CMA FINAL EXAM MULTIPLE CHOICE - Amelia Pellegrino.

A favorable fixed overhead spending variance indicates that Select one: a. actual fixed overhead is less than budgeted fixed overhead. b. budgeted fixed overhead is less than actual fixed overhead. c. budgeted fixed overhead is greater than applied fixed overhead. d. applied fixed overhead is greater than budgeted fixed overhead.

a. actual fixed overhead is less than budgeted fixed overhead.

Which of the following costs would not be accounted for in a company's recordkeeping system? Select one: a. an opportunity cost b. an expired cost c. an unexpired cost d. a product cos

a. an opportunity cost

A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance if a. the mix of workers used in the production process was more experienced than the normal mix. b. the mix of workers used in the production process was less experienced than the normal mix. c. workers from another part of the plant were used due to an extra heavy production schedule. d. the purchasing agent acquired very high quality material that resulted in less spoilage.

a. the mix of workers used in the production process was more experienced than the normal mix.

A purpose of standard costing is to a. replace budgets and budgeting. b. simplify costing procedures. c. eliminate the need for actual costing for external reporting purposes. d. eliminate the need to account for year-end underapplied or overapplied manufacturing overhead.

b. simplify costing procedures.

Virgil Corp. uses a standard cost system. In May, Virgil purchased and used 17,500 pounds of materials at a cost of $70,000. The materials usage variance was $2,500 unfavorable and the standard materials allowed for May production was 17,000 pounds. What was the materials price variance for May? Answers:A. $15,000 favorable. B. $15,000 unfavorable. C. $17,500 unfavorable. D. $17,500 favorable.

Selected Answer:D. $17,500 favorable.

Which of the following capacity levels has traditionally been used to compute the fixed overhead application rate? Select one: a. expected annual b. normal c. theoretical d. prior yea

a. expected annual

Costs forgone when an individual or organization chooses one option over another are Select one: a. sunk costs b. opportunity costs c. budgeted costs d. historical costs

b. opportunity costs

Which of the following is the least likely to be a relevant item in deciding whether to replace an old machine? Select one: a. annual savings to be enjoyed on the new machine b. outlay to be made for the new machine c. acquisition cost of the old machine d. life of the new machine

c. acquisition cost of the old machine

Standard costs may be used for a. product costing. b. planning. c. controlling. d. all of the above.

d. all of the above.

Which service department cost allocation method utilizes a "benefits-provided" ranking? Select one: a. algebraic method b. indirect method c. direct method d. step method

d. step method

Standard costs a. are estimates of costs attainable only under the most ideal conditions. b. are difficult to use with a process costing system. c. can, if properly used, help motivate employees. d. require that significant unfavorable variances be investigated, but do not require that significant favorable variances be investigated.

c. can, if properly used, help motivate employees.

A total variance is best defined as the difference between total a. actual cost and total cost applied for the standard output of the period. b. standard cost and total cost applied to production. c. actual cost and total standard cost of the actual input of the period. d. actual cost and total cost applied for the actual output of the period.

d. actual cost and total cost applied for the actual output of the period.

A fixed cost is relevant if it is Select one: a. a product cost b. sunk c. uncontrollable d. avoidable

d. avoidable

The standard cost card contains quantities and costs for a. direct material only. b. direct labor only. c. direct material and direct labor only. d. direct material, direct labor, and overhead.

d. direct material, direct labor, and overhead.

The sum of the material price variance (calculated at point of purchase) and material quantity variance equals a. the total cost variance. b. the material mix variance. c. the material yield variance. d. no meaningful number.

d. no meaningful number.

The following information pertains to Roe Co.'s Year 1 manufacturing operations: Standard direct labor hours per unit 2 Actual direct labor hours 10,500 Number of units produced 5,000 Standard variable overhead per standard direct labor hour $3 Actual variable overhead $28,000 Roe's Year 1 unfavorable variable overhead efficiency variance was Answers:A. $1,500. B. $2,000. C. $3,500. D

Selected Answer:A. $1,500.

A favorable material price variance coupled with an unfavorable material usage variance would most likely result from Answers:A. The purchase of lower than standard quality material. B. Labor efficiency problems. C. Machine efficiency problems. D. The purchase and use of higher than standard quality material.

Selected Answer:A. The purchase of lower than standard quality material.

Which of the following standard costing variances would be least controllable by a production supervisor? Answers:A. Labor efficiency. B. Overhead volume. C. Overhead efficiency. D. Material usage.

Selected Answer:B. Overhead volume.

Relevant information for product A follows: Actual variable overhead cost per hour $8.00 Standard variable overhead cost per hour $7.50 Actual hours 4,500 Standards hours 5,000 What was the variable overhead spending variance for product A? Answers:A. $4,000 unfavorable. B. $4,000 favorable. C. $2,250 unfavorable. D. $2,250 favorable.

Selected Answer:C. $2,250 unfavorable.

