Deck 9: Performance Measurement in Decentralized Organizations

Question 1

An unfavorable spending variance may reflect waste as well as paying too much for inputs.

Answer 1

True

Question 2

A favorable spending variance occurs when the actual cost exceeds the amount of the cost in the static planning budget.

Answer 2

False

Question 3

A direct materials quantity standard generally includes an allowance for waste.

Answer 3

True

Question 4

The materials price variance is computed by multiplying the difference between the actual price and the standard price by the actual quantity of materials purchased.

Question 5

A flexible budget cannot be used to estimate what costs should have been at a given level of activity.

Question 6

A planning budget is prepared before the period begins and is valid for whatever the actual level of activity turns out to be.

Question 7

Comparing a static planning budget to actual costs is a good way to assess whether variable costs are under control.

Question 8

A flexible budget can be used to estimate what revenues and costs should have been, given the actual level of activity for the period.

Question 9

A revenue variance is unfavorable if the actual revenue is less than the revenue in the static planning budget.

Question 10

The revenue and spending variances are the differences between the flexible budget and the actual results for the period.

Question 11

Fixed costs should be ignored when evaluating how well a manager has controlled costs.

Question 12

Controllability has little to do with whether a cost is fixed or variable.

Question 13

A spending variance is the difference between the cost in the static planning budget and the actual amount of the cost for the period.

Question 14

A flexible budget should not be used when making comparisons to actual results such as actual expenses.

Question 15

Waste on the production line will result in an unfavorable materials quantity variance.

Question 16

Directly comparing a static planning budget to actual costs helps to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled.

Question 17

Fixed costs should be included in a flexible budget even though they do not change when the level of activity changes.

Question 18

When a flexible budget is used in performance evaluation, actual costs are compared to the static planning budget rather than to what the costs should have been for the actual level of activity during the period.

Question 19

A materials price variance is unfavorable if the actual price exceeds the standard price.

Question 20

A revenue variance is favorable if the actual revenue exceeds what the revenue should have been for the actual level of activity of the period.

Question 21

The standard price per unit for direct materials should not include the cost of delivering the materials.

Question 22

Which of the following comparisons best isolates the impact that changes in operating efficiency have on performance?

A)static planning budget and flexible budget
B)static planning budget and actual results
C)flexible budget and actual results
D)master budget and static planning budget

Question 23

A static planning budget is:

A)a budget for a single level of activity.
B)a budget that ignores inflation.
C)used only for fixed costs.
D)used when the mix of products does not change.

Question 24

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is unfavorable, the variable overhead efficiency variance will be:

A)favorable.
B)unfavorable.
C)either favorable or unfavorable.
D)zero.

Question 25

The variance that is usually most useful in assessing the performance of the purchasing department manager is:

A)the materials quantity variance.
B)the materials price variance.
C)the labor rate variance.
D)the labor efficiency variance.

Question 26

During a recent lengthy strike at Morell Manufacturing Company, management replaced striking assembly line workers with office workers. The assembly line workers had been paid $18 per hour while the office workers are only paid $10 per hour. What is the most likely effect on the labor variances in the first month of this strike?

A)Option A
B)Option B
C)Option C
D)Option D

Question 27

The variable overhead efficiency variance measures how efficiently variable manufacturing overhead resources were used.

Question 28

Purchase of poor quality materials may cause a favorable materials price variance and an unfavorable labor efficiency variance.

Question 29

The standard cost per unit is computed by dividing the standard quantity or hours by the standard price or rate.

Question 30

An unfavorable labor rate variance can occur if workers with high hourly wage rates are assigned to work on products with standards that assume workers have low hourly wage rates.

Question 31

In a company's standard costing system direct labor-hours are used as the base for applying variable manufacturing overhead costs. The standard direct labor rate is twice the variable overhead rate. Last period the labor efficiency variance was unfavorable. From this information one can conclude that last period the variable overhead efficiency variance was:

A)unfavorable and half the labor efficiency variance.
B)favorable and half the labor efficiency variance.
C)unfavorable and twice the labor efficiency variance.
D)favorable and twice the labor efficiency variance.

Question 32

The standard labor rate per hour defines the company's expected direct labor wage rate per hour, including employment taxes and fringe benefits.

Question 33

Which of the following would produce a materials price variance?

A)An excess quantity of materials used.
B)An excess number of direct labor-hours worked in completing a job.
C)Shipping materials to the plant by air freight rather than by truck.
D)Breakage of materials in production.

Question 34

Which of the following would produce a labor rate variance?

A)Poor quality materials causing breakage and work interruptions.
B)Use of persons with high hourly wage rates in tasks that call for low hourly wage rates.
C)Excessive number of hours worked in completing a job.
D)An unfavorable variable overhead rate variance.

