Deck 15: Operational Performance Measurement: Indirect-Cost Variances and Resource- Capacity Management

Question 1

Manufacturing companies using a standard cost system often can achieve more effective control when factory overhead variance analysis is done with:

A)A two-variance approach.
B)A three-variance approach.
C)A four-variance approach.
D)A single cost driver.
E)Multiple cost drivers.

Answer 1

E

Question 2

Proration of manufacturing cost variances among ending inventories and cost of goods sold has the effect of carrying the cost (savings)of inefficient (efficient)operations of a period to:

A)Only the balance sheet of the current period.
B)Only the income statement of the current period.
C)The balance sheets of future periods only.
D)The income statement of the current period and the balance sheet of the current period.

Answer 2

D

Question 3

Factors contributing to the fixed factory overhead spending variance can include all except:

A)Inaccurate budget estimates for these costs.
B)Inadequate control of fixed overhead costs.
C)Misclassification of cost items by the accounting system.
Operating inefficiency.
E)Unanticipated increases in costs such as factory insurance.

Answer 3

D .

Question 4

In a standard cost system,an unfavorable production-volume variance would result if:

A)There is an unfavorable labor efficiency variance.
B)There is an unfavorable labor rate variance.
C)Actual production is less than the "denominator volume."
D)There is an unfavorable manufacturing overhead spending variance.
E)Actual fixed overhead costs are greater than budgeted fixed overhead costs.

Question 5

Many firms feel a strong obligation to establish and use a standard rate for fixed factory overhead for all the following reasons except:

A)Generally accepted accounting principles require full costing for financial reporting.
B)The mandate to include fixed factory overhead in pricing for federal government contract bidding.
C)Because of current income tax provisions in the U.S.
D)Improved performance measurement.

Question 6

If inventories in a business using a standard cost system are insignificant,the firm would be justified (in a practical sense)by disposing of variances each year:

A)As an adjustment to the finished goods inventory only.
B)As an adjustment to cost of goods sold only.
C)As adjustments to both inventory accounts and the cost of goods sold for the period.
D)As a special item (gain or loss)on the income statement for the period.
E)As an adjustment to the work-in-process (WIP)inventory only.

Question 7

Using an activity-based costing system (ABC)enables a firm to calculate overhead variances for:

A)Sales volume and production volume.
B)Spending and selling price.
C)Each activity-based cost driver.
D)Semi-variable overhead costs.
E)Federal income tax purposes.

Question 8

A manufacturing company that uses standard costs and flexible budgets can break the variable factory overhead flexible-budget variance down into:

A)Volume and efficiency components.
B)Spending and efficiency variances.
C)Spending and production volume variances.
D)Spending variances only.

Question 9

An activity-based cost (ABC)driver applies factory overhead to products or services according to the:

A)Activity output as measured by the units produced.
B)Activity level of hours of direct labor.
C)Resource demands/resource consumption of the firm's outputs.
D)Budgeted activity level for the period.
E)Volume of output (i.e. ,units produced)during the period.

Question 10

Among characteristics that distinguish service and manufacturing firms are the:

A)Absence of output inventory in service firms.
B)Existence of labor-intensive products in manufacturing firms.
C)Rendering of identical services in a service firm.
D)Capital intensiveness of service firms.
E)Organizational structure of service firms.

Question 11

Cost behavior for variable overhead is more difficult to predict than for direct material or direct labor cost for all the following reasons except:

A)Multiple cost drivers are involved with variable overhead.
B)Direct material and direct labor contain no semi-variable component.
C)The variable portion of overhead must first be separated from the fixed portion.
D)Variable overhead is a relatively small part of total overhead.

Question 12

The difference between actual overhead costs incurred during the period and the overhead in the flexible budget based on the output for the period is called the:

A)Total overhead spending variance.
B)Total overhead efficiency variance.
C)Production-volume variance.
D)Overhead flexible-budget variance.
E)Total overhead variance.

Question 13

Which of the following factors is not usually important when deciding whether to investigate a variance?

A)Magnitude of the variance.
B)Trend of the variance over time.
C)Whether the variance is favorable or unfavorable.
D)Cost of investigating the variance.
E)Likelihood that the variance will recur in the future.

Question 14

The production-volume variance should generally not be calculated and reported for control purposes because,unless interpreted properly,it can:

A)Distract top management.
B)Give information that only top management should have.
C)Distort other variable-cost variances.
D)Encourage overproduction by managers to achieve a favorable volume variance.
E)Encourage underproduction by managers to avoid an unfavorable variance.

