Cost Ch. 7/8 Standard Costing and Variances & Ch. 14 Profitability Analysis and Sales Variance Analysis
An unfavorable sales mix variance would most likely be caused by A. A new competitor providing better service in the high margin product sector B. A competitor having distribution problems with high margin products C. The company offering low margin products at a higher price D. The company experiencing quality control problems that get negative media coverage of low margin products E. Some other answer
A. A new competitor providing better service in the high margin product sector In class ch. 14 #7
The sales volume variance equals A. A static budget minus a flexible budget B. Actual operating income minus flexible budget operating income C. Budgeted unit price minus actual unit price, times the actual units produced D. Budgeted unit price times the difference between actual inputs and expected inputs for the actual output level achieved
A. A static budget minus a flexible budget Gleim 7.1.5
The flexible budget variance in operating income is A. Actual operating income minus flexible budget operating income B. Budgeted unit price times the difference between actual inputs and expected inputs for the actual output level achieved C. A flexible budget amount minus a static budget amount D. Actual unit price minus budgeted unit prices times the actual units produced
A. Actual operating income minus flexible budget operating income Gleim 7.1.8
The sales mix variance is partly a function of the unit contribution margin (UCM). It equals A. Actual units sold x (budgeted WA UCM for planned mix - budgeted WA UCM for actual mix) B. (Actual units sold - master budget units sold) x budgeted WA UCM for the planned mix C. Budgeted market share percentage x (actual market size in units - budgeted market size in units) x budgeted WA UCM D. (Actual market share percentage - budgeted market share percentage) x actual market size in units x budgeted WA UCM
A. Actual units sold x (budgeted WA UCM for planned mix - budgeted WA UCM for actual mix) Gleim 7.5.3
Unfavorable direct material price variances are: A. Always credits B. Always debits C. Credited to the Materials Control account D. Credited to the Accounts Payable Control account
A. Always credits In class ch. 7/8 #2
When a manager is concerned with monitoring total cost, total revenue, and net profit conditioned upon the level of productivity, an accountant would normally recommend A. Flexible budget and Static budget B. Flexible budget C. Static budget D. Neither
A. Flexible budget and Static budget Gleim 7.1.2
Companies in what type of industry may use a standard cost system for cost control? A. Mass Production Industry and Service Industry B. Mass Production Industry C. Neither D. Service Industry
A. Mass Production Industry and Service Industry Gleim 7.1.7
A difference between standard costs used for cost control and the budgeted costs of the same manufacturing effort can exist because A. Standard costs represent what costs should be, whereas budgeted costs are expected actual costs B. Budgeted costs are historical costs, whereas standard costs are based on engineering studies C. Budgeted costs include some slack, whereas standard costs do not D. Standard costs include some slack, whereas budgeted costs do not
A. Standard costs represent what costs should be, whereas budgeted costs are expected actual costs Gleim 7.1.3
The sales mix variance will be unfavorable when: A. The actual sales mix shifts toward the less profitable units B. The market share variance and the market size variance C. The flexible budget variance and the market size variance D. The flexible budget variance and the sales mix variance
A. The actual sales mix shifts toward the less profitable units In class ch. 14 #3
More insight into the sales volume variance can be gained by subdividing it into: A. The sales mix variance and the sales quantity variance B. The market share variance and the market size variance C. The flexible budget variance and the market size variance D. The flexible budget variance and the sales mix variance
A. The sales mix variance and the sales quantity variance In class ch. 14 #2
What does a favorable direct labor efficiency variance indicate? A. The standard hours allowed for the units produced were greater than actual direct labor hours B. The average wage rate paid to direct labor employees was less than the standard rate C. Actual total direct labor costs incurred were less than standard direct labor costs allowed for the units produced D. The number of units produced was less than the number of units budgeted for the period
A. The standard hours allowed for the units produced were greater than actual direct labor hours In class ch. 7/8 #8
If overhead is applied on the basis of units of output, the variable overhead efficiency variance will be A. Zero B. Favorable C. Unfavorable, if output is less than the budgeted level D. A function of the direct labor efficiency variance
