ACCT Unit 3
The standard hours per unit includes both direct and indirect labor hours.
False Reason: The standard hours per unit only includes direct labor hours.
Given planning budget revenue of $284,000, actual revenue of $275,000, and flexible budget revenue of $290,000, there is a(n)
Favorable
A cost center's performance report does not include ______.
net operating income
The flexible budget report combines activity and revenue and spending variances.
performance
Developing goals and preparing various budgets to achieve those goals is part of
planning
In a manufacturing company, the______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.
production
If poor-quality materials results in excessive labor processing time, the manager will probably be held responsible for the labor efficiency variance. (Enter only one word per blank.)
purchasing
When using a standard cost system,
the information in the variance reports may be too old to be useful. an undue emphasis on labor efficiency variances can create pressure to build excess inventory.
Borrowing money is required whenever______.
there is a cash deficiency the cash excess is less than the minimum required cash balance
When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is Blank______.
unfavorable
If the actual cost is greater than what the cost should have been, the variance is labeled as
unfavorable, U, or unfavourable
The materials price variance is calculated using the Blank______ quantity of the input purchased.
actual
The spending variance is labeled as favorable when the Blank______.
actual cost is less than what the cost should have been at the actual level of activity
The variance analysis cycle Blank______.
begins with the preparation of performance reports
A detailed plan for the future that is usually expressed in formal quantitative terms is a(n)
budget
A quantity variance is Blank______.
calculated using the standard price of the input
When creating an Excel budget and performing what-if analysis, it is generally easiest to
create the budget with a budgeting assumption tab
The difference between the actual hours used and the standard hours allowed for the actual output is used in the calculation of the labor variance. (Enter only one word per blank.)
efficiency
The cost of unsold units is computed on the ______ budget.
ending finished goods inventory
The purpose of preparing a direct materials budget is to ________.
estimate the quantity of raw materials to be purchased
The cash budget includes four major sections: receipts, disbursements, the cash excess or deficiency, and
financing, borrowing, finance, or finances
The terms price and quantity are used when computing direct variance, while the terms rate and hours are used when computing direct variances. (Enter only one word per blank.)
material, labor
The standard cost for Blank______ manufacturing overhead is computed the same way as the standard cost for direct labor.
variable
The standard rate per unit that a company expects to pay for variable overhead equals the Blank______.
variable portion of the predetermined overhead rate
All of the following are reasons for revenue variances EXCEPT ________.
A change in input prices Correct
Which of the following is not found in the financing section of the cash budget?
Cash deficiency
All costs of production other than direct materials and direct labor are shown on the
manufacturing overhead
When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that
net income is higher than expected but all or most expense variances are unfavorable
The difference between the amount of an input used and the amount that should have been used, all evaluated at the standard price for the input, is called a(n) variance. (Enter only one word per blank.)
quantity
The difference between the standard and the actual direct labor wages per hour is reflected in the labor variance. (Enter only one word per blank.)
rate
The difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n)
revenue
The production department should generally be responsible for materials price variances that resulted from:
rush orders arising from poor scheduling.
Because all other parts of the budget depend on it, if the Blank______ budget is inaccurate, the rest of the budget will be inaccurate.
sales
The budgeting process begins with the preparation of the ______ budget.
sales
The first step in the budgeting process is the preparation of the
sales
True or false: A static budget is being compared to actual activity. The variance is F for net income but U for most expenses. This suggests that actual activity was lower than budgeted.
False Reason: The opposite is true. This suggests that actual activity was higher than expected which resulted in higher net income and expenses.
