Question 1

Why might a material variance arise?
A)More efficient use of materials than the standard.
B)The purchase of inferior raw materials.
C)Both "a" and "b" above.
D)None of the above.

Accepted Answer

A material variance can arise due to both reasons - more efficient use of materials than the standard, or the purchase of inferior raw materials. If the actual usage of materials is less than the standard, it results in a favorable variance, whereas excess usage results in an unfavorable variance. Similarly, if the actual cost of purchased raw materials is lower than the standard cost, it results in a favorable variance, whereas higher costs result in an unfavorable variance.

Question 2

Activity-based costing is commonly used with standard costing.Using more activity drivers increases the potential for managers to
A)get much more information from activity-based costing than from the traditional approach.
B)get much more information from the traditional approach than from activity-based costing.
C)get the same information from activity-based costing as from the traditional approach.
D)None of the above.

Accepted Answer

Activity-based costing provides more detailed information about the costs of products or services. Using more activity drivers allows managers to allocate costs more accurately and identify areas of waste or inefficiency. Traditional costing methods may not provide this level of detail, leading to less informed decision-making. Therefore, using more activity drivers with activity-based costing increases the potential for managers to get much more information than from the traditional approach.

Question 3

The production volume variance is the difference between which of the following two costs?
A)Budgeted and applied fixed costs.
B)Actual costs and the budgeted costs.
C)Budgeted and actual fixed costs.
D)Variable costs and the budgeted costs.

Accepted Answer

The production volume variance is calculated as the difference between budgeted fixed costs and applied fixed costs. This variance measures the difference between what was expected (budgeted) and what was actually allocated or applied based on the level of production activity.

Question 4

The production price (spending)variance is the difference between which of the following two costs?
A)Budgeted and applied costs.
B)Actual and budgeted costs.
C)Applied and actual costs.
D)Variable and budgeted costs.

Accepted Answer

The production price variance compares the actual cost incurred (actual costs) with the cost that should have been incurred (budgeted costs). It measures the difference between the budgeted and actual costs, and hence the correct option is B.

Question 5

To help managers in their efforts to control overhead costs,managers and accountants analyze overhead variances using the variable cost variance model by separating variable overhead variances into
A)price and quality components.
B)economy and efficiency components.
C)price and efficiency components.
D)economy and effectiveness components.

Accepted Answer

The variable cost variance model separates variable overhead variances into two components: price and efficiency. Price variance is caused by changes in the price of variable overhead items, while efficiency variance is caused by changes in the quantity or usage of the variable overhead item. Economy and effectiveness components are not commonly used to analyze overhead variances. Quality is not a relevant component in analyzing variable overhead variances.

Question 6

Tool(s)that managers can use to decide when to investigate variances include which of the following?
A)Use of both tolerance limits and decision models.
B)Use of tolerance limits only.
C)Decision models only.
D)None of the above.

Accepted Answer

Managers can use a combination of tolerance limits and decision models to determine when to investigate variances. Tolerance limits set a range within which variances are deemed acceptable, while decision models help managers make informed decisions about whether to take action based on factors such as the magnitude of the variance and its impact on performance. Using both of these tools together can help managers make more informed decisions about when to take action to address variances.

Question 7

Why do direct labor variances occur?
A)Managers do not correctly anticipate changes in wage rates.
B)Poor materials are used in production.
C)Supervisors encounter scheduling problems.
D)All of the above.

Accepted Answer

Direct labor variances can occur due to various reasons such as incorrect anticipation of changes in wage rates by managers, poor materials used in production and scheduling problems encountered by supervisors. Therefore, all of the above options are correct.

Question 8

Activity-based costing is commonly used with standard costing.Using activity-based costing,a company has
A)a single cost driver
B)multiple cost drivers.
C)no cost drivers.
D)the same cost drivers as standard costing.

Accepted Answer

Activity-based costing is designed to identify multiple cost drivers that are used to allocate indirect costs to products or services. Standard costing, on the other hand, uses only a single predetermined cost driver, such as direct labor hours or machine hours, to allocate indirect costs. By incorporating multiple cost drivers, activity-based costing provides a more accurate picture of product costs and enables companies to better understand their cost structure.

Question 9

Which of the following might cause a materials variance?
A)Failing to take purchase discounts.
B)Using a better grade of raw material.
C)Changes in the market supply for the raw materials.
D)All of the above.

Accepted Answer

All the options listed can cause a materials variance. Failing to take purchase discounts can lead to paying more for materials than budgeted. Using a better grade of raw material typically costs more, affecting the variance. Changes in the market supply for raw materials can lead to price fluctuations, impacting the cost against what was planned or budgeted.

Question 10

To analyze variances,the variable cost variance model is applied to the calculation of which of the following?
A)Direct materials variances.
B)Direct labor variances.
C)Variable manufacturing overhead price and efficiency variances.
D)All of the above.

Accepted Answer

The variable cost variance model can be applied to the calculation of all of the given variances - direct materials, direct labor, and variable manufacturing overhead price and efficiency variances. This model helps in identifying the reasons behind variances and taking corrective actions to improve performance. Therefore, D is the best choice.

Question 11

Which variance(s)are generally calculated to analyze fixed manufacturing overhead costs?
A)Production volume variances only.
B)Price variances only.
C)Production volume and price variances only.
D)Production volume,price,and efficiency variances.

Accepted Answer

The answer of Which variance(s)are generally calculated to analyze fixed...

Question 12

Which variance measures the efficiency with which the firm uses inputs to produce outputs?
A)Throughput.
B)Efficiency.
C)Economy.
D)Effectiveness.