Question 15

A standard costing system will produce the same income as an actual costing system when end-of-period standard cost variances are assigned:

A)Only to work-in-process (WIP)inventory.
B)Only to finished goods inventory.
C)To work-in-process and finished goods inventories.
D)Entirely to cost of goods sold.
E)To cost of goods sold and all inventory accounts.

Question 16

Because fixed factory overhead does not vary with changes in output:

A)The amount used in the control budget for a period is a lump-sum amount.
B)There is no way to assign fixed overhead cost to products for product-costing purposes.
C)Most companies treat such costs as period,rather than as product,costs.
D)There is no justification for fixed overhead cost application.
E)Generally accepted accounting principles permit companies to use variable rather than absorption (full)costing for external reporting purposes.

Question 17

Intangible attributes often play dominant roles in determining the value of outputs from a service organization.These characteristics often lead service firms to rely on:

A)Input-related measures for measuring and monitoring operations.
B)Intuitive judgment in monitoring operations.
C)Quantitative measures of output.
D)Qualitative measures exclusively for measuring and monitoring operations.
E)Output-related measures for measuring and monitoring operations.

Question 18

The fixed factory overhead production-volume variance represents:

A)Money lost or gained because of achieved production levels.
B)An artifact of unitizing fixed overhead costs for product-costing purposes.
C)Information regarding the effectiveness of the organization in meeting sales targets.
D)Information that management can use for cost-control purposes.
E)Important information for companies pursuing a JIT production philosophy.

Question 19

Finding a single cost driver that changes in the same proportion as variable factory overhead costs is:

A)Simplified by breaking out the fixed portion of overhead cost.
B)The first step in variable overhead cost assignment.
C)Difficult but manageable using advanced statistical techniques.
D)An important goal of effective cost system design.
E)Virtually impossible because of the underlying nature of variable overhead costs.

Question 20

In firms using activity-based costing (ABC),budgeted total factory overhead varies with changes in:

A)A single cost driver for applying overhead.
B)Several cost drivers.
C)The selected denominator activity level.
D)The quantity of input resources used in operations of the period.

Question 21

The fixed factory overhead application rate (for product-costing purposes)is equal to:

A)The denominator activity divided by budgeted fixed factory overhead.
B)The denominator activity divided by budgeted variable factory overhead.
C)Budgeted variable factory overhead divided by denominator activity.
D)Budgeted fixed factory overhead divided by budgeted variable factory overhead.
E)Budgeted fixed factory overhead divided by denominator activity.

Question 22

The difference between total variable overhead cost incurred and the standard variable overhead cost based on the actual quantity of the cost driver used to apply variable overhead is the:

A)Total variable overhead variance.
B)Variable overhead spending variance.
C)Variable overhead rate variance.
D)Variable overhead efficiency variance.
E)Variable overhead flexible-budget variance.

Question 23

Which one of the following reflects both price (rate)as well as efficiency (quantity)effects regarding variable overhead items?

A)Variable overhead production-volume variance.
B)Variable overhead rate variance.
C)Variable overhead spending variance.
D)Variable usage variance.
E)Variable overhead efficiency variance.

Question 24

Causes of random variances are beyond the control of management,and are most often found in:

A)Fixed costs.
B)Commodity products exchanged in open markets.
C)Wages and salaries.
D)Depreciation charges.
E)Specialized industries.

Question 25

If I = the cost of conducting an investigation,C = the estimated cost to correct the cause of a variance,and L = loss associated with not investigating a variance,what is the formula for determining the indifference probability,p?

A)p = I/(L + C).
B)p = (L - C)/I.
C)p = (L + C)/I.
D)p = I/(L - C).

Question 26

Which of the following statements is correct?

A)Random variances are typically investigated because they can repeat.
B)Systematic variances are considered uncontrollable.
C)Most standard cost variances call for investigation and corrective action.
D)Random variances are typically not investigated.
E)Most variances from ideal standards will be favorable.

Question 27

If there is a 90 percent chance that an observed variance is random,the cost of conducting an investigation is $1,000,the cost to correct a variance if the investigation reveals a nonrandom cause,and the amount of loss a company expects to incur if it does not investigate a variance that had a nonrandom cause is $30,000,what is the expected cost of not investigating the variance?