Master budget schedules Blank______.
are based on estimates and assumptions answer several key questions for a company
Because it is needed for the schedule of expected cash collections, the annual master budget file includes the
balance sheet
To prepare a budgeted balance sheet as of December 31, 2020, data is needed from the ______ December 31, 2019.
balance sheet as of
A budgeted balance sheet is developed using data from the ______ of the budget period and data contained in the various schedules.
beginning
Budgets Blank______.
communicate management's plan throughout the organization
SR(AH - SH) is the formula for the ______ variance.
labor efficiency
When demand for a product is insufficient to keep all of the production workers busy and no layoffs occur, an unfavorable variance may occur. (Enter only one word per blank.)
labor efficiency
Using budgeting assumptions when preparing the master budget,______.
makes it easier to answer "what-if" questions
Standard costs are a key element in the by approach utilized by some companies.
management by exception
An integrated business plan that formally lays out the company's goals is called the ______ budget.
master
A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the
master budget
Nonprofit organizations
may have revenue sources that are fixed usually have significant funding sources other than sales
The amount of goods for resale to be acquired from suppliers during the period is shown on the
merchandise purchases
The difference between the standard and the actual direct labor wages per hour is reflected in the labor
rate variance
Standard costs fit naturally into an integrated system of
responsibility accounting
To calculate total sales on the sales budget, multiply budgeted sales in units by Blank______.
sales price per unit
Recognizing individuals at all levels of the organization as team members whose views and judgments are valued by top management is an advantage of
self-imposed budgeting
In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the
selling and administrative
Standards are Blank______.
set for each major production input or task benchmarks for measuring performance compared to the actual quantities and costs of inputs
The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n)
spending
The difference between actual results and the flexible budget amount is a(n)
spending variance
Advantages to using a standard cost system include
standard costs can simplify bookkeeping standards can provide benchmarks for individuals to judge their own performance
The receipts, disbursements, excess or deficiency, and financing section are all parts of the
cash
A spending variance is the
difference between what a cost should have been at the actual level of activity and the actual amount of the cost
A revenue variance is the Blank______.
difference between what revenue should have been at the actual level of activity and the actual revenue
Working hours required to satisfy the production budget are shown on the______ budget.
direct labor
In a manufacturing company, the ______ budget details the raw materials that must be purchased to fulfill the production budget and provide for adequate inventories
direct materials
Performance reports for cost centers
do not include revenues or net income
When actual revenue Blank______ what the revenue should have been, the variance is labeled favorable.
exceeds
In a manufacturing company, the______budget is prepared right after the sales budget.
production
The labor efficiency variance is generally the responsibility of the Blank______ manager.
production
Options to generate a favorable revenue and spending variance include
protecting the selling price reduce the prices of inputs increase operating efficiency
Commission expense is budgeted to be $16,000 at a planned sales level of 4,000 units. If only 2,900 units are sold, how much commission expense will appear on the flexible budget, and is the activity variance favorable or unfavorable?
$11,600 and favorable Reason: Flexible budget expense: $16,000 ÷ 4,000 = $4 per unit × 2,900 units = $11,600. Since the flexible budget expense < planning budget expense, the variance is favorable.
Actual hours used 5,500; Standard hours allowed 5,800; Actual labor rate $14.75 per hour; and Standard labor rate $14.00 per hour. The labor rate variance is Blank______.
$4,125 U Reason: The labor rate variance is: AH(AR-SR): 5,500 × ($14.75 - $14.00) = $4,125 U
Use the following information to calculate the labor efficiency variance for Adkinson Company. Actual hours used 5,500 Standard hours allowed 5,800 Actual labor rate $14.75 per hour Standard rate $14.00 per hour
$4,200 F $14 x (5,800 - 5,500) = $4,200 F the labor efficiency variance is calculated using the standard labor rate
The spending variance is Blank______.
(AQ × AP) − (SQ × SP)
Which of the following are used to calculate the standard quantity per unit of direct materials?
Allowance for waste and spoilage Direct materials requirements per unit of finished product
Which of the following statements are true?
Managers should not use standards to assign blame. Standard cost reports may be too outdated to be useful.
Which of the following is NOT a column on a flexible budget performance report?
Net operating income
Which of the following is needed to prepare a sales budget?
