Chapter 16

What is the term used to describe a budget that indicates revenues, costs, and profits for different levels of activity? Static budget Master budget Production budget Flexible budget None of these.

Flexible budget

In the general model, an efficiency variance is calculated as: (SP × AQ) - (SP × SQ) (AP × SQ) - (SP × SQ) (AP × AQ) - (SP × SQ) (AP × AQ) - (SP × AQ)

(SP × AQ) - (SP × SQ)

Which of the following statements regarding variances is(are) false?(A) In general and holding all other things constant, an unfavorable variance decreases operating profits.(B) A favorable variance is not always good, and an unfavorable variance is not always bad. Only A is false. Only B is false. Both A and B are false. Neither A nor B is false.

Neither A nor B is false.

In the general model, a price variance is calculated as: (AP × AQ) - (AP × SQ) (AP × SQ) - (SP × SQ) (AP × AQ) - (SP × AQ) (AP × AQ) - (SP × SQ)

(AP × AQ) - (SP × AQ)

Which of the following is the most probable 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 towards the use of higher paid experienced individuals. B) The mix of workers assigned to the particular job was heavily weighted towards the use of new relatively low paid unskilled workers. C) Because of the production schedule, workers from other production areas were assigned to assist this particular process. D) Defective materials caused more labor to be used in order to produce a standard unit.

A) The mix of workers assigned to the particular job was heavily weighted towards the use of higher paid experienced individuals.

The sales price variance is the difference between the actual sales revenues and the: A) budgeted selling price multiplied by the budgeted number of units sold. B) budgeted selling price multiplied by the actual number of units sold. C) actual selling price multiplied by the budgeted number of units sold. D) actual selling price multiplied by the actual number of units sold.

B) budgeted selling price multiplied by the actual number of units sold.

A variance can best be described as: A) benchmarks common to other firms in the same industry. B) differences between planned results and actual results. C) useful for performance evaluations but not making decisions. D) generally accepted accounting principles when standards are used.

B) differences between planned results and actual results.

If the total materials variance for a given operation is favorable, why must this variance be further evaluated as to price and usage? A) There is no need to further evaluate the total materials variance if it is favorable. B) Generally accepted accounting principles require that all variances be analyzed in three stages. C) All variances must appear in the annual report to equity owners for proper disclosure. D) A further evaluation lets management evaluate the activities of the purchasing and production functions.

D) A further evaluation lets management evaluate the activities of the purchasing and production functions.

The production volume variance is computed by the difference between the: A) actual fixed overhead and applied fixed overhead. B) actual fixed overhead and budget at actual level of activity reached. C) actual fixed overhead and budget at denominator level of activity planned. D) budget at actual levels of activity reached and fixed overhead applied.

D) budget at actual levels of activity reached and fixed overhead applied.

The difference between operating profits in the master budget and operating profits in the flexible budget is called: sales activity variance. flexible budget variance. production volume variance. total operating profit variance.

sales activity variance.