Ch 7

The best label for the formula (AP - BP) AQ is the ________.

price variance

The flexible-budget variance for direct cost inputs can be further subdivided into a ________.

price variance and an efficiency variance

Which of the following items will be same for a flexible budget and a master budget?

total fixed costs

A favorable price variance for direct manufacturing labor might indicate that ________.

underskilled employees are being hired

If manufacturing machines are breaking down more than​ expected, this will contribute to​ a(n) ________.

unfavorable direct manufacturing labor efficiency variance

An unfavorable flexible-budget variance for variable costs may be the result of ________.

using more input quantities than were budgeted

Why might managers find a​ flexible-budget analysis more informative than a​ static-budget analysis?

A​ flexible-budget analysis enables a manager to distinguish how much of the difference between an actual result and a budgeted amount is due to​ (a) the difference between actual and budgeted output​ levels, and​ (b) the difference between actual and budgeted selling​ prices, variable​ costs, and fixed costs.

Which of the following can be a reason for a favorable price variance for direct materials?

a decrease in the price of materials due to an oversupply of materials

A price variance reflects the difference between ________.

an actual input price and a budgeted input price

An efficiency variance reflects the difference between ________.

an actual input quantity and a budgeted input quantity

The flexible budget contains ________.

budgeted amounts for actual output

Which of the following elements are used in calculating revenue in a flexible budget?

budgeted selling price and actual quantity of output

A flexible budget ________.

is developed at the end of the period

A favorable efficiency variance for direct manufacturing labor indicates that ________.

less direct manufacturing labor-hours were used during production than planned for actual output

What is the key difference between a static budget and a flexible​ budget?

A static budget is based on the level of output at the beginning of the​ period; a flexible budget is based on the actual output level in the budget period.

Select some possible reasons for an unfavorable direct manufacturing labor efficiency variance.

A. Poor maintenance of machines resulting in a high proportion of​ non-value-added labor. B. Hiring and use of underskilled workers. C. Inefficient scheduling of work so that the workforce was not optimally occupied. D.All of the above. Answer: D

The best label for the formula (AQ - BQ) BP is the ________.

Efficiency Variance

Which of the following is true of flexible budget?

It calculates total variable cost by multiplying actual units by budgeted variable cost per unit.

For any actual level of output, the efficiency variance is the difference between actual quantity of input used and the budgeted quantity of input allowed to produce actual output, multiplied by the budgeted price.

True

The flexible-budget variance is the total of price variance and efficiency variance.

True

The price variance is the difference between the actual price and the budgeted price of the input, multiplied by the actual quantity of input.

True