Deck 23: Flexible Budgets and Standard Costs

Question 1

A fixed budget performance report never provides useful information for evaluating variances.

Answer 1

False

Question 2

Standard costs are preset costs for delivering a product or service under normal conditions.

Answer 2

True

Question 3

A flexible budget is based on a single predicted amount of sales or other activity measure.

Answer 3

False

Question 4

Variable budget is another name for a flexible budget.

Question 5

A cost variance equals the difference between the quantity variance and the price variance.

Question 6

Cost variances are ignored under management by exception.

Question 7

A cost variance is the difference between actual cost and standard cost.

Question 8

While companies strive to achieve ideal standards,reality implies that some loss of materials usually occurs with any process.

Question 9

A variable or flexible budget is so named because it only focuses on variable costs.

Question 10

Within the same flexible budget performance report,it is impossible to have both favorable and unfavorable variances.

Question 11

Management by exception means that managers focus on the most significant differences between actual costs and standard costs.

Question 12

When standard costs are used,factory overhead is assigned to products with a predetermined standard overhead rate.

Question 13

Standard material costs,standard labor costs,and standard overhead costs can be obtained from standard cost tables published by the Institute of Management Accountants.

Question 14

Fixed budget performance reports compare actual results with the results expected under a fixed budget.

Question 15

Another name for a static budget is a variable budget.

Question 16

Fixed budgets are also known as flexible budgets.

Question 17

Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards.

Question 18

A budget performance report shows budgeted amounts,actual amounts,and differences between budgeted and actual amounts.

Question 19

Standard costs can be used by management to assess the reasonableness of actual costs incurred.

Question 20

When computing a price variance,the price is held constant.

Question 21

Which of the following is not part of the flow of events in variance analysis:

A)Preparing a standard cost performance report.
B)Identifying questions and their explanations.
C)Taking corrective and strategic actions.
D)Computing and analyzing variances.
E)Working to ensure that all variances are favorable.

Question 22

The total sales variance can be divided into the sales price variance and the sales volume variance.

Question 23

A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased inferior materials.

Question 24

A flexible budget expresses all costs on a per unit basis,regardless of cost behavior.

Question 25

Standard costs are:

A)Actual costs incurred to produce a specific product or perform a service.
B)Preset costs for delivering a product or service under normal conditions.
C)Established by the IMA.
D)Rarely achieved.
E)Uniform among companies within an industry.

Question 26

The purchasing department is usually responsible for the price paid for materials.

Question 27

The anticipated costs incurred under normal conditions to produce a specific product or to perform a specific service are:

A)Variable costs.
B)Fixed costs.
C)Standard costs.
D)Product costs.
E)Period costs.

Question 28

The difference between the actual cost incurred and the standard cost is called the:

A)Flexible variance.
B)Price variance.
C)Cost variance.
D)Controllable variance.
E)Volume variance.

Question 29

In sales variance analysis,the budgeted amount of unit sales is the predicted activity level and the budgeted cost of the goods sold can be treated as a "standard" price.

Question 30

An unfavorable variance is recorded with a debit because it reflects additional costs higher than the standard cost.

Question 31

A volume variance is the difference between overhead at maximum volume of production and the standard volume of production.

Question 32

A direct labor cost variance can be divided into price and quantity variances,which are almost always called controllable and volume variances.

Question 33

The difference between actual price per unit of input and the standard price per unit of input results in a:

A)Standard variance.
B)Quantity variance.
C)Volume variance.
D)Controllable variance.
E)Price variance.

Question 34

A flexible budget expresses variable costs on a per unit basis and fixed costs on a total basis.

Question 35

An overhead cost variance is the difference between the total overhead actually incurred for the period and the standard overhead applied to products.

Question 36

Although a fixed budget is only useful over the relevant range of operations,a flexible budget is useful over all possible production levels.

Question 37

One possible explanation for direct labor rate and efficiency variances is the use of workers with different skill levels.

