Question 1

Which one of the following would result in an unfavourable sales volume variance?&#10;A) A selling price higher than budgeted.&#10;B) A selling price lower than budgeted.&#10;C) Selling more products or services than budgeted.&#10;D) Selling fewer products or services than budgeted.

Accepted Answer

Selling fewer products or services than budgeted would result in an unfavorable sales volume variance because it indicates that the actual sales volume is less than what was planned or expected, negatively impacting revenue.

Question 2

Variances calculate the difference between actual and budgeted revenues and costs.

Accepted Answer

False&#10;

Question 3

Product G uses materials with a standard cost of £20 per unit of production. The results for May show an unfavourable direct material price variance of £2,400 and a favourable direct material usage variance of £1,800. Actual production during May was 3,000 units of Product

A) £55,800
B) £59,400
C) £60,600
D) £64,200

£60,600

Accepted Answer

The standard cost for materials for 3,000 units is £60,000 (3,000 units x £20). The net variance is £600 unfavorable (£2,400 unfavorable - £1,800 favorable). Therefore, the actual cost is £60,600 (£60,000 + £600).

Question 4

The standard cost of labour for Product Y is £15 per unit of production. The results for February show an unfavourable direct labour rate variance of £500 and a favourable direct labour efficiency variance of £700. Actual production for February was 2,500 units of Product Y. What was the actual direct labour cost of Product Y for February?

A) £37,300
B) £37,500
C) £37,700
D) £38,700

Accepted Answer

Actual direct labour cost = Standard cost per unit * Actual production + Direct labour rate variance - Direct labour efficiency variance= £15 * 2,500 + £500 - £700= £37,300

Question 5

XYZ Limited produces Product W. Product W has a standard selling price of £240 and a standard variable cost of £160. During the month of June, sales of Product W produced a favourable sales volume variance of £7,200. Budgeted contribution from sales of Product W for June was £48,000. How many units of Product W were actually sold during June?

A) 510
B) 630
C) 645
D) 690

Accepted Answer

The sales volume variance is calculated as (Actual units sold - Budgeted units sold) x Standard contribution per unit. The standard contribution per unit is £240 - £160 = £80. Given a favourable sales volume variance of £7,200, we have: (Actual units sold - Budgeted units sold) x £80 = £7,200. The budgeted contribution is £48,000, which means the budgeted units sold were £48,000 / £80 = 600 units. Solving for actual units sold: (Actual units sold - 600) x £80 = £7,200, gives Actual units sold = 690.

Question 6

TJC Limited allocates a standard &#163;5.00 fixed overhead cost to Product J on the basis that 5,000 units of Product J are produced each month. 5,500 units of Product J were produced in July resulting in an unfavourable fixed overhead expenditure variance of &#163;1,000. What was the actual fixed overhead expenditure during July?&#10;A) &#163;24,000&#10;B) &#163;26,000&#10;C) &#163;26,500&#10;D) &#163;28,500

Accepted Answer

The fixed overhead expenditure variance is calculated as the difference between the budgeted fixed overheads and the actual fixed overheads. Given that the variance is unfavourable by £1,000, it means the actual fixed overheads were £1,000 more than the budgeted. The budgeted fixed overheads for 5,000 units at £5.00 per unit is £25,000 (£5.00 * 5,000 units). Therefore, the actual fixed overhead expenditure was £25,000 + £1,000 = £26,000.

Question 7

Variances calculate the differences between actual and standard revenues and costs.

Accepted Answer

Variances are used in budgeting and accounting to measure the differences between actual results and expected (standard) results, including both revenues and costs.

Deck 10: Standard Costing and Variance Analysis