A company produces widgets with budgeted standard direct materials of 2 pounds per widget at $5 per pound. Standard direct labor was budgeted at 0.5 hour per widget at $15 per hour. The actual usage in the current year was 25,000 pounds and 3,000 hours to produce 10,000 widgets. What was the direct material usage variance? Answers:A. $30,000 unfavorable. B. $25,000 favorable. C. $25,000 unfavorable. D. $30,000 favorable.

Selected Answer:D. $30,000 favorable.

A company uses a standard costing system. At the end of the current year, the company provides the following overhead information: Actual overhead incurred Variable $90,000 Fixed $62,000 Budgeted fixed overhead $65,000 Variable overhead rate (per direct labor hour) $8 Standard hours allowed for actual production 12,000 Actual labor hours used 11,000 What amount is variable overhead efficiency variance? Answers:A. $6,000 favorable. B. $2,000 unfavorable. C. $8,000 unfavorable. D. $8,000 favorable.

Selected Answer:D. $8,000 favorable.

The production volume variance is due to Answers:A. Excessive application of direct labor hours over the standard amounts for the output level actually achieved. B. Inefficient or efficient use of direct labor hours. C. Efficient or inefficient use of variable overhead. D. Difference from the planned level of the base used for overhead allocation and the actual level achieved.

Selected Answer:D. Difference from the planned level of the base used for overhead allocation and the actual level achieved.

Management has reviewed the standard cost variance analysis and is trying to explain an unfavorable labor efficiency variance of $8,000. Which of the following is the most likely cause of the variance? Answers:A. The quality of raw materials has improved greatly. B. The department manager has chosen to use highly skilled workers. C. The maintenance of machinery has been inadequate for the past few months. D. The new labor contract increased wages.

C. The maintenance of machinery has been inadequate for the past few months.

For the current period production levels, Woodwork Co. budgeted 11,000 board feet of production and purchased 15,000 board feet. The material cost was budgeted at $7 per foot. The actual cost for the period was $8.50 per foot. What was Woodwork's material price variance for the period? Answers: A. $6,000 unfavorable. B. $19,500 unfavorable. C. $22,500 unfavorable. D. $16,500 unfavorable.

C. $22,500 unfavorable.

The variance most useful in evaluating plant utilization is the Select one: a. fixed overhead volume variance. b. variable overhead efficiency variance. c. fixed overhead spending variance. d. variable overhead spending variance.

a. fixed overhead volume variance.

Which service department cost allocation method provides for reciprocal allocation of service costs among the service department as well as to the revenue producing departments? Select one: a. indirect method b. direct method c. algebraic method d. step method

c. algebraic method

At the end of a period, a significant material quantity variance should be a. closed to Cost of Goods Sold. b. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods Sold. c. allocated among Work in Process, Finished Goods, and Cost of Goods Sold. d. carried forward as a balance sheet account to the next period.

c. allocated among Work in Process, Finished Goods, and Cost of Goods Sold.

The algebraic method Select one: a. is not a service department cost allocation method b. is also referred to as the "benefits-provided" ranking method c. considers all interrelationships of the departments and reflects these relationships in equations d. does not consider interrelationships of the departments nor reflect these relationships in equations

c. considers all interrelationships of the departments and reflects these relationships in equations

A standard cost system may be used in a. job order costing, but not process costing. b. process costing, but not job order costing. c. either job order costing or process costing. d. neither job order costing nor process costing.

c. either job order costing or process costing.

The variance least significant for purposes of controlling costs is the Select one: a. variable overhead efficiency variance. b. material quantity variance. c. fixed overhead volume variance. d. fixed overhead spending variance.

c. fixed overhead volume variance.

In a standard cost system, Work in Process Inventory is ordinarily debited with a. actual costs of material and labor and a predetermined overhead cost for overhead. b. standard costs based on the level of input activity (such as direct labor hours worked). c. standard costs based on production output. d. actual costs of material, labor, and overhead.

c. standard costs based on production output.

A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance if Select one: a. the purchasing agent acquired very high quality material that resulted in less spoilage. b. workers from another part of the plant were used due to an extra heavy production schedule. c. the mix of workers used in the production process was less experienced than the normal mix. d. the mix of workers used in the production process was more experienced than the normal mix.

d. the mix of workers used in the production process was more experienced than the normal mix.

Which of the following factors should not be considered when deciding whether to investigate a variance? a. magnitude of the variance b. trend of the variances over time c. likelihood that an investigation will reduce or eliminate future occurrences of the variance d. whether the variance is favorable or unfavorable

d. whether the variance is favorable or unfavorable

A large labor efficiency variance is prorated to which of the following at year-end? WIP FG Cost of Goods Sold Inventory Inventory a. no no no b. no yes yes c. yes no no d. yes yes yes

d. yes yes yes

The difference between standard hours at standard wage rates and actual hours at standard wage rates is referred to as which of the following types of variances? Answers:A. Direct labor spending. B. Indirect labor spending. C. Labor usage. D. Labor rate.

Selected Answer:C. Labor usage.

