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The intercept of the flexible budget-line is total: A) sales. B) variable costs. C) fixed costs. D) contribution margin. E) assets.

C

The purpose of the flexible budget is to: A) allow management some latitude in meeting goals. B) eliminate cyclical fluctuations in production reports by ignoring variable costs. C) compare actual and budgeted results at virtually any level of production. D) reduce the total time in preparing the annual budget.

C

The variable overhead price variance is due to: A) price items only. B) efficiency items only. C) both price and efficiency items. D) neither price or efficiency items.

C

When using a flexible budget, what will happen to variable costs on a per-unit basis as production increases within the relevant range?: A) Decrease. B) Increase. C) Remain unchanged. D) Fixed costs are not considered in flexible budgeting.

C

Which of the following statements is/are true?: (A) A favorable variance is not necessarily good, and an unfavorable variance is not necessarily bad. (B) The master budget includes operating budgets (e.g., production budget) and financial budgets (e.g., cash budget). A) Only A is true. B) Only B is true. C) Both A and B are true. D) Neither A nor B is true.

C

Which of the following variances will always be favorable when actual sales exceeds budgeted sales?: A) variable cost B) fixed cost C) sales revenue D) operating profit E) contribution margin

C

True or False: In essence, the terms "master budget" and "operating budget" mean the same thing and can be used interchangeably.

False

True or False: The direct labor price variance will always be unfavorable if more hours are worked than the standard hours allowed for the actual output attained

False

True or False: The direct labor rate variance is the actual rate per hour multiplied by the difference between the actual hours worked and the standard hours allowed for the actual number of units attained.

False

True or False: The production volume variance is the difference between fixed costs on the flexible budget and the fixed costs on the master budget

False

True or False: The production volume variance is unfavorable when the actual number of units sold is less than the budgeted number of units on the master budget.

False

True or False: The sales price variance is the actual selling price per unit times the difference between budgeted number of units and the actual number of units sold.

False

True or False: The slope of the flexible budget line is the contribution margin per unit.

False

True or False: The standard labor rate per hour includes wages earned but not fringe benefits.

False

True or False: The terms "master budget" and "flexible budget" mean the same thing and can be used interchangeably.

False

True or False: If the actual total costs are above the flexible budget-line, then the total cost variance is unfavorable.

True

True or False: The decomposition of the operating profit variance into revenue and cost variances provides additional information for control and decision-making.

True

True or False: The direct labor efficiency variance can be the result of poor supervision or poor scheduling by divisional managers.

True

True or False: The total costs for the master budget and the total costs for the flexible budget lie on the flexible budget line.

True

True or False: A flexible budget adjusts the static budget to reflect the actual activity level achieved during the period.

True

True or False: A price variance is the difference between actual costs and the flexible budget based on actual inputs used

True

True or False: Both the actual material used and the standard quantity allowed for material is based on the actual output attained.

True

True or False: For fixed costs, there is no difference between the flexible budget and the master budget within the relevant range.

True

True or False: If the budgeted activity level is greater than the actual activity level, then the total budgeted costs of the master budget will be greater than the total budgeted costs of the flexible budget.

True

True or False: If the sales activity variance for sales revenue is unfavorable, then the contribution margin sales activity variance will be unfavorable.

True

True or False: In general, actual total costs do not lie on the flexible budget line.

True

True or False: In general, and holding all other things constant, an unfavorable variance decreases operating profits.

True

True or False: In setting standards, allowances usually include normal inefficiencies (e.g., defects in the direct material, inexperienced workers, and coffee breaks).

True

True or False: In variance analysis, all fixed costs are treated as period costs.

True

True or False: It is possible to have a favorable direct material price variance and an unfavorable direct material efficiency variance.

True

True or False: Production cost variances are input variance, while sales activity variances are output variances.

True

True or False: Responsibility for the direct material price variance can be assigned to the purchasing department.

True

True or False: The budget variance for fixed production costs is the difference between the actual fixed costs and the budgeted fixed costs on the master budget.

