Deck 10: Variance Analysis and Standard Costing

Question 1

Which of the following spotlights which factors contribute to differences between budgeted and actual outcomes?

A) Breakeven analysis
B) Cost behavior analysis
C) Variance analysis
D) Benchmarking analysis

Answer 1

Variance analysis

Question 2

An organization uses a combination of budgeting and variance analysis as effective tools for

A) planning and control.
B) performance evaluation and troubleshooting.
C) motivation and benchmarking.
D) motivation and benchmarking, planning and control, and performance evaluation and control.

Answer 2

motivation and benchmarking, planning and control, and performance evaluation and control.

Question 3

Once set, ____________ numbers become the benchmark for comparison purposes.

A) actual
B) budgeted
C) industry
D) prior year

Answer 3

budgeted

Question 4

Long-range planning happens _____________ the current year's budget is set.

A) before
B) after
C) at the same time as
D) every time that

Question 5

To ensure that operational plans are enacted, _____________ are put into place to prevent deviations from budgeted numbers and to detect when spending goes off course.

A) high standards
B) benchmarking activities
C) variance projections
D) control activities

Question 6

Approved budgets become ___________.

A) uncontrollable.
B) standards.
C) benchmarks.
D) control activities.

Question 7

The logical, systematic identification of the source of problems to fix them and avoid their recurrence is called

A) benchmarking.
B) targeting.
C) troubleshooting.
D) budgeting.

Question 8

In budgeting, when realities change, old assumptions and their benchmarks

A) are never adjusted, since the budget was created based on these assumptions.
B) must be adjusted to reflect better information, so that actual performance is more on target.
C) can be changed to reflect better information, but the changes are not required.
D) may or may not be changed, based on the discretion of management.

Question 9

When an employee overspends on a business expense where a specific guideline has been set, the spending above the guideline is called a

A) cost override.
B) corrective-action activity.
C) ethical violation.
D) variance.

Question 10

Which of the following depicts how organizations use budgets and variance analysis to attain their goals?

A) Troubleshoot and Plan ? Benchmark and Control ? Evaluate Performance and Motivate
B) Motivate and Benchmark ? Plan and Control ? Evaluate Performance and Troubleshoot
C) Plan and Control ? Evaluate Performance and Benchmark ? Motivate and Troubleshoot
D) Plan and Control ? Evaluate Performance and Troubleshoot ? Motivate and Benchmark

Question 11

When management sets expectations that are high, achievable, and clearly communicated

A) unfavorable variances will always result.
B) employees will normally work to reach the high standards if they feel the company is committed to their success.
C) poor employee performance evaluations will happen, and workers miss out on expected incentives.
D) flexibility and creativity for employees is stifled.

Question 12

Which of the following statements is true regarding budgets?

A) Actual numbers should never be compared to budgets, since budgets are simply estimates.
B) Variances resulting from comparison of actual and budgeted amounts will always require management to take corrective action.
C) Management should set expectations high and unattainable so that employees will be motivated to reach the goals set.
D) Managers use variance analysis to compare actual outcomes to the budget to evaluate performance and solve issues that caused the variances.

Question 13

How does a company track its progress toward reaching its goals as created in a budget?

A) Sensitivity analysis
B) Variance analysis
C) Regression analysis
D) Breakeven analysis

Question 14

Which of the following is performed once the current budget is created?

A) Variance analysis
B) Troubleshooting
C) Operational plans
D) Performance evaluation

Question 15

In order to achieve its goals, a company should

A) set its goals at the highest level in order to motivate employees to reach the goals
B) enact its budgeted plan and set regular evaluations of actual versus budgeted numbers to track its progress towards these goals.
C) evaluate only the accuracy of the budget assumptions used to create the budget.
D) constantly change assumptions used in creating the budget when actual events occur contrary to the budget assumptions.

Question 16

A comprehensive, organization-wide budget that requires inputs from many sources
Throughout the company is a(n)

A) cash budget.
B) operational budget.
C) master budget.
D) financial budget.

Question 17

Which of the following is used to coordinate a company's plans and to allocate resources
Accordingly?

A) Master budget
B) Variance analysis
C) Operational plans
D) Troubleshooting

Question 18

The correct equation for a Master Budget Variance is

A) (Budgeted volume x Actual price) - (Actual volume x Budgeted price).
B) (Budgeted volume x Actual price) + (Actual volume x Budgeted price).
C) (Budgeted volume x Budgeted price) - (Actual volume x Actual price).
D) (Budgeted volume x Budgeted price) + (Actual volume x Actual price).

Question 19

Corner Cupcakes has the following budgeted amounts for the current month: budgeted sales
In units of 3,500 at a budgeted unit selling price of $5. Actual amounts for the month were as follows: 4,000 units at a unit selling price of $4.80. What is the sales activity variance for Corner Cupcakes for the current month?

A) $2,400 unfavorable
B) $2,400 favorable
C) $2,500 unfavorable
D) $2,500 favorable

Question 20

When should a flexible budget be used instead of the master budget?

A) When actual sales volume equals the master budget sales volume
B) When actual sales volume approximates the master budget sales volume
C) When actual sales volume differs from the master budget sales volume
D) When the actual sales revenue differs from the master budget sales revenue

Question 21

When computing variances related to a flexible budget, a favorable (F) variance causes a(n)

A) decrease in operating income compared to the master budget.
B) increase in operating income compared to the master budget.
C) decrease in sales revenue compared to the master budget.
D)increase in sales revenue compared to the master budget.

Question 22

The variance that highlights the difference between actual sales volume and the master budget
Sales volume is the

A) MOH volume variance.
B) Master budget variance.
C) Flexible budget variance.
D) Sales activity variance.

Question 23

Which of the following costs will transfer from the master budget to the flexible budget unchanged assuming an operating capacity within the relevant range?

A) Fixed costs
B) Direct labor
C) Direct materials
D) Variable manufacturing overhead (MOH)

Question 24

Fern's Florist has a Flexible Budget Variance of $15, favorable and a Sales Activity Variance of
$25, unfavorable. What is Fern's Florist's Master Budget Variance?

A) $10 favorable
B) $10 unfavorable
C) $40 unfavorable
D) Cannot be determined; not enough information given.

Question 25

Which of the following variances holds the volume constant between actual and flexible
Budget, and highlights the price difference between actual and budget?

A) Flexible budget variance
B) Master budget variance
C) Sales activity variance
D) Manufacturing overhead (MOH) efficiency variance

Question 26

Cubana Candles produces and sells custom candles. Last month it had the following product
Sales volume and pricing data:
What is the flexible budget variance for Cubana Candles?

A) $10 favorable
B) $10 unfavorable
C) $20 favorable
D) $20 unfavorable

Question 27

Cubana Candles produces and sells custom candles. Last month it had the following product
Sales volume and pricing data:
What is the master budget variance for Cubana Candles?

A) $30 favorable
B) $30 unfavorable
C) $65 favorable
D) $65 unfavorable

Question 28

Cubana Candles produces and sells custom candles. Last month it had the following product
Sales volume and pricing data:
What is the sales activity variance for Cubana Candles?

A) $45 favorable
B) $45 unfavorable
C) $60 favorable
D) $60 unfavorable

Question 29

Texas Tad's T-shirt Warehouse has a Flexible Budget Variance of $175, favorable and a
Sales Activity Variance of $75, favorable. What is Texas Tad's Master Budget Variance?

A) $100 favorable
B) $250 favorable
C) $250 unfavorable
D) Cannot be determined; not enough information given.

Question 30

Cosmo Cookie Creations had the following variable cost data for the past month:
What is Cosmo Cookie's Flexible Budget Variance and Sales Activity Variance?

A) $600, unfavorable and $300, favorable
B) $600, unfavorable and $300, unfavorable
C) $600, favorable and $300, favorable
D) $600, favorable and $300, unfavorable

Question 31

Standard costing uses _________ costs set at the _________ level as product costs in the
General ledger.

A) actual; unit
B) budgeted; unit
C) actual; total
D) budgeted; total

Question 32

Companies using standard costing have ________ controls over production costs.

A) tight
B) flexible
C) weak
D) variable

Question 33

Which of the following shows the required quantities and current prices of manufacturing costs
For each input: direct materials, direct labor, variable manufacturing overhead and fixed manufacturing overhead?

A) Bill of materials
B) Standard cost card
C) Variance analysis
D) Job cost sheet

Question 34

Which of the following standards are firm, yet attainable unit benchmarks that allow for the realities of life?

A) Ideal
B) Theoretical
C) Practical
D) Idyllic

Question 35

Roja Winery has the standard cost data for the production of each bottle of red wine below.
What is the standard cost per unit for one bottle of red wind for Roja Winery?

