Question 1

Assume the static budget sales revenue is $69,000 and the flexible budget sales revenue is $70,000.If the actual sales price is $6 and the budgeted sales price is $6.50,what is the sales volume variance?
A) $1,000 favorable
B) $1,000 unfavorable
C) $6,000 favorable
D) $6,500 unfavorable

Accepted Answer

$70,000 - $69,000 = $1,000 favorable.

Question 2

The sales volume variance reflects
A)How efficiently the company operated in producing a given level of sales.
B)How effectively the company reached its strategic goals.
C)A different volume of products than that specified in the static budget.
D)All of these ans choices are correct.

Accepted Answer

The sales volume variance reflects the difference between the actual quantity of products sold and the quantity of products specified in the static budget. This means that the company sold a different volume of products than what was planned in the budget. Options A and B are not correct because the variance does not reflect efficiency or effectiveness in achieving strategic goals, but rather the difference between planned and actual sales. Option D is not entirely correct as only option C is a valid explanation for the sales volume variance.

Question 3

Assume the actual sales volume is 69,000 units and the budgeted sales volume is 70,000 units. If the actual sales price is $6 and the budgeted sales price is $6.50, what is the sales volume variance?
A) $6,500 unfavorable
B) $6,500 favorable
C) $6,000 unfavorable
D) $6,000 favorable

Accepted Answer

69,000 – 70,000 units x $6.50 = $6,500 unfavorable.

Question 4

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000 units.     Actual results for the year were 28,000 units, reflected in the following income statement:   
What is the flexible budget variance for direct labor?
A) $14,000 favorable
B) $14,000 unfavorable
C) $16,000 favorable
D)$30,000 unfavorable

Accepted Answer

Per flexible budget: $450,000 ÷ 30,000 = $15 per unit
$15 x 28,000 = $420,000 - $434,000 = $14,000 unfavorable.

Question 5

The sales volume variance is influenced most heavily by actions of
A)The budget committee.
B)The operations personnel.
C)The sales and marketing personnel.
D)The executives of the company.

Accepted Answer

The sales volume variance is a measure of the difference between the actual and budgeted sales volume. This variance is most heavily influenced by the sales and marketing personnel, as they are responsible for generating sales and promoting the company's products or services. The budget committee may set sales targets, but it is the sales and marketing personnel who are responsible for achieving those targets. The operations personnel may contribute to the variance through their production activities, but it is ultimately the sales volume that drives the variance. The executives of the company may have some influence, but their impact is likely to be more indirect than that of the sales and marketing personnel.

Question 6

Which of the following is not a factor that managers use in deciding whether to investigate a variance?
A)Materiality.
B)The existence of a trend.
C)Whether combining several accounts with large offsetting variances results in a small variance.
D)All of these ans choices are correct..

Accepted Answer

All of the given choices are factors that managers use in deciding whether to investigate a variance. Therefore, none of them should be not considered.

Question 7

The sales volume variance does not help managers understand
A)The effects of price changes on actual results.
B)Operational efficiency on actual results.
C)Either the effects of price changes on actual results or the operational efficiency on actual results.
D)None of these ans choices are correct.

Accepted Answer

The sales volume variance only helps managers understand the difference between actual sales volume and expected sales volume. It does not provide information about the effects of price changes or operational efficiency on actual results.

Question 8

The sales volume variance is the difference between
A)The static budget and the flexible budget.
B)The flexible budget and actual results.
C)The actual quantity and budgeted quantity.
D)The actual price and the standard price.

Accepted Answer

The sales volume variance is calculated by comparing the static budget (based on budgeted sales volume) with the flexible budget (adjusted for actual sales volume but using budgeted prices and costs).

Question 9

Which of the following variances would not be investigated by a manager following the management by exception principle?
A)A 10% favorable variance in raw materials price
B)A 10% unfavorable variance in direct labor rates
C)A 10% unfavorable variance in payroll tax expense
D)An unfavorable variance that has increased by 5% in each of the last five months

Accepted Answer

The answer of Which of the following variances would not...

Question 10

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000 units.  
 
Actual results for the year were 28,000 units, reflected in the following income statement:

What is the flexible budget variance for direct material?
A) $28,000 favorable
B) $28,000 unfavorable
C) $6,000 favorable
D) $34,000 unfavorable

Accepted Answer

Per flexible budget: $510,000 ÷ 30,000 = $17 per unit
$17 x 28,000 = $476,000 - $504,000 = $28,000 unfavorable.

Question 11

Flexible budgets are used as a tool for
A)Control.
B)Evaluation.
C)Planning.
D)All of these ans choices are correct.

Accepted Answer

Flexible budgets are used for all three purposes: control, evaluation, and planning. They allow for adjustments to be made based on actual results, which can help with controlling costs and improving performance. They also provide a framework for evaluating performance by comparing actual results to the flexible budget. Finally, flexible budgets are a valuable tool for planning as they allow for adjustments to be made based on changes in activity or other factors.