Question 35

A favorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period.

Question 36

A major weakness of flexible budgets is that:

A)they are valid for only a single level of activity.
B)they ignore fixed costs.
C)they compare actual costs at one level of activity to budgeted costs at a different level of activity.
D)none of these is a major weakness of flexible budgets.

Question 37

Comparing actual results to a budget based on the actual activity for the period is possible with the use of a:

A)monthly budget.
B)master budget.
C)flexible budget.
D)rolling budget.

Question 38

Papenfuss Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below: The Inn's variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 76 guests?

A)$52,848.40
B)$8,343.40
C)$8,274.40
D)$7,373.24

Question 39

A quantity standard indicates how much output should have been produced.

Question 40

Poor quality materials could have an unfavorable effect on which of the following variances?

A)Option A
B)Option B
C)Option C
D)Option D

Question 41

Tulip Midwifery's cost formula for its wages and salaries is $2,420 per month plus $388 per birth. For the month of January, the company planned for activity of 119 births, but the actual level of activity was 123 births. The actual wages and salaries for the month was $50,540. The wages and salaries in the flexible budget for January would be closest to:

A)$50,540
B)$48,592
C)$50,144
D)$50,225

Question 42

Biggs Enterprise's flexible budget cost formula for indirect materials, a variable cost, is $0.60 per unit of output. If the company's performance report for last month shows a $200 favorable spending variance for indirect materials and if 9,000 units of output were produced last month, then the actual costs incurred for indirect materials for the month must have been:

A)$5,600
B)$5,400
C)$6,000
D)$5,200

Question 43

Peixoto Framing's cost formula for its supplies cost is $1,150 per month plus $14 per frame. For the month of July, the company planned for activity of 556 frames, but the actual level of activity was 555 frames. The actual supplies cost for the month was $9,190. The supplies cost in the planning budget for July would be closest to:

A)$8,920
B)$9,207
C)$8,934
D)$9,190

Question 44

Loggin Midwifery's cost formula for its wages and salaries is $2,380 per month plus $231 per birth. For the month of April, the company planned for activity of 100 births, but the actual level of activity was 102 births. The actual wages and salaries for the month was $25,510. The spending variance for wages and salaries in April would be closest to:

A)$30 F
B)$432 U
C)$30 U
D)$432 F

Question 45

Akey Hospital bases its budgets on patient-visits. The hospital's static budget for March appears below: The total overhead cost at an activity level of 3,000 patient-visits per month should be:

A)$97,800
B)$92,100
C)$88,020
D)$92,640

Question 46

At Worthe Corporation, indirect labor is a variable cost that varies with direct labor-hours. Last month's performance report showed that actual indirect labor cost totaled $7,920 for the month and that the associated spending variance was $240F. If 10,200 direct labor-hours were actually worked last month, then the flexible budget cost formula for indirect labor must be (per direct labor-hour) closest to:

A)$0.95
B)$0.90
C)$0.80
D)$0.85

Question 47

Ros Corporation's flexible budget cost formula for indirect materials, a variable cost, is $0.90 per unit of output. If the company's performance report for last month shows a $500 unfavorable spending variance for indirect materials and if 8,000 units of output were produced last month, then the actual costs incurred for indirect materials for the month must have been:

A)$7,650
B)$7,700
C)$7,200
D)$6,700

Question 48

Towne Snow Removal's cost formula for its vehicle operating cost is $1,470 per month plus $399 per snow-day. For the month of November, the company planned for activity of 13 snow-days, but the actual level of activity was 9 snow-days. The actual vehicle operating cost for the month was $5,230. The vehicle operating cost in the flexible budget for November would be closest to:

A)$6,657
B)$5,230
C)$4,609
D)$5,061

Question 49

Ohme Framing's cost formula for its supplies cost is $1,620 per month plus $13 per frame. For the month of April, the company planned for activity of 882 frames, but the actual level of activity was 878 frames. The actual supplies cost for the month was $13,500. The supplies cost in the flexible budget for April would be closest to:

A)$13,086
B)$13,500
C)$13,034
D)$13,027

Question 50

Randt Footwear Corporation's flexible budget cost formula for supplies, a variable cost, is $2.79 per unit of output. The company's performance report for last month showed a $5,363 favorable spending variance for supplies. During that month, 17,300 units were produced. Budgeted activity for the month had been 17,200 units. The actual cost per unit for indirect materials must have been closest to:

A)$2.48
B)$2.18
C)$2.79
D)$2.17

Question 51

Dehnert Midwifery's cost formula for its wages and salaries is $2,030 per month plus $409 per birth. For the month of May, the company planned for activity of 112 births, but the actual level of activity was 114 births. The actual wages and salaries for the month was $50,800. The wages and salaries in the planning budget for May would be closest to:

A)$47,838
B)$50,800
C)$49,909
D)$48,656

Question 52

Loomer Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $550 per month plus $95 per job plus $21 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in July to be 12 jobs and 136 meals, but the actual activity was 13 jobs and 137 meals. The actual cost for catering supplies in July was $4,770. The catering supplies in the planning budget for July would be closest to:

A)$4,403
B)$4,770
C)$4,662
D)$4,546

Question 53

Olivera Corporation's performance report for last month shows that actual indirect materials cost, a variable cost, was $31,178 and that the spending variance for indirect materials cost was $2,261 unfavorable. During that month, the company worked 11,900 machine-hours. Budgeted activity for the month had been 12,200 machine-hours. The cost formula per machine-hour for indirect materials cost must have been closest to:

A)$2.74
B)$2.81
C)$2.37
D)$2.43

Question 54

Fuhrer Hotel bases its budgets on guest-days. The hotel's static budget for December appears below: The total overhead cost at an activity level of 7,500 guest-days per month should be:

A)$227,250
B)$215,140
C)$216,140
D)$206,040

Question 55

Gastineau Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,230 square feet and the actual level of activity was 1,200 square feet. The company's owner budgets for supply costs, a variable cost, at $2.70 per square foot. The actual supply cost last month was $2,690. In the company's performance report for last month, what would have been the spending variance for supply costs?

A)$67 F
B)$550 F
C)$631 F
D)$81 F

Question 56

Hatzenbuhler Manufacturing Corporation has prepared the following overhead budget for next month. The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 6,600 machine-hours rather than 6,800 machine-hours?

A)$107,824.00
B)$110,600.00
C)$108,300.00
D)$107,347.06

Question 57

Paradiso Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,060 patient-visits and the actual level of activity was 1,050 patient-visits. The cost formula for administrative expenses is $3.00 per patient-visit plus $17,000 per month. The actual administrative expense was $19,300. In the clinic's performance report for last month, the spending variance for administrative expenses was:

A)$850 F
B)$220 U
C)$30 F
D)$880 F

Question 58

Pettry Snow Removal's cost formula for its vehicle operating cost is $2,170 per month plus $408 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 13 snow-days. The actual vehicle operating cost for the month was $7,600. The vehicle operating cost in the planning budget for December would be closest to:

A)$7,474
B)$9,354
C)$8,698
D)$7,600

Question 59

Lynne Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $480 per month plus $91 per job plus $14 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in June to be 10 jobs and 79 meals, but the actual activity was 14 jobs and 77 meals. The actual cost for catering supplies in June was $2,970. The catering supplies in the flexible budget for June would be closest to:

A)$2,496
B)$2,970
C)$2,832
D)$3,494

Question 60

Tysor Framing's cost formula for its supplies cost is $2,610 per month plus $17 per frame. For the month of July, the company planned for activity of 710 frames, but the actual level of activity was 712 frames. The actual supplies cost for the month was $14,540. The spending variance for supplies cost in July would be closest to:

A)$140 U
B)$174 F
C)$140 F
D)$174 U

Question 61

Gershon Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $38,720 per month plus $2,061 per flight plus $9 per passenger. The company expected its activity in June to be 76 flights and 238 passengers, but the actual activity was 75 flights and 239 passengers. The actual cost for plane operating costs in June was $196,310. The spending variance for plane operating costs in June would be closest to:

A)$864 F
B)$1,188 U
C)$1,188 F
D)$864 U

Question 62

Blue Corporation's standards call for 2,500 direct labor-hours to produce 1,000 units of product. During May 900 units were produced and the company worked 2,400 direct labor-hours. The standard hours allowed for May production would be:

A)2,500 hours
B)2,400 hours
C)2,250 hours
D)1,800 hours

Question 63

The following labor standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: What is the labor efficiency variance for the month?

