Cost Accounting Ch 7

Easy Carry provides the following particulars for the current year: Budgeted selling price $400 Budgeted variable cost per unit $220 Actual sales during the year 50,000 units Static budget units sold 40,000 units Budgeted fixed cost was $200,000 and actual fixed cost was $500,000. What is the sales-volume variance for operating income for the year for Easy Carry? a) $1,800,000 favorable b) $1,500,000 favorable c) $1,500,000 unfavorable d) $2,100,000 favorable

$1,800,000 favorable

Leo Pen Company budgets that it will use 2 units of raw materials for per unit manufactured and the budgeted price of input was $5 per unit. It used 22,000 units for raw material for producing 10,000 units during the year. Actual cost of raw material was $6 per unit. What is direct materials efficiency variance of Leo during the year ? a) $10,000 unfavorable b) $10,000 favorable c) $12,000 unfavorable d) $12,000 favorable

$10,000 unfavorable

Julian Accessory Inc. provides the following data for the previous year: Direct manufacturing labor-hours used 8,500 hours Actual price incurred per direct manufacturing labor-hour $30 Budgeted direct manufacturing labor-hours needed per unit 2.25 hours Budgeted rate per labor-hour $25 Actual sales during the previous year 4,000 units Budgeted sales during the previous year 3,500 units What was the direct manufacturing labor efficiency variance for the previous year? a) $18,750 unfavorable b) $42,500 unfavorable c) $15,000 favorable d) $12,500 favorable

$12,500 favorable

Robin Shoe Company provides the following particulars for the current year: Actual selling price $1,500 Budgeted selling price $1,250 Actual units sold 1,000 units Budgeted sales 800 units What is the selling-price variance for the year for Robin Shoe Company? a) $250,000 favorable b) $200,000 unfavorable c) $200,000 favorable d) $250,000 unfavorable

$250,000 favorable

Jerome Mobility Inc. had the following budgeted cost per unit for each category: Cost Category Variable Cost per unit Direct materials costs $40 Direct manufacturing labor costs 21 Variable manufacturing overhead costs 9 Total variable cost 70 Budgeted and actual data for the year are as follows: Budgeted fixed costs for current production levels $50,000 Budgeted selling price 130 Budgeted production and sales 1,500 units Actual production and sales 1,700 units Actual direct material cost $50,000 Actual direct manufacturing labor costs 36,500 Actual variable manufacturing overhead 16,000 Actual fixed costs 75,000 Actual selling price 130 What is static-budget variance for operating income for Jerome Mobility Inc. for the year? a) $26,000 favorable variance b) $28,500 favorable variance c) $3,500 unfavorable variance d) $3,500 favorable variance

$3,500 favorable variance

Herb Clothing had an unfavorable direct manufacturing labor flexible budget variance of $76,000 for the previous year. Budgeted rate per labor-hour was $20, whereas actual rate per labor-hour was $22. 18,000 direct manufacturing labor-hours were actually used during the previous year. What was the direct manufacturing labor efficiency variance for the previous year? a) $36,000 unfavorable b) $112,000 unfavorable c) $112,000 favorable d) $40,000 unfavorable

$40,000 unfavorable

Ralph Electronics had the following budgeted cost per unit for each category: Cost Category Variable Cost per unit Direct materials costs $60 Direct manufacturing labor costs 85 Variable manufacturing overhead costs 15 Total variable costs 160 Budgeted and actual data for the year are as follows: Budgeted fixed costs for current production levels $500,000 Budgeted selling price $240 Budgeted production and sales 10,000 units Actual production and sales 15,000 units Actual direct material cost $1,000,000 Actual direct manufacturing labor costs $1,500,000 Actual variable manufacturing overhead $250,000 Actual fixed costs $450,000 Actual selling price $265 What is the flexible-budget variance for Ralph Electronics for the year? a) $525,000 unfavorable b) $975,000 favorable c) $25,000 favorable d) $575,000 favorable

$575,000 favorable

A company has an unfavorable static-budget variance of $125,000 and an unfavorable flexible-budget variance of $45,500. What will be the sales volume variance of the company, assuming direct manufacturing labor efficiency variance is $12,000 favorable? a) $158,500 unfavorable b) $158,500 favorable c) $79,500 favorable d) $79,500 unfavorable

$79,500 unfavorable

Solomon Cellular has the following details relating to the previous year: Direct materials variance $19,600 F Budgeted quantity of input allowed per unit 10 units Actual output for the year 1,000 units Direct materials price variance $9,600 F Budgeted price of input per unit $10 What is the actual quantity of input used by Solomon Cellular for the previous year? a) 1,000 units b) 10,000 F c) 11,000 units d) 10,000 units

