Question 1

A purchasing manager's performance is BEST evaluated using the:

Accepted Answer

A purchasing manager's primary responsibility is to ensure that the company acquires high-quality materials at the lowest possible cost, so the best way to evaluate their performance is to assess the impact of their actions on the company's overall costs. Evaluating performance based on variances is more suitable for assessing the performance of production managers or line supervisors.

Question 2

The Omega Corporation manufactures two types of dishwashers: the ZENITH for commercial use and the House-Helper for homes.Budgeted and actual operating data for the year 2018 are as follows:
 $$\begin{array} { l r r r } 
\text { Static Budget } & \text { ZENITH } & \text { House-Helper } & \text { Total } \
\text { Number sold } & 15000 & 60000 & 75000 \
\text { Contribution margin } & \$ 3750000 & \$ 12000000 & \$ 15750000 \
& & & \
\text { Actual Results } & \text { ZENITH } & \text { House-Helper } & \text { Total } \
\hline \text { Number sold } & 16500 & 38500 & 55000 \
\text { Contribution margin } & \$ 6200000 & \$ 10200000 & \$ 16400000
\end{array}$$ 
Required:
Calculate the sales-mix variance and the sales-quantity variance by type of dishwasher,and in total (in terms of the contribution margin).
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of The Omega Corporation manufactures two types of...

Question 3

To control a production process,supervisors cannot wait for an accounting report with variances reported in:

Accepted Answer

Supervisors need to control the production process in real time, and variances reported in dollars can be used to make immediate adjustments.

Question 4

Managers benefit from variance analysis because it highlights individual aspects of:

Accepted Answer

Variance analysis compares actual performance against budgeted performance to identify areas of improvement. Therefore, variance analysis highlights individual aspects of performance and helps managers identify areas where they need to take corrective action. It is not focused on costs, profit, or prices specifically.

Question 5

The degree to which a predetermined objective or target is met is called:

Accepted Answer

The term "effectiveness" refers specifically to the degree to which a predetermined objective or target is met. Efficiency, on the other hand, refers to the ability to accomplish a given task with the minimum amount of time, effort, or cost. While efficiency is important, it does not necessarily guarantee that objectives or targets will be met. Economy refers to the wise use of resources to achieve objectives, and benchmarking involves comparing performance to industry best practices or standards. While both may be related to meeting objectives, they are not the same as effectiveness.

Question 6

_______________________ can be assumed and factored into changes in standards so they continue to provide challenging,but achievable,targets.

Accepted Answer

Continuous improvement involves regularly reviewing and adjusting standards to ensure they are still challenging but attainable. This includes taking into account factors such as changes in technology, competition, and customer expectations. Performance evaluation and measurement are important components of continuous improvement, but they do not directly involve adjusting standards. Benchmarking can be used as part of the continuous improvement process to compare performance against industry standards or best practices, but it does not play a direct role in factoring changes in standards.

Question 7

Employees logging into production floor terminals and other modern technologies greatly facilitate the use of a standard costing system.

Accepted Answer

When employees log into production floor terminals, it becomes easier to track and record the actual costs incurred during the production process. This, in turn, allows for a more accurate comparison with the standard costs set by the standard costing system. Similarly, modern technologies such as barcode scanners and automated inventory systems also aid in the efficient implementation of a standard costing system.

Question 8

Effectiveness is the relative amount of inputs used to achieve a given output level.

Accepted Answer

Effectiveness refers to the degree to which objectives are achieved and the extent to which targeted problems are solved, not to the amount of inputs used to achieve outputs. Efficiency, not effectiveness, relates to the amount of inputs used to produce a given output.

Question 9

What type of performance measures for planning and control do almost all companies use in addition to financial measures?
Variant question

Accepted Answer

Almost all companies use non-financial performance measures in addition to financial measures for planning and control. Non-financial measures are typically used to capture more qualitative aspects of performance, such as customer satisfaction, employee engagement, and operational efficiency.

Question 10

Managers often use variance analysis when evaluating the performance of their subordinates.

Accepted Answer

Variance analysis is a common tool used by managers to analyze and evaluate the performance of their subordinates. By comparing actual results to expected or budgeted results, managers can identify areas of success and areas for improvement.

Question 11

Manufacturing firms as well as firms in the service sector find standard costing to be a useful tool.

Accepted Answer

Standard costing is a widely used technique in both manufacturing and service industries to control costs and plan budgets.