True

True or False: The comparison of the master budget with the flexible budget is called the sales activity variance.

True

True or False: The flexible and master budget amounts are the same for fixed marketing and administrative costs.

True

True or False: The intercept and slope of the flexible budget-line are the budgeted fixed costs and the budgeted variable costs per unit, respectively.

True

True or False: The master budget includes operating budgets (e.g., production budget) and financial budgets (e.g., cash budget).

True

True or False: The sales activity variance for sales revenue is the actual selling price per unit times the difference between the budgeted units and actual units.

True

True or False: The sales activity variance is the result of a difference between budgeted units sold and actual units sold.

True

True or False: The slope of the flexible budget line is the variable costs per unit

True

True or False: The standard cost for a unit of output is the standard price per unit of input times the standard number of inputs per one unit of output.

True

True or False: The total cost variance is the difference between the actual costs and the flexible budget based on the budgeted input per unit and the actual output attained.

True

An operating budget would not include a: A) cash budget. B) sales budget. C) labor budget. D) production budget. E) operating expense budget.

A

If overhead is applied to production using direct labor hours and the direct labor efficiency variance is favorable, then the variable overhead efficiency variance is: A) favorable. B) unfavorable. C) either favorable or unfavorable. D) neither favorable not unfavorable.

A

In general, the terms favorable and unfavorable are used to describe the effect of a variance on: A) net income. B) sales revenue. C) production costs. D) operating expenses. E) balance sheet.

A

In the general model, an efficiency variance is calculated as: A) (SP x AQ) - (SP x SQ) B) (AP x SQ) - (SP x SQ) C) (AP x AQ) - (SP x SQ) D) (AP x AQ) - (SP x AQ)

A

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

A

When using a flexible budget, what will happen to fixed costs on a per-unit basis as production increases within the relevant range?: A) Decrease. B) Increase. C) Remain unchanged. D) Fixed costs are not considered in flexible budgeting.

A

True or False: The variable overhead production price variance can be attributed to a less than perfect relationship between the variable overhead costs and the direct labor hours worked.

True

True or False: There is no variance called the fixed production cost efficiency variance

True

True or False: Variance analysis is used to evaluate the performance of individuals and assist them make decisions about the future.

True

True or False: Variances are often used to evaluate the performance of cost centers within an organization

True

True or False: .The direct labor price variance is also known as the direct labor rate variance.

True

True or False: A favorable variance is not necessarily good, and an unfavorable variance is not necessarily bad.

True

Which of the following direct material variances uses the standard cost per unit?: ...............................Quantity......................................................Price........................................ A)...........................Yes................................................................Yes............................................ B)............................No................................................................No............................................. C)............................Yes...............................................................No............................................ D)............................No................................................................Yes...........................................

A

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

In the general model, a price variance is calculated as: A) (AP x AQ) - (AP x SQ) B) (AP x SQ) - (SP x SQ) C) (AP x AQ) - (SP x AQ) D) (AP x AQ) - (SP x SQ)

C

A debit balance in the labor-efficiency variance account indicates that: A) standard hours exceed actual hours. B) actual hours exceed standard hours. C) standard rate and standard hours exceed actual rate and actual hours. D) actual rate and actual hours exceed standard rate and standard hours.

B

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

If a company uses a predetermined rate for allocating overhead costs, the production volume variance is the: A) underapplied or overapplied variable cost element of overhead. B) underapplied or overapplied fixed cost element of overhead. C) difference in budgeted costs and actual costs of fixed overhead items. D) difference in budgeted costs and actual costs of variable overhead items.

B

If materials are carried in the direct materials inventory account at standard cost, then it is reasonable to assume that the: A) raw materials inventory account is understated. B) price variance is recognized when materials are purchased. C) company does not follow generally accepted accounting principles. D) price variance is recognized when materials are placed into production.