A)$30,000.
B)$1,500.
C)$0.
D)$3,900.
E)$3,000.

Question 28

Which of the following is not a plausible cause of a systematic variance?

A)Prediction error.
B)Modeling error.
C)Implementation error.
D)Measurement error.
E)Random error.

Question 29

The difference between the standard variable overhead cost for the actual quantity of the cost driver used for applying variable overhead and the standard variable overhead cost for the units manufactured during the period is the:

A)Total variable overhead variance.
B)Variable overhead spending variance.
C)Variable overhead rate variance.
D)Variable overhead efficiency variance.
E)Variable overhead flexible-budget variance.

Question 30

A payoff table for variance investigation that measures the cost of two states of nature and possible alternative actions by management will have:

A)Four combinations.
B)Three combinations.
C)Only two realistic combinations.
D)Only idealistic combinations.
E)One combination for each probability level.

Question 31

Random variances are:

A)Often considered as uncontrollable from the standpoint of management.
B)Likely to recur until corrected.
C)The result of failing to include all relevant variables in the analysis.
D)The result of including wrong or irrelevant variables in the variance-investigation model.
E)Controlled through the use of six sigma and other techniques from operations management.

Question 32

A statistical control chart:

A)Sets control limits on the basis of managerial intuition and experience with the process.
B)Is useful for identifying random versus systematic variances.
C)Is useful for identifying in-control but not out-of-control observations.
D)Depicts the expected mean (or target)value of a process,but not the allowable range around that value.
E)Determines control limits (both upper and lower)heuristically.

Question 33

As long as the organization is making good progress toward achieving an ideal standard,its management may not need to:

A)Modify its standards.
B)Curtail spending on variable costs.
C)Curtail spending on fixed costs.
D)Take any corrective action if the variance for the period is large.
E)Take any corrective action,even if the variance for the period is rather substantial in amount.

Question 34

In deciding whether to further investigate a variance,managers usually:

A)Investigate all variances determined to be systematic in nature.
B)Investigate all variances under a prescribed percentage limit.
C)Investigate all variances associated with factory overhead spending.
D)Investigate all variances over a given dollar amount or percentage.
E)Investigate all flexible-budget but not volume-related variances.

Question 35

Systematic variances are persistent and most likely:

A)Will disappear over time.
B)Average out to a steady-state amount over time.
C)Will recur unless corrected.
D)Are small in amount.
E)Are large in amount.

Question 36

Which of the following statements about the standard variable factory overhead application rate is true?

A)The rate is a function of the denominator volume chosen.
B)The rate is used for cost-control,but not product-costing purposes.
C)The rate is used for product-costing,but not cost-control purposes.
D)The same rate is used for both product-costing and cost-control purposes.
E)Generally speaking,the rate will be independent of the allocation base chosen to apply overhead.

Question 37

The difference between variable overhead incurred and total standard variable overhead for the output of the period is called the:

A)Variable factory overhead flexible-budget variance.
B)Variable factory overhead spending variance.
C)Variable factory overhead rate variance.
D)Variable factory overhead efficiency variance.
E)Variable factory overhead usage variance.

Question 38

Which of the following tools is helpful in addressing the variance-investigation problem under uncertainty?

A)Statistical control charts.
B)Pay-off tables.
C)Regression analysis.
D)Sensitivity analysis.
E)Run charts.

Question 39

Which one of the following factory overhead variances reflects the effect of deviation in input quantities only if the cost driver for applying variable overhead is a perfect predictor of variable overhead cost?

A)Total variable overhead variance.
B)Variable overhead rate variance.
C)Variable overhead spending variance.
D)Variable overhead flexible-budget variance.
E)Variable overhead efficiency variance.

Question 40

In deciding whether to further investigate a variance,an organization needs to weigh the costs of investigation against the:

A)Ongoing time constraints.
B)Size of the variance.
C)Nature of the variance.
D)Difficulty of the investigation.
E)Anticipated benefits from the investigation.

Question 41

Determining the standard fixed factory overhead applied to production for a period involves all of the following essential elements except:

A)The actual amount of fixed overhead cost incurred during the period.
B)A cost driver (or drivers)for applying the fixed overhead.
C)The standard fixed overhead application rate.
D)An output level,as reflected by the quantity of the cost driver for applying the fixed overhead (i.e. ,the denominator activity level for the period).
E)The total budgeted fixed overhead cost for the period.

Question 42

Which one of the following journal entries in a standard cost system is needed at the end of the period to close out to Cost of Goods Sold an unfavorable production-volume variance?

A)A credit to Finished Goods Inventory,at standard cost.
B)A credit to Cost of Goods sold,at standard cost.
C)A credit to Cost of Goods sold,at actual cost.
D)A debit to the Production-Volume Variance account.
E)A debit to Cost of Goods sold.

Question 43

Which of the following statements about variable overhead costs is true?

A)The underlying model for control and product-costing purposes is the same for variable overhead.
B)The amount of variable overhead applied to production is a function of the denominator output volume and the actual quantity of the cost-allocation base (cost driver)used to apply overhead.
C)The total variable overhead cost variance can be decomposed into a production-volume variance and a flexible-budget variance.
D)For control purposes,the actual quantity of the cost-allocation base (cost driver)is used.
E)Standard costs can be used for control,but not product-costing,purposes.

Question 44

For internal reporting purposes,it is recommended that fixed overhead allocation rates in a standard costing system be based on:

A)Budgeted capacity usage.
B)Theoretical capacity since this is the level required under generally accepted accounting principles.
C)Actual capacity utilization.
D)Expected capacity usage.
E)Practical capacity.

Question 45

All of the following choices exist for defining the denominator volume (denominator activity level)for assigning fixed overhead costs in a standard cost system,except:

A)Budgeted capacity utilization.
B)Actual capacity utilization.
C)Theoretical capacity.
D)Practical capacity.
E)Normal capacity.

Question 46

The difference between the actual fixed overhead cost incurred during a period and the budgeted fixed overhead cost for the period is the:

A)Fixed overhead efficiency variance.
B)Fixed overhead production-volume variance.
C)Fixed overhead spending variance.
D)Fixed overhead rate variance.
E)Fixed overhead sales-volume variance.

Question 47

The difference between the total factory overhead cost in the flexible budget for the actual units produced and the amount of factory overhead cost applied to products using the standard overhead rate is called the factory overhead ______________

A)Flexible-budget variance.
B)Production-volume variance.
C)Total fixed cost variance.
D)Efficiency variance.
E)Controllable variance.

Question 48

A deviation from standard because of an inaccurate estimation of the amounts of variables used in the standard-setting process is an example of a(n):

A)Random error.
B)Prediction error.
C)Implementation error.
D)Modeling error.
E)Measurement error.

Question 49

The difference between total factory overhead cost incurred during a period and the total standard factory overhead cost assigned to production of the period is the ______________

A)Flexible-budget variance.
B)Production-volume variance.
C)Total factory overhead variance.
D)Overhead efficiency variance.
E)Total overhead spending variance.

Question 50

For product-costing purposes,which of the following statements is true?

A)It is necessary to "unitize" fixed overhead costs,under the absorption or full-costing approach.
B)The amount of standard fixed overhead costs for product-costing and control purposes is the same.
C)Only standard variable overhead costs are included since these costs change in response to cost drivers.
D)Standard costing is not permissible under generally accepted accounting principles.
E)Total fixed overhead costs are applied as a "lump-sum" amount.

Question 51

The difference between the total actual overhead cost incurred during a period and budgeted total factory overhead for the actual quantity of the cost driver used to apply overhead is equal to the:

A)Total overhead spending variance.
B)Total overhead efficiency variance.
C)Factory overhead production-volume variance.
D)Total overhead rate variance.
E)Total overhead variance.

Question 52

The "death-spiral" effect refers to:

A)The allocation of fixed overhead costs over time to an increasing volume of output.
B)A possible consequence when variable,not full,costing is used.
C)A likely consequence when fixed overhead allocation rates are based on practical capacity.
D)The continual raising of prices in an attempt to recover fixed costs.
E)Increases in product demand over time in response to increases in fixed promotional costs.

Question 53

The difference between budgeted fixed factory overhead for a period and the amount of the fixed factory overhead applied to production during the period is the:

A)Fixed factory overhead efficiency variance.
Fixed factory overhead production-volume variance.
C)Fixed factory overhead spending variance.
D)Fixed factory overhead sales-volume variance.
E)Fixed factory overhead flexible budget variance.

Question 54

In regard to the investigation of variances under uncertainty,which of the following is not a positive (i.e. ,desirable)combination of courses of action and states of nature?

