ACC ch. 8

The differences between the standard and actual amounts are called variances. True False

T

Which of the following is not an advantage of using a standard cost system? A. The easiest cost system to develop and maintain B. Can boost morale and motivate employees C. Promotes the efficient use of management talent to control costs D. Provides immediate feedback that permits rapid response to problems

A

All of the following factors should influence the decision to investigate a variance except: A. Capacity for management to control. B. Materiality of the variance amount. C. The direction of the variance (favorable or unfavorable). D. Frequency of occurrence.

C

Johansson Company developed the following static budget at the beginning of the company's accounting period: If actual production totals 8,400 units, the flexible budget would show variable costs of (Do not round intermediate calculations): A. $16,400. B. $4,000. C. $4,100. D. $4,200.

D

Which of the following reason(s) cause flexible budgets to be useful planning tools? A. Flexible budgets allow managers to anticipate results under a variety of scenarios. B. Flexible budgets can help determine if a company's cash position is adequate. C. Flexible budgets can help managers judge if materials and storage facilities are appropriate for various production levels. D. All of the above answers are correct.

D

If the master budget prepared at a volume level of 10,000 units includes direct labor of $10,000, a flexible budget based on a volume of 11,000 units would include direct labor of $11,000. True False

T

If the master budget prepared at a volume level of 20,000 units includes direct materials of $80,000, a flexible budget based on a volume of 18,000 units would include direct materials of $72,000. True False

T

When would a cost variance be listed as unfavorable? A. When actual costs exceed budgeted costs B. When actual costs are less than budgeted costs C. When actual costs are equal to budgeted costs D. None of the above answers are correct.

A

When would a sales variance be listed as favorable? A. When actual sales exceed budgeted or expected sales B. When actual sales are less than budgeted or expected sales C. When actual sales are equal to budgeted or expected sales D. None of the above answers are correct.

A

Which of the following is a difference between a static and a flexible budget? A. Static budgets are based on single estimate of volume, whereas flexible budgets show estimated costs and revenues at a variety of activity levels. B. Static budgets are based on the same per unit variable amount, whereas flexible budgets are based on multiple per unit variable amounts. C. Static budgets use the same fixed cost amounts, whereas flexible budgets change the amount of fixed costs at different levels of activity. D. None of the above answers are correct.

A

The Latham Company provides the following standard cost data per unit of product: The total variable overhead variance was: A. $3,375 unfavorable. B. $3,375 favorable. C. $2,400 unfavorable. D. $2,400 favorable.

B

The Specialized Company provides the following standard cost information for one of its products: The fixed overhead cost volume variance is: A. $2,000 favorable. B. $2,000 unfavorable. C. $4,500 favorable. D. $800 unfavorable.

B

Which of the following applications is most suited for developing flexible budgets? A. Word processing B. Spreadsheet C. Graphics D. Database

B

Which of the following is an incorrect statement regarding variances? A. A variance is a difference between budgeted and actual amounts. B. A variance can only be calculated for revenues. C. A variance can be both favorable and unfavorable. D. A variance is unfavorable when expected sales are more than actual sales.

B

Starlight Company's static budget is based on a planned activity level of 35,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 30,000 units and one based on 40,000. The company actually produced and sold 39,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets? A. A budget based on 30,000 units B. A budget based on 35,000 units C. A budget based on 39,000 units D. A budget based on 40,000 units

C

Static and flexible budgets are similar in that: A. They both are prepared for multiple activity levels. B. They both concentrate solely on costs. C. They both are based on the same per unit variable amounts and the same fixed costs. D. None of the above answers are correct.

C

The Russell Company provides the following standard cost data per unit of product: The direct labor usage variance was: A. $6,000 favorable. B. $2,425 unfavorable. C. $6,000 unfavorable. D. $2,425 favorable.

C

Which of the following income statement formats is most commonly used with flexible budgeting? A. Sales − manufacturing costs − selling and administrative costs = net income B. Sales − cost of goods sold = gross margin; gross margin − operating expenses = net income C. Sales − variable costs = contribution margin; contribution margin − fixed costs = net income D. None of the above answers are correct.

C

A cost variance is unfavorable if standard cost exceeds actual cost. True False

F

If the master budget prepared at a volume level of 20,000 units includes factory rent of $40,000, a flexible budget based on a volume of 21,000 units would include factory rent of $42,000. True False

F