Question 1

The difference between the flexible-budget operating income and the actual operating income in a period is the:
A) Sales mix variance.
B) Sales volume variance.
C) Sales price variance.
D) Operating income flexible-budget variance.
E) Total operating income variance.

Accepted Answer

The difference between the flexible-budget operating income and the actual operating income in a period is known as the Operating income flexible-budget variance. This variance is the result of differences between actual and budgeted quantities of inputs and their actual prices. It allows managers to determine whether the variance was due to changes in price, quantity, or both. Therefore, Option D is the correct answer.

Question 2

The total variable cost flexible-budget variance for any given period:
A) Is the difference between actual total variable cost incurred and master budgeted total variable cost.
B) Is decomposable into sales-volume and sales-mix components.
C) Is decomposable into production-volume and production-mix components.
D) Can be broken down into flexible-budget variances for major costs such as materials, labor, variable overhead, and variable selling expenses.
E) Is directly affected by the difference between actual sales volume and the sales volume embodied in the flexible budget.

Accepted Answer

The total variable cost flexible-budget variance can indeed be broken down into variances for major variable costs like materials, labor, variable overhead, and variable selling expenses. This allows for a more detailed analysis of where variances are occurring.

Question 3

Which one of the following is defined as the difference between the actual direct labor hours worked and the standard direct labor hours allowed for the units manufactured, multiplied by the standard hourly wage rate per hour?
A) The direct labor price variance.
B) The direct labor efficiency variance.
C) The total direct labor standard cost variance.
D) The direct labor flexible-budget variance.
E) The direct labor operating-income variance.

Accepted Answer

The difference between the actual direct labor hours worked and the standard direct labor hours allowed for the units manufactured is the direct labor efficiency variance. This variance measures the efficiency of the workforce in terms of labor hours used compared to the standard hours allowed for a given level of output. Multiplying the variance by the standard hourly wage rate per hour gives the dollar amount of the variance.

Question 4

A standard that assumes perfect implementation and maximum efficiency is called a(n):
A) Currently attainable standard.
B) Practical standard.
C) Efficiency standard.
D) Normal standard.
E) Ideal standard.

Accepted Answer

The description given in the question matches with an ideal standard, which assumes perfect implementation and maximum efficiency regardless of actual conditions. The other options, such as currently attainable, practical, efficiency, and normal standards consider the actual conditions and functioning of the system, which is not the case with an ideal standard. Therefore, the best choice for this question is E, ideal standard.

Question 5

Which one of the following is defined as the difference between the actual hourly wage rate and the standard hourly wage rate, multiplied by the actual number of direct labor hours (DLHs) worked during a period?
A) The total direct labor standard cost variance.
B) The direct labor efficiency variance.
C) The direct labor usage variance.
D) The direct labor flexible-budget variance.
E) The direct labor rate variance.

Accepted Answer

The direct labor rate variance is calculated as the difference between the actual hourly wage rate and the standard hourly wage rate, multiplied by the actual number of direct labor hours worked. This variance measures how much the actual labor costs differ from what was expected (the standard) due to the rate of pay.

Question 6

The total variable cost flexible-budget variance includes all the following except:
A) Direct materials variances.
B) The Sales price variance.
C) Variable selling and administrative expenses variances.
D) Direct labor variances.
E) Variable overhead variances.

Accepted Answer

The total variable cost flexible-budget variance includes all variable costs, except for the sales price variance, which is a part of the sales revenue budget.

Question 7

A standard that sets the performance criterion at a level that workers with proper training and experience can attain most of the time without extraordinary effort is a(n):
A) Currently attainable standard.
B) Practical standard.
C) Efficiency standard.
D) Ideal standard.
E) Authoritative standard.

Accepted Answer

Currently attainable standards are set at levels that can be achieved by workers with proper training and experience under normal working conditions without requiring extraordinary effort.

Question 8

A total variable cost variance (such as for direct materials) can be broken down into separate variances that evaluate:
A) Price (rate) and efficiency (quantity).
B) Units and cost.
C) Volume (output) and productivity.
D) Sales-volume versus sales-mix effects.
E) Efforts versus results.