Question 38

The difference between actual quantity of input used and the standard quantity of input used results in a:

A)Controllable variance.
B)Standard variance.
C)Budget variance.
D)Quantity variance.
E)Price variance.

Question 39

If ending variances account balances are material,they should always be closed directly to Cost of Goods Sold.

Question 40

When the actual cost of direct materials used exceeds the standard cost,the company must have experienced an unfavorable direct materials price variance.

Question 41

A company's flexible budget for 12,000 units of production showed sales,$48,000;variable costs,$18,000;and fixed costs,$16,000.The operating income expected if the company produces and sells 16,000 units is:

A)$2,667.
B)$14,000.
C)$18,667.
D)$24,000.
E)$35,000.

Question 42

Variable budget is another name for:

A)Cash budget.
B)Flexible budget.
C)Fixed budget.
D)Manufacturing budget.
E)Rolling budget.

Question 43

Standard costs are used in the calculation of:

A)Price and quantity variances.
B)Price variances only.
C)Quantity variances only.
D)Price,quantity,and sales variances.
E)Quantity and sales variances.

Question 44

Based on predicted production of 12,000 units,a company anticipates $150,000 of fixed costs and $123,000 of variable costs.The flexible budget amounts of fixed and variable costs for 10,000 units are:

A)$125,000 fixed and $102,500 variable.
B)$125,000 fixed and $123,000 variable.
C)$102,500 fixed and $150,000 variable.
D)$150,000 fixed and $123,000 variable.
E)$150,000 fixed and $102,500 variablE.Fixed costs remain at $150,000

Question 45

Product A has a sales price of $10 per unit.Based on a 10,000-unit production level,the variable costs are $6 per unit and the fixed costs are $3 per unit.Using a flexible budget for 12,500 units,what is the budgeted operating income from Product A?

A)$12,500.
B)$25,000.
C)$20,000.
D)$30,000.
E)$35,000.

Question 46

A budget based on several different levels of activity,often including both a best-case and worst-case scenario,is called a:

A)Rolling budget.
B)Production budget.
C)Flexible budget.
D)Merchandise purchases budget.
E)Fixed budget.

Question 47

Based on a predicted level of production and sales of 22,000 units,a company anticipates total variable costs of $99,000,fixed costs of $30,000,and operating income of $36,000.Based on this information,the budgeted amount of sales for 20,000 units would be:

A)$165,000.
B)$150,000.
C)$117,272.
D)$181,500.
E)$141,900.

Question 48

A company's flexible budget for 10,000 units of production reflects sales of $200,000;variable costs of $40,000;and fixed costs of $75,000.Calculate the expected level of operating income if the company produces and sells 13,000 units.

A)$110,500.
B)$85,000.
C)$133,000.
D)$100,000.
E)$50,500.

Question 49

An analytical technique used by management to focus attention on the most significant variances and give less attention to the areas where performance is reasonably close to standard is known as:

A)Controllable management.
B)Management by variance.
C)Performance management.
D)Management by objectives.
E)Management by exception.

Question 50

An internal report that helps management analyze the difference between actual performance and budgeted performance based on the actual sales volume (or other level of activity)is called a(n):

A)Sales budget performance report.
B)Flexible budget performance report.
C)Master budget performance report.
D)Static budget performance report.
E)Operating budget performance report.

Question 51

A flexible budget performance report compares the differences between:

A)Actual performance and budgeted performance based on actual sales volume.
B)Actual performance over several periods.
C)Budgeted performance over several periods.
D)Actual performance and budgeted performance based on budgeted sales volume.
E)Actual performance and standard costs at the budgeted sales volume.

Question 52

Identify the situation below that will result in a favorable variance.

A)Actual revenue is higher than budgeted revenue.
B)Actual revenue is lower than budgeted revenue.
C)Actual income is lower than expected income.
D)Actual costs are higher than budgeted costs.
E)Actual expenses are higher than budgeted expenses.

Question 53

A company provided the following direct materials cost information.Compute the cost variance.

