Chapter 8 Accounting

The analysis of the fixed cost volume variance focuses on how volume affects fixed cost per unit. This statement is

true

The fixed cost flexible budget variance is also called the fixed cost spending variance. This statement is

true

Cost variances are always unfavorable. This statement is

False

A static budget is a different term for the master budget. This statement is

True

The difference between budget data and actual results is called a variance. This statement is

True

An unfavorable materials cost flexible budget variance indicates that the production manager should be reprimanded. This statement is

false

An unfavorable materials cost volume variance indicates that the production manager should be reprimanded. This statement is

false

Capilla Company experienced an unfavorable sales volume variance and an unfavorable sales price flexible budget variance. Which of the following is a logical explanation for these variances? a. The company was unable to sell its products and was forced to reduce its sales price. b. The company reduced its sales price and therefore sold more items that it expected to sell. c. The sales volume and the sales price were higher than expected. d. None of the answers is correct.

a. The company was unable to sell its products and was forced to reduce its sales price.

When the actual amount of sales is greater than the budgeted amount of sales, the variance a. is classified as favorable. b. is classified as unfavorable. c. is both favorable and unfavorable. d. is not determinable.

a. is classified as favorable.

The static budget is based on an estimated level of sales volume that was determined at a. the beginning of an accounting period. b. the end of an accounting period. c. at any point during the accounting period.

a. the beginning of an accounting period.

At the beginning of the accounting period, Nutrition Incorporated estimated that total fixed overhead cost would be $50,600 and that sales volume would be 10,000 units. At the end of the accounting period actual fixed overhead cost amounted to $56,100 and actual sales volume was 11,000 units. Nutrition uses a predetermined overhead rate and a cost plus pricing model to establish its sales price. Based on this information the predetermined overhead rate is a. $5.61. b. $5.06. c. $4.60. d. $5.10.

b. $5.06.

Capilla Company experienced a favorable sales volume variance and an unfavorable sales price flexible budget variance. Which of the following is a logical explanation for these variances? a. The company increased its sales price and therefore sold fewer items than it expected to sell. b. The company reduced its sales price and therefore sold more items that it expected to sell. c. The standard sales price per unit was lower than the actual price per unit while volume did not change. d. None of the answers is correct.

b. The company reduced its sales price and therefore sold more items that it expected to sell.

At the beginning of the accounting period, Nutrition Incorporated estimated that total fixed cost would be $50,600 and that sales volume would be 10,000 units. At the end of the accounting period actual sales volume was 11,000 units. Nutrition uses a predetermined overhead rate and a cost plus pricing model to establish its sales price. Based on this information Nutrition a. underpriced its products. b. overpriced its products. c. priced its products accurately. d. The answer cannot be determined from the information provided.

b. overpriced its products.

A difference between the static budget and the flexible budget is called the a. total variance. b. volume variance. c. flexible budget variance. d. None of the answers is correct.

b. volume variance.

At the beginning of the accounting period, Nutrition Incorporated estimated that total fixed overhead cost would be $50,600 and that sales volume would be 10,000 units. At the end of the accounting period actual fixed overhead was $56,100 and actual sales volume was 11,000 units. Nutrition uses a predetermined overhead rate and a cost plus pricing model to establish its sales price. Based on this information the overhead spending variance is a. $5,500 favorable. b. $440 favorable. c. $5,500 unfavorable. d. $440 unfavorable.

c. $5,500 unfavorable.

Which of the following statements is true? a. The fixed cost spending variance is the difference between the amount of fixed cost shown on the static budget and the fixed cost shown on the flexible budget. b. The fixed cost spending variance explains how volume affects fixed cost per unit. c. The fixed cost spending variance is the difference between the amount of fixed cost shown on the flexible budget and the actual amount of fixed cost. d. Since fixed costs do not change with volume, the fixed cost spending variance is always equal to zero.

c. The fixed cost spending variance is the difference between the amount of fixed cost shown on the flexible budget and the actual amount of fixed cost.

Differences between the flexible budget and the actual results are called a. total variances. b. volume variances. c. flexible budget variances. d. None of the answers is correct.

c. flexible budget variances.

Kahn Company's static budget was based on sales volume of 12,000 units. Its flexible budget was based on sales volume of 14,000 units. Based on this information a. the sales volume variance is expected to be unfavorable. b. the materials cost volume variance is expected to be favorable. c. the labor cost volume variance is expected to be unfavorable. d. None of the answers is correct.

c. the labor cost volume variance is expected to be unfavorable.

A flexible budget is prepared using a. the same sales price per unit that was used to prepare the static budget. b. a different amount of expected sales volume than was used to prepare the static budget. c. the same variable cost per unit that was used to prepare the master budget. d. All of the answers are correct.

d. All of the answers are correct.

Chi Company had budgeted sales of $243,000. Actual sales amounted to $262,000. Which of the following items could have caused this result? a. Chi lowered per unit sales price of its products. b. Chi decreased the variable cost per unit of its products. c. Chi increased its fixed cost. d. Chi increased the number of units of product sold.

d. Chi increased the number of units of product sold.

The predetermined overhead rate is a. equal to the amount of fixed cost estimated at the end of the accounting period divided by the actual number of units produced. b. equal to the amount of fixed cost estimated at the beginning of the accounting period divided by the actual number of units produced. c. equal to the amount of fixed cost estimated at the end of the accounting period divided by the number of units a company estimates it will produce at the beginning of the accounting period. d. equal to the amount of fixed cost estimated at the beginning of the accounting period divided by the number of units a company estimates it will produce at the beginning of the accounting period.

d. equal to the amount of fixed cost estimated at the beginning of the accounting period divided by the number of units a company estimates it will produce at the beginning of the accounting period.

Favorable and unfavorable variances are not necessarily indicators of good or bad performance. This statement is

true