysis of fixed overhead costs is also useful when a company uses activitybased costing.

Answer 54

T

Question 55

(T/F) 28. An unfavorable fixed setup overhead spending variance could be due to higher lease costs of new setup equipment

Answer 55

T

Question 56

(T/F) 29. A favorable variable setup overhead efficiency variance could be due to actual setuphours exceeding the setup-hours planned for the units produced

Answer 56

F

Question 57

30. Overhead costs have been increasing due to all of the following EXCEPT
    a. increased automation.
    b. more complexity in distribution processes.
    c. tracing more costs as direct costs with the help of technology.
    d. product proliferation

Answer 57

c. tracing more costs as direct costs with the help of technology.

Question 58

31. Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily add value
    a. for the current shareholders.
    b. for the customer using the products or services.
    c. for plant employees.
    d. for major suppliers of component parts.

Answer 58

b. for the customer using the products or services.

Question 59

Variable overhead costs include
a. plant-leasing costs.
b. the plant manager’s salary.
c. depreciation on plant equipment.
d. machine maintenance

Answer 59

d. machine maintenance

Question 60

Fixed overhead costs include
a. the cost of sales commissions.
b. property taxes paid on plant facilities.
c. energy costs.
d. indirect materials

Answer 60

b. property taxes paid on plant facilities.

Question 61

34. Effective planning of fixed overhead costs includes all EXCEPT
    a. planning day-to-day operational decisions.
    b. eliminating nonvalue-added costs.
    c. planning to be efficient.
    d. choosing the appropriate level of capacity

Answer 61

a. planning day-to-day operational decision

Question 62

35. Effective planning of variable overhead includes all EXCEPT
    a. choosing the appropriate level of capacity.
    b. eliminating nonvalue-adding costs.
    c. redesigning products to use fewer resources.
    d. redesigning the plant layout for more efficient processing

Answer 62

a. choosing the appropriate level of capacity

Question 63

Choosing the appropriate level of capacity
a. is a key strategic decision.
b. may lead to loss of sales if overestimated.
c. may lead to idle capacity if underestimated.
d. can be all of the above

Answer 63

a. is a key strategic decision

Question 64

The MAJOR challenge when planning fixed overhead
a. is calculating total costs.
b. is calculating the cost-allocation rate.
c. is choosing the appropriate level of capacity.
d. is choosing the appropriate planning period

Answer 64

c. is choosing the appropriate level of capacity

Question 65

38. In a standard costing system, a cost-allocation base would MOST likely be
    a. actual machine-hours.
    b. normal machine-hours.
    c. standard machine-hours.
    d. any of the above

Answer 65

c. standard machine-hours

Question 66

39. For calculating the costs of products and services, a standard costing system
    a. only requires a simple recording system.
    b. uses standard costs to determine the cost of products.
    c. does not have to keep track of actual costs.
    d. does all of the above

Answer 66

d. does all of the above

Question 67

40. The variable overhead flexible-budget variance measures the difference between
    a. actual variable overhead costs and the static budget for variable overhead costs.
    b. actual variable overhead costs and the flexible budget for variable overhead costs.
    c. the static budget for variable overhead costs and the flexible budget for variable overhead costs.
    d. none of the above

Answer 67

b. actual variable overhead costs and the flexible budget for variable overhead costs.

Question 68

41. A $5,000 unfavorable flexible-budget variance indicates that
    a. the flexible-budget amount exceeded actual variable manufacturing overhead by $5,000. b. actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000.
    c. the flexible-budget amount exceeded standard variable manufacturing overhead by $5,000. d. standard variable manufacturing overhead exceeded the flexible-budget amount by $5,000.

Answer 68

b. actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000.

Question 69

42. Which of the following is NOT a step in developing budgeted variable overhead rates?
    a. Identifying the variable overhead costs associated with each cost-allocation base.
    b. Estimating the budgeted denominator level based on expected utilization of available capacity.
    c. Selecting the cost-allocation bases to use.
    d. Choosing the period to be used for the budget.

Answer 69

b. Estimating the budgeted denominator level based on expected utilization of available capacit

Question 70

43. In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are
    a. allocated costs.
    b. budgeted costs.
    c. fixed costs.
    d. variable costs

Answer 70

c. fixed costs

Question 71

52. The variable overhead flexible-budget variance can be further subdivided into the
    a. price variance and the efficiency variance.
    b. static-budget variance and sales-volume variance.
    c. spending variance and the efficiency variance.
    d. sales-volume variance and the spending variance

Answer 71

c. spending variance and the efficiency variance.

