Deck 17: Additional Topics in Variance Analysis

Question 1

Professional accounting firms could not compute a labor mix and labor yield variance for their auditors because labor in accounting is not substitutable.

Answer 1

False

Question 2

The industry volume variance is the portion of the sales activity variance due to a change in the company's proportion of sales in the markets in which they operate.

Answer 2

False

Question 3

An increase in an industry's volume and a decrease in a company's market share implies that the company's sales price variance is unfavorable.

Answer 3

False

Question 4

Two important characteristics to consider when deciding how many variances to review are how large the variance is and the extent to which the variance can be managed.

Question 5

The direct material price variance is based on the quantity of materials purchased when the quantity purchased is different from the quantity used.

Question 6

Some variances are the result of standards that are inaccurate or do not reflect the current production process.

Question 7

The sales quantity variance is the same as the sales activity variance on a flexible budget performance report.

Question 8

The variable production cost variances are computed using the units produced instead of the units sold.

Question 9

The only variances that should be investigated are those for which the expected benefits of correction exceed the costs of investigating and correcting.

Question 10

The production mix variance measures the impact of substituting one material for another material during the production process.

Question 11

If a company sells two products,it is possible for both products to have a favorable sales mix variance.

Question 12

The direct labor yield variance is unfavorable when the total hours worked during a period are less than the total standard hours allowed for the actual number of units produced.

Question 13

Some variances are the result of accounting errors and omissions,including timing differences.

Question 14

Labor variances are more important than material variances in service organizations.

Question 15

If variances are not prorated at the end of the accounting period,they are closed to the Cost of Goods Sold.

Question 16

The production cost yield variance is conceptually the same as the sales quantity variance.

Question 17

The basic variance analysis framework used for manufacturing companies can also be used in service organizations.

Question 18

If a company sells two products,it is possible for both products to have an unfavorable sales quantity variance.

Question 19

The market share variance is more controllable by the marketing department than the industry volume variance.

Question 20

If the number of units produced exceeds the number of units sold,the full-absorption operating profit will be lower than variable costing operating profit.

Question 21

Using the abbreviations listed below,what is the formula for the industry volume variance? AMS = actual market share
BMS = budgeted market share
BCM = budgeted contribution margin per unit
ACM = actual contribution margin per unit
ATM = actual total market
BTM = budgeted total market

A)(ATM - BTM)(BMS)(ACM)
B)(ATM - BTM)(BMS)(BCM)
C)(AMS - BMS)(ATM)(ACM)
D)(AMS - BMS)(ATM)(BCM)
E)(ATM - BTM)(AMS)(ACM)

Question 22

Which of the following income statement items is analyzed using the sales mix and the sales quantity variances?

A)operating expenses.
B)cost of goods sold.
C)gross margin.
D)contribution margin.

Question 23

Which of the following statements is (are)true? (A)The market share variance is more controllable by the marketing department than the industry volume variance.
(B)The industry volume variance is the portion of the sales activity variance due to a change in the company's proportion of sales in the markets in which they operate.

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

Question 24

One feature of a standard cost system is that it

A)makes the record keeping process more complex and difficult.
B)never requires updating if standard costs have been carefully determined.
C)reduces the amount of information available to a manager.
D)simplifies the record keeping process by allowing amounts to be carried at standard cost rather than actual cost in the accounting records.

Question 25

A credit balance in the labor yield variance implies

A)the total units produced was greater than the expected number of units given the total labor hours actually used.
B)the total units produced was less than the expected number of units given the total labor hours actually used.
C)the total units produced was greater than the expected number of units given the total standard hours allowed.
D)the total units produced was less than the expected number of units given the total standard hours allowed.

Question 26

The computation of the material yield variance does not require the

A)standard material mix.
B)standard material price.
C)standard output units.
D)total material actually used.
E)total material actually acquired.

Question 27

The sales mix variance would be

A)favorable when a company sells relatively fewer of the products that have contribution margins lower than average.
B)favorable when a company sells relatively more of the products that have contribution margins higher than average.
C)unfavorable when a company sells relatively fewer of the products that have selling prices higher than average.
D)unfavorable when a company sells more of the products that have selling prices lower than average.