A. Zero Gleim 7.4.14
Yola Co. manufactures one product with a standard direct labor cost of 4 hours at $12.00 per hour. During June, 1,000 units were produced using 4,100 hours at $12.20 per hour. The unfavorable direct labor efficiency variance was A. $1,220 B. $1,200 C. $820 D. $400
B. $1,200 Labor efficiency variance = (SQ-AQ) x SP = (4,000 hours -4,100 hours) x $12 = (-100 hours) x $12 =$1,200 U Gleim 7.3.17
The standard direct materials cost to produce a unit of Lem is 4 meters of materials at $2.50 per meter. During May, 4200 meters of materials costing $10,080 were purchased and used to produce 1000 units of Lem. What was the materials price variance for May? A. $400 F B. $420 F C. $80 U D. $480 U
B. $420 F AP= $10,080/4,200=$2.40 Materials price variance= AQ x (SP-AP) =4200 x ($2.5-$2.4) =$420 F Gleim 7.2.7
The sales quantity variance is partly a function of the unit contribution margin (UCM). It equals A. Actual units sold x (budgeted WA UCM for planned mix - budgeted WA UCM for actual mix) B. (Actual units sold - master budget units sold) x budgeted WA UCM for the planned mix C. Budgeted market share percentage x (actual market size in units - budgeted market size in units) x budgeted WA UCM D. (Actual market share percentage - budgeted market share percentage) x actual market size in units x budgeted WA UCM
B. (Actual units sold - master budget units sold) x budgeted WA UCM for the planned mix Gleim 7.5.1
In a standard cost system, the materials price variance is obtained by multiplying the A. Actual price by the difference between actual quantity used and standard quantity used B. Actual quantity purchased by the difference between standard price and actual price C. Standard price by the difference between expected quantity and budgeted quantity D. Standard quantity used by the difference between actual price and standard price
B. Actual quantity purchased by the difference between standard price and actual price Gleim 7.2.2
How should a usage variance that is significant in amount be treated at the end of an accounting period? A. Reported as a deferred charge or credit B. Allocated among WIP inventory, finished goods inventory, and COGS C. Charged or credited to COGM D. Allocating among COGM, finished goods inventory, and COGS E. Closed to COGS
B. Allocated among WIP inventory, finished goods inventory, and COGS In class ch. 14 #9
Which of the following is a purpose of standard costing? A. Determine breakeven production level B. Control costs C. Eliminate the need for subjective decisions by management D. Allocate cost with more accuracy
B. Control costs Gleim 7.1.11
A standard cost system may be used in A. Job order costing but not process costing B. Either job order costing or process costing C. Process costing but not job order costing D Neither job order costing or process costing
B. Either job order costing or process costing In class ch. 7/8 #9
A standard costing system may be used in A. Job-order costing but not process costing B. Either process costing or job-order costing C. Process costing but not job-order costing D. Neither process costing nor job-order costing
B. Either process costing or job-order costing Gleim 7.1.1
The difference between the actual costs incurred and the costs that should have been incurred given the actual output achieved is the A. Production volume variance B. Flexible budget variance C. Sales volume variance D. Standard cost variance
B. Flexible budget variance Gleim 7.1.6
Management by exception is the practice of concentrating on A. Unfavorable variances B. Favorable variances C. Areas not operating as anticipated D. The master budget
C. Areas not operating as anticipated In class ch. 7/8 #1
The market size variance is partly a function of the unit contribution margin (UCM). It equals A. Actual units sold x (budgeted WA UCM for planned mix - budgeted WA UCM for actual mix) B. (Actual units sold - master budget units sold) x budgeted WA UCM for the planned mix C. Budgeted market share percentage x (actual market size in units - budgeted market size in units) x budgeted WA UCM D. (Actual market share percentage - budgeted market share percentage) x actual market size in units x budgeted WA UCM
C. Budgeted market share percentage x (actual market size in units - budgeted market size in units) x budgeted WA UCM Gleim 7.5.4
Standard costing will produce the same income before extraordinary items as actual costing when standard cost variances are assigned to A. WIP and FG inventories B. An income or expense account C. COGS and inventories D. COGS
C. COGS and inventories Gleim 7.1.16
The variance in an absorption costing system that measures the departure from the denominator level of activity that was used to set the fixed overhead rate is the A. Spending variance B. Efficiency variance C. Production volume variance D. Flexible budget variance
C. Production volume variance Gleim 7.4.2