Accepted Answer

Efficiency variance measures the difference between the actual quantity of inputs used and the standard quantity of inputs that should have been used to produce the actual output, thus reflecting the efficiency with which the firm uses inputs to produce outputs. Throughput refers to the rate of production or completion of a process, economy variance measures the difference between the actual price paid for inputs and the standard price that should have been paid to acquire the actual inputs, while effectiveness variance measures the difference between the actual output achieved and the budgeted output, reflecting the extent to which the firm achieves its goals.

Question 13

Why do fixed manufacturing cost variances occur?
A)Managers do not correctly anticipate changes in wage rates.
B)Poor materials are used in production.
C)Supervisors encounter scheduling problems.
D)Actual fixed costs differ from budgeted fixed costs.

Accepted Answer

Fixed manufacturing cost variances occur when actual fixed costs differ from budgeted fixed costs. This can happen due to changes in market conditions, inflation, unexpected maintenance expenses, or any other factors that affect fixed costs. Managers cannot control all of these factors, but they need to monitor and analyze the variances to adjust budgets and make decisions accordingly. A, B, and C are incorrect because these factors may cause other types of variances but not specifically fixed manufacturing cost variances.

Question 14

Which statement is true concerning the fixed overhead production efficiency variance?
A)The production efficiency variance exists as fixed costs are assumed to vary inversely with volume.
B)The production efficiency variance exists as fixed costs are assumed to vary along with volume.
C)The production efficiency variance exists as fixed costs are assumed to vary exponentially with volume.
D)The production efficiency variance does not exist as fixed costs are assumed not to vary with volume.

Accepted Answer

The production efficiency variance does not exist for fixed overhead because fixed costs are, by definition, not supposed to vary with the volume of production. They remain constant regardless of the level of production activity.

Question 15

Which of the following is not a major group responsible for variances in organizations?
A)Marketing
B)Consulting
C)Administration
D)Production

Accepted Answer

The major groups responsible for variances in organizations are typically related to the core functions and departments within the organization. Marketing, administration, production, and finance are some of the most common groups that can drive variances in performance or outcomes. Consulting, on the other hand, is not typically considered an internal group within an organization and is more often brought in from an external source to provide guidance or support. Therefore, it is not a major group responsible for variances in organizations.

Question 16

Which is not a reason direct labor variances may occur?
A)Managers do not correctly anticipate changes in wage rates.
B)Poor materials are used in production.
C)Prices rise with direct materials.
D)All of the above.

Accepted Answer

Direct labor variances specifically relate to the costs associated with labor, not the costs of materials. Therefore, rising prices with direct materials would not be a direct cause of labor variances.

Question 17

Fixed production costs variances are calculated as
A)the difference between actual and budgeted fixed costs.
B)(actual hours ´ standard inputs)- budgeted fixed costs.
C)(actual hours ´ standard outputs)- budgeted fixed costs.
D)(actual hours ´ standard outputs)- actual fixed costs.

Accepted Answer

Fixed production costs variances are calculated as the difference between actual and budgeted fixed costs. This variance helps managers understand whether they have spent more or less than expected on fixed costs such as rent, salaries, and other overhead expenses related to production.

Question 18

Which of the following terms describes the difference between the budgeted (or standard)price and the actual price paid for each unit of input?
A)Price variance.
B)Efficiency variance.
C)Usage variance.
D)Quantity variance.

Accepted Answer

Price variance measures the difference between the actual price paid for a unit of input and the budgeted (or standard) price. Efficiency variance, usage variance, and quantity variance relate to the difference between the actual quantity of input used and the budgeted (or standard) quantity.

Question 19

Which of the following does the cost variance model use to analyze differences between actual and budgeted profits?
A)Flexible production budget.
B)Fixed production budget.
C)Prior period's production budget.
D)Generally accepted accounting principles.

Accepted Answer

The cost variance model typically uses a flexible production budget to analyze differences between actual and budgeted profits. This allows for adjustments based on actual production levels, providing a more accurate comparison.

Question 20

What is the term that describes the rate companies frequently use to apply fixed overhead costs to units produced?
A)Actual overhead rate.
B)Predetermined overhead rate.
C)Post-determined overhead rate.
D)Variable overhead rate.

Accepted Answer

The predetermined overhead rate is the term that describes the rate companies frequently use to apply fixed overhead costs to units produced. This rate is calculated before the period begins by dividing the estimated total amount of overhead costs by the estimated level of activity or allocation base.

Quiz 10: Profit and Cost Center Performance Evaluation

Why might a material variance arise?

Activity-based costing is commonly used with standard costing.Using more activity drivers increases the potential for managers to

The production volume variance is the difference between which of the following two costs?

The production price (spending) variance is the difference between which of the following two costs?

To help managers in their efforts to control overhead costs,managers and accountants analyze overhead variances using the variable cost variance model by separating variable overhead variances into

Tool(s) that managers can use to decide when to investigate variances include which of the following?

Why do direct labor variances occur?

Activity-based costing is commonly used with standard costing.Using activity-based costing,a company has

Which of the following might cause a materials variance?

To analyze variances,the variable cost variance model is applied to the calculation of which of the following?

Which variance(s) are generally calculated to analyze fixed manufacturing overhead costs?

Which variance measures the efficiency with which the firm uses inputs to produce outputs?

Why do fixed manufacturing cost variances occur?

Which statement is true concerning the fixed overhead production efficiency variance?

Which of the following is not a major group responsible for variances in organizations?

Which is not a reason direct labor variances may occur?

Fixed production costs variances are calculated as

Which of the following terms describes the difference between the budgeted (or standard) price and the actual price paid for each unit of input?

Which of the following does the cost variance model use to analyze differences between actual and budgeted profits?

What is the term that describes the rate companies frequently use to apply fixed overhead costs to units produced?