A)$19,017 F
B)$19,017 U
C)$16,029 F
D)$16,577 F

Question 64

Ishibashi Snow Removal's cost formula for its vehicle operating cost is $1,240 per month plus $337 per snow-day. For the month of February, the company planned for activity of 17 snow-days, but the actual level of activity was 12 snow-days. The actual vehicle operating cost for the month was $5,140. The spending variance for vehicle operating cost in February would be closest to:

A)$144 U
B)$1,829 U
C)$1,829 F
D)$144 F

Question 65

The standard cost card of a particular product specifies that it requires 4.5 direct labor-hours at $12.80 per direct labor-hour. During March, 2,300 units of the product were produced and direct labor wages of $128,300 were incurred. A total of 11,700 direct labor-hours were worked. The direct labor variances for the month were:

A)Option A
B)Option B
C)Option C
D)Option D

Question 66

Sekuterski Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $45,700 per month plus $2,892 per flight plus $4 per passenger. The company expected its activity in November to be 81 flights and 283 passengers, but the actual activity was 80 flights and 282 passengers. The actual cost for plane operating costs in November was $286,360. The plane operating costs in the flexible budget for November would be closest to:

A)$286,360
B)$277,614
C)$281,084
D)$278,188

Question 67

The standards for direct materials in making a certain product are 20 pounds at $0.75 per pound. During the past period, 56,000 units of product were made and the materials quantity variance was $30,000 U. The number of pounds of direct material used during the period amounted to:

A)1,080,000
B)1,160,000
C)1,200,000
D)784,000

Question 68

A quantity of a particular raw material was purchased for $43,250. The standard cost of the material was $2.00 per kilogram and there was an unfavorable materials price variance of $3,250. How many kilograms were purchased?

A)20,000
B)21,625
C)23,250
D)24,875

Question 69

Hejl Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $210 per month plus $86 per job plus $15 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in March to be 23 jobs and 222 meals, but the actual activity was 28 jobs and 217 meals. The actual cost for catering supplies in March was $5,830. The spending variance for catering supplies in March would be closest to:

A)$312 F
B)$312 U
C)$43 F
D)$43 U

Question 70

Dreary Credit Agency uses a standard cost system for the processing of its credit applications. The labor standard at Dreary is 10 applications per 8 hour day at a standard cost of $15 per hour. During the last pay period, Dreary's credit agents worked 1,920 hours and processed 2,500 applications. The total labor cost for the agents during this period was $29,184. What was Dreary's labor efficiency variance for this last pay period?

A)$384 Unfavorable
B)$816 Favorable
C)$1,200 Favorable
D)$1,500 Favorable

Question 71

The standard cost card for one unit of a certain finished product shows the following: If the total standard variable cost for one unit of finished product is $85, then the standard price per pound for direct materials is:

A)$1.74
B)$4.60
C)$5.90
D)$3.00

Question 72

The Swenson Corporation has a standard costing system. The following data are available for June: The actual price per pound of direct materials purchased in June is:

A)$3.92
B)$4.32
C)$4.08
D)$4.20

Question 73

Krizum Industries makes heavy construction equipment. The standard for a particular crane calls for 24 direct labor-hours at $16 per direct labor-hour. During a recent period 850 cranes were made. The labor rate variance was zero and the labor efficiency variance was $8,800 unfavorable. How many actual direct labor-hours were worked?

A)19,850
B)20,400
C)20,950
D)35,200

Question 74

Petroski Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 19,700 skeins and the actual level of activity was 19,900 skeins. The company's owner budgets for dye costs, a variable cost, at $0.67 per skein. The actual dye cost last month was $13,910. In the company's performance report for last month, what would have been the spending variance for dye costs?

A)$134 U
B)$577 U
C)$711 U
D)$140 U

Question 75

The standard cost card for a product indicates that one unit of the product requires 8 kilograms of a raw material at $0.80 per kilogram. The production of the product in April was 870 units, but production had been budgeted for 850 units. During April, 8,200 kilograms of the raw material were purchased for $6,888 and 7,150 kilograms of the raw material were used in production. The material variances for April were:

A)Option A
B)Option B
C)Option C
D)Option D

Question 76

The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: What is the materials price variance for the month?

A)$2,250 F
B)$7,540 U
C)$24,317 U
D)$7,660 U

Question 77

The Hanson Corporation employs a standard costing system. The following data are available for February: The actual direct labor rate for February is:

A)$7.60 per hour
B)$8.40 per hour
C)$8.00 per hour
D)$2.50 per hour

Question 78

The Fischer Corporation uses a standard costing system. The following data have been assembled for December: The standard hours allowed for December's production is:

A)5,400 hours
B)5,600 hours
C)5,800 hours
D)6,000 hours

Question 79

Krejci Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $41,430 per month plus $2,419 per flight plus $6 per passenger. The company expected its activity in March to be 84 flights and 222 passengers, but the actual activity was 81 flights and 220 passengers. The actual cost for plane operating costs in March was $239,870. The plane operating costs in the planning budget for March would be closest to:

A)$245,958
B)$239,870
C)$248,754
D)$238,689

Question 80

The following materials standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: What is the materials quantity variance for the month?

A)$13,720 U
B)$6,732 F
C)$13,860 U
D)$6,664 F