A) $11.39
B) $13.64
C) $14.64
D) $15.39

Question 36

When assigning costs for direct materials, direct labor, and manufacturing overhead to
Production, the costs should be recorded as

A) actual costs incurred.
B) standard costs.
C) estimated costs.
D) total budgeted costs.

Question 37

When a unit of product is completed, the correct accounting entry to record this is to

A) debit Work In Process (WIP) Inventory and credit Finished Goods (FG) Inventory
B) debit Finished Goods (FG) Inventory and credit Work In Process (WIP) Inventory
C) debit Work In Process (WIP) Inventory and credit Raw Materials Inventory
D) debit Finished Goods (FG) Inventory and credit Raw Materials Inventory

Question 38

Which of the following would not appear as a debit entry in the Work In Process (WIP) Inventory account when manufacturing a unit of product?

A) Cost of goods manufactured (COGM)
B) Direct materials (DM) used
C) Direct labor (DL) used
D) Variable manufacturing overhead (MOH) assigned

Question 39

Which of the following standards have no tolerance for machine breakdowns or employee
Breaks?

A) Practical standards
B) Realistic standards
C) Ideal standards
D) Firm, yet attainable standards

Question 40

Which of the following standards would be best suited to a futuristic production facility comprised of robots and drones, but lacking people?

A) Firm, yet attainable standards
B) Ideal standards
C) Realistic standards
D) Practical standards

Question 41

Standards should be reviewed and updated

A) throughout the year, every time conditions and assumptions change.
B) only if variances are significant and indicate a change is required.
C) at the end of each period, once variances are known.
D)at the beginning of each year, in anticipation of what the variances will be for the year.

Question 42

Which of the following statements regarding standard costing is not correct?

A)Establishing and maintaining standard costs and the efficient process to sustain cost stability requires great attention to detail.
B) A key benefit of standard costing is that using variance analysis one year helps inform planning and budgeting for the next year.
C) At the beginning of the period, before variances are known, management reviews standards that are in place for that period and considers updating them.
D) Setting standards for direct materials, direct labor and manufacturing overhead is an iterative process.

Question 43

When goods are completed and transferred from Work In Process Inventory (WIP) to Finished Goods (FG) Inventory, the costs in the transfer accounting entry are

A) incurred costs.
B) standard costs.
C) assigned costs.
D) actual costs.

Question 44

Which of the following factors would not be considered when setting a direct labor standard?

A) Mix of skilled and unskilled workers
B) Observation of production workers in action
C) Setting up approved suppliers
D) Timing of production workers to manufacture a unit of product

Question 45

Cost accountants work with which of the following to determine the types and quantities of direct materials inputs that will work best when setting the direct materials standard?

A) Only engineers
B) Only purchasing managers
C)Only manufacturing experts
D) Engineers, purchasing managers, and manufacturing experts.

Question 46

Given that standard costs are like budgets or benchmarks at the unit-level, it is imperative to

A) follow up with variance analysis to plan for unit costs only.
B) control the unit costs only.
C) evaluate performance once the units are produced and troubleshoot why variances occurred only.
D) follow up with variance analysis to plan for unit costs, control them, and evaluate performance once the units are produced, and then, troubleshoot why variances occurred.

Question 47

A price variance compares the

A) actual cost incurred for the input (DM, DL, or variable-MOH) to the standard cost allowed for the actual input quantity.
B) actual cost incurred for the input (DM, DL, or variable-MOH) to the standard cost allowed for the standard input quantity.
C) actual quantity used of each input (DM, DL, or variable-MOH) to the standard quantity allowed for each input, at its standard cost.
D) actual quantity used of each input (DM, DL, or variable MOH) to the standard quantity allowed for each input, at its actual cost.

Question 48

An efficiency variance compares the

A) actual quantity used of each input (DM, DL, or variable MOH) to the standard quantity allowed for each input, at its actual cost.
B) actual cost incurred for the input (DM, DL, or variable-MOH) to the standard cost allowed for the actual input quantity.
C) actual quantity used of each input (DM, DL, or variable-MOH) to the standard quantity allowed for each input, at its standard cost.
D) actual cost incurred for the input (DM, DL, or variable-MOH) to the standard cost allowed for the standard input quantity.

Question 49

Which variance helps management address what quantity of direct material (DM) inputs
Should have been used in making the actual volume of units?

