Deck 23: Flexible Budgets and Standard Costs

Question 1

Sweet Baby Diaper Company sells disposable diapers for $.20 each. Variable costs are $.05 per diaper, while fixed costs are $75,000 per month. At a volume of 600,000 diapers per month, what operating income would be shown in the flexible budget?

A) $7,500
B) $45,000
C) $30,000
D) $15,000

Answer 1

$15,000

Question 2

The flexible budget is based on the actual number of outputs.

Answer 2

True

Question 3

A company's flexible budget for 40,000 units of production showed sales of $110,000, variable costs of $60,000, and fixed costs of $41,000. What net operating income would you expect the company to earn if it produces and sells 43,000 units?

A) $17,250
B) $12,750
C) $9,000
D) $11,850

Answer 3

$12,750

Question 4

The sales volume variance results from the fact that the actual selling price is different than the budgeted selling price.

Question 5

A static budget presents financial data at several different volume levels

Question 6

ABBA Manufacturing makes staplers. The budgeted selling price is $10 per stapler, the variable rate is $5 per stapler and budgeted fixed costs are $12,000. What is the budgeted operating income for 5,000 staplers?

A) $15,000
B) $13,000
C) $25,000
D) $50,000

Question 7

Portobello Company prepared the following static budget for the coming month:
$\begin{array}{|l|l|r|}\hline \text { Static Budget } & & \\\hline \text { Units/volume } & & 5,000 \\\hline & \text { Per Unit } & \\\hline \text { Sales revenue } & \$ 3.00 & \$ 15,000 \\\hline \text { Variable expenses } & \$ 1.80 & 9,000 \\\hline \text { Contribution margin } & & 6,000 \\\hline \text { Fixed expenses } & & 5,000 \\\hline \text { Operating income/(1oss) } & & \$ 1,000 \\\hline\end{array}$

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If a flexible budget was prepared at a volume of 6,000, how much would the operating income be?

A) ($200)
B) $500
C) $2,200
D) $1,000

Question 8

Which of the following BEST describes flexible budgets?

A) Flexible budgets have contingency funds to allow flexibility of spending.
B) Flexible budgets summarize financial results at several different volume levels.
C) Flexible budgets are an integral part of the master budget.
D) Flexible budgets can accommodate several different price structures.

Question 9

The sales volume variance arises because the number of units actually sold differs from the number of units expected to be sold according to the static budget.

Question 10

Ibis Company prepared the following static budget for the coming month:
$\begin{array}{|l|l|r|}\hline \text { Static Budget } & & \\\hline \text { Units/volume } & & 12,000 \\\hline & \text { Per Unit } & \\\hline \text { Sales revenue } & \$ 20.00 & \$ 240,000 \\\hline \text { Variable expenses } & \$ 9.00 & 108,000 \\\hline \text { Contribution margin } & & 132,000 \\\hline \text { Fixed expenses } & & 130,000 \\\hline \text { Operating income/(1oss) } & & \$ 2,000 \\\hline\end{array}$

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If a flexible budget was prepared at a volume of 14,000 units, how much would the operating income be?

A) $22,000
B) $17,500
C) $24,000
D) $13,000

Question 11

Portobello Company prepared the following static budget for the coming month:
$\begin{array}{|l|l|r|}\hline \text { Static Budget } & & \\\hline \text { Units/volume } & & 5,000 \\\hline & \text { Per Unit } & \\\hline \text { Sales revenue } & \$ 3.00 & \$ 15,000 \\\hline \text { Variable expenses } & \$ 1.80 & 9,000 \\\hline \text { Contribution margin } & & 6,000 \\\hline \text { Fixed expenses } & & 5,000 \\\hline \text { Operating income/(1oss) } & & \$ 1,000 \\\hline\end{array}$

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If a flexible budget was prepared at a volume of 4,000, how much would the operating income be?

A) ($200)
B) $500
C) $2,200
D) $1,000

Question 12

A static budget is prepared for one level of sales volume.

Question 13

In a flexible budget, which of the following amounts stays the same as the volume changes?

A) The total amount of contribution margin
B) The total amount of fixed costs
C) The total amount of variable expenses
D) The total amount of sales revenue

Question 14

The flexible budget variance arises because the number of units actually sold differs from the static budget units.

Question 15

Flexible budgets are budgets that summarize cost and revenue information at various volume levels within a relevant range.

Question 16

Sweet Baby Diaper Company sells disposable diapers for $.20 each. Variable costs are $.05 per diaper, while fixed costs are $75,000 per month. At a volume of 700,000 diapers per month, what operating income would be shown in the flexible budget?

