chapter 23 accounting

An internal report that compares actual cost and sales amounts with budgeted amounts and identifies the differences between them as favorable or unfavorable variances is called a: A. Performance report. B. Production report. C. Budget report. D. Variance report. E. Standard report.

a

Standard costs are used to measure: A. Price and quantity variances. B. Price variances only. C. Quantity variances only. D. Price, quantity, and sales variances. E. Quantity and sales variances.

a

An internal report that helps management analyze the difference between actual performance and budgeted performance based on the actual sales volume (or other level of activity) and that presents the differences between actual and budgeted amounts as variances is called a(n): A. Sales budget performance report. B. Flexible budget performance report. C. Master budget performance report. D. Static budget performance report. E. Operating budget performance report.

b

Overhead cost variance is: A. The difference between the overhead costs actually incurred and the overhead budgeted at the actual operating level. B. The difference between the actual overhead incurred during a period and the standard overhead applied. C. The difference between actual and budgeted cost caused by the difference between the actual price per unit and the budgeted price per unit. D. The costs that should be incurred under normal conditions to produce a specific product (or component) or to perform a specific service. E. The difference between the total overhead cost that would have been expected if the actual operating volume had been accurately predicted and the amount of overhead cost that was allocated to products using the standard overhead rate.

b

Standard costs are: 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.

b

The difference between the total budgeted overhead cost and the overhead applied to production using the predetermined overhead rate is the: A. Production variance B. Volume variance C. Overhead cost variance D. Quantity variance E. Controllable variance

b

Variable budget is another name for: A. Cash budget. B. Flexible budget. C. Fixed budget. D. Manufacturing budget. E. Rolling budget.

b

A _______________________ contains relevant information that compares actual results to planned activities.

budget report

A report based on predicted amounts of revenues and expenses corresponding to the actual level of output is called a: A. Rolling budget. B. Production budget. C. Flexible budget. D. Merchandise purchases budget. E. Fixed budget.

c

The costs that should be incurred under normal conditions to produce a specific product or component or to perform a specific service are: A. Variable costs. B. Fixed costs. C. Standard costs. D. Product costs. E. Period costs.

c

The difference between the actual cost incurred and the standard cost is called the: A. Flexible variance. B. Price variance. C. Cost variance. D. Controllable variance. E. Volume variance.

c

When standard manufacturing costs are recorded in the accounts and the cost variances are immaterial at the end of the accounting period, the cost variances should be: A. Carried forward to the next accounting period. B. Allocated between cost of goods sold, finished goods, and goods in process. C. Closed to cost of goods sold. D. Written off as a selling expense. E. Ignored.

c

Which department is often responsible for the direct materials price variance? A. The accounting department. B. The production department. C. The purchasing department. D. The finance department. E. The budgeting department.

c

The sum of the variable overhead spending variance, the variable overhead efficiency variance, and the fixed overhead spending variance is the ____________________________.

controllable variance

Which of the following variances is not used in a standard cost system? A. Variable overhead spending variance. B. Fixed overhead spending variance. C. Variable overhead efficiency variance. D. Fixed overhead efficiency variance. E. Fixed overhead volume variance.

d

In the analysis of variances, management commonly focuses on four categories of production costs: __________________ cost, ___________________ cost; _________________cost; and _________________ cost.

direct materials; direct labor; variable overhead; fixed overhead

A process of examining the differences between actual and budgeted costs and describing them in terms of the amounts that resulted from price and quantity differences is called: A. Cost analysis. B. Flexible budgeting. C. Variable analysis. D. Cost variable analysis. E. Cost variance analysis.

e

An analytical technique used by management to focus on the most significant variances and give less attention to the areas where performance is satisfactory is known as: A. Controllable management. B. Management by variance. C. Performance management. D. Management by objectives. E. Management by exception.

e

The difference between actual and standard cost caused by the difference between the actual price and the standard price is called the: A. Standard variance. B. Quantity variance. C. Volume variance. D. Controllable variance. E. Price variance.

e

The sum of the variable overhead spending variance, the variable overhead efficiency variance, and the fixed overhead spending variance is the: A. Production variance B. Quantity variance C. Volume variance D. Price variance E. Controllable variance

e

In preparing flexible budgets, the costs that remain constant in total are _______________ costs. Those costs that change in total are _______________ costs.

fixed; variable

Companies promoting continuous improvement strive to achieve _____________ standards by eliminating inefficiencies and waste.

ideal

A flexible budget is also called a _______________ budget

variable

A direct labor cost variance may be broken down into a controllable variance and a volume variance

False

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

False

A flexible budget expresses all costs on a per unit basis.

False

A variable or flexible budget is so named because it only focuses on variable costs.