A) Direct material (DM) price variance
B) Direct material (DM) efficiency variance
C) Direct labor (DL) price variance
D) Direct labor (DL) efficiency variance

Question 50

The direct labor (DL) price variance for Vellux Manufacturers is $15,600 unfavorable. The standard number of hours worked was 10,000 and the standard rate per hour for direct labor was $14. If the actual direct labor hours were 12,000, what was the actual rate per direct labor hour?

A) $7.80
B) $12.70
C)$15.30
D) $17.50

Question 51

Venda Company purchased and used 40,000 pound of materials in production. It paid $6.00 per pound for these materials. If the direct materials (DM) price variance was $50,000 favorable, what was the standard price per pound?

A) $4.25
B) $5.75
C) $7.25
D) $9.30

Question 52

Kidzlane has direct materials (DL) standards of 2 pounds per unit at $4 per pound for its most popular toy. Last month, 5,600 pounds of direct materials that actually cost $28,000 were used to produce 3,000 toy units. The direct materials (DM) efficiency variance for last month was

A) $1,600 unfavorable.
B) $1,600 favorable.
C) $5,600 unfavorable.
D) $5,600 favorable.

Question 53

Kingston Company produces a hover board, which has standard requirements of two hours per board at a direct labor rate per hour of $18. In the last quarter, 2,000 hover boards were produced using 4,200 direct labor hours at rate of $19.00 per hour. The direct labor (DL) efficiency variance for last quarter was

A) $7,200 unfavorable.
B) $7,200 favorable.
C) $3,600 unfavorable.
D) $3,600 favorable.

Question 54

In a standard costing system, direct material (DM) price variances are recorded when goods are

A) purchased.
B) placed into production.
C) completed and transferred to finished goods inventory.
D) sold.

Question 55

For standard costing journal entries,

A) standard cost is used to record the method of payment and the actual amount is used to record the DM inventory, WIP Inventory, and FG Inventory, with the difference recognized in the variance accounts.
B) standard cost is recorded in both DM Inventory, WIP Inventory, FG Inventory, and the Cash or Accounts Receivable depending on the method of payment
C) standard cost is recorded in both DM Inventory, WIP Inventory, FG Inventory, and the Cash or Accounts Receivable depending on the method of payment.
D) standard cost is used to record the DM inventory, WIP Inventory, and FG Inventory, actual cost is used to record the method of payment, Cash or Accounts Receivable, and the difference is recognized in the variance accounts.

Question 56

Direct materials (DM) efficiency variances are recorded

A) when materials are purchased.
B) during production.
C) when units are sold.
D) at the same time as direct materials (DM) price variances.

Question 57

The direct labor (DL) price variance reflects the difference between the

A) standard direct labor cost for the actual direct labor hours used and the direct labor hours that were expected to use for the actual production.
B) actual direct labor rate and the standard direct labor rate for all of the direct labor hours used.
C) actual direct labor rate applied to the actual labor hours and the standard direct labor rate applied to the standard direct labor hours.
D) standard direct labor rate applied to the actual labor hours and the actual direct labor rate applied to the standard direct labor hours.

Question 58

A company's direct labor (DL) efficiency variance is computed as

A) (AQ x SP) + (SQ x SP).
B) (AQ x AP) - (SQ x SP).
C) (AQ x AP) - (AQ x SP).
D) (AQ x SP) - (SQ x SP).

Question 59

The formula for the direct materials (DM) price variance is

A) (AQ_purch x AP) - (AQ_purch x SP).
B) (SQ_purch x AP) - (SQ_purch x SP).
C) (AQ_purch x AP) + (AQ_purch x SP).
D) (AQ_purch x AP) - (SQ_purch x SP).

Question 60

The formula for the direct materials (DM) efficiency variance is

A) (AQ_used x AP) - (SQ x SP).
B) (AQ_used x SP) - (SQ x SP).
C) (AQ_used x SP) + (SQ x SP).
D) (AQ_used x AP) - (AQ_used x SP).

Question 61

The standard price (SP) in the variable-MOH price variance is computed by total

A) actual variable-MOH divided by the actual use of the cost driver.
B) actual variable-MOH divided by the budgeted use of the cost driver.
C) budgeted variable-MOH divided by the budgeted use of the cost driver.
D) budgeted variable-MOH divided by the actual use of the cost driver.