Accepted Answer

A total variable cost variance can be broken down into a price (rate) variance and an efficiency (quantity) variance. The price variance evaluates the difference between the actual price paid for direct materials and the budgeted price, while the efficiency variance evaluates the difference between the actual amount of direct materials used and the budgeted amount based on the actual level of output. Breaking down the variance into these two components can help managers identify the sources of cost differences and take appropriate corrective action.

Question 9

Which of the following benefits is not typically associated with a move to a just-in-time (JIT) manufacturing system?
A) Raw materials are delivered as close as possible to time of production.
B) Existence of long-term contracts with selected suppliers.
C) Reduction in employee training and education costs.
D) Decreases in manufacturing lead time.
E) Improved customer-response time (CRT).

Accepted Answer

JIT manufacturing often requires a highly skilled and knowledgeable workforce, so it is unlikely that there would be a reduction in employee training and education costs. Rather, there may be a shift towards providing more targeted and specialized training for employees to meet the specific needs of the system. The other benefits listed are commonly associated with a move to JIT manufacturing.

Question 10

The difference between the actual operating income of the period and master budget operating income for the period is defined as the:
A) Total flexible-budget variance.
B) Sales volume variance.
C) Sales price variance.
D) Operating income flexible-budget variance.
E) Total operating income variance.

Accepted Answer

The total operating income variance is the difference between the actual operating income and the master budget operating income, encompassing all variances including sales volume and flexible-budget variances.

Question 11

The primary purpose of calculating standard cost variances each period is:
A) To achieve financial control regarding operating activities.
B) To facilitate the recording of manufacturing costs during a period.
C) To adjust reported income to flexible-budget income.
D) To diagnose the cause of operating problems as well as what should be done to correct such problems.
E) To minimize income tax liabilities.

Accepted Answer

Standard cost variances are calculated to achieve financial control by comparing actual costs to standard costs, helping identify areas where performance deviates from expectations.

Question 12

Using continuous-improvement standards likely causes (or brings about) all the following except: 
A) Reductions in inefficiencies.
B) Reduced product defects.
C) Constantly decreasing standard levels.
D) Improved productivity.
E) Increasing pressure on employees and managers.

Accepted Answer

Continuous-improvement standards aim to maintain or gradually increase the level of standards, not decrease them. Therefore, constantly decreasing standard levels is not a likely effect of using continuous-improvement standards.

Question 13

The difference between the total actual sales revenue of a period and the total flexible-budget sales revenue for the units sold during the period is the:
A) Total flexible-budget variance.
B) Sales volume variance.
C) Selling price variance.
D) Operating income flexible-budget variance.
E) Operating income variance.

Accepted Answer

The difference between the total actual sales revenue and the total flexible-budget sales revenue for the units sold during the period is known as the selling price variance. This variance measures the effect of the actual selling price being different from the budgeted selling price on the total sales revenue.

Question 14

Which one of the following is the difference in direct material costs between the actual cost incurred during the period and the total standard cost in the flexible budget for the units manufactured during the period?
A) Direct materials price variance.
B) Direct materials mix variance.
C) Direct materials usage variance.
D) Direct materials flexible-budget variance.
E) Direct materials efficiency variance.

Accepted Answer

The direct materials flexible-budget variance shows the difference between the actual cost for direct materials incurred during the period and the total standard cost for direct materials in the flexible budget for the units produced during the period. It takes into account any changes in the quantity of direct materials used and the prices paid for those materials. Thus, it covers both price variances and usage variances. Therefore, the direct materials flexible-budget variance is the correct answer.

Question 15

For control purposes, it is usually preferable to calculate the materials price variance:
A) At point of purchase (i.e., when the materials are purchased).
B) At point of production (i.e., when the materials are issued to production).
C) At the end of the accounting period.
D) Only if the materials quantity variance is significant in amount.
E) Only if it is controllable by operating managers.

Accepted Answer

Calculating the materials price variance at the point of purchase allows a company to immediately identify any discrepancies between the actual price paid for materials and the standard or expected price. This timely information enables the company to investigate and address any issues related to purchasing practices, supplier performance, or market price changes, facilitating better cost control and budgeting accuracy.

Question 16

For a direct material, which one of the following is defined as the difference between the actual and standard unit price of the direct material multiplied by the actual quantity of the material purchased?
A) Direct materials purchase-price variance.
B) Direct materials volume variance.
C) Direct materials usage variance.
D) Direct materials flexible-budget variance.
E) Direct materials purchase-mix variance.