False

A volume variance is the difference between overhead at maximum production volume and that at the budgeted production volume.

False

Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards.

False

Cost variances are ignored under management by exception

False

Fixed budgets are also known as flexible budgets.

False

If cost variances are material, they should always be closed directly to Cost of Goods Sold

False

Standard material, labor, and overhead costs can be obtained from standard cost tables published by the Institute of Management Accountants.

False

The amounts in a flexible budget are based on one expected level of sales or production.

False

Within the same budget performance report, it is impossible to have both favorable and unfavorable variances.

False

______________________ are preset costs for delivering a product or service under normal conditions.

Standard costs

A cost variance equals the sum of the quantity variance and the price variance.

True

A cost variance is the difference between actual cost and standard cost.

True

A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased cheap materials

True

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

True

Although a fixed budget is only useful over the relevant range of operations, a flexible budget is useful over all possible production levels.

True

An overhead cost variance is the difference between the actual overhead incurred for the period and the standard overhead applied.

True

An unfavorable variance is recorded with a debit

True

Fixed budget performance reports compare actual results with the expected amounts in the fixed budget.

True

Sales variances may be computed in a manner similar to cost variances-that is, computing both price and volume variances.

True

Standard costs can serve as a basis for evaluating actual performance.

True

Standard costs provide a basis for assessing the reasonableness of actual costs incurred for producing a product or service.

True

The purchasing department is often responsible for the events that create a direct materials price variance.

True

Variable budget is another name for a flexible budget

True

When standard costs are used, factory overhead is assigned to products with a predetermined standard overhead rate.

True

When the actual cost of direct materials used exceeds the standard cost, the company must have experienced an unfavorable direct materials price variance.

True

Another name for a static budget is a variable budget

False

Management by exception allows managers to focus on the most significant variances in performance.

True

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

True

Sales variances allow managers to focus on sales mix as well as sales quantities.

True

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

cost of goods sold

Differences between actual costs and standard costs are known as ___________________. These differences may be subdivided into _________________ and _________________.

cost variances; price variances; quantity variances

A flexible budget is prepared: A. Before the operating period only. B. After the operating period only. C. During the operating period only. D. At any time in the planning period. E. A flexible budget should never be prepared.

d

A planning budget based on a single predicted amount of sales or production volume is called a: A. Sales budget. B. Standard budget. C. Flexible budget. D. Fixed budget. E. Variable budget.

d

Regarding overhead costs, as volume increases: A. Unit fixed cost increases, unit variable cost decreases. B. Unit fixed cost decreases, unit variable cost increases. C. Unit variable cost decreases, unit fixed cost remains constant. D. Unit fixed cost decreases, unit variable cost remains constant. E. Both unit fixed cost and unit variable cost remain constant.

d

Sales analysis is useful for: A. Planning purposes only. B. Budgeting purposes only. C. Control purposes only. D. Planning and control purposes. E. Planning and budgeting purposes

d

Static budget is another name for: A. Standard budget. B. Flexible budget. C. Variable budget. D. Fixed budget. E. Rolling budget.

d

The difference between actual and standard cost caused by the difference between the actual quantity and the standard quantity is called the: A. Controllable variance. B. Standard variance. C. Budget variance. D. Quantity variance. E. Price variance.

d

When recording variances in a standard cost system: A. Only unfavorable material variances are debited. B. Only unfavorable material variances are credited. C. Both unfavorable material and labor variances are credited. D. All unfavorable variances are debited. E. All unfavorable variances are credited

d

. A favorable variance for a cost means that when compared to the budget, the actual cost is ____________________ than the budgeted cost.

lower

A management approach that emphasizes significant differences from plans is known as ___________________.

management by exception

The difference between the actual overhead cost incurred and the standard overhead applied is the __________________________.

overhead cost variance

A standard that takes into account the reality that some loss usually occurs with any process under normal application of the process is known as a __________________ standard.

practical

Direct materials variances are called price and quantity variances. However, when referring to direct labor, these variances are usually called _________________ and _____________ variances.

rate; efficiency

The difference between the actual sales and the flexible budget sales is called the ______________________ variance.

sales price variance

The difference between the flexible budget sales and the fixed budget sales is called the __________________________ variance.

sales volume

The fixed overhead variance can be broken down into the _________________ variance and the _________________ variance.

spending; volume

A fixed budget is also called a _____________ budget

static

A budget performance report that includes variances can have variances caused by both price differences and quantity differences.

True

A performance report compares the differences between: A. Actual results and predicted results. B. Actual results over several periods. C. Predicted results over several periods. D. Predicted results over several levels of activity. E. Predicted results and standard results.

a

If actual price per unit of materials is greater than the standard price per unit of materials, the direct materials price variance is _______________________.

unfavorable