A)$2,500 Favorable.
B)$78,250 Favorable.
C)$78,250 Unfavorable.
D)$80,750 Favorable.
E)$80,750 UnfavorablE.Actual cost $888,250 - Standard cost $810,000 = $78,250 U

Question 54

A flexible budget may be prepared:

A)Before the operating period only.
B)After the operating period only.
C)During the operating period only.
D)At any time in the planning period.
E)Only when the company encounters excessive costs.

Question 55

A company's flexible budget for 12,000 units of production showed total contribution margin of $24,000 and fixed costs,$16,000.The operating income expected if the company produces and sells 15,000 units is:

A)$34,000.
B)$10,000.
C)$18,667.
D)$8,000.
E)$14,000.

Question 56

Sales variance analysis is used by managers for:

A)Planning purposes only.
B)Budgeting purposes only.
C)Control purposes only.
D)Planning and control purposes.
E)Planning and budgeting purposes.

Question 57

Static budget is another name for:

A)Standard budget.
B)Flexible budget.
C)Variable budget.
D)Fixed budget.
E)Master budget.

Question 58

In this type of control system,the master budget is based on a single prediction for sales volume,and the budgeted amount for each cost essentially assumes that a specific amount of sales will occur:

A)Sales budget.
B)Standard budget.
C)Flexible budget.
D)Fixed budget.
E)Variable budget.

Question 59

Based on a predicted level of production and sales of 12,000 units,a company anticipates reporting operating income of $26,000 after deducting variable costs of $72,000 and fixed costs of $10,000.Based on this information,the budgeted amounts of fixed and variable costs for 15,000 units would be:

A)$10,000 of fixed costs and $72,000 of variable costs.
B)$10,000 of fixed costs and $90,000 of variable costs.
C)$12,500 of fixed costs and $90,000 of variable costs.
D)$12,500 of fixed costs and $72,000 of variable costs.
E)$10,000 of fixed costs and $81,000 of variable costs.

Question 60

A company's flexible budget for 12,000 units of production showed per unit contribution margin of $3.00 and fixed costs,$20,000.The operating income expected if the company produces and sells 18,000 units is:

A)$34,000.
B)$10,000.
C)$18,667.
D)$16,000.
E)$24,000.

Question 61

Based on a predicted level of production and sales of 30,000 units,a company anticipates total contribution margin of $105,000,fixed costs of $40,000,and operating income of $52,000.Based on this information,the budgeted operating income for 28,000 units would be:

A)$52,000.
B)$135,333.
C)$58,000.
D)$72,500.
E)$105,000.

Question 62

The following company information is available for March.The direct materials price variance is:

A)$5,000 favorable.
B)$300 favorable.
C)$5,200 unfavorable.
D)$5,000 unfavorable.
E)$5,200 favorablE.

Question 63

Hassock Corp.produces woven wall hangings.It takes 2 hours of direct labor to produce a single wall hanging.Bartels' standard labor cost is $12 per hour.During August,Bartels produced 10,000 units and used 21,040 hours of direct labor at a total cost of $250,376.What is Bartels' labor efficiency variance for August?

A)$12,480 favorable.
B)$10,376 unfavorable.
C)$14,584 unfavorable.
D)$4,160 favorable.
E)$12,480 unfavorablE.

Question 64

The following company information is available.The direct materials quantity variance is:

A)$10,000 unfavorable.
B)$13,200 unfavorable.
C)$9,600 unfavorable.
D)$10,000 favorable.
E)$13,200 favorablE.

Question 65

Use the following data to find the direct labor rate variance if the company produced 3,500 units during the period.

A)$6,125 unfavorable.
B)$7,000 unfavorable.
C)$7,000 favorable.
D)$12,250 favorable.
E)$6,125 favorablE.

Question 66

Use the following data to find the total direct labor cost variance if the company produced 3,500 units during the period.