A) $7,500
B) $45,000
C) $30,000
D) $15,000

Question 17

A variance is the difference between an actual amount and a budgeted amount.

Question 18

A favorable variance reflects an increase in operating income.

Question 19

Ibis Company prepared the following static budget for the coming month:
$\begin{array}{|l|l|r|}\hline \text { Static Budget } & & \\\hline \text { Units/volume } & & 12,000 \\\hline & \text { Per Unit } & \\\hline \text { Sales revenue } & \$ 20.00 & \$ 240,000 \\\hline \text { Variable expenses } & \$ 9.00 & 108,000 \\\hline \text { Contribution margin } & & 132,000 \\\hline \text { Fixed expenses } & & 130,000 \\\hline \text { Operating income/(1oss) } & & \$ 2,000 \\\hline\end{array}$

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If a flexible budget was prepared at a volume of 13,000 units, how much would the operating income be?

A) $22,000
B) $17,500
C) $24,000
D) $13,000

Question 20

In a flexible budget, which of the following amounts does NOT stay the same as the volume changes?

A) The price per unit
B) The fixed costs
C) The variable expense per unit
D) The total contribution margin

Question 21

The Carolina Products Company has just completed a flexible budget analysis of 2^nd quarter operating income, as shown here:


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Based on the above data, which of the following statements would be a correct interpretation of the flexible budget variance for sales revenue?

A) Decrease in price per unit
B) Increase in variable cost per unit
C) Increase in sales volume
D) Increase in fixed costs

Question 22

Onyx Company prepared a static budget at the beginning of the month. It's the end of the month and the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows:
Static budget: Sales volume: 1,000 units Price: $70 per unit
Variable expense: $32 per unit Fixed expenses: $37,500 per month
Operating income: $500
Actual results: Sales volume: 990 units Price: $74 per unit
Variable expense: $35 per unit Fixed expenses: $33,000 per month
Operating income: $5,610

-
Based on the above data, how much was the flexible budget variance for sales revenue?

A) $5,490 U
B) $5,490 F
C) $3,960 U
D) $3,960 F

Question 23

Onyx Company prepared a static budget at the beginning of the month. At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows:
Static budget: Sales volume: 1,000 units Price: $70 per unit
Variable expense: $32 per unit Fixed expenses: $37,500 per month
Operating income: $500
Actual results: Sales volume: 990 units Price: $74 per unit
Variable expense: $35 per unit Fixed expenses: $33,000 per month
Operating income: $5,610

-
Based on the above data, how much was the flexible budget variance for operating income?

A) $4,500 U
B) $4,500 F
C) $380 U
D) $5,490 F

Question 24

The Carolina Products Company has just completed a flexible budget analysis of 2^nd quarter operating income, as shown here:


-
Based on the above data, which of the following statements would be a correct interpretation of the sales volume variance for sales revenues?

A) Increase in price per unit
B) Increase in sales volume
C) Increase in variable expense per unit
D) Increase in fixed costs

Question 25

The Carolina Products Company has just completed a flexible budget analysis of 2^nd quarter operating income, as shown here:


-
Based on the above data, which of the following statements would be a correct interpretation of the flexible budget variance for fixed expenses?

A) Decrease in price per unit
B) Increase in variable cost per unit
C) Increase in sales volume
D) Increase in fixed costs

Question 26

Onyx Company prepared a static budget at the beginning of the month. At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows:
Static budget: Sales volume: 1,000 units Price: $70 per unit
Variable expense: $32 per unit Fixed expenses: $37,500 per month
Operating income: $500
Actual results: Sales volume: 990 units Price: $74 per unit
Variable expense: $35 per unit Fixed expenses: $33,000 per month
Operating income: $5,610

-
Based on the above data, how much was the flexible budget variance for variable expenses?

A) $5,490 U
B) $2,970 U
C) $2,970 F
D) $3,960 F

Question 27

Which of the following BEST describes sales volume variance?

A) Difference between actual amounts and the flexible budget due to differences in price and costs
B) Difference between the flexible budget and static budget due to differences in volumes
C) Difference between the static budget and actual amounts due to differences in price
D) Difference between the flexible budget and static budget due to differences in fixed expenses

Question 28

Onyx Company prepared a static budget at the beginning of the month. At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows:
Static budget: Sales volume: 1,000 units Price: $70 per unit
Variable expense: $32 per unit Fixed expenses: $37,500 per month
Operating income: $500
Actual results: Sales volume: 990 units Price: $74 per unit
Variable expense: $35 per unit Fixed expenses: $33,000 per month
Operating income: $5,610

-
Based on the above data, how much was the sales volume variance for revenues?

A) $4,500 U
B) $700 U
C) $380 U
D) $3,960 F

Question 29

The sales volume variance is the difference between the static budget and the flexible budget amounts, and is caused by actual sales volume being different than budgeted sales volume.

Question 30

The Carolina Products Company has just completed a flexible budget analysis of 2^nd quarter operating income, as shown here:


-
Based on the above data, which of the following statements would be a correct interpretation of the sales volume variance for variable expenses?

A) Decrease in price per unit
B) Increase in variable cost per unit
C) Increase in sales volume
D) Increase in fixed costs

Question 31

A company is analyzing month-end results compared to both static and flexible budgets. This month the actual variable expenses per unit were lower than projected in the static budget. What kind of variance would that produce?

A) Favorable flexible budget variance for variable expenses
B) Favorable sales volume variance for variable expenses
C) Unfavorable flexible budget variance for variable expenses
D) Unfavorable sales volume variance for variable expenses

Question 32

Which of the following BEST describes flexible budget variance?

A) Difference between actual amounts and the flexible budget due to differences in price and costs
B) Difference between the flexible budget and static budget due to differences in volumes
C) Difference between the flexible budget and actual amounts due to differences in volumes
D) Difference between the flexible budget and static budget due to differences in fixed expenses

Question 33

A company is analyzing month-end results compared to both static and flexible budgets. This month the actual selling price was higher than projected in the static budget. What kind of variance would that produce?

A) Favorable flexible budget variance for sales revenues
B) Favorable sales volume variance for sales revenues
C) Unfavorable flexible budget variance for sales revenues
D) Unfavorable sales volume variance for sales revenues

Question 34

A company is analyzing month-end results compared to both static and flexible budgets. This month the actual fixed expenses were lower than projected in the static budget. What kind of variance would that produce?

A) Favorable flexible budget variance for fixed expenses
B) Favorable sales volume variance for fixed expenses
C) Unfavorable flexible budget variance for fixed expenses
D) Unfavorable sales volume variance for fixed expenses

Question 35

Portobello Company prepared the following static budget for the coming month:
$\begin{array}{|l|l|r|}\hline \text { Static Budget } & & \\\hline \text { Units/volume } & & 5,000 \\\hline & \text { Per Unit } & \\\hline \text { Sales revenue } & \$ 3.00 & \$ 15,000 \\\hline \text { Variable expenses } & \$ 1.80 & 9,000 \\\hline \text { Contribution margin } & & 6,000 \\\hline \text { Fixed expenses } & & 5,000 \\\hline \text { Operating income/(1oss) } & & \$ 1,000 \\\hline\end{array}$
Using the format below, please prepare a flexible budget including data at volumes of 4,000 and 6,000 units.
$\begin{array}{|l|l|r|r|r|}\hline \text { Flexible Budget } & & & \\\hline \text { Units/volume } & & 4,000 & 5,000 & 6,000 \\\hline & \text { Per Unit } \\\hline \text { Sales revenue } & \$ 3.00 \\\hline \text { Variable expenses } & \$ 1.80 \\\hline \text { Contribution margin } & \\\hline \text { rixed expenses } & \\\hline \text { Operating income/(loss) } &\\\hline\end{array}$

Question 36

The Carolina Products Company has just completed a flexible budget analysis of 2^nd quarter operating income, as shown here:


-
Based on the above data, which of the following statements would be a correct interpretation of the sales volume variance for operating income?

A) Decrease in price per unit
B) Increase in variable cost per unit
C) Increase in sales volume
D) Increase in fixed costs

Question 37

Onyx Company prepared a static budget at the beginning of the month. At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows:
Static budget: Sales volume: 1,000 units Price: $70 per unit
Variable expense: $32 per unit Fixed expenses: $37,500 per month
Operating income: $500
Actual results: Sales volume: 990 units Price: $74 per unit
Variable expense: $35 per unit Fixed expenses: $33,000 per month
Operating income: $5,610

-
Based on the above data, how much was the sales volume variance for variable expenses?

A) $2,970 U
B) $320 F
C) $380 U
D) $3.960 F

Question 38

The Carolina Products Company has just completed a flexible budget analysis of 2^nd quarter operating income, as shown here:


-
Based on the above data, which of the following statements would be a correct interpretation of the flexible budget variance for variable expenses?

