Question 1

Which of the following statements about activity measures is false?

Accepted Answer

Dollar measures are often not preferred for activity measures because they can be influenced by price-level changes, making them less stable compared to physical measures like machine hours or process time. This contradicts the statement in option C, making it false.

Question 2

Use the following to answer questions:
The WriteAll Company sells two types of pens - rollerball and ballpoint - to specialty retailers. The company budgets by month in order to anticipate the peak demands occurring at various times during the year. The following information is available for July.
 
-How much is the total contribution-margin sales-volume variance?

Accepted Answer

The total contribution-margin sales-volume variance is calculated by comparing the actual sales volume to the budgeted sales volume, multiplied by the contribution margin per unit. The $4,000 unfavorable variance indicates that the actual sales volume was less than the budgeted sales volume, resulting in a lower contribution margin.

Question 3

Use the following to answer questions:
The WriteAll Company sells two types of pens - rollerball and ballpoint - to specialty retailers. The company budgets by month in order to anticipate the peak demands occurring at various times during the year. The following information is available for July.
 
-How much is the contribution-margin sales-volume variance for rollerball pens?

Accepted Answer

The answer of Use the following to answer questions:
The WriteAll...

Question 4

Use the following to answer questions:
The WriteAll Company sells two types of pens - rollerball and ballpoint - to specialty retailers. The company budgets by month in order to anticipate the peak demands occurring at various times during the year. The following information is available for July.
 
-How much is the total contribution-margin sales-quantity variance?

Accepted Answer

The total contribution-margin sales-quantity variance is $0 because it measures the difference between the actual and expected sales quantities, and if not specified otherwise, it is assumed to be zero.

Question 5

Use the following to answer questions:
The WriteAll Company sells two types of pens - rollerball and ballpoint - to specialty retailers. The company budgets by month in order to anticipate the peak demands occurring at various times during the year. The following information is available for July.
 
-How much is the total contribution-margin sales-mix variance?

Accepted Answer

The total contribution-margin sales-mix variance is $4,000 unfavorable. This is because the actual sales mix is less profitable than the budgeted sales mix. The actual sales mix has a higher proportion of low-margin products than the budgeted sales mix.

Question 6

In a standard cost system overhead application is based on

Accepted Answer

Standard overhead application in a standard cost system is based on the standard hours allowed for the actual output produced. This method facilitates variance analysis by comparing the standard cost to the actual cost incurred.

Question 7

The ________is the difference between the budgeted fixed manufacturing overhead and the fixed overhead applied to the actual output units produced (or standard input units allowed for actual output).

Accepted Answer

The correct answer is C) Volume variance. Volume variance measures the difference between the budgeted fixed manufacturing overhead and the fixed overhead applied to actual output units produced, reflecting how the actual production volume differs from the expected production volume.

Question 8

Which of the following is true?

Accepted Answer

A negative fixed overhead volume variance occurs when fewer items are produced than expected, often due to decreased market demand, leading to under-absorption of fixed overheads.

Question 9

Which of the following is not involved in establishing variable factory overhead costs?

Accepted Answer

Deciding upon the maximum sales price to obtain targeted market share is not involved in establishing variable factory overhead costs. This decision is more related to pricing strategy and marketing considerations rather than the calculation or allocation of variable factory overhead costs.

Question 10

Which of the following will cause a negative or favorable fixed overhead volume variance

Accepted Answer

A negative or favorable fixed overhead volume variance is caused by a difference between the actual production volume and the expected (or standard) production volume. An unexpected increase in production (D) would directly affect this variance, as it would mean more units were produced than planned, potentially leading to a favorable variance if fixed overhead costs are spread over more units, reducing the cost per unit. Choices A, B, and C do not directly affect fixed overhead volume variance, as they relate to labor hours, material costs, and variable overhead costs, respectively, rather than the volume of production.

Question 11

The Direct Material Inventory account had an ending balance of $10,000
If the company prorates the overhead variance to the ending balances in the appropriate accounts, how much is the balance in Work-in-Process Inventory after proration?
[Appendix A] Hammid Co ended this year with a total overhead variance of $50,000 favorable. The records showed the following overhead amounts in the relevant accounts:

Accepted Answer

The answer of The Direct Material Inventory account had an...