Question 28

What is the correct journal entry to record a favorable materials mix variance assuming all material variances are recognized when the direct materials are issued to production?

A)a
B)b
C)c
D)d

Question 29

What is the correct journal entry to record direct labor when the actual labor mix is favorable and the total standard hours allowed is greater than the total actual hours worked?

A)a
B)b
C)c
D)d

Question 30

Which of the following sales variances is further analyzed into the market size and industry volume variances?

A)Quantity
B)Efficiency
C)Mix
D)Activity

Question 31

The sales activity variance is equal to the sum of the market share variance and the

A)selling price variance.
B)industry volume variance.
C)sales quantity variance.
D)sales mix variance.
E)contribution margin variance.

Question 32

Standard costs should be based on

A)perfect performance.
B)an average of past costs.
C)most likely level of performance.
D)reasonably attainable levels of efficiency.

Question 33

If raw materials are carried in the Direct Materials Inventory at standard cost,then it is reasonable to assume that the

A)price variance is recognized when materials are purchased.
B)price variance is recognized when materials are placed into production.
C)company does not follow generally accepted accounting principles.
D)efficiency variance is recognized when the materials are purchased.
E)efficiency variance is recognized when the materials are placed into production.

Question 34

In a standard cost system,overhead is applied to production on a basis of

A)the denominator hours chosen for the period.
B)the budgeted hours for the normal production level of activity.
C)the actual hours required to complete the output of the period.
D)the standard hours allowed to complete the output of the period.

Question 35

Using the abbreviations listed below,what is the market share variance? AMS = actual market share
BMS = budgeted market share
BCM = budgeted contribution margin per unit
ACM = actual contribution margin per unit
ATM = actual total market
BTM = budgeted total market

A)(ATM - BTM)(BMS)(ACM)
B)(ATM - BTM)(BMS)(BCM)
C)(AMS - BMS)(ATM)(ACM)
D)(AMS - BMS)(ATM)(BCM)
E)(ATM - BTM)(AMS)(ACM)

Question 36

The sales quantity variance would be favorable when a company sells

A)relatively fewer of the products bearing contribution margins lower than average.
B)relatively more of the products bearing contribution margins higher than average.
C)more total units than budgeted,holding the sales mix constant.
D)less total units than budgeted,holding the sales mix constant.

Question 37

Which of the following statements is (are)false? (A)All variances should be prorated to inventories and cost of goods sold at the end of the accounting period.
(B)If the number of units produced exceeds the number of units sold,the full-absorption operating profit will be lower than variable costing operating profit.

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

Question 38

The labor mix variance is actual total hours at

A)actual mix times actual labor rates less actual total hours at actual mix times standard labor rates.
B)actual mix times standard labor rates less standard total hours at standard mix times standard labor rates.
C)actual mix times standard labor rates less actual total hours at standard mix times standard labor rates.
D)standard mix times standard labor rates less standard total hours at standard mix times standard labor rates.

Question 39

The labor yield variance is actual total hours at

A)actual mix times actual labor rates less actual total hours at actual mix times standard labor rates.
B)actual mix times standard labor rates less standard total hours at standard mix times standard labor rates.
C)actual mix times standard labor rates less actual total hours at standard mix times standard labor rates.
D)standard mix times standard labor rates less standard total hours at standard mix times standard labor rates.

Question 40

Which of the following statements is (are)true? (A)If variances are prorated at the end of the accounting period,an unfavorable direct materials price variance will,when prorated,increase the value of the Finished Goods Inventory.
(B)Insignificant variances are not generally prorated at the end of the accounting period and are closed to the Cost of Goods Sold.

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

Question 41

What is the sales mix variance for the basic model?

A)$256,000
B)$1,344,000
C)$1,600,000
D)$2,520,000

Question 42

Is the sales activity variance for the basic model favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 43

What is the sales quantity variance for the basic model?

A)$120,000
B)$256,000
C)$1,344,000
D)$1,600,000

Question 44

What is the sales quantity variance for the deluxe model?