For a company that produces more than one product, the sales volume variance can be divided into which two of the following additional variances? A. Sales price variance and Flexible budget variance B. Sales mix variance and Sales price variance C. Sales quantity variance and Sales mix variance D. Sales mix variance and Production volume variance
C. Sales quantity variance and Sales mix variance Gleim 7.5.6
The market size variance will be unfavorable when: A. The flexible budget contribution margin is greater than the static budget contribution margin B. The actual market share is greater than the budgeted market share C. The actual market size in units is less than the budgeted market size in units D. Actual sales in units is less than budget sales in units
C. The actual market size in units is less than the budgeted market size in units In class ch. 14 #6
How is labor rate variance computed? A. The difference between standard and actual rates times standard hours B. The difference between standard and actual hours times actual rate C. The difference between standard and actual rates times actual hours D. The difference between standard and actual hours times the difference between standard and actual rates
C. The difference between standard and actual rates times actual hours Gleim 7.3.5
The market share variance is partly a function of the unit contribution margin (UCM). It equals A. Actual units sold x (budgeted WA UCM for planned mix - budgeted WA UCM for actual mix) B. (Actual units sold - master budget units sold) x budgeted WA UCM for the planned mix C. Budgeted market share percentage x (actual market size in units - budgeted market size in units) x budgeted WA UCM D. (Actual market share percentage - budgeted market share percentage) x actual market size in units x budgeted WA UCM
D. (Actual market share percentage - budgeted market share percentage) x actual market size in units x budgeted WA UCM Gleim 7.5.7
Under the three-variance method for analyzing manufacturing overhead, which of the following is used in the computation of the spending variance? A. Budget allowance based on actual input B. Neither C. Actual manufacturing overhead D. Actual manufacturing overhead & Budget allowance based on actual input
D. Actual manufacturing overhead & Budget allowance based on actual input Gleim 7.4.19
A purchasing manager's performance is best evaluated using the A. Direct materials price variance B. Direct materials flexible budget variance C. Direct manufacturing labor flexible budget variance D. Affect the manager's action has on total costs for the entire company
D. Affect the manager's action has on total costs for the entire company In class ch. 7/8 #4
The standard unit cost is used in the calculation of which of the following variances? A. Neither B. Materials usage variance C. Materials price variance D. Both
D. Both Gleim 7.2.21
Fixed overhead costs must be unitized for: A. Financial planning purposes B. Planning purposes C. Calculating the production volume variance D. Both A & C are correct E. All answers are correct
D. Both A & C are correct In class ch. 7/8 #6
The variances that should be investigated by management include: A. Only unfavorable variances B. Only favorable variances C. All variances, both favorable and unfavorable D. Both favorable and unfavorable variances considered significant in magnitude for the company
D. Both favorable and unfavorable variances considered significant in magnitude for the company In class ch. 7/8 #5
In analyzing company operations, the controller of the corporation found a $250,000 favorable flexible-budget revenue variance. The variance was calculated by comparing the actual results with the flexible budget. This variance can be wholly explained by A. The total flexible budget variance B. The total sales volume variance C. The total static budget variance D. Changes in unit selling prices
D. Changes in unit selling prices Gleim 7.1.9
Excess direct labor wages resulting from overtime premium will be disclosed in which type of variance A. Yield B. Quantity C. Labor efficiency D. Labor rate
D. Labor rate Gleim 7.3.6
Differences is product costs resulting from the application of actual overhead rates rather than predetermined overhead rates could be immaterial if A. Production is not stable B. Fixed manufacturing overhead is a significant cost C. Several products are produced simultaneously D. Overhead is composed only of variable costs
D. Overhead is composed only of variable costs Gleim 7.4.1
Price variances and efficiency variances can be key to the performance measurement within a company. In evaluating the performance within a company, a materials efficiency variance can be caused by all of the following , except the A. Performance of the workers using the material B. Actions of the Purchasing Department C. Design of the product D. Sales volume of the product
D. Sales volume of the product Gleim 7.2.5