A) Decrease in price per unit
B) Increase in variable cost per unit
C) Increase in sales volume
D) Increase in fixed costs

Question 39

Ibis Company prepared the following static budget for the coming month:
$$\begin{array} { | l | l | r | } \hline \text { Static Budpgt } & & \\\hline \text { Units/volume } & & 12,000 \\\hline & \text { Per Unit } & \\\hline \text { Sales revenue } & \$ 20.00 & \$ 240,000 \\\hline \text { Variable expenses } & \$ 9.00 & 108,000 \\\hline \text { Contribution margin } & & 132,000 \\\hline \text { Fixed Expenses } & & 130,000 \\\hline \text { Operating income(loss) } & & \$ 2,000 \\\hline\end{array}$$
Using the format below, please prepare a flexible budget including data at volumes of 13,000 and 14,000 units.
$\begin{array}{|l|l|l|l|l|}\hline \text { Flexible Budget } & & & & \\\hline & & 12,000 & 13,000 & 14,000 \\\hline & \text { Per Unit } & & & \\\hline \text { Snits/volume } & \$ 20.00 & & & \\\hline \text { Sariable expenses } & \$ 9.00 & & & \\\hline \text { Contribution margin } & & & & \\\hline \text { Fixed expenses } & & & & \\\hline \text { Operating income/(1oss) } & & & & \\\hline\end{array}$

Question 40

Onyx Company prepared a static budget at the beginning of the month. At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows:
Static budget: Sales volume: 1,000 units Price: $70 per unit
Variable expense: $32 per unit Fixed expenses: $37,500 per month
Operating income: $500
Actual results: Sales volume: 990 units Price: $74 per unit
Variable expense: $35 per unit Fixed expenses: $33,000 per month
Operating income: $5,610

-
Based on the above data, how much was the flexible budget variance for fixed expenses?

A) $4,500 U
B) $4,500 F
C) $0
D) $5,490 F

Question 41

An unfavorable flexible budget variance in operating income might be due to a(n):

A) increase in price.
B) decrease in volume.
C) increase in variable expenses per unit.
D) decrease in fixed costs.

Question 42

A favorable sales volume variance in sales revenue suggests a(n):

A) increase in price.
B) increase in volume.
C) increase in variable expenses per unit.
D) decrease in fixed costs.

Question 43

Western Outfitters Mountain Sports projected 2011 sales of 75,000 units at a unit sale price of $12.00. Actual 2011 sales were 72,000 units at $14.00 per unit. Variable costs were budgeted at $4.00 per unit; actual amount was $4.75 per unit. Budgeted fixed costs totaled $375,000, while actual fixed costs amounted to $400,000. What is the sales volume variance for total revenue?

A) $144,000 favorable
B) $42,000 unfavorable
C) $108,000 favorable
D) $36,000 unfavorable

Question 44

Global Engineering's actual operating income for the current year is $50,000. The flexible budget operating income for actual volume achieved is $40,000, while the static budget operating income is $53,000. What is the sales volume variance for operating income?

A) $13,000 favorable
B) $10,000 unfavorable
C) $13,000 unfavorable
D) $10,000 favorable

Question 45

Shirt Fantasy produces and sells two types of tee shirts Fancy and Plain. Shirt Fantasy provides the following data:
$$\begin{array} { | l | l | l | } \hline & \text { Budpgt } & \text { Actual } \\\hline \text { Unit sales price-Fancy } & \$ 24 & \$ 25 \\\hline \text { Unit sales price-Plain } & \$ 18 & \$ 17 \\\hline \text { Unit siles-Fancy } & 1,300 & 1,250 \\\hline \text { Unit sales-Plain } & 900 & \$ 75 \\\hline\end{array}$$

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Using the format below, compute the flexible budget variance for Fancy tee shirts for sales revenue only.

Question 46

An unfavorable flexible budget variance in variable expenses suggests a(n):

A) increase in price.
B) decrease in volume.
C) increase in variable expenses per unit.
D) decrease in fixed costs.

Question 47

Western Outfitters Mountain Sports projected 2011 sales of 75,000 units at a unit sale price of $12.00. Actual 2011 sales were 72,000 units at $14.00 per unit. Variable costs were budgeted at $4.00 per unit; actual amount was $4.75 per unit. Budgeted fixed costs totaled $375,000 while actual fixed costs amounted to $400,000. What is the flexible budget variance for variable expenses?