A)$6,125 unfavorable.
B)$7,000 unfavorable.
C)$7,000 favorable.
D)$12,250 favorable.
E)$6,125 favorablE.

Question 67

Summerlin Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units.The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units.What is the direct materials price variance?

A)$400 unfavorable.
B)$450 unfavorable.
C)$2,500 unfavorable.
D)$2,550 unfavorable.
E)$2,950 unfavorablE.

Question 68

Georgia,Inc.has collected the following data on one of its products.The direct materials quantity variance is:

A)$30,000 favorable.
B)$13,750 unfavorable.
C)$16,250 favorable.
D)$30,000 unfavorable.
E)$13,750 favorablE.

Question 69

Parallel Enterprises has collected the following data on one of its products.During the period the company produced 25,000 units.The direct materials price variance is:

A)$27,500 unfavorable.
B)$50,000 unfavorable.
C)$50,000 favorable.
D)$22,500 unfavorable.
E)$22,500 favorablE.

Question 70

Georgia Inc. ,has collected the following data on one of its products.The actual cost of the direct materials used is:

A)$133,750.
B)$150,000.
C)$106,250.
D)$158,750.
E)$120,000.

Question 71

A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z.The company has just produced 1,000 units of this product,using 5,200 pounds of Material J that cost $9,880.The direct materials price variance is:

A)$520 unfavorable.
B)$400 unfavorable.
C)$120 favorable.
D)$520 favorable.
E)$400 favorablE.

Question 72

Parallel Enterprises has collected the following data on one of its products.During the period the company produced 25,000 units.The direct materials quantity variance is:

A)$27,500 unfavorable.
B)$50,000 unfavorable.
C)$50,000 favorable.
D)$22,500 unfavorable.
E)$22,500 favorablE.

Question 73

A job was budgeted to require 3 hours of labor per unit at $8.00 per hour.The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000.What is the total labor cost variance?

A)$2,000 unfavorable.
B)$3,000 unfavorable.
C)$6,000 unfavorable.
D)$8,000 unfavorable.
E)$9,000 unfavorablE.

Question 74

Use the following data to find the direct labor efficiency variance if the company produced 3,500 units during the period.

A)$6,125 unfavorable.
B)$7,000 unfavorable.
C)$7,000 favorable.
D)$12,250 favorable.
E)$6,125 favorablE.

Question 75

A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z.The company has just produced 1,000 units of this product,using 5,200 pounds of Material J that cost $9,880.The direct materials quantity variance is:

A)$400 unfavorable.
B)$120 favorable.
C)$400 favorable.
D)$520 favorable.
E)$520 unfavorablE.

Question 76

Hassock Corp.produces woven wall hangings.It takes 2 hours of direct labor to produce a single wall hanging.Bartels' standard labor cost is $12 per hour.During August,Bartels produced 10,000 units and used 21,040 hours of direct labor at a total cost of $250,376.What is Bartels' labor rate variance for August?

A)$2,000 favorable.
B)$2,104 unfavorable.
C)$2,104 favorable.
D)$4,160 favorable.
E)$2,000 unfavorablE.

Question 77

Which department is often responsible for the direct materials price variance?

A)The accounting department.
B)The production department.
C)The purchasing department.
D)The finance department.
E)The budgeting department.

Question 78

Summerlin Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units.The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units.What is the direct materials quantity variance?

A)$400 unfavorable.
B)$450 unfavorable.
C)$2,500 unfavorable.
D)$2,550 unfavorable.
E)$2,950 unfavorablE.

Question 79

Georgia,Inc.has collected the following data on one of its products.The direct materials price variance is:

A)$13,750 unfavorable.
B)$16,250 unfavorable.
C)$16,250 favorable.
D)$30,000 unfavorable.
E)$33,000 favorablE.

Question 80

Use the following data to find the direct labor rate variance if the company produced 7,000 units of product during the period.

A)$12,250 unfavorable.
B)$14,700 unfavorable.
C)$14,700 favorable.
D)$12,250 favorable.
E)$26,950 favorablE.