The sales volume variance is partly a function of the unit contribution margin (UCM). For a single-product company, it is A. The difference between actual and master budget sales volume, times actual UCM B. The difference between flexible budget and actual sales volume, times master budget UCM C. The difference between flexible budget and master budget sales volume, times actual UCM D. The difference between flexible budget and master budget sales volume, times master budget UCM
D. The difference between flexible budget and master budget sales volume, times master budget UCM Gleim 7.5.2
A favorable materials price variance coupled with an unfavorable materials usage variance most likely results from A. Machine efficiency problems B. Product mix production changes C. The purchase and use of higher than standard quality materials D. The purchase of lower than standard quality materials
D. The purchase of lower than standard quality materials Gleim 7.2.6
A shift toward a mix of products with a lower contribution margin per unit will most likely result in a(n) A. Favorable sales quantity variance B. Favorable sales mix variance C. Unfavorable sales quantity variance D. Unfavorable sales mix variance
D. Unfavorable sales mix variance In class ch. 14 #8
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 eliminate future occurrences of the variance D. Whether the variance is favorable or unfavorable
D. Whether the variance is favorable or unfavorable Gleim 7.1.15
Which of the following is the most probably reason a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance? A. The mix of workers assigned to the particular job was heavily weighted toward the use of the higher-paid, experienced individuals B. The mix of workers assigned to the particular job was heavily weighted toward the use of new, relatively low-paid unskilled workers C. Because of the production schedule, workers from other production areas were assigned to assist in this particular process D. Defective materials caused more labor to be used to produce a standard unit
Gleim 7.3.16
Info on the Hanley's direct labor costs for the month of January is as follows: Actual DL rate: $7.50 Standard DLH allowed : 11,000 Actual DL hours: 10,000 DLR variance-favorable: $5,500
Gleim 7.3.18
Variable overhead is applied on the basis of standard direct labor hours. If, for a given period, the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be A. Favorable B. Unfavorable C. Zero D. The same amount as the direct labor efficiency variance
Gleim 7.4.7
The variable overhead flexible budget variance can be further subdivided into the A. Price variance and efficiency variance B. Static budget variance and sales volume variance C. Spending variance and efficiency variance D. Sales volume variance and spending variance
In class ch. 7/8 #7
Under a three way variance method for analyzing manufacturing overhead, the difference between actual manufacturing overhead and the budget allowance based upon actual input is the A. Efficiency variance B. Spending variance C. Volume variance D. Idle capacity variance
B. Spending variance In class ch. 7/8 #10
The static budget variance will be favorable when: A. Actual unit sales are less than budgeted unit sales B. The actual contribution margin is greater than the static-budget contribution margin C. The actual sales mix shifts toward the less profitable units D. All of the above will generate a favorable static budget variance E. None of the above will generate a favorable static budget variance
B. The actual contribution margin is greater than the static-budget contribution margin In class ch. 14 #1
The market share variance will be favorable when: A. The flexible budget contribution margin is greater than the static budget contribution margin B. The actual market share is greater than the budgeted market share C. The actual market size in units is less than the budgeted market size in units D. Actual sales in units is less than budget sales in units
B. The actual market share is greater than the budgeted market share In class ch. 14 #5
More insight into the sales quantity variance can be gained by subdividing it into: A. The sales mix variance and the sales volume variance B. The market share variance and the market size variance C. The flexible budget variance and the sales volume variance D. The sales price variance and the sales volume variance
B. The market share variance and the market size variance In class ch. 14 #4
An unfavorable direct labor efficiency variance could be caused by a(n) A. Unfavorable variable overhead spending variance B. Unfavorable direct materials usage variance C. Unfavorable fixed overhead volume variance D. Favorable variable overhead spending variance
B. Unfavorable direct materials usage variance Gleim 7.3.2
From the perspective of control, the direct materials efficiency variance should be isolated at the time of: A. Purchase B. Use C. Completion of the entire product D. Sale of the product
B. Use In class ch. 7/8 #3