A)Investigate;a random fluctuation has occurred.
B)Do not investigate;a random fluctuation has occurred.
C)Do not investigate;a noncontrollable fluctuation has occurred.
D)Investigate;a nonrandom fluctuation has occurred.

Question 55

In terms of allocating fixed overhead cost to products,generally accepted accounting principles:

A)Require that such allocations be based on normal capacity.
B)Allow for the use of either practical capacity or theoretical capacity.
C)Don't apply since the resulting data are used only internally (for control purposes).
D)Specify only that such costs be "reasonably allocated" to outputs.

Question 56

A deviation from standard that occurs because of an incorrect number resulting from improper or inaccurate accounting systems or procedures is an example of a(n):

A)Random error.
B)Prediction error.
C)Implementation error.
D)Modeling error.
E)Accounting error.

Question 57

A deviation from standard because of the failure to include one or more relevant variables,or the inclusion of the wrong or irrelevant variables in the standard-setting process is an example of a(n):

A)Random error.
B)Prediction error.
C)Implementation error.
D)Modeling error.
E)Measurement error.

Question 58

Which one of the following journal entries in a standard cost system is needed to record the completion of production for the period?

A)A debit to Work-in-Process Inventory,at standard cost.
B)A debit to Work-in-Process Inventory,at actual cost.
C)A credit to Cost of Goods Sold,at standard cost.
D)A debit to Finished Goods Inventory,at standard cost.
E)A debit to Finished Goods Inventory,at actual cost.

Question 59

In a standard cost system,when production is greater than the denominator volume level,there will be:

A)An unfavorable production-volume variance.
B)An unfavorable total spending variance.
C)A favorable production-volume variance.
D)A favorable sales-volume variance.
E)A favorable overhead budget variance.

Question 60

A deviation from standard that occurs during operations as a result of operator errors is an example of a(n):

A)Random error.
B)Prediction error.
C)Implementation error.
D)Modeling error.
E)Accounting error.

Question 61

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead:
Under a two-variance breakdown (decomposition)of the total factory overhead variance,the factory overhead controllable variance (i.e. ,total flexible-budget variance)is:

A)$400 favorable.
B)$600 unfavorable.
C)$1,400 favorable.
D)$1,400 unfavorable.
E)$2,000 favorable.

Question 62

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead:
The standard fixed overhead application rate is:

A)$1.00 per machine hour.
B)$2.00 per machine hour.
C)$3.00 per machine hour.
D)$4.00 per machine hour.
E)$5.00 per machine hour.

Question 63

When a company uses absorption costing,there is the potential for income manipulation based on choice of the denominator volume for setting the fixed overhead allocation rate.In which case is this manipulation-potential manifested?

A)When sales volume > production volume,and the production-volume variance is prorated to inventories and cost of goods sold at the end of the period.
B)When sales volume < production volume,and the production-volume variance is prorated to inventories and cost of goods sold at the end of the period.
C)When the production-volume variance is written off entirely as an adjustment to cost of goods sold at the end of the period.
D)When budgeted output is used to develop the standard overhead cost-allocation rate.

Question 64

The following budget data pertain to the Machining Department of Yolkenverst Co.:
The company prepared the budget at 85% of the maximum capacity level.The department uses machine hours as the basis for applying standard factory overhead costs to production.During the year the Machining Department produced 50,000 units,consuming 127,500 machine hours and incurring $433,500 of fixed overhead.For the current year the department has a production-volume variance of:

A)$0.
B)$3,400 unfavorable.
C)$3,600 unfavorable.
D)$7,000 unfavorable.
E)$8,500 unfavorable.

Question 65

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead:
Under a two-variance breakdown (decomposition)of the total factory overhead variance,the factory overhead production-volume variance is:

A)$400 favorable.
B)$600 unfavorable.
C)$1,400 favorable.
D)$1,400 unfavorable.
E)$2,000 favorable.

Question 66

Which of the following statement is true regarding choice of the denominator volume level in conjunction with the process of allocating fixed manufacturing costs to production?

A)The choice typically will affect end-of-period asset values,but not the production-volume variance for the period.
B)The choice is important only if the company in question uses variable costing.
C)Under absorption (full)costing,this choice can affect reported profits for the period.
D)This choice has no effect on the standard overhead cost-allocation rate.
E)The choice affects the standard overhead cost-allocation rate but not product cost.

