Question 1

Standard costing systems are a useful tool when using:

Accepted Answer

Standard costing systems can be applied in variety of manufacturing systems including just-in-time systems, total quality management, and computer-integrated manufacturing systems. Therefore, all the answers are correct.

Question 2

Variances should be investigated:

Accepted Answer

The answer of Variances should be investigated:
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Question 3

A single variance:

Accepted Answer

A single variance cannot necessarily pinpoint the cause of a problem, as it could be the result of many different factors. It is important to consider other variances and information when evaluating performance.

Question 4

When using variance for performance evaluation, managers often focus on effectiveness and efficiency as two of the common attributes used in comparing expected results with actual results.

Accepted Answer

Variance analysis is used for performance evaluation by comparing expected results with actual results. Managers focus on two common attributes, effectiveness, and efficiency, in this process.

Question 5

Unfavorable direct material price variances are:

Accepted Answer

Unfavorable direct material price variances occur when the actual price paid for materials is higher than the standard price. This results in a higher cost of materials and hence, increases the cost of goods sold. To reflect this increase in cost, the variance is debited to the Materials Control account. Hence, the correct answer is option B - always debits.

Question 6

Variance analysis should be used:

Accepted Answer

Variance analysis is used to understand why variances arise and to encourage employees to focus on meeting standards.

Question 7

A particular variance generally signals one particular problem.

Accepted Answer

A particular variance can have multiple causes and may not necessarily signal only one problem. It could be caused by a combination of factors or have indirect causes that need to be considered.

Question 8

Nonfinancial performance measures:

Accepted Answer

Nonfinancial performance measures are usually used in combination with financial measures for control purposes. Both financial and nonfinancial measures are needed for a complete understanding of a manager's performance and to make informed decisions about tradeoffs. Nonfinancial measures may also provide insight into areas where improvements can be made that will ultimately impact financial performance. Nonfinancial measures alone are not usually used for performance evaluations as they do not provide a complete picture of a manager's performance.

Question 9

For critical items such as product defects, a small variance may prompt investigation.

Accepted Answer

Critical items such as product defects require strict standards and any small deviation from those standards can lead to significant consequences. Therefore, even a small variance should prompt investigation to prevent serious issues from occurring.

Question 10

If variance analysis is used for performance evaluation, managers are encouraged to meet targets using creativity and resourcefulness.

Accepted Answer

The most common outcome when variance analysis is used for performance evaluation is that managers seek targets that are easily attainable and avoid targets that require creativity and resourcefulness.

Question 11

The relative amount of inputs used to achieve a given output level is known as

Accepted Answer

Efficiency is a measure of the amount of resources utilized to produce a given output level. It is commonly used to evaluate the performance of a production process, and is an important factor in determining productivity and profitability. Effectiveness, on the other hand, refers to the extent to which a process achieves its intended goals, and continuous improvement is a systematic approach to enhancing performance over time. While all of these answers are important concepts in business, the most appropriate choice for the given question is efficiency.

Question 12

Favorable direct manufacturing labor efficiency variances are:

Accepted Answer

Favorable direct manufacturing labor efficiency variances represent the amount by which the actual labor hours worked are less than the labor hours expected to complete the production process. As a result, these variances are considered positive or favorable and are credited to the manufacturing overhead control account.

Question 13

From the perspective of control, the direct materials efficiency variance should be isolated at the time of:

Accepted Answer

The direct materials efficiency variance is the difference between the actual quantity of materials used and the standard quantity of materials that should have been used in the production process. This variance can only be isolated at the time of use because it compares the actual quantity of materials used to the standard quantity of materials that should have been used. Therefore, the best choice is B.

Question 14

Continuous improvement budgeted costs target price reductions and efficiency improvements.

Accepted Answer

Continuous improvement involves ongoing efforts to reduce costs and improve efficiency. This often includes budgeted costs and target price reductions as part of the improvement process.

Question 15

Variances often affect each other.

Accepted Answer

Variances can be interdependent, meaning changes in one variance can affect another variance, leading to a ripple effect. This is why it is important to consider all variances when making decisions or analyzing data.

Question 16

A favorable variance can be automatically interpreted as "good news."

Accepted Answer

A favorable variance may not be good news at all because it adversely affects other variances that increase total costs.

Question 17

When continuous improvement budgeted costing is implemented, cost reductions can result from:

Accepted Answer

When continuous improvement budgeted costing is implemented, cost reductions can result from all of the choices listed. Price reductions can be negotiated with suppliers, reducing materials waste can lower the amount of materials needed to produce a product, and producing products faster and more efficiently can reduce labor costs and improve overall productivity. Therefore, all of these options are viable ways to achieve cost reductions with continuous improvement budgeted costing.

Question 18

Improvement opportunities are easier to identify when products have been on the market for a considerable period of time.

Accepted Answer

The answer of Improvement opportunities are easier to identify when...

Question 19

If budgets contain slack, cost variances will tend to be favorable.

Accepted Answer

Budget slack refers to the intentional overestimation of expenses or underestimation of revenues, which can lead to favorable cost variances when actual costs are lower than the inflated budgeted amounts.

Question 20

Repeatedly identifying causes of variances, initiating corrective actions, and evaluating results of actions is an example of

Accepted Answer

This is an example of continuous improvement, which involves analyzing and improving processes over time. The identification of causes, implementation of corrective actions, and evaluation of results are all part of the continuous improvement process. While efficiency and effectiveness are important measures of success, continuous improvement is a proactive approach to ensuring long-term success and sustainability.

Quiz 7: Flexible Budgets, Direct-Cost Variances, and Management Control