A) $12,000 favorable
B) $54,000 unfavorable
C) $54,000 favorable
D) $25,000 favorable

Question 48

A favorable flexible budget variance in sales revenues suggests a(n):

A) increase in selling price.
B) increase in volume.
C) decrease in variable expenses per unit.
D) decrease in fixed costs.

Question 49

Onyx Company prepared a static budget at the beginning of the month. At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows:
Static budget: Sales volume: 1,000 units Price: $70 per unit
Variable expense: $32 per unit Fixed expenses: $37,500 per month
Operating income: $500
Actual results: Sales volume: 990 units Price: $74 per unit
Variable expense: $35 per unit Fixed expenses: $33,000 per month
Operating income: $5,610
Using the format below, please prepare an income statement performance report:

Question 50

Western Outfitters Mountain Sports projected 2011 sales of 75,000 units at a unit sale price of $12.00. Actual 2011 sales were 72,000 units at $14.00 per unit. Variable costs were budgeted at $4.00 per unit; actual amount was $4.75 per unit. Budgeted fixed costs totaled $375,000 while actual fixed costs amounted to $400,000. What is the flexible budget variance for operating income?

A) $48,000 unfavorable
B) $65,000 favorable
C) $65,000 unfavorable
D) $41,000 favorable

Question 51

A favorable sales volume variance in variable expenses suggests a(n):

A) increase in volume.
B) decrease in volume.
C) increase in variable expenses per unit.
D) decrease in fixed costs.

Question 52

A standard cost is a carefully predetermined cost that usually is expressed on a per-unit basis.

Question 53

An unfavorable sales volume variance in operating income suggests a(n):

A) increase in volume.
B) decrease in volume.
C) increase in variable expenses per unit.
D) decrease in fixed costs.

Question 54

A company is analyzing month-end results compared to both static and flexible budgets. This month the actual sales volume was lower than projected in the static budget. What kind of variance would that produce?

A) Unfavorable flexible budget variance for variable expenses
B) Unfavorable sales volume variance for variable expenses
C) Unfavorable flexible budget variance for sales revenues
D) Unfavorable sales volume variance for sales revenues

Question 55

A standard cost system helps management set performance standards.

Question 56

Western Outfitters Mountain Sports projected 2011 sales of 75,000 units at a unit sale price of $12.00. Actual 2011 sales were 72,000 units at $14.00 per unit. Variable costs were budgeted at $4.00 per unit; actual amount was $4.75 per unit. Budgeted fixed costs totaled $375,000 while actual fixed costs amounted to $400,000. What is the sales volume variance for operating income?

A) $41,000 unfavorable
B) $24,000 unfavorable
C) $24,000 favorable
D) $65,000 unfavorable

Question 57

Tiger's Golf Center reported actual operating income for the current year of $60,000. The flexible budget operating income for actual volume achieved is $55,000, while the static budget operating income is $58,000. What is the flexible budget variance for operating income?

A) $5,000 favorable
B) $3,000 unfavorable
C) $5,000 unfavorable
D) $2,000 favorable

Question 58

Standard cost is a budget for a single unit of materials, labor or overhead.

Question 59

Shirt Fantasy produces and sells two types of tee shirts Fancy and Plain. Shirt Fantasy provides the following data:
$\begin{array}{|l|r|r|} \hline& \text { Budget } & \text { Actual } \\\hline \text { Unit sales price- Fancy } & \$ 24 & \$ 25 \\\hline \text { Unit sales price-Plain } & \$ 18 & \$ 17 \\\hline \text { Unit sales-Fancy } & 1,300 & 1,250 \\\hline \text { Unit sales-Plain } & 900 & 875 \\\hline\end{array}$

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Using the format below, compute the flexible budget variance for Plain tee shirts for sales revenue only.
$\begin{array}{|c|c|c|c|c|c|}\hline & \text { Actual } & \begin{array}{l}\text { Flexible } \\\text { Budget }\end{array} & \text { Flexible } & \text { Sales Volume } & \text { Static } \\\hline & \text { Results } & \text { Variance } & \text { Budget } & \text { Variance } & \text { Budget } \\\hline \text { Units/volume } & 875 & & & & 900 \\\hline \text { Sales revenue } & & & & & \\ \hline\end{array}$

Question 60

Standard costs help motivate employees by serving as benchmarks against which their performance is measured.