Question 67

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead:
Under a three-variance breakdown (decomposition)of the total factory overhead variance,the factory overhead production-volume variance is:

A)$400 favorable.
B)$600 unfavorable.
C)$1,400 favorable.
D)$1,400 unfavorable.
E)$2,000 favorable.

Question 68

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead:
The factory overhead production-volume variance is:

A)$600 unfavorable.
B)$1,000 favorable.
C)$1,400 unfavorable.
D)$1,500 favorable.
E)$2,100 favorable.

Question 69

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead:
The variable overhead spending variance is:

A)$600 unfavorable.
B)$1,000 favorable.
C)$1,400 unfavorable.
D)$1,500 favorable.
E)$2,100 favorable.

Question 70

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead:
Under a two-variance breakdown (decomposition)of the total factory overhead variance,the factory overhead efficiency variance is:

A)$0.
B)$400 favorable.
C)$600 unfavorable.
D)$1,400 favorable.
E)$1,400 unfavorable.

Question 71

Bonehead Co.has the following factory overhead costs:
The factory overhead production-volume variance is:

A)$4,000 unfavorable.
B)$7,000 favorable.
C)$10,000 favorable.
D)$11,000 unfavorable.
E)$14,000 unfavorable.

Question 72

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead:
Under a three-variance breakdown (decomposition)of the total factory overhead variance,the total factory overhead spending variance is:

A)$0.
B)$600 unfavorable.
C)$1,400 favorable.
D)$1,400 unfavorable.
E)$2,000 favorable.

Question 73

If standard cost variances are allocated (i.e. ,prorated)to inventory and cost of goods sold (CGS)accounts at the end of a period,which of the following is correct?

A)Conceptually,the amount allocated to each account is based on the relative amount of the current period's standard cost in the end-of-period balance in each account.
B)The resulting balances represent relative actual cost in each of the affected accounts.
C)There is a presumption that the net variance for the period is immaterial in amount.
D)The amount allocated to inventories is generally larger than the amount allocated to CGS.

Question 74

The following budget data pertain to the Machining Department of Yolkenverst Co.:
The company prepared the budget at 85% of the maximum capacity level.The department uses machine hours as the basis for applying standard factory overhead costs to production.The standard fixed overhead application rate for the Machining Department is:

A)$2.89 per machine hour.
B)$3.40 per machine hour.
C)$3.47 per machine hour.
D)$4.08 per machine hour.
E)$8.50 per machine hour.

Question 75

Which one of the following journal entries in a standard cost system would be used to apply factory overhead costs to production?

A)A debit to the factory overhead account,at standard cost.
B)A credit to the factory overhead account,at standard cost.
C)A debit to WIP inventory,at actual cost.
D)A credit to Finished Goods Inventory,at standard cost.

Question 76

The following budget data pertain to the Machining Department of Yolkenverst Co.:
The company prepared the budget at 85% of the maximum capacity level.The department uses machine hours as the basis for applying standard factory overhead costs to production.The budgeted total factory overhead for the Machining Department is:

A)$617,100.
B)$875,000.
C)$883,500.
D)$892,500.
E)$1,050,000.

Question 77

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead:
Under a three-variance breakdown (decomposition)of the total factory overhead variance,the factory overhead efficiency variance is:

A)$400 favorable.
B)$600 unfavorable.
C)$1,400 favorable.
D)$1,400 unfavorable.
E)$2,000 favorable.

Question 78

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead:
The variable factory overhead efficiency variance is:

A)$600 unfavorable.
B)$1,000 favorable.
C)$1,400 unfavorable.
D)$1,500 favorable.
E)$2,100 favorable.

Question 79

Bonehead Co.has the following factory overhead costs:
The total overhead flexible-budget (FB)variance is:

A)$4,000 unfavorable.
B)$7,000 favorable.
C)$10,000 favorable.
D)$11,000 unfavorable.
E)$14,000 unfavorable.

Question 80

Some accountants would argue that any variances from standard costs,when such standards are current,should be written off to cost of goods sold.The principal rationale for this treatment is:

A)This is the treatment required currently under generally accepted accounting principles.
B)To allocate such variances implies that asset values on the balance sheet (i.e. ,inventories)contain the cost of inefficiencies.
C)The negligible effect this treatment has on total cost of goods sold for the period.
D)Consistency with current income tax provisions.