Chapter 16

When a company uses a standard cost system, the entry to record fixed overhead applied to production includes a debit to Work-in-Process Inventory and a credit to ______.

Fixed Overhead (Applied)

The number that should be used to evaluate production performance is the variance from the ___ budget.

Flexible

A difference between actual and standard labor costs per hour results in a direct labor ___ variance.

Price

Budgeted fixed manufacturing cost was $890,000 for 40,000 units or 100,000 hours, Actual fixed overhead totaled $910,000. The standard fixed production overhead cost per unit was $___.

22.25 = $890,000 / 40,000

Budgeted fixed manufacturing cost was $890,000 for 40,000 units or 100,000 hours, Actual fixed overhead totaled $910,000. The standard fixed production overhead cost per direct-labor hour was $___ .

8.9 = $890,000 / 100,000

Given applied fixed overhead of $156,400 and actual fixed overhead of $155,000, the standard cost journal entry to record actual fixed overhead costs would include a (debit/credit) ___ to Fixed Overhead (Actual/Applied) ___ for $___.

Debit; Actual; 155,000

Within the relevant range of activity, variance analysis treats fixed and variable production costs ______.

Differently

Differences between budgeted and actual results due to differences between budgeted and actual inputs used is a(n) ______ variance.

Efficiency

True or false: A direct labor efficiency variance is always the responsibility of the production department manager.

False

True or false: Decomposing the profit variance into revenue and cost components provides information that is useful for control purposes.

False

True or false: The variable overhead efficiency variance measures the efficient use of resources such as electricity.

False

Both actual overhead costs and the relationship between overhead costs and direct labor hours could impact the variable production overhead ___ variance.

Price

The purchasing department is generally responsible for the direct materials ___ variance.

Price

Responsibility for the direct materials efficiency variances are generally assigned to the ______ department.

Production

Details about the differences between budgeted earnings and actual earnings is shown on the ___ ___ analysis.

Profit variance

Quantities of each input used to produce a unit of output along with the budgeted unit price for each input are shown on the ___ ___ ___.

Standard cost sheet

The sum of the price and the efficiency variances equals the ___ ___ variance.

Total cost

True or false: The variable overhead price variance can contain both price and efficiency items.

True

There is no fixed overhead efficiency variance when a company uses ______ costing.

Variable

An additional fixed manufacturing overhead variance is computed when a company uses ______ costing.

absorption

Which of the following statements is correct? a. Paying workers more than the standard wage allowed in the budget will lead to a favorable labor price variance. b. If wages rates used to set standards are the same as those in the union contract, labor price variances will not occur. c. Using inexperienced workers should result in an unfavorable labor price variance.

b. If wages rates used to set standards are the same as those in the union contract, labor price variances will not occur.

A production volume variance can occur with ______. a. both variable and absorption costing b. absorption costing only c. variable costing only

b. absorption costing only

On a standard cost sheet, overhead is ______. a. based on the actual overhead costs incurred b. expressed in terms of the burden rate c. based on the expected budgeted overhead

b. expressed in terms of the burden rate

When computing a flexible budget and variances, ______ marketing and administrative costs are expected to change. a. neither fixed nor variable b. only variable c. only fixed d. both fixed and variable

b. only variable

Which of the following statements are correct? a. Fixed costs are only affected by activity levels within the relevant range. b. For purposes of variance analysis, fixed costs are treated like product costs. c. The flexible budget fixed costs equal the master budget's fixed costs. d. A fixed production cost variance is the difference between actual and budgeted costs.

c. The flexible budget fixed costs equal the master budget's fixed costs. d. A fixed production cost variance is the difference between actual and budgeted costs.