Question 61

Georgia Custom Cabinet Company is setting standard costs for one of its products. The main material is cedar wood, sold by the board foot. The current cost of cedar wood is $2.00 per board foot from the supplier. Delivery costs are $0.25 per board foot. Carpenters' wages are $22.00 per hour. Payroll costs are $3.60 per hour and benefits are $3.00 per hour. How much is the direct materials price standard (per -board foot)?

A) $2.25 per board foot
B) $2.00 per board foot
C) $1.75 per board foot
D) $22.00 per board foot

Question 62

A quantity variance measures how well a company keeps unit prices of material and labor inputs within standards.

Question 63

Standard costs are developed by the cooperative effort of procurement, production, human resources, and accounting personnel.

Question 64

Which of the following is one of the reasons why companies use standard costs?

A) To increase sales
B) To set performance targets
C) To bolster good internal controls and prevent shrinkage
D) To insure the accuracy of the financial records

Question 65

Artscapes Company is setting its direct materials and direct labor standards for its leading product. Materials cost from the supplier are $4.50 per square foot, net of purchase discount. Freight-in amounts to $0.10 per square foot. Basic wages of the assembly line personnel are $12.00 per hour. Payroll taxes are approximately 20% of wages. Benefits amount to $3.00 per hour. How much is the direct labor price standard (per hour)?

A) $17.40 per hour
B) $15.00 per hour
C) $14.40 per hour
D) $16.50 per hour

Question 66

Which of the following will result in an unfavorable direct labor price variance?

A) When actual direct labor hours exceed standard direct labor hours
B) When actual direct labor hours are less than standard direct labor hours
C) When the actual direct labor rate exceeds the standard direct labor rate
D) When the actual direct labor rate is less than the standard direct labor rate

Question 67

Which of the following is NOT a reason that companies use standard costs?

A) To establish performance standards
B) To prepare the budget
C) To achieve higher levels of sales
D) To set the sales prices of their products and services

Question 68

Price Variance = (Actual Price x Actual Quantity) - (Standard Price x Standard Quantity).

Question 69

Georgia Custom Cabinet Company is setting standard costs for one of its products. The main material is cedar wood, sold by the board foot. The current cost of cedar wood is $2.00 per board foot from the supplier. Delivery costs are $0.25 per board foot. Carpenters' wages are $22.00 per hour. Payroll costs are $3.60 per hour and benefits are $3.00 per hour. How much is the direct labor price standard (per hour)?

A) $6.60 per hour
B) $25.60 per hour
C) $22.00 per hour
D) $28.60 per hour

Question 70

Which of the following is one of the reasons why companies use standard costs?

A) To increase sales
B) To insure the accuracy of the financial records
C) To bolster good internal controls and prevent shrinkage
D) To make budgeting easier and more efficient

Question 71

Efficiency Variance = (Standard Price x Actual Quantity) - (Standard Price x Standard Quantity).

Question 72

The static budget is NEVER used to compute flexible budget variance or price and efficiency variances.

Question 73

Which of the following BEST describes standard costs?

A) Costs used as a budget for a single unit of product
B) Costs incurred to produce the standard model of a product
C) Costs based on the average of current market values
D) Costs used to compare with competitors' prices

Question 74

Which of the following will result in an unfavorable direct materials efficiency variance?

A) The actual cost per unit of direct materials exceeded the standard cost of direct materials.
B) The actual cost per unit of direct materials was less than the standard cost of direct materials.
C) The actual quantity of direct materials used per unit exceeded the standard quantity of direct materials allowed per unit.
D) The actual quantity of direct materials used per unit was less than the standard quantity of direct materials allowed per unit.

Question 75

Price variances show how changes in usage of raw materials and labor affect a company's profits.

Question 76

In a standard costing system, each item has a price standard and a quantity standard.

Question 77

Setting standard costs is a function done within a company's production department and does NOT require any input from other departments.

Question 78

Companies use techniques like time-and-motion studies, and consult industry "best practices" when developing standards. This is referred to as benchmarking.

Question 79

Artscapes Company is setting its direct materials and direct labor standards for its leading product. Materials cost from the supplier are $4.50 per square foot, net of purchase discount. Freight-in amounts to $0.10 per square foot. Basic wages of the assembly line personnel are $12.00 per hour. Payroll taxes are approximately 20% of wages. Benefits amount to $3.00 per hour. How much is the direct material price standard (per square foot)?

A) $4.60 per square foot
B) $4.00 per square foot
C) $3.90 per square foot
D) $16.50 per square foot

Question 80

Manufacturing companies that use standard costs do NOT need to compute inventory cost based on LIFO, FIFO, or weighted average.