Question 72

53. An unfavorable variable overhead spending variance indicates that
    a. variable overhead items were not used efficiently.
    b. the price of variable overhead items was more than budgeted.
    c. the variable overhead cost-allocation base was not used efficiently.
    d. the denominator level was not accurately determined

Answer 72

b. the price of variable overhead items was more than budgeted.

Question 73

54. When machine-hours are used as an overhead cost-allocation base, the MOST likely cause of a favorable variable overhead spending variance is
    a. excessive machine breakdowns.
    b. the production scheduler efficiently scheduled jobs.
    c. a decline in the cost of energy.
    d. strengthened demand for the product

Answer 73

c. a decline in the cost of energy

Question 74

55. When machine-hours are used as an overhead cost-allocation base, and the unexpected purchase of a new machine results in fewer expenditures for machine maintenance, the MOST likely result would be to report
    a. a favorable variable overhead spending variance.
    b. an unfavorable variable overhead efficiency variance.
    c. a favorable fixed overhead flexible-budget variance.
    d. an unfavorable production-volume variance

Answer 74

a. a favorable variable overhead spending variance

Question 75

56. For variable manufacturing overhead, there is no
    a. spending variance.
    b. efficiency variance.
    c. flexible-budget variance.
    d. production-volume variance

Answer 75

d. production-volume variance

Question 76

69. The variable overhead efficiency variance is computedand interpreted the direct-cost efficiency variance.
    a. the same as; the same as
    b. the same as; differently than
    c. differently than; the same as
    d. differently than; differently than

Answer 76

b. the same as; differently than

Question 77

70. An unfavorable variable overhead efficiency variance indicates that
    a. variable overhead items were not used efficiently.
    b. the price of variable overhead items was less than budgeted.
    c. the variable overhead cost-allocation base was not used efficiently.
    d. the denominator level was not accurately determined

Answer 77

c. the variable overhead cost-allocation base was not used efficiently

Question 78

71. Variable overhead costs can be managed by
    a. reducing the consumption of the cost-allocation base.
    b. eliminating nonvalue-adding variable costs.
    c. planning for appropriate capacity levels.
    d. both (a) and (b).

Answer 78

d. both (a) and (b).

Question 79

72. When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to a favorable variable overhead efficiency variance is
    a. excessive machine breakdowns.
    b. the production scheduler’s impressive scheduling of machines.
    c. a decline in the cost of energy.
    d. strengthened demand for the product

Answer 79

b. the production scheduler’s impressive scheduling of machines

Question 80

73. When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to an unfavorable variable overhead efficiency variance is
    a. using more machine hours than budgeted.
    b. workers wastefully using variable overhead items.

c. unused capacity.
d. more units being produced than planned.

Answer 80

a. using more machine hours than budgeted

Question 81

74. When machine-hours are used as an overhead cost-allocation base, a rush order resulting in unplanned overtime that used less-skilled workers on the machines would MOST likely contribute to reporting
    a. a favorable variable overhead spending variance.
    b. an unfavorable variable overhead efficiency variance.
    c. a favorable fixed overhead flexible-budget variance.
    b. an unfavorable production-volume variance

Answer 81

b. an unfavorable variable overhead efficiency variance

Question 82

75. When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the MOST likely result would be to report
    a. an unfavorable variable overhead spending variance.
    b. a favorable variable overhead efficiency variance.
    c. an unfavorable fixed overhead flexible-budget variance.
    b. a favorable production-volume variance

Answer 82

c. an unfavorable fixed overhead flexible-budget variance

Question 83

76. The fixed overhead cost variance can be further subdivided into the
    a. price variance and the efficiency variance.
    b. spending variance and flexible-budget variance.
    c. production-volume variance and the efficiency variance.
    d. flexible-budget variance and the production-volume variance

Answer 83

d. flexible-budget variance and the production-volume variance

Question 84

77. The amount reported for fixed overhead on the static budget is also reported
    a. as actual fixed costs.
    b. as allocated fixed overhead.
    c. on the flexible budget.
    d. as both (b) and (c).

Answer 84

c. on the flexible budget

Question 85

78. An unfavorable fixed overhead spending variance indicates that
    a. there was more excess capacity than planned.
    b. the price of fixed overhead items cost more than budgeted.
    c. the fixed overhead cost-allocation base was not used efficiently.

d. the denominator level was more than planned

Answer 85

b. the price of fixed overhead items cost more than budgeted

Question 86

79. A favorable fixed overhead spending variance might indicate that
    a. more capacity was used than planned.
    b. the denominator level was less than planned.
    c. the fixed overhead cost-allocation base was not used efficiently.
    d. a plant expansion did not proceed as originally planned.

Answer 86

d. a plant expansion did not proceed as originally planned

Question 87

80. For fixed manufacturing overhead, there is no
    a. spending variance.
    b. efficiency variance.
    c. flexible-budget variance.
    d. production-volume variance

Answer 87

b. efficiency variance.

Question 88

89. The production-volume variance may also be referred to as the
    a. flexible-budget variance.
    b. denominator-level variance.
    c. spending variance.
    d. efficiency variance

Answer 88

b. denominator-level variance

Question 89

90. A favorable production-volume variance indicates that the company
    a. has good management.
    b. has allocated more fixed overhead costs than budgeted.
    c. has a total economic gain from using excess capacity.
    d. should increase capacity

Answer 89

b. has allocated more fixed overhead costs than budgeted

Question 90

91. An unfavorable production-volume variance of $40,000 indicates that the company has
    a. unused fixed manufacturing overhead capacity.
    b. overallocated $40,000 of fixed manufacturing overhead costs.
    c. $40,000 more capacity than needed.
    d. an economic loss of $40,000 from selling fewer products than planned

Answer 90

. unused fixed manufacturing overhead capacity

Question 91

92. When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to a favorable production-volume variance is
    a. an increase in the selling price of the product.
    b. the purchase of a new manufacturing machine costing considerably less than expected.
    c. a decline in the cost of energy.
    d. strengthened demand for the product

Answer 91

d. strengthened demand for the product

Question 92

93. When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to an unfavorable production-volume variance is
    a. a new competitor gaining market share.
    b. a new manufacturing machine costing considerably more than expected.
    c. an increase in the cost of energy.
    d. strengthened demand for the product

Answer 92

a. a new competitor gaining market share

Question 93

94. Excess capacity is a sign
    a. that capacity should be reduced.
    b. that capacity may need to be re-evaluated.
    c. that the company is suffering a significant economic loss.
    d. of good management decisions

Answer 93

b. that capacity may need to be re-evaluated

Question 94

95. An unfavorable production-volume variance
    a. is not a good measure of a lost production opportunity.
    b. measures the total economic gain or loss due to unused capacity.
    c. measures the amount of extra fixed costs planned for but not used.
    d. takes into account the effect of additional revenues due to maintaining higher prices

Answer 94

c. measures the amount of extra fixed costs planned for but not used

Question 95

96. The difference between budgeted fixed manufacturing overhead and the fixed manufacturing overhead allocated to actual output units achieved is called the fixed overhead
    a. efficiency variance.
    b. flexible-budget variance.
    c. combined-variance analysis.
    d. production-volume variance

Answer 95

d. production-volume variance

Question 96

97. Variable overhead costs
    a. never have any unused capacity.
    b. have no production-volume variance.
    c. allocated are always the same as the flexible-budget amount.
    d. are all of the above

Answer 96

d. are all of the above

Question 97

98. Fixed overhead costs
    a. never have any unused capacity.
    b. should be unitized for planning purposes.
    c. are unaffected by the degree of operating efficiency in a given budget period.
    d. are both (a) and (b).

Answer 97

c. are unaffected by the degree of operating efficiency in a given budget period.

Question 98

99. Fixed overhead costs must be unitized for
    a. financial reporting purposes.
    b. planning purposes.
    c. calculating the production-volume variance.
    d. both (a) and (c).

Answer 98

d. both (a) and (c).

Question 99

100. Generally Accepted Accounting Principles require that unitized fixed manufacturing costs be used for
     a. pricing decisions.
     b. costing decisions.
     c. external reporting.
     d. all of the above

Answer 99

c. external reporting

Question 100

101. A nonfinancial measure of performance evaluation is
     a. increased sales.
     b. reducing distribution costs.
     c. energy used per machine-hour.
     d. all of the above

Answer 100

c. energy used per machine-hour.

Question 101

102. Variance information regarding nonmanufacturing costs can be used
     a. to plan capacity in the service sector.
     b. to control distribution costs in the retail sector.
     c. to determine the most profitable services offered by a bank.
     d. for all of the above

Answer 101

d. for all of the above

Question 102

103. Tucker Company uses a standard cost system. In March, $133,000 of variable manufacturing overhead costs was incurred and the flexible-budget amount for the month was $150,000. Which ofthe following variable manufacturing overhead entries

would have been recorded for March?
a. Accounts Payable Control and other accounts $150,000
Work-in-Process Control $150,000
b. Variable Manufacturing Overhead Allocated $150,000
Accounts Payable and other accounts $150,000
c. Work-in-Process Control $133,000
Accounts Payable Control and other accounts $133,000
d. Variable Manufacturing Overhead Control $133,000
Accounts Payable Control and other accounts $133,000

Answer 102

d. Variable Manufacturing Overhead Control $133,000
Accounts Payable Control and other accounts $133,000

Question 103

104. Alvarado Company made the following journal entry, therefore:
     Variable Manufacturing Overhead Allocated $100,000
     Variable Manufacturing Overhead Efficiency Variance 30,000
     Variable Manufacturing Overhead Control $125,000 Variable Manufacturing Overhead Spending Variance 5,000
     a. Alvarado overallocated variable manufacturing overhead.
     b. a $5,000 favorable spending variance was recorded.
     c. Work-in-Process is currently overstated.
     d. this entry may be recorded yearly to provide timely feedback to managers

Answer 103

b. a $5,000 favorable spending variance was recorded.

Question 104

105. John’s Football Manufacturing Company reported:
     Actual fixed overhead $800,000
     Fixed manufacturing overhead spending variance $20,000 favorable
     Fixed manufacturing production-volume variance $30,000 unfavorable
     To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated
     a. for $780,000.
     b. for $790,000.
     c. for $800,000.
     d. for $810,000

Answer 104

b. for $790,000

Question 105

107. Jovana Company uses a standard cost system. In March, $117,000 of variable manufacturing overhead costs was incurred and the flexible-budget amount for the month was $120,000. Which of the following variable manufacturing overhead entries would have been recorded for March?
     a. Accounts Payable Control and other accounts $120,000
     Work-in-Process Control $120,000
     b. Work-in-Process Control $120,000
     Variable Manufacturing Overhead Allocated $120,000
     c. Work-in-Process Control $117,000
     Accounts Payable Control and other accounts $117,000
     d. Accounts Payable Control and other accounts $117,000
     Variable Manufacturing Overhead Control $117,000

Answer 105

b. Work-in-Process Control $120,000
Variable Manufacturing Overhead Allocated $120,000

Question 106

108. Tate Company makes the following journal entry, therefore:
     Variable Manufacturing Overhead Allocated $150,000
     Variable Manufacturing Overhead Efficiency Variance 5,000
     Variable Manufacturing Overhead Control $125,000
     Variable Manufacturing Overhead Spending Variance 30,000
     a. Tate underallocated variable manufacturing overhead.
     b. a $30,000 unfavorable spending variance was recorded.
     c. Work-in-Process is currently understated.
     d. a $25,000 favorable flexible-budget variance was recorded

Answer 106

d. a $25,000 favorable flexible-budget variance was recorded

Question 107

109. Jeremy’s Football Manufacturing Company reported:
     Actual fixed overhead $500,000
     Fixed manufacturing overhead spending variance $30,000 favorable
     Fixed manufacturing production-volume variance $20,000 unfavorable
     To isolate these variances at the end of the accounting period, Jeremy would debit Fixed Manufacturing Overhead Allocated
     a. for $480,000.
     b. for $490,000.
     c. for $500,000.
     d. for $510,000.

Answer 107

d. for $510,000

Question 109

Variance

Answer 109

Actual results vary from expectation (budget)

Question 110

Management by exception

Answer 110

Focusing on items that did not materialize as expected (good or bad)

Question 111

Static budget

Answer 111

Put together before the period begins, sets all of the DM, DL, etc, standards do not change in the period

Question 112

Flexible budget

Answer 112

Applies the static budget standards to the actual output

Question 113

Key difference between static budget and flexible budget

Answer 113

The output quantity

Question 114

How is the amount of detail shown in a budget denoted

Answer 114

By levels (level 0 least, level 3 most)

Question 115

Static budget variance

Answer 115

Change in actual vs expected

Question 116

Favorable static budget variance

Answer 116

Favorable effect on income (credit), increased revenues, decreased costs

Question 117

Unfavorable static budget variance

Answer 117

Unfavorable effect on income (debit), decreased revenues, increased costs

Question 118

Sales volume variance

Answer 118

Happens only because the output quantity changes

Question 119

Budgeted input prices and quantities are available (3)

Answer 119

1) actual data from previous period
2) other companies in the industry
3) develop standards internally