Accepted Answer

The Direct materials purchase-price variance measures the difference between the actual price paid for direct materials and the standard price that should have been paid, multiplied by the actual quantity purchased.

Question 17

The way managers and employees who are affected by a standard cost system perceive the system will:
A) Be of little consequence on the success of the system if correctly implemented.
B) Generally be minimal in impact on the implementation of the system.
C) Affect its success or failure in implementing the system.
D) Be difficult to assess.
E) Not matter in the long run (e.g., because of competitive pressures).

Accepted Answer

The way managers and employees perceive the standard cost system can significantly impact the success or failure of implementing the system. Managers and employees who do not understand or trust the system may resist its implementation, making it difficult to achieve the desired results. Therefore, it is crucial to address any concerns or misconceptions surrounding the system and ensure that everyone understands the benefits and how it works.

Question 18

Which one of the following, for each direct material used in production, is defined as the difference between the actual units of material used and the total standard units of the direct material that should have been used for the units of the product manufactured during the period, multiplied by the standard unit price of the direct material?
A) Direct materials sales-volume variance.
B) Direct materials rate variance.
C) Direct materials usage variance.
D) Direct materials flexible-budget variance.
E) Direct materials mix variance.

Accepted Answer

The direct materials usage variance is the difference between the actual amount of direct material used and the standard amount that should have been used, multiplied by the standard price for each unit of the direct material. It measures the efficiency of the production process in using direct materials.

Question 19

The difference between the actual sales volume for a period and the flexible-budget sales volume is equal to:
A) The total sales volume variance for the period.
B) The total production-volume variance for the period.
C) The sales price variance for the period.
D) The operating-income sales volume variance for the period.
E) Zero—by definition.

Accepted Answer

The answer of The difference between the actual sales volume...

Question 20

For improved financial control, a standard cost system should be designed to generate and report cost and revenue variances:
A) Coincidental with regular financial-reporting intervals.
B) As soon as possible.
C) Only when significant in amount.
D) Only when negative in impact.
E) Only when requested by decision-makers/managers.

Accepted Answer

The standard cost system should generate and report cost and revenue variances as soon as possible so that corrective actions can be taken promptly. Delayed reporting can result in the continuation of ineffective processes and practices, leading to further losses. Therefore, it is important to have timely and accurate information to make informed decisions.

Quiz 14: Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

The difference between the flexible-budget operating income and the actual operating income in a period is the:

The total variable cost flexible-budget variance for any given period:

Which one of the following is defined as the difference between the actual direct labor hours worked and the standard direct labor hours allowed for the units manufactured, multiplied by the standard hourly wage rate per hour?

A standard that assumes perfect implementation and maximum efficiency is called a(n) :

Which one of the following is defined as the difference between the actual hourly wage rate and the standard hourly wage rate, multiplied by the actual number of direct labor hours (DLHs) worked during a period?

The total variable cost flexible-budget variance includes all the following except:

A standard that sets the performance criterion at a level that workers with proper training and experience can attain most of the time without extraordinary effort is a(n) :

A total variable cost variance (such as for direct materials) can be broken down into separate variances that evaluate:

Which of the following benefits is not typically associated with a move to a just-in-time (JIT) manufacturing system?

The difference between the actual operating income of the period and master budget operating income for the period is defined as the:

The primary purpose of calculating standard cost variances each period is:

Using continuous-improvement standards likely causes (or brings about) all the following except:

The difference between the total actual sales revenue of a period and the total flexible-budget sales revenue for the units sold during the period is the:

Which one of the following is the difference in direct material costs between the actual cost incurred during the period and the total standard cost in the flexible budget for the units manufactured during the period?

For control purposes, it is usually preferable to calculate the materials price variance:

For a direct material, which one of the following is defined as the difference between the actual and standard unit price of the direct material multiplied by the actual quantity of the material purchased?

The way managers and employees who are affected by a standard cost system perceive the system will:

The difference between the actual sales volume for a period and the flexible-budget sales volume is equal to:

For improved financial control, a standard cost system should be designed to generate and report cost and revenue variances: