ACC 213 test 3
If the actual hourly rate is greater than the standard hourly rate, the labor rate variance is labeled unfavorable.
True
In a flexible budget, when the activity declines, the total variable cost also declines.
True
Move time is considered non-value-added time.
True
A budget that is based on the actual activity of a period is known as:
flexible budget
An activity variance is the difference between an actual revenue or cost and the revenue or cost in the flexible budget that is adjusted for the actual level of activity of the period.
False
Which of the following would be considered an operating asset in return on investment computations?
Accounts receivable
Which of the following may appear on a flexible budget performance report?
All of the above
All other things equal, which of the following would increase a division's residual income?
Decrease in average operating assets
Which of the following will increase a company's manufacturing cycle efficiency?
Decrease inspection time: Yes Decrease in Queue time: Yes
A change in sales has no effect on margin and turnover.
False
A favorable spending variance occurs when the actual cost is less than the amount of the costs in the static planning budget.
False
A flexible budget performance report contains activity variances but not revenue or spending variances.
False
A revenue variance is favorable if the actual revenue is greater than the revenue in the static planning budget.
False
A spending variance is the difference between amount of the cost in the static planning budget and the amount of the cost in the flexible budget.
False
An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period.
False
If activity is higher than expected, total fixed costs should be higher than expected. If activity is lower than expected, total fixed costs should be lower than expected.
False
If skilled workers workers with high hourly rates of pay are given duties that require little skill and call for lower hourly rates of pay, this will result in favorable labor rate variance.
False
If the actual level of activity is 4% more than planned, then the costs in the static budget should be increased by 4% before comparing them to actual costs.
False
If variable manufacturing overhead is applied based on direct labor-hours, it is impossible to have a favorable labor rate variance and unfavorable variable overhead rate variance for the same period.
False
In general, the production manager is responsible for the materials price variance.
False
Land held for possible plant expansion would be included as an operating asset when computing return on investment.
False
Return on investment equals margin multiplied by sales.
False
The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the fixed part of the predetermined overhead rate.
False
Waste on the production line will result in an unfavorable materials price variance.
False
Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will be
Favorable
Poorly trained workers could have an unfavorable effect on which of the following variances.
Labor rate: no Materials quantity: yes
Which of the following performance measures will increase if inventory decreases and all else remains the same?
Return on investment: Yes Residual income: Yes
The general model for calculating a quantity variance is:
Standard price X (actual quantity of inputs used - standard quantity allowed for output)
In a flexible budget, what will happen to fixed costs as the activity level increases?
The fixed cost per unit will decrease
A balanced scorecard contains both customer and internal business process performance measures because improvements in internal business process should result in customer satisfaction.
True
A cost center is a responsibility center.
True
An unfavorable activity variance for revenue indicates that activity was less than expected when the static planning budget was developed.
True
Comparing a static planning budget to actual costs is not a good way to assess whether variable costs are under control.
True
Fixed costs should not be ignored when evaluating how well a manager has controlled costs.
True
Fixed costs should usually be included in performance reports because fixed costs are generally controllable.
True
Flexible budgets can be used when there is more than one cost drive.
True
If a company contains a number of investment centers of differing sizes, return on investment should be used rather than residual income to rank the financial performance the divisions.
True
If a strategy is not working, it should become evident on the balanced scorecard when some of the predicted effects don't occur.
True
Net operating income is income before interest and taxes.
True
ROI and residual income are tools used to evaluate managerial performance in investment centers.
True
Residual income is the difference between net operating income and the product of average operating assets and the minimum rate of return.
True
The labor efficiency variance is labeled favorable if the actual hours used is less than the standard hours allowed for the actual output.
True
The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity.
True
The standard price per unit for direct materials should reflect the final, delivered cost of the materials.
True
The standard quantity or standard hours allowed refers to the amount of the input that should have been used to produce the actual output of the period.
True
The variable overhead efficiency variance does not actually measure how efficiently variable manufacturing overhead resources were used.
True
The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the variable part of the predetermined overhead rate.
True
To help assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity
True
When the activity measure is the number of units sold, the revenue variance is favorable if the average actual selling price is greater than expected.
True
When the materials price variance is recorded at the time of purchase, raw materials are recorded as inventory at standard costs.
True
When used in return on investment calculations, turnover equals sales divided by average operating assets.
True
A segment of a business responsible for both revenues and expenses would be called:
a profit center.
An unfavorable materials quantity variance indicates that:
actual usage of material exceeds the standard material allowed for output.
Which of the following will not result in an increase in return on investment, assuming other factors remain the same?
an increase in operating assets
When using a flexible budget, a decrease in activity within the relevant range:
decrease total costs
Which of the following measures of performance encourages continued expansion by an investment center so long as it is able to earn a return in excess of the minimum required return on average operating assets?
residual income
Some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of:
return on investment
The production department should generally be responsible for materials price variances that resulted from
rush orders arising from poor scheduling.
A favorable labor rate variance indicates that
the standard rate exceeds the actual rate
If variable manufacturing overhead is applied on the basis of direct labor-hours and the variable overhead rate variance is favorable then:
the standard variable overhead rate exceeds the actual rate