Question 62

The correct equation for the variable-MOH price variance is

A) actual variable-MOH incurred - (SQ x SP).
B) budgeted variable-MOH - (SQ x AP).
C) budgeted variable-MOH - (AQ x SP).
D) actual variable-MOH incurred - (AQ x SP).

Question 63

Which of the following would not be a key transaction-related standard costing journal entry for variable-MOH costs?

A) Actual Variable-MOH costs are recorded as debits to Variable-MOH Control account.
B) As units are completed, the applied cost is debited to WIP Inventory account and credited to Variable-MOH Control account.
C) As units are completed, the applied cost is credited to the WIP Inventory account and debited to the Variable-MOH Control account.
D) Specific variable-MOH price variances and/or efficiency variances are recognized as the Variable-MOH Control account is closed out.

Question 64

Which variance captures the difference in the standard variable-MOH cost for the actual quantity of the cost driver used, compared to the cost driver quantity expected for actual units produced?

A) Variable-MOH Efficiency Variance
B) Fixed-MOH Price Variance
C) Variable-MOH Price Variance
D) Fixed-MOH Volume Variance

Question 65

A favorable Variable-MOH Price Variance means that

A) less was paid than expected for variable-MOH resources.
B) more was paid than expected for variable-MOH resources.
C) less of the cost driver related to the variable-MOH resources was used than expected.
D) more of the cost driver related to the variable-MOH resources was used than expected.

Question 66

Variances with overall favorable effects will carry

A) debit balances which increase operating income.
B) credit balances which decrease operating income.
C) credit balances which increase operating income.
D) debit balances which decrease operating income.

Question 67

General ledger accounts for variances are classified as

A) permanent accounts.
B) temporary accounts.
C) real accounts.
D) retained earnings.

Question 68

Because variance accounts are

A) temporary accounts, they must be closed at year-end.
B) temporary accounts, their balances will carry over from one period to the next.
C) permanent accounts, they must be closed at year-end.
D) permanent accounts, their balances will carry over from one period to the next.

Question 69

Variance accounts are closed or written off to

A) Retained Earnings.
B) Cost of Goods Sold.
C) Finished Goods (FG) Inventory.
D) Work In Process Inventory.

Question 70

Which of the following account balances will reflect the actual cost of production at year-end in a standard costing system?

A) Work In Process Inventory
B) Raw Materials Inventory
C) Finished Goods Inventory
D) Cost of Goods Sold

Question 71

Bonaventura Boots had the following variances at year-end:
What is the effect of closing these variances on the Cost of Goods Sold account at year-end?

A) Increase by $35
B) Decrease by $35
C) Increase by $715
D) Decrease by $715

Question 72

Bonaventura Boots had the following variances at year-end:
What is the journal entry to close these variances?

A)
B)
C)
D)

Question 73

Dairy Delites had the following projected and incurred the following production and cost data shown below:
What is the Variable-MOH Price Variance?

A) $161 unfavorable
B) $161 favorable
C) $373 unfavorable
D) $373 favorable

Question 74

Dairy Delites had the following projected and incurred the following production and cost data shown below:
What is the Variable-MOH Efficiency Variance?

A) $161 unfavorable
B) $161 favorable
C) $373 unfavorable
D) $373 favorable

Question 75

Dairy Delites had the following projected and incurred the following production and cost data shown below:
What is the Fixed-MOH Price Variance?

A) $136 favorable
B) $136 unfavorable
C) $216 favorable
D) $216 unfavorable

Question 76

Dairy Delites had the following projected and incurred the following production and cost data shown below:
What is the Fixed-MOH Volume Variance?

A) $136 favorable
B) $136 unfavorable
C) $216 favorable
D) $216 unfavorable

Question 77

Which variance isolates and quantifies the change in sales prices?

A) Simplified Sales Activity Variance
B) Master Budget Sales Variance
C) Sales Price Variance
D) Sales Mix Variance

Question 78

Which of the following spotlights the change in volume between the flexible budget sales level and the master budget sales level?

A) Sales Mix Variance
B) Sales Price Variance
C) Master Budget Sales Variance
D) Simplified Sales Activity Variance

Question 79

The master budget sales variance captures

A) only the difference between actual results and master budget values for sales price.
B) only the difference between actual results and master budget values for sales volume.
C) the difference between actual results and master budget values for both sales price and volume.
D) the difference between actual results and the flexible budget for sales.

Question 80

The total sales variance is also known as the

A) sales price variance.
B) simplified sales activity variance
C) sales mix variance.
D) master budget sales variance.