A company produces widgets with budgeted standard direct materials of 2 pounds per widget at $5 per pound. Standard direct labor was budgeted at 0.5 hour per widget at $15 per hour. The actual usage in the current year was 25,000 pounds and 3,000 hours to produce 10,000 widgets. What was the direct labor usage variance? Answers:A. $30,000 unfavorable. B. $25,000 unfavorable. C. $25,000 favorable. D. $30,000 favorable.

Selected Answer:D. $30,000 favorable.

For the current period production levels, XL Molding Co. budgeted 8,500 board feet of production and used 9,000 board feet for actual production. Material cost was budgeted at $2 per foot. The actual cost for the period was $3 per foot. What was XL's material efficiency variance for the period? Answers:A. $1,000 favorable. B. $1,500 unfavorable. C. $1,500 favorable. D. $1,00

Answer:D. $1,000 unfavorable.

A company manufactures a product that has the direct material standard cost presented below. Budgeted and actual information for the current month for the manufacture of the finished product and the purchase and use of the direct material are also presented. Standard cost for direct material 1.60 lb. @ $2.50 per lb. = $4.00 Budget Actual Finished goods (in units) 30,000 32,000 Direct material usage (in pounds) 48,000 51,000 Direct material purchases (in pounds) 48,000 50,000 Total cost of direct material purchases $120,000 $120,000 The direct material efficiency (usage) variance for the current month is Answers:A. $3,000 favorable. B. $7,500 unfavorable. C. $500 favorable. D. $8,000 unfavorable.

Selected Answer:C. $500 favorable.

Which of the following statements regarding standard cost systems is true? a. Favorable variances are not necessarily good variances. b. Managers will investigate all variances from standard. c. The production supervisor is generally responsible for material price variances. d. Standard costs cannot be used for planning purposes since costs normally change in the future.

a. Favorable variances are not necessarily good variances.

A company wishing to isolate variances at the point closest to the point of responsibility will determine its material price variance when a. material is purchased. b. material is issued to production. c. material is used in production. d. production is completed.

a. material is purchased.

The material price variance (computed at point of purchase) is a. the difference between the actual cost of material purchased and the standard cost of material purchased. b. the difference between the actual cost of material purchased and the standard cost of material used. c. primarily the responsibility of the production manager. d. both a and c.

a. the difference between the actual cost of material purchased and the standard cost of material purchased.

Relevant costs are Select one: a. past costs that are expected to be different in the future b. anticipated future costs that will differ among various alternatives c. all costs that would be incurred within the relevant range of production d. all fixed and variable costs

b. anticipated future costs that will differ among various alternatives

The overhead allocation method that allocates service department costs without consideration of services rendered to other service departments is the Select one: a. step method b. direct method c. reciprocal method d. none of the above

b. direct method

Which service department cost allocation method assigns costs directly to revenue-producing areas with no other intermediate cost pools or allocations? Select one: a. step method b. direct method c. indirect method d. algebraic method

b. direct method

If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n) a. favorable variable overhead spending variance exists. b. favorable variable overhead efficiency variance exists. c. favorable volume variance exists. d. unfavorable volume variance exists.

b. favorable variable overhead efficiency variance exists.

When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields a a. combined price-quantity variance. b. price variance. c. quantity variance. d. mix variance.

b. price variance.

Which service department cost allocation method assigns indirect costs to cost objects after considering some of the interrelationships of the cost objects? Select one: a. direct method b. step method c. algebraic method d. indirect method

b. step method

The term incremental cost refers to Select one: a. the profit foregone by selecting one choice instead of another b. the additional cost of producing or selling another product or service c. a cost common to all choices in question and not clearly or feasibly allocable to any of them d. a cost that continues to be incurred in the absence of activity

b. the additional cost of producing or selling another product or service

A primary purpose of using a standard cost system is a. to make things easier for managers in the production facility. b. to provide a distinct measure of cost control. c. to minimize the cost per unit of production. d. b and c are correct.

b. to provide a distinct measure of cost control.

The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is Select one: a. the fixed manufacturing cost of the component b. zero c. the total variable cost of the component d. the total manufacturing cost of the component

b. zero

The term standard hours allowed measures a. budgeted output at actual hours. b. budgeted output at standard hours. c. actual output at standard hours. d. actual output at actual hours.

c. actual output at standard hours.

The most accurate method for allocating service department costs is the Select one: a. step method b. direct method c. algebraic method d. none of the above

c. algebraic method

If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n) Select one: a. unfavorable volume variance exists. b. favorable variable overhead spending variance exists. c. favorable variable overhead efficiency variance exists. d. favorable volume variance exists.

c. favorable variable overhead efficiency variance exists.

A favorable fixed overhead volume variance occurs if Select one: a. there is a favorable labor efficiency variance. b. production is less than planned. c. production is greater than planned. d. there is a favorable labor rate variance.

c. production is greater than planned.

Bailey Corporation. incurred 2,300 direct labor hours to produce 600 units of product. Each unit should take 4 direct labor hours. Bailey Corporation applies variable overhead to production on a direct labor hour basis. The variable overhead efficiency variance Select one: a. will depend upon the capacity measure selected to assign overhead to production. b. is impossible to determine without additional information. c. will be unfavorable. d. will be favorable.

d. will be favorable.