A)$120,000
B)$256,000
C)$1,344,000
D)$1,600,000

Question 45

Is the sales mix variance for the basic model favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 46

The Trey Company experienced a $100,000 shortfall in sales revenues for the year.Top management is quite disturbed about this and has decided to use variance analysis in assigning the responsibility for the decline.Which of the following variances would be most within the control of the marketing department?

A)Sales mix
B)Market share
C)Sales quantity
D)Industry volume

Question 47

What was the total standard cost of direct materials allowed during May?

A)$8,260
B)$8,400
C)$9,440
D)$9,600

Question 48

The Wilbur Company gathered the following information for the year. What is the total sales mix variance?

A)$705,600
B)$403,200
C)$302,400
D)$100,800

Question 49

What is the sales activity variance for the deluxe model?

A)$400,000
B)$800,000
C)$1,600,000
D)$2,400,000

Question 50

What is XYZ's market share variance?

A)$37,296.88
B)$40,906.25
C)$35,700.00
D)$32,550.00

Question 51

Is the sales quantity variance for the basic model favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 52

What was the total actual cost of the direct materials purchased during May?

A)$9,000
B)$11,800
C)$12,000
D)$12,200

Question 53

Is the sales mix variance for the deluxe model favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 54

What is the sales activity variance for the basic model?

A)$1,280,000
B)$1,600,000
C)$11,200,000
D)$12,800,000

Question 55

Which of the following factors should not be considered when deciding whether to investigate a variance?

A)Absolute or relative magnitude of the variance
B)Trend or pattern of the variance over time
C)Chance that an "out-of-control" situation can be corrected
D)Cost of investigating the underlying production process
E)Whether the variance is favorable or unfavorable

Question 56

Is the sales activity variance for the deluxe model favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 57

Is the sales quantity variance for the basic model favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 58

There are several reasons why actual results differ from standards.Which of the following does not represent a reason why a variance might occur?

A)Inaccurate information from the accounting system
B)Increasing the accuracy of a variance report by decreasing its timeliness
C)Standards which do not reflect the current economic conditions
D)Operating conditions that are consistently inefficient
E)Event or transaction that is unexpected and infrequent

Question 59

What is the sales mix variance for the deluxe model based?

A)$1,176,000
B)$1,344,000
C)$2,400,000
D)$2,520,000

Question 60

What was the total standard cost of direct materials purchased during May?

A)$9,150
B)$11,800
C)$12,000
D)$12,200

Question 61

What is the total sales mix variance?

A)$12,478.00
B)$20,815.00
C)$33,915.00
D)$40,553.50

Question 62

What is the total materials mix variance?

A)$476.00
B)$420.00
C)$388.50
D)$280.00

Question 63

Is the materials mix variance favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 64

Is the total material price variance favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 65

What is the total sales quantity variance?

A)$3,570.00
B)$20,815.00
C)$33,915.00
D)$40,553.50

Question 66

Is the total direct materials mix variance favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 67

What is the total sales price variance?

A)$22,203.50
B)$28,442.50
C)$50,646.50
D)$79,088.50

Question 68

If KMG recognizes all variances at the earliest possible moment,what is the total material price variance?

A)$160
B)$540
C)$890
D)$1,270

Question 69

Is the total direct material yield variance favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 70

Is the market share variance favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 71

Is the materials mix variance favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 72

Is the materials yield variance favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 73

What is the materials yield variance?

A)$1.12
B)$1.68
C)$3.00
D)$1.32

Question 74

What is the total materials yield variance?

A)$388.50
B)$294.50
C)$280.00
D)$94.50

Question 75

Is the total sales price variance favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 76

What is the total direct materials mix variance for May?

A)$12,000
B)$24,000
C)$36,000
D)$60,000

Question 77

Is the total sales mix variance favorable or unfavorable?

A)favorable.
B)unfavorable.

Question 78

What is the materials mix variance?

A)$1.68
B)$3.00
C)$1.32
D)$.84

Question 79

Is the total sales quantity variance favorable or unfavorable?

A)favorable
B)unfavorable

Question 80

What is the total direct material yield variance for May?

A)$45,000
B)$81,000
C)$109,800
D)$117,000