Deck 9: Variance Analysis: Revenue and Cost

Question 1

Revenue variances are excluded from variance analysis because they are outside the control of the business.

Answer 1

B

Question 2

Variances for costs including material and labour can be broken down into price and efficiency variances.

Answer 2

A

Question 3

The sales price variance is calculated using (actual price - standard price) multiplied by budgeted volume.

Answer 3

B

Question 4

The revenue budget variance is determined by comparing total budgeted revenues to actual revenues.

Question 5

The revenue budget variance cannot be caused by changes in sales mix as total sales is unaffected by sales mix.

Question 6

The profit variance includes variances due to volume, price and efficiency.

Question 7

The sales price variance can be broken down into market size variance, market share variance and product mix variance.

Question 8

The sales price variance is favourable when the actual selling price exceeds the standard price.

Question 9

Revenue variance analysis can also be called "competiveness effectiveness".

Question 10

The flexible budget is equal to budgeted revenue and costs multiplied by actual volume.

Question 11

The aggregation of favourable and unfavourable variances helps reveal operational problems.

Question 12

The sales volume variance can be broken down into market size variance, market share variance and product volume variance.

Question 13

The best way to develop standards for revenue is to use historical sales data.

Question 14

The use of standards assists managers to identify the source of variances.

Question 15

The sales price variance reflects the difference between standard and actual selling prices.

Question 16

The static budget is equal to budgeted revenue and costs multiplied by budgeted volume.

Question 17

The sales price variance is caused by a difference in the volume of units sold.

Question 18

The only variance for overhead is the production volume variance.

Question 19

Revenue drivers include competition, market share and brand strength.

Question 20

Total budgeted revenues can be calculated using standard sales prices multiplied by budgeted volume.

Question 21

The total direct labour variance can be broken down into two components: the efficiency variance and the hourly variance.

Question 22

The static budget compared to the flexible budget provides the profit variance that is due to volume difference.

Question 23

Under standard costing direct materials are recorded in raw materials inventory at the actual cost.

Question 24

The direct materials efficiency variance compares the actual amount of materials used to the standard amount of materials that should have been required for the actual level of output.

Question 25

The information required for the market size variance is collected by the marketing department.

Question 26

Change in market size multiplied by budgeted market share multiplied by planned average contribution margin is the market size variance.

Question 27

The product mix variance is only useful when the products involved are not substitutable.

Question 28

Variable costs per unit of volume increase when volume increases.

Question 29

The market share variance provides an indication of the changes in contribution margin due to selling a different mix of products than planned.

Question 30

The direct materials efficiency variance is measured at standard price because the price variance has already been isolated.

Question 31

The direct materials efficiency variance is favourable when direct materials used is less than expected for the actual level of output.

Question 32

When standard volume exceeds actual sales volume the sales quantity variance is favourable.

Question 33

The market share variance is calculated using planned market size multiplied by change in market share multiplied by planned average contribution margin.

Question 34

Using the standard cost for raw materials in the ledgers allows managers to identify the price variance during the period in which the variance occurred.

Question 35

The direct materials price variance is usually based on materials purchased, rather than on materials used.

Question 36

Fixed costs remain the same for both the budgeted level of volume and the static budget level of volume.

Question 37

The direct materials price variance is calculated by (actual price - standard price) multiplied by quantity purchased.

Question 38

The market size variance provides an indication of the proportion of sales volume variance that can be attributed to unexpected changes in market size.

Question 39

The sales quantity variance is calculated by (actual volume - budgeted volume) multiplied by standard price.

Question 40

Product mix variance = change in average standard contribution margin multiplied by actual unit volume.

Question 41

Fixed overhead costs per unit have an inverse relationship to volume.

Question 42

Errors in the accounting records can only cause price variance not efficiency variances.

Question 43

A change in quality of materials may cause both efficiency and price variances for direct materials.

Question 44

The allocation base for variable overhead should reflect the use of variable resources.

Question 45

In standard costing the price and efficiency variances account for the differences between actual and standard costs in the ledger accounts.

Question 46

A contract with a new supplier may cause a favourable or unfavourable materials price variance.

Question 47

The standard fixed overhead allocation rate is calculated by estimated fixed overhead cost divided by estimated volume of an allocation base.

Question 48

Hiring highly skilled workers could result in a favourable direct labour price variance and a favourable direct materials efficiency variance.

Question 49

A change in the price paid in materials will result in a direct materials efficiency variance.

Question 50

The direct labour price variance is calculated using (actual labour price per hour - standard labour price per hour) multiplied by actual hours used.

Question 51

Unreasonable standards may be the cause of direct materials efficiency variances, but not of direct labour efficiency variances.

Question 52

The variable overhead budget variance is the difference between allocated variable overhead cost and actual fixed overhead cost.

Question 53

Theft of raw materials may cause a favourable materials efficiency variance.

Question 54

Normal fluctuations in labour hours may cause a favourable direct price variance.

Question 55

Fixed overhead costs do not vary with volume.

Question 56

Unanticipated overtime hours may cause an unfavourable direct labour price variance.

Question 57

The standard variable overhead allocation rate is calculated using estimated variable overhead cost divided by estimated volume of the allocation base.

Question 58

When the proportion of labour related costs in the variable overhead cost pool is high, machine hours is an appropriate allocation base.

Question 59

Under standard costing direct labour is recorded in the work in process account at standard cost.

Question 60

Trade-offs mean that an unfavourable variance could be offset by a favourable variance in another area.

Question 61

The fixed overhead spending variance is related to the variable overhead efficiency variance.

Question 62

The variable overhead spending variance is the difference between actual variable overhead costs and the expected variable overhead costs for the actual use of the allocation base.

Question 63

A favourable variable overhead spending variance could be due to lower use of actual resources than expected or lower cost of actual resources compared to standard costs.

Question 64

The production volume variance is adjusted out at the end of each accounting period.

Question 65

The variable overhead efficiency variance will be present whenever the expected volume of the allocation base is different from the actual volume.

Question 66

The production volume variance is used for book keeping purposes only.

Question 67

Actual production volume may be different than expected due to machine breakdowns, unreasonable estimates or normal fluctuations.

Question 68

The fixed overhead spending variance is the difference between the static budget and the actual fixed overhead cost.

Question 69

Actual overhead costs are allocated to inventory each period.

Question 70

Usually companies produce more or less than expected and this causes a production volume variance.

Question 71

The variable overhead spending variance focuses on the volume difference in the allocation base used.

Question 72

The dollar amount of the production volume variance is the most informative element of this variance.

Question 73

The difference between the standard amount of fixed overhead cost allocated to products and estimated fixed overhead costs is the production volume variance.

Question 74

The variable overhead efficiency variance is favourable if the actual volume of the allocation base is less than expected given actual production levels.

Question 75

The fixed overhead spending variance is favourable when more is spent on fixed overhead than expected.

Question 76

The production volume variance is equivalent to the amount of under or over applied overhead.

Question 77

If actual volumes of the allocation base are less than estimated then the production volume variance will be unfavourable.

Question 78

Fixed overheard variances are closed to spending and efficiency variance accounts.

Question 79

Variable overhead variances are closed to spending and efficiency variance accounts.

Question 80

The fixed overhead budget variance can be broken down into two parts: the spending variance and the volume variance.