Question 12

The Chair Company produces two modular types of chairs: one for the residential market,and the other for the office market.Budgeted and actual operating data for the year 2018 are:
 $$\begin{array} { l r r r } 
\text { Static Budget } & \text { Residential } & \text { Office } & \text { Total } \
\text { Number of chairs sold } & 260000 & 140000 & 400000 \
\text { Contribution margin } & \$ 26000000 & \$ 11200000 & \$ 37200000 \
& & & \
\text { Actual Results } & \text { Residential } & \text { Office } & \text { Total } \
\hline \text { Number of chairs sold } & 248400 & 165600 & 414000 \
\text { Contribution margin } & \$ 22356000 & \$ 13248000 & \$ 35604000
\end{array}$$ 
During 2017,an office products research firm estimated the industry volume for residential and office chairs of the type sold by the Chair Company to be 2 400 000.Actual industry volume for the year 2018 was only 2 200 000 chairs.
Required:
Calculate the following variances in terms of contribution margin:
a.Calculate the total static-budget variance,the total flexible-budget variance,and the total sales-volume variance.
b.Calculate the sale-mix variance and the sales-quantity variance by type of chair,and in total.
c.Calculate the market-share variance and market-size variance.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of The Chair Company produces two modular types...

Question 13

Standard costing provides valuable information for the management and control of materials,labour and other activities related to production.

Accepted Answer

Standard costing helps in establishing cost standards for materials, labour and other activities, and provides a basis for comparison with actual costs. This information is useful for management to monitor and control production costs, improve efficiency, and make informed decisions related to pricing, budgeting, and resource allocation.

Question 14

The Omega Corporation manufactures two types of dishwashers: the ZENITH for commercial use and the House-Helper for homes.Budgeted and actual operating data for the year 2018 are as follows:
 $$\begin{array} { l r r r } 
\text { Static Budget } & \text { ZENTTH } & \text { House-Helper } & \text { Total } \
\text { Number sold } & 15000 & 60000 & 75000 \
\text { Contribution margin } & \$ 3750000 & \$ 12000000 & \$ 15750000 \
& & & \
\text { Actual Results } & \text { ZENTH } & \text { House-Helper } & \text { Total } \
\hline \text { Number sold } & 16500 & 38500 & 55000 \
\text { Contribution margin } & \$ 6200000 & \$ 10200000 & \$ 16400000
\end{array}$$ 
Required:
a.Calculate the contribution margin for the flexible budget.
b.Determine the total static-budget variance,the total flexible-budget variance,and the total sales-volume variance in terms of the contribution margin.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of The Omega Corporation manufactures two types of...

Question 15

A(n)__________________ on performance evaluation may also cause managers to take actions to achieve the budget and avoid an unfavourable variance,even if such actions could hurt the company in the long run.

Accepted Answer

Overemphasis on performance evaluation can lead to managers prioritizing the achievement of budget targets over the long-term health of the company, potentially causing them to make short-sighted decisions that ultimately harm the organization.

Question 16

What type of analysis can managers use to create a cycle of continuous improvement?
Variant question

Accepted Answer

Variance analysis is a technique that managers can use to compare actual performance with the planned or expected performance. By analyzing the variance or difference between the two, managers can identify areas where improvements can be made and take corrective action. The cycle of continuous improvement involves continually analyzing variance and taking action to improve performance, thereby creating a continuous cycle of improvement. While the other options (B, C, and D) are important for financial management, they do not directly contribute to creating a cycle of continuous improvement.

Question 17

The relative amount of inputs used to achieve a given output level is called:

Accepted Answer

The concept described in the question is efficiency, which refers to maximizing the output for a given level of inputs. Therefore, the correct answer is D) efficiency.

Question 18

The variances that should be investigated by management include:

Accepted Answer

Management should investigate both favourable and unfavourable variances that are significant in amount, as these can indicate areas of performance that are either exceeding or not meeting expectations, and can lead to insights for improving operations or strategies.

Question 19

Why would a manager want to calculate the sales-mix and the sales-quantity variances,the market-share and market-size variances?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of Why would a manager want to calculate...

Question 20

Companies implementing total quality management programs use standard costing to control materials costs.

Accepted Answer

Total Quality Management (TQM) programs often use standard costing as a tool to control materials costs by setting benchmarks or standards for material usage, which helps in identifying variances and areas for improvement in the production process.

Quiz 12: Flexible Budgets, Direct Cost Variances and Management Control