ACCT CH 9

The difference between the actual fixed manufacturing overhead cost and the budgeted fixed manufacturing overhead cost is the: a. fixed overhead spending variance. b. fixed overhead volume variance. c. fixed overhead rate variance. d. fixed overhead efficiency variance.

a. fixed overhead spending variance.

A budget that is based on a single estimate of sales volume is called a: a. static budget. b. flexible budget. c. variable budget. d. sunk cost budget.

a. static budget.

A price standard is the price that should be paid per output unit for the input. True False

False

A spending variance is calculated by comparing actual costs with the static budget. True False

False

A standard cost card shows what the company spent to produce each unit of product. True False

False

A standard cost system records cost at their actual amounts. True False

False

Easily attainable standards are the best for motivating individuals to work hard. True False

False

The direct material quantity variance is the difference between the actual quantity and the standard quantity of materials multiplied by the actual price. True False

False

The fixed overhead volume variance is the difference between actual production volume and actual sales volume. True False

False

The production manager is typically responsible for the direct labor rate variance. True False

False

Fixed overhead does not have separate price and quantity variances. True False

True

Exeter has a material standard of 1 pound per unit of output. Each pound has a standard price of $26 per pound. During July, Exeter paid $66,100 for 2,475 pounds, which it used to produce 2,350 units. What is the direct materials price variance? a. $1,750 unfavorable b. $1,300 favorable c. $6,300 unfavorable d. $5,000 unfavorable

a. $1,750 unfavorable

Venus Company applies overhead based on direct labor hours. The variable overhead standard is 10 hours at $3.50 per hour. During October, Venus Company spent $157,600 for variable overhead. 47,440 labor hours were used to produce 4,800 units. What is the over- or underapplied variable overhead? a. $10,400 overapplied b. $8,440 overapplied c. $8,440 underapplied d. $1,960 overapplied

a. $10,400 overapplied

Whitman has a direct labor standard of 2 hours per unit of output. Each employee has a standard wage rate of $22.50 per hour. During July, Whitman paid $94,750 to employees for 4,445 hours worked. 2,350 units were produced during July. What is the flexible budget amount for direct labor? a. $105,750 b. $189,500 c. $200,025 d. $211,500

a. $105,750

Warner Company has budgeted fixed overhead of $225,000 based on budgeted production of 7,500 units. During October, 7,200 units were produced and $236,400 was spent on fixed overhead. What is the fixed overhead spending variance? a. $11,400 unfavorable b. $9,000 unfavorable c. $20,400 unfavorable d. $20,400 favorable

a. $11,400 unfavorable

Melrose Inc. uses standard costing. Last period, it spent $145,000 for labor. The direct labor rate variance was $5,000 favorable, and the direct labor efficiency variance was $6,000 unfavorable. In the journal entry to record the use of direct labor, the amount debited to cost of goods sold would be: a. $144,000. b. $145,000. c. $150,000. d. $151,000.

a. $144,000.

Tucker Co. has budgeted fixed overhead of $225,000 based on budgeted production of 7,500 units. During February, 7,200 units were produced and $233,400 was spent on fixed overhead. What is the fixed overhead spending variance? a. $8,400 unfavorable b. $9,000 unfavorable c. $17,400 unfavorable d. $600 favorable

a. $8,400 unfavorable

Standard cost systems depend on which two types of standards? a. Quantity and price standards b. Quantity and efficiency standards c. Rate and price standards d. Rate and spending standards

a. Quantity and price standards

Oxford Co. has a material standard of 2.1 pounds per unit of output. Each pound has a standard price of $10 per pound. During February, Oxford Co. paid $57,220 for 4,840 pounds, which were used to produce 2,400 units. What is the direct materials quantity variance? a. $2,000 unfavorable b. $2,000 favorable c. $6,820 favorable d. $6,820 unfavorable

b. $2,000 favorable

Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's fixed overhead cost be if it used a flexible budget for the period based on actual sales? a. $43,200 b. $46,440 c. $49,923 d. $166,410

b. $46,440

Avon Co. has a favorable fixed overhead spending variance of $2,800. During February, Avon budgeted to produce 2,500 units, it actually produced 2,400 units, and it budgeted $75,000 for fixed overhead. How much was actually spent on fixed overhead? a. $72,000 b. $72,200 c. $75,000 d. $77,800

b. $72,200

How do managers and companies set price and quantity standards? a. Based on a manager's previous experience at another company. b. Based on historical data, industry averages, and the results of process studies. c. Based on the ideal budget created for the operating division. d. Based on prior period variances.

b. Based on historical data, industry averages, and the results of process studies.

Which of the following types of standards can be achieved only under perfect conditions? a. Easily attainable standard b. Ideal standard c. Currently attainable standard d. Tight but attainable standard

b. Ideal standard

A fixed overhead rate based on _______________ highlights for management attention the cost of unutilized capacity. a. budgeted production b. practical capacity c. utilized capacity d. actual production

b. practical capacity

The difference between the actual cost driver amount and the standard cost driver amount, multiplied by the standard variable overhead rate is the: a. variable overhead rate variance. b. variable overhead efficiency variance. c. variable overhead volume variance. d. over- or underapplied variance.

b. variable overhead efficiency variance.

Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's total costs be if it used a flexible budget for the period based on actual sales? a. $111,070 b. $119,400 c. $124,872 d. $128,355

c. $124,872

Raven applies overhead based on direct labor hours. The variable overhead standard is 2 hours at $11 per hour. During July, Raven spent $116,700 for variable overhead. 8,890 labor hours were used to produce 4,700 units. What is the variable overhead efficiency variance? a. $5,610 favorable b. $46,090 favorable c. $18,910 favorable d. $18,910 unfavorable

c. $18,910 favorable

Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's variable overhead cost be if it used a flexible budget for the period based on actual sales? a. $16,745 b. $18,000 c. $19,350 d. $46,440

c. $19,350

Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's direct materials cost be if it used a flexible budget for the period based on actual sales? a. $19,870 b. $21,360 c. $22,962 d. $91,848

c. $22,962

A budget depends upon: a. only the level of output. b. only the input standards. c. both the level of output as well as the input standards. d. neither the level of output nor the input standards.

c. both the level of output as well as the input standards.

The formula AH × (SR - AR) is the: a. direct labor spending variance. b. direct labor volume variance. c. direct labor rate variance. d. direct labor efficiency variance.

c. direct labor rate variance.

The difference between the actual price and the standard price, multiplied by the actual quantity of materials purchased is the: a. direct materials spending variance. b. direct materials volume variance. c. direct materials price variance. d. direct materials quantity variance.

c. direct materials price variance.

The formula AQ × (SP - AP) is the: a. direct materials spending variance. b. direct materials volume variance. c. direct materials price variance. d. direct materials quantity variance.

c. direct materials price variance.

Both the master budget and the flexible budget are based on: a. variable costs. b. actual costs. c. standard costs. d. ideal costs.

c. standard costs.

In a standard cost system, overhead is applied per unit by multiplying the ___________ overhead rate times the ____________ quantity of the cost driver. a. actual, actual b. actual, standard c. standard, standard d. standard, actual

c. standard, standard

Warner Co. has budgeted fixed overhead of $150,000. Practical capacity is 6,000 units, and budgeted production is 5,000 units. During February, 4,800 units were produced and $155,600 was spent on fixed overhead. What is the budgeted fixed overhead rate based on practical capacity? a. $31.12 b. $31.25 c. $30.00 d. $25.00

d. $25.00

At the end of the accounting period, all variances are closed to the _____________ account. a. Work in Process b. Finished Goods c. Cost of Goods Manufactured d. Cost of Goods Sold

d. Cost of Goods Sold

Which of the following statements is correct about the way managers set standards for employees? a. The standards managers set for employee productivity should be based on ideal conditions to encourage employees to push themselves. b. Eliminating breaks, downtime, and maintenance time from set standards is an excellent way to motivate employees. c. High employee turnover results in higher standards over the long run because weak or underperforming employees are replaced with high performing employees. d. When setting standards, managers should include a reasonable amount of downtime for preventable maintenance, employee breaks, and training.

d. When setting standards, managers should include a reasonable amount of downtime for preventable maintenance, employee breaks, and training.

The difference between the actual labor hours and the standard labor hours, multiplied by the standard labor rate is the: a. direct labor spending variance. b. direct labor volume variance. c. direct labor rate variance. d. direct labor efficiency variance.

d. direct labor efficiency variance

The difference between the actual volume and the budgeted volume, multiplied by the fixed overhead rate based on budgeted volume, is the: a. fixed overhead spending variance. b. fixed overhead price variance. c. fixed overhead efficiency variance. d. fixed overhead volume variance.

d. fixed overhead volume variance.

Warner Co. has budgeted fixed overhead of $150,000. Practical capacity is 6,000 units, and budgeted production is 5,000 units. During February, 4,800 units were produced and $155,600 was spent on fixed overhead. What is the expected (planned) capacity variance? a. $5,600 unfavorable b. $25,000 unfavorable c. $30,000 unfavorable d. $35,600 unfavorable

not a

Madrid Co. has a direct labor standard of 4 hours per unit of output. Each employee has a standard wage rate of $11 per hour. During February, Madrid Co. paid $99,500 to employees for 9,150 hours worked. 2,400 units were produced during February. What is the direct labor efficiency variance? a. $1,150 favorable b. $4,950 favorable c. $6,100 favorable d. $302 favorable

not a not b

The difference between the actual labor rate and the standard labor rate, multiplied by the actual labor hours is the: a. direct labor spending variance. b. direct labor volume variance. c. direct labor rate variance. d. direct labor efficiency variance.

not b

Warner Co. has budgeted fixed overhead of $150,000. Practical capacity is 6,000 units, and budgeted production is 5,000 units. During February, 4,800 units were produced and $155,600 was spent on fixed overhead. What is the total fixed overhead capacity variance? a. $5,000 unfavorable b. $5,600 unfavorable c. $25,000 unfavorable d. $30,000 unfavorable

not c

The difference between actual volume and budgeted production, multiplied by the fixed overhead rate based on practical capacity, is the: a. expected (planned) capacity variance. b. unexpected (unplanned) capacity variance. c. total capacity variance. d. volume variance.

not d