Question 12

Rafter Company uses a standard-cost just-in-time manufacturing system. During the first year of the company's operation direct materials at a standard cost of $100,000 were purchased and charged to Cost of Goods Sold. At the end of the year $45,000 of this can be traced to various inventory accounts: 60 percent to direct materials, 25 percent to Work-in-Process, and 15 percent to Finished Goods. Which of the following entries is the correct end-of-period adjustment?

Accepted Answer

The answer of  Rafter Company uses a standard-cost just-in-time...

Question 13

During the second year of operations Halachmi Company's records showed the following information about direct labor and overhead: actual amount spent $395,000; standard allowed $390,000. Which of the following entries reflect the recording of the Direct labor and overhead during the year?

Accepted Answer

The answer of  During the second year of operations...

Question 14

The revenue sales-volume variance is

Accepted Answer

The revenue sales-volume variance is calculated as the difference between the actual and budgeted sales volumes, multiplied by the budgeted selling price. This measures the impact of the difference in the quantity sold from the budgeted quantity on revenue. Option A accurately describes this calculation.

Question 15

Health Foods Inc. sells a special multi-grain muffin. In January the budgeted output an actual output were equal. January's revenue sales-volume variance

Accepted Answer

Since the budgeted output and actual output were equal, there would be no difference attributable to sales volume, resulting in a sales-volume variance of zero.

Question 16

The Campus Express bookstore ordered T-shirts and bookbags with the university log in September. The bookstore expected to sell 2,000 T-shirts and actually sold 1,800; the planned selling price was $25 while the actual was $20. The planned sales of bookbags was 1,000 at a price of $75. The actual sales were 1,200 at a price of $60. What was the revenue sales-volume variance for September?

Accepted Answer

The revenue sales-volume variance is calculated by comparing the actual sales volume to the planned sales volume, using the planned selling price. For T-shirts: (1,800 - 2,000) * $25 = -$5,000 (unfavorable). For bookbags: (1,200 - 1,000) * $75 = $15,000 (favorable). The net variance is $15,000 - $5,000 = $10,000 favorable.

Question 17

Which of the following is not important to managers when analyzing revenue sales-volum variance information?

Accepted Answer

The comparison of budgeted and actual total costs is not directly related to analyzing revenue sales-volume variance, which focuses on the differences between expected and actual sales volumes, not costs.

Question 18

The cost functions are considered reliable within a relevant range of 25,000 to 50,000 direct labor hours per month. The company expects to operate at 30,000 hours per month.
Actual results for February are as follows:
  McIntire Inc. developed the following monthly cost functions for manufacturing overhead:
 
Required:
(1) What are the following standard manufacturing overhead rates based on expected activity?
(a) Variable manufacturing overhead
(b) Fixed manufacturing overhead
(2) (a) Prepare a flexible budget using the following headings: Budget at
Overhead Cost VC/DLH Actual cost actual hrs. Variance
(b) Which variances need to be investigated and what are some probable causes?

Accepted Answer

The answer of The cost functions are considered reliable within...

Question 19

Briefly differentiate between a static budget and a flexible budget for manufacturing overhead and why the flexible budget is more appropriate for cost control and performance evaluation.

Accepted Answer

The answer of Briefly differentiate between a static budget and...

Question 20

Jewel Company produces jewelry for a specialized market. The fixed overhead costs for the coming year are budgeted at $705,000 and are allocated on the basis of good units completed. It is expected that 300,000 units will be completed during the year. Good units average 94 percent of total production. During the month of July 30,000 units were produced. The actual fixed overhead per good unit averaged $2.78.
Required (Where necessary, round variances to nearest dollar):
(1) Determine the fixed overhead rate for the year.
(2) Determine the fixed overhead budget variance for the month of July,
(3) Determine the fixed overhead volume variance for the month of July.

Accepted Answer

The answer of Jewel Company produces jewelry for a specialized...

Quiz 17: Flexible Budgets, Overhead Cost Management, and Activity-Based Budgeting