B

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

The slope of the flexible budget-line is the: A) selling price per unit. B) variable cost per unit. C) fixed cost per unit. D) contribution margin per unit. E) operating profit per unit.

B

Which of the following phrases is appropriate for the master budget and the flexible budget?: A) ex post ex post B) ex ante ex post C) ex post ex ante D) ex ante ex ante

B

Which variance will be unfavorable due to employees working more hours than allowed for the actual number of units produced?: A) price (rate) B) efficiency C) sales activity D) production volume

B

In general, the direct labor efficiency variance is the responsibility of the: A) purchasing agent. B) company president. C) production manager. D) industrial engineering. E) marketing department

C

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 efficiency of the purchasing and production functions.

D

The basic difference between a master budget and a flexible budget is that a: A) flexible budget considers only variable costs but a master budget considers all costs. B) flexible budget allows management latitude in meeting goals whereas a master budget is based upon a fixed standard. C) master budget is for an entire production facility but a flexible budget is applicable to single departments only. D) master budget is based on one specific level of production and a flexible budget can be prepared for any production level within a relevant range.

D

The most basic variance analysis compares: A) standard material prices with actual material prices. B) standard direct labor rates with actual direct labor rates. C) budgeted sales revenue with actual sales revenue. D) budgeted operating income with actual operating income.

D

True or False: Variance analysis for fixed production costs is virtually the same as for variable production costs.

False

True or False: Variance analysis is more useful for cost centers than for revenue centers

False

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

The production volume variance must be computed when a company uses: A) activity-based costing. B) process costing. C) job-order costing. D) full-absorption costing. E) variable costing.

D

When are the following direct materials variances ideally reported? ....................Quantity...........................................................Price.............................................. A)...............Purchase Date..............................................Purchase Date ......................... B)................Time of Use....................................................Time of Use................................ C)...............Purchase Date..............................................Time of Use................................ D)...............Time of Use....................................................Purchase Date..........................

D

Which department is customarily held responsible for an unfavorable materials quantity variance?: A) Quality control. B) Purchasing. C) Engineering. D) Production.

D

Which of the following direct labor variances uses the standard hours allowed for the actual number of units produced?: .................................Rate..................................Efficiency......................................................... A).............................Yes....................................Yes...................................................................... B)..............................No....................................No....................................................................... C)..............................Yes...................................No...................................................................... D)..............................No....................................Yes.....................................................................

D

Which of the following is not an alternative name for the production volume variance?: A) capacity variance B) idle capacity variance C) denominator variance D) fixed overhead efficiency variance

D

Which of the following statements is (are) true regarding the sales activity variance?: (A) The sales activity variance for sales revenue is the actual selling price per unit times the difference between the budgeted units and actual units. (B) If the sales activity variance for sales revenue is unfavorable, then the contribution margin sales activity variance will be unfavorable. A) Only A is true. B) Only B is true. C) Neither A and B is true. D) Both A and B are true.

D

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. A) Only A is false. B) Only B is false. C) Both A and B are false. D) Neither A nor B is false.

D

Which of these variances is least significant for cost control?: A) labor price variance B) material quantity variance C) fixed overhead price variance D) production volume variance E) labor efficiency variance

D

True or False: A favorable variance always implies that actual results exceeded budgeted results.

False

True or False: An efficiency variance is the difference between the actual output attained and the budgeted output used to prepare the master budget.

False

True or False: If overhead is applied on the basis of machine hours, then the direct labor efficiency variance and the variable overhead efficiency variance will either both be favorable or unfavorable.

False

True or False: If the sales revenue on the master budget is greater than the sales revenue on the flexible budget, then the variance between the two budgets is favorable.

False

True or False: The difference between operating profits in the master budget and operating profits in the flexible budget is called a sales price variance

False

True or False: If overhead is applied on the based of direct labor hours, then the direct labor efficiency variance and the variable overhead efficiency variance will either both be favorable or unfavorable.

true

True or False: Variances are the difference between actual results and budgeted results.

true