Standard costing ______. a. does not accumulate actual costs in general ledger accounts b. can only be used with process costing c. allows Work-in-Process entries to be made before actual costs are known

c. allows Work-in-Process entries to be made before actual costs are known

A profit variance analysis compares ______. a. flexible budget results to master budget results only b. actual results with the flexible budget only c. actual results with the master budget only d. actual results with both the flexible budget and master budget

d. actual results with both the flexible budget and master budget

The production department is generally responsible for a direct materials ___ variance.

efficiency

When analyzing a profit variance, a(n) ___ variance increases operating profits and a(n) ___ variance decreases profits.

favorable; unfavorable

The cash budget and budgeted balance sheet are examples of ___ budgets.

financial

A budget prepared for various levels of anticipated activity is called a(n) ___ budget.

flexible

The four-way analysis of overhead variances computes ___ and efficiency variances for ___ overhead and price and ___ volume for ___ overhead.

price; variable; production; fixed

When fixed manufacturing costs are treated as ______ costs, an additional variance is computed.

product

When computing variances, marketing and administrative costs are treated like ______ costs.

production

Capacity variance, idle capacity variance and denominator variances are all names for the ___ ___ variance.

production volume

Responsibility for the direct materials price variance is generally assigned to the ______ department.

purchasing

The difference between operating profits in the master budget and operating profits in the flexible budget is called a(n) ___ ___ variance.

sale activity

The accounting method that assigns costs to cost objects at predetermined amounts is called ___ ___.

standard costing

if less overhead is applied that was budgeted, the production volume variance is ______.

unfavorable

There is no fixed overhead efficiency variance when a company uses ___ costing.

variable

The difference between actual and budgeted costs is the ___ production cost variance.

Fixed

True or false: Unfavorable variances are always bad.

False

Which of the following statements are correct? a. A sales activity variance impacts variable production costs. b. Production performance should be evaluated based on the master budget. c. A sales activity variance impacts fixed production costs. d. A sales activity variance impacts both variable and fixed production costs. e. Production performance should be evaluated based on the flexible budget.

a. A sales activity variance impacts variable production costs. e. Production performance should be evaluated based on the flexible budget.

Which of the following statements is correct? a. When doing variance analysis, fixed and variable production costs are treated differently. b. Budgeted fixed overhead is the same in both the master and flexible budget. c. When doing variance analysis, fixed and variable production costs are treated the same. d. Budgeted variable overhead is the same in both the master and flexible budget.

a. When doing variance analysis, fixed and variable production costs are treated differently. b. Budgeted fixed overhead is the same in both the master and flexible budget.

Regarding fixed overhead variances, ______ a. a production volume variance only occurs when fixed costs are unitized b. there is no efficiency variance c. the amount assigned to units produced equals the budgeted fixed overhead

a. a production volume variance only occurs when fixed costs are unitized b. there is no efficiency variance

When using standard costing journal entries, ______. a. actual costs are recorded in various accounts b. the debit entry is to an overhead applied account c. overhead costs may be charged to production before actual costs are known d. variances are the difference between overhead applied and actual costs

a. actual costs are recorded in various accounts c. overhead costs may be charged to production before actual costs are known d. variances are the difference between overhead applied and actual costs

A production volume variance occurs if the ______. a. number of units produced differs from the number used to estimate fixed cost per unit b. actual fixed overhead is different from the budgeted fixed overhead c. number of units produced differs from the number of units in the static budget

a. number of units produced differs from the number used to estimate fixed cost per unit

Unfavorable direct labor efficiency variances can be caused by ______. a. poorly trained workers b. faulty equipment c. scheduling issues d. highly motivated workers

a. poorly trained workers b. faulty equipment c. scheduling issues

Operating budgets include ______. a. production budget b. budgeted income statement c. cost of goods sold budget d. budgeted balance sheet

a. production budget b. budgeted income statement c. cost of goods sold budget

When standard overhead costs are charged to production during the period, ______ a. the credit entry is to an overhead applied account b. actual costs are not recorded in the accounts c. variances are computed as the difference between the budget amount and overhead applied

a. the credit entry is to an overhead applied account

The decomposition of the profit variance into revenue and cost components ______. a. explains what portion of the total profit variance is due to each cause b. is more informative that the simple profit variance c. does not help managers determine how to incorporate changes d. provides information that is useful for control purposes

b. is more informative that the simple profit variance c. does not help managers determine how to incorporate changes

Under the four-way analysis of overhead variances, ______ variances are computed for both fixed and variable overhead. a. price and production volume b. price c. production volume d. price and efficiency

b. price

A difference between the number of budgeted units sold and actual units sold results in a(n) ______ variance. a. sales price b. sales activity c. efficiency d. profit

b. sales activity

A budget prepared for only one level of anticipated activity is known as a(n) ______ budget. a. operating b. static c. flexible d. financial

b. static