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.

Accepted Answer

Professional accounting firms can compute labor mix and labor yield variances for their auditors because labor in accounting is substitutable. For example, a senior auditor can be replaced by a junior auditor with lower cost, thus creating a labor substitution possibility.

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.

Accepted Answer

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.

Accepted Answer

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.

Accepted Answer

It is important to review variances that are large and those that can be managed effectively in order to prioritize actions and resources.

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.

Accepted Answer

The direct material price variance is calculated when the actual price paid for materials differs from the standard price. It does not take into account the quantity of materials purchased or used. However, the quantity purchased and used can affect the total cost of materials and therefore impact the overall variance.

Question 6

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

Accepted Answer

Variances can be caused by inaccurate or outdated standards that no longer reflect the current production process.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.

Accepted Answer

The answer of The sales quantity variance is the same...

Question 8

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

Accepted Answer

Production cost variances are calculated using the actual production costs and the standard production costs. These variances are computed based on the total number of units produced during the period, regardless of whether those units were sold or not. Therefore, the statement "the variable production cost variances are computed using the units produced instead of the units sold" is true.

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.

Accepted Answer

This statement is true. It is not practical or efficient to investigate and correct every single variance, so it is important to prioritize and focus on those that will yield the greatest benefits compared to the costs involved.

Question 10

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

Accepted Answer

The production mix variance measures the impact on costs of using a different mix of materials than what was originally planned for 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.

Accepted Answer

The answer of If a company sells two products,it is...

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.

Accepted Answer

The answer of The direct labor yield variance is unfavorable...

Question 13

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

Accepted Answer

Variances can occur due to accounting errors, including timing differences, such as recording revenue in one period when it should have been recorded in another.

Question 14

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

Accepted Answer

In service organizations, labor costs tend to be the largest component of total costs, and therefore, labor variances can have a greater impact on overall financial performance. Additionally, the quality of labor can directly affect the quality of service provided to customers, making it even more important to monitor and manage labor variances. Material costs, while still important to track, generally make up a smaller portion of overall costs 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.

Accepted Answer

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

Question 16

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

Accepted Answer

The production cost yield variance and the sales quantity variance are both measures of the difference between the actual output and the expected output. The production cost yield variance measures the difference between the actual cost of production and the expected cost of production, while the sales quantity variance measures the difference between the actual sales volume and the expected sales volume.

Question 17

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

Accepted Answer

The basic variance analysis framework, including budgeting, actual results, and variance analysis, can be applied to both manufacturing and service organizations. However, some adjustments may need to be made to account for differences in the nature of the products or services being provided.

Question 18

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

Accepted Answer

It is possible for both products to have an unfavorable sales quantity variance if the company did not meet its overall sales target or if the other product had a much more favorable variance compared to the other.

Question 19

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

Accepted Answer

Market share is influenced by marketing strategies and tactics such as advertising, promotion, pricing, and product differentiation, which are within the control of the marketing department. In contrast, industry volume is influenced by external factors such as the overall economy, industry trends, and consumer behavior, which are not entirely controllable by the marketing department.

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.

Accepted Answer

The answer of If the number of units produced exceeds...

Quiz 17: Additional Topics in Variance Analysis