10,000 F

Direct materials yield variance for each input = (Actual total quantity of all direct materials inputs used - Budgeted total quantity of all direct materials input allowed for actual output) × ________ a) Budgeted direct materials input mix percentage × Budgeted price of direct materials input b) Actual direct materials input mix percentage × Actual price of direct materials input c) Budgeted direct materials input mix percentage × Actual price of direct materials input d) Actual direct materials input mix percentage × Budgeted price of direct materials input

Budgeted direct materials input mix percentage × Budgeted price of direct materials input

Which of the following statements is true with respect to variances? a) Sale-volume variances are a better measure of sales price and cost performance than flexible-budget variances b) Flexible-budget variances are a better measure of sales price and cost performance than static-budget variances c) Static-budget variances are a better measure of sales price and cost performance than flexible-budget variances d) Flexible-budget variances are a better measure of sales price and cost performance than sale-volume variances

Flexible-budget variances are a better measure of sales price and cost performance than static-budget variances

Nilen Manufacturing Corporation provides the following data for the previous year: Number of units of raw material purchased and used 5,000 units Actual price incurred per unit of raw material $70 Budgeted units of raw material required per unit of finished product 3 units Budgeted price per unit of raw material $75 Actual sales during the previous year 1,500 units Budgeted sales during the previous year 1,700 units Which of the following statements is true for Nilen Manufacturing Corporation for the previous year? a) It will have a favorable direct material price variance of $25,000 and an unfavorable direct material efficiency variance of $35,000 b) It will have a favorable direct material price variance of $22,500 and an unfavorable direct material efficiency variance of $37,500 c) It will have a favorable direct material price variance of $25,000 and an unfavorable direct material efficiency variance of $37,500 d) It will have a favorable direct material price variance of $25,000 and a favorable direct material efficiency variance of $7,500

It will have a favorable direct material price variance of $25,000 and an unfavorable direct material efficiency variance of $37,500

Which of the following statements is most likely to be true of variances? a) Variance must be analyzed in isolation of each other for the analysis to be simple and comprehensible b) A favorable variance is always good news for a company and an unfavorable variance is almost always bad news c) All variances can be correlated to one single factor d) Managers can use variance analysis to create a virtuous cycle of continuous improvement

Managers can use variance analysis to create a virtuous cycle of continuous improvement

If for Orange Corporation, the budgeted units produced and sold and the unit selling price are the same as the actual units produced and sold and actual selling price, which of the following statements is most likely to be true? a) Orange Corporation's sales-volume variance will be equal to flexible-budget variance b) Orange Corporation's static-budget variance and sales-volume variance will be the same c) Orange Corporation's static-budget variance and flexible-budget variance will be the same d) Orange Corporation's sales-volume variance will be greater than flexible-budget variance

Orange Corporation's static-budget variance and flexible-budget variance will be the same

Which of the following companies is most likely to be using benchmarking? a) Nulin Technologies analyses any variance from the budgeted amounts only when its crosses a certain threshold b) Quick bite measures its inventory productivity by calculating gross margin return on inventory investment and comparing it with its competitors c) Transparent Inc. displays real-time defect rates and production levels on large LED screens throughout their plants for workers and managers to see d) Jubiliant Shoe Corp. pays its managers annual incentive based on the increase in revenue while using any one of the previous years as benchmark

Quick bite measures its inventory productivity by calculating gross margin return on inventory investment and comparing it with its competitors

Which of the following statements is true in relation to static and flexible budgets? a) Static budgets are prepared on the basis of budgeted unit variable cost, whereas flexible budgets are prepared based on actual unit variable cost b) Static budgets are prepared on the basis of budgeted total fixed costs, whereas flexible budgets are prepared based on actual fixed costs c) Static budgets are prepared at the beginning of the period, whereas flexible budgets are prepared at the end of the period d) Static budgets are prepared on the basis of budgeted selling price, whereas flexible budgets are prepared based on actual selling price

Static budgets are prepared at the beginning of the period, whereas flexible budgets are prepared at the end of the period

Direct materials mix variance for each input = Actual total quantity of all direct materials inputs used × (Actual direct materials input mix percentage - Budgeted direct materials input mix percentage) × ________ a) actual price of direct materials input b) actual total quantity of all direct materials inputs used c) budgeted price of direct materials input d) actual direct materials input mix percentage

budgeted price of direct materials input

Which of the following is a level 3 variance? a) flexible-budget variance b) efficiency variance c) sales-volume variance d) static-budget variance

efficiency variance

The ________ is the difference between a flexible-budget amount and the corresponding static-budget amount a) price variance b) efficiency variance c) sales-volume variance d) flexible-budget variance

sales-volume variance

The static budget is based on ________ a) the level of output sold during the budget period b) the level of output planned at the start of the budget period c) the level of practical production capacity of the company d) the level of theoretical production capacity of the company

the level of output planned at the start of the budget period