Question 12

All differences between the flexible budget and actual performance must result from
A)Sales.
B)Operations.
C)Differences in quantities.
D)Differences in costs.

Accepted Answer

The answer of All differences between the flexible budget and...

Question 13

The flexible budget variance is the difference between
A)The static budget and the flexible budget.
B)The flexible budget and actual results.
C)The actual quantity and budgeted quantity.
D)The actual price and the standard price.

Accepted Answer

The flexible budget variance is the difference between the flexible budget and actual results. The flexible budget takes into account the actual level of activity, while the static budget is based on a fixed level of activity. Therefore, the flexible budget variance provides a better measure of performance than the static budget variance. Choice A is incorrect because the static budget is not used in calculating the flexible budget variance. Choice C is incorrect because it refers to a quantity variance, not a flexible budget variance. Choice D is incorrect because it refers to a price variance, not a flexible budget variance.

Question 14

Materiality can be measured in terms of
A)Absolute dollars.
B)Relative percentages.
C)Both absolute dollars and relative percentages.
D)None of these ans choices are correct.

Accepted Answer

Materiality can be measured both in absolute dollars and relative percentages. Absolute dollars refer to a specific dollar amount that may have a significant impact on a company's financial statements, while relative percentages compare the amount in question to a baseline, such as revenue or income. Both methods are commonly used by auditors and financial analysts to assess the significance of financial information.

Question 15

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000 units.   
Actual results for the year were 28,000 units, reflected in the following income statement:  
 
What is the sales volume variance for direct labor?
A) $28,000 favorable
B) $28,000 unfavorable
C) $6,000 unfavorable
D) $30,000 favorable

Accepted Answer

30,000 units – 28,000 units x $450,000 ÷30,000 = $30,000 favorable

Question 16

The flexible budget variance is influenced most heavily by actions of
A)The budget committee.
B)The operations personnel.
C)The sales personnel.
D)The executives of the company.

Accepted Answer

The flexible budget variance is the difference between actual results and flexible budget amounts. Since the flexible budget is based on actual output and activity levels, it means that the flexible budget variance is influenced most heavily by the actions of the operations personnel who determine the level of activity and output. The budget committee, sales personnel, and executives of the company can also influence the variance, but to a lesser extent.

Question 17

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000 units.  Actual results for the year were 28,000 units, reflected in the following income statement:    What is the sales volume variance for direct material?
A) $28,000 favorable
B) $28,000 unfavorable
C) $6,000 unfavorable
D) $34,000 favorable

Accepted Answer

30,000 units – 28,000 units x $510,000 ÷ 30,000 = $34,000 favorable

Question 18

The flexible budget variance reflects
A)How efficiently the company operated in producing a given level of sales.
B)How effectively the company reached its strategic goals.
C)A different volume of products than that specified in the static budget.
D)All of these ans choices are correct.

Accepted Answer

The flexible budget variance measures the efficiency of operations by comparing actual results to what should have been achieved for the actual level of sales, focusing on cost control and operational efficiency.

Question 19

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000 units.    Actual results for the year were 28,000 units, reflected in the following income statement:    What is the flexible budget variance for variable overhead?
A) $5,600 favorable
B) $5,600 unfavorable
C) $30,400 favorable
D) $34,000 unfavorable

Accepted Answer

$540,000 ÷30,000= $18
$18 x 28,000 = $504,000 - $509,600 = $5,600 unfavorable.

Question 20

The difference between the static budget sales revenue and the flexible budget sales revenue is referred to as the
A)Flexible budget variance
B)Static budget variance
C)Sales price variance
D)Sales volume variance

Accepted Answer

The difference between the static budget sales revenue and the flexible budget sales revenue is referred to as the sales volume variance, as it measures the impact of the difference in the number of units sold.

Quiz 6: Performance Evaluation: Variance Analysis

Assume the static budget sales revenue is $69,000 and the flexible budget sales revenue is $70,000.If the actual sales price is $6 and the budgeted sales price is $6.50,what is the sales volume variance?

The sales volume variance reflects

Assume the actual sales volume is 69,000 units and the budgeted sales volume is 70,000 units. If the actual sales price is $6 and the budgeted sales price is $6.50, what is the sales volume variance?

The sales volume variance is influenced most heavily by actions of

Which of the following is not a factor that managers use in deciding whether to investigate a variance?

The sales volume variance does not help managers understand

The sales volume variance is the difference between

Which of the following variances would not be investigated by a manager following the management by exception principle?

Flexible budgets are used as a tool for

All differences between the flexible budget and actual performance must result from

The flexible budget variance is the difference between

Materiality can be measured in terms of

The flexible budget variance is influenced most heavily by actions of

The flexible budget variance reflects

The difference between the static budget sales revenue and the flexible budget sales revenue is referred to as the