The budgeted number of units to be sold
A detailed plan for the future that is usually expressed in formal quantitative terms is ______.
a budget
One option to generate a favorable Blank______ variance for net operating income is to increase the number of clients.
activity
The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n)
activity
A price variance is the difference between the Blank______.
actual price and the standard price multiplied by the actual amount of the input
The materials price variance is calculated using the Blank______.
actual price of the input actual quantity of the input purchased standard price of the input
Budgets ______.
define goals and objectives that can serve as benchmarks for evaluating subsequent performance coordinate the activities of the entire organization by integrating the plans of its various parts encourage managers to think about and plan for the future and the budgeting process can uncover potential bottlenecks before they occur
In a direct materials budget, the desired ending raw materials inventory for the year is equal to the ________.
desired ending raw materials inventory for the last period
A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted
income statement
Using multiple cost drivers on a flexible budget report will generally
increase accuracy
An unfavorable labor efficiency variance can result from Blank______.
insufficient product demand poorly motivated workers faulty equipment
A manager cannot complain that the budget was unrealistic and impossible to meet when a(n)
self-imposed
A company can consider making investments or repay outstanding principal and interest when
the cash excess is greater than the minimum required cash balance
The ending finished goods inventory budget computes the cost of Blank______ units.
unsold
The prominent difference between performance reports in nonprofit and for-profit organizations is that nonprofit organizations
usually receive significant funding from sources other than sales
The amount of goods to be acquired from suppliers during the period is shown on the______ budget.
merchandise purchases
Variances are more accurate when using
multiple cost drivers
Planning budgets are sometimes called Blank______ budgets.
static Reason: A planning budget is prepared using a static level of activity. A flexible budget takes into account what costs should have been at the actual level of activity.
The standard price of materials is $4.10 per pound and the standard quantity allowed for actual output is 5,800 pounds. If the actual quantity purchased and used was 6,000 pounds, and the actual price per pound was $4.00, the direct materials price variance is Blank______.
6,000 x ($4.00 - $4.10) = $600 F
The standard price of materials is $3.50 per pound and the standard quantity allowed for actual output is 7,000 pounds. If the actual quantity purchased and used was 6,700 pounds, and the actual price per pound was $3.40, the direct materials price variance is $700
670, Favorable
The labor rate variance measures the productivity of direct labor.
False Reason: The labor rate variance reflects the difference between the actual and standard direct labor rates.
True or false: Control involves developing goals and preparing various budgets to achieve those goals.
False Reason: Control involves the steps taken by management to increase the likelihood that all parts of the organization are working to achieve the goals set down in the planning stage.
Revenues and costs are adjusted as the level of activity changes on a(n)
Flexible
Estimates of what revenues and costs should have been based on the actual level of activity are shown on the
Flexible or flex budget
Material requirements plus an allowance for normal inefficiencies are added together to determine the ________ per unit of output for direct materials.
Standard quanity
Which of the following statements are true?
Standards provide information for measuring performance. When actual results depart significantly from the standard, the reasons why should be investigated.
A performance report shows that the planning revenue was $200,000, the flexible budget revenue was $225,000, and actual revenue was $223,000. Which of the following statements are true?
The activity variance is $25,000 Favorable. The revenue variance is $2,000 Unfavorable. Reason: Because the actual revenue was less than the flexible budget revenue, the variance is unfavorable. Reason: Because the actual activity was greater than the planned activity, the variance is favorable.
Companies use the________cycle to evaluate and improve performance.
Variance analysis
The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) Blank______ variance.
activity Reason: A spending variance is the difference between how much a cost should have been given the actual level of activity and the actual amount of the cost. Reason: A revenue variance is the difference between how much revenue should have been given the actual level of activity and the actual revenue.
Many of the schedules in a master budget are based on a variety of management estimates and assumptions.
True Reason: Managers must make a number of estimates and assumptions when preparing a master budget.
An unchanged planning budget is known as a(n)
static
A flexible budget performance report combines the
activity variances with the revenue and spending variances
Which of the following budgets shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured?
Budgeted income statement
To calculate a price variance, multiply the _____quantity times the actual price and compare it to the actual quantity times the _______price. (Enter only one word per blank.)
actual, standard
The materials price variance is the difference between the actual price of materials Blank______.
and the standard price for materials with the difference multiplied by the actual quantity of materials
The amount of direct-labor hours that should be used to produce one unit of finished goods is the _______ hours per unit.
standard
The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the Blank______ hourly rate.
standard
