ACC/350 Cost Accounting Week 8 Quiz - Strayer

ACC 350 Week 8 Quiz – Strayer

  

Chapter 7  

 

Flexible Budgets, Direct-Cost Variances, and Management Control

 

1)

 

The master budget is one type of flexible budget.  

 

2)

 

A flexible budget is calculated at the start of the budget period.  

 

3)

 

Information regarding the causes of variances is provided when the master budget is compared with actual results.  

 

4)

 

A variance is the difference between the actual cost for the current and previous year. 

 

5)

 

A favorable variance results when budgeted revenues exceed actual revenues.  

 

6)

 

Management by exception is the practice of concentrating on areas not operating as anticipated (such as a cost overrun) and placing less attention on areas operating as anticipated.  

 

7)

 

The essence of variance analysis is to capture a departure from what was expected.  

 

8)

 

A favorable variance should be ignored by management.  

 

9)

 

An unfavorable variance may be due to poor planning rather than due to inefficiency.  

 

10)

 

The only difference between the static budget and flexible budget is that the static budget is prepared using planned output.  

 

11)

 

The static-budget variance can be subdivided into the flexible-budget variance and the sales-volume variance.  

 

12)

 

The flexible-budget variance may be the result of inaccurate forecasting of units sold.  

 

13)

 

Decreasing demand for a product may create a favorable sales-volume variance.  

 

14)

 

An unfavorable variance is conclusive evidence of poor performance.  

 

15)

 

A company would not need to use a flexible budget if it had perfect foresight about actual output units.  

 

16)

 

The flexible-budget variance pertaining to revenues is often called a selling-price variance.  

 

17)

 

Cost control is the focus of the sales-volume variance.  

 

18)

 

The term efficiency variance is the direct-cost portion of the flexible-budget variance. 

 

19)

 

Managers generally have more control over efficiency variances than price variances.  

 

20)

 

To prepare budgets based on actual data from past periods is preferred since past inefficiencies are excluded.  

21)

 

All budgets are based on standard costs.  

 

22)

 

A standard is attainable through efficient operations but allows for normal disruptions such as machine breakdowns and defective production.  

 

23)

 

One advantage of using standard times to develop a budget is they are simple to compile, are based solely on the past actual history, and do not require expected future changes to be taken into account. 

 

24)

 

The presumed cause of a material price variance will determine how a company responds.  

 

25)

 

The price variance is the difference between the actual price and the budgeted price of the input, multiplied by the actual quantity of input. 

 

26)

 

For any actual level of output, the efficiency variance is the difference between actual quantity of input used and the budgeted quantity of input allowed to produce actual output, multiplied by the actual price.  

 

27)

 

The use of high-quality raw materials is likely to result in a favorable efficiency variance and an unfavorable price variance.  

 

28)

 

The direct manufacturing labor price variance is likely to be favorable if higher-skilled workers are put on a job.   

 

29)

 

Although computed separately, price variances and efficiency variances should not be analyzed separately from each other.  

 

30)

 

A favorable variance can be automatically interpreted as "good news."  

31)

 

Variances often affect each other.  

 

32)

 

If variance analysis is used for performance evaluation, managers are encouraged to meet targets using creativity and resourcefulness.  

 

33)

 

When using variance for performance evaluation, managers often focus on effectiveness and efficiency as two of the common attributes used in comparing expected results with actual results. 

 

34)

 

For critical items such as product defects, a small variance may prompt investigation.  

 

35)

 

A particular variance generally signals one particular problem.  

 

36)

 

If budgets contain slack, cost variances will tend to be favorable.  

 

37)

 

Continuous improvement budgeted costs target price reductions and efficiency improvements.  

 

38)

 

Improvement opportunities are easier to identify when products have been on the market for a considerable period of time.  

 

39)

 

It is best to rely totally on financial performance measures rather than using a combination of financial and nonfinancial performance measures.  

 

40)

 

From the perspective of control, the direct materials price variance should be isolated at the time the direct materials are requisitioned for use.  

 

41)

 

The goal of variance analysis is for managers to understand why variances arise, to learn, and to improve future performance. 

 

42)

 

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

 

43)

 

Performance variance analysis can be used in activity-based costing systems.  

 

44)

 

Price variances can be calculated for batch-level costs as well as for output unit-level costs.  

 

45)

 

Benchmarking is the continuous process of measuring products, services, and activities against the best possible levels of performance, either inside or outside the organization.  

 

46)

 

When benchmarking, the best levels of performance are typically found in companies that are totally different.  

 

47)

 

One problem with benchmarking is ensuring that numbers are comparable.  

 

48)

 

When benchmarking it is best when management accountants simply analyze the costs and allow management to provide the insight as to why the revenues and costs differ between companies.  

 

49)

 

The master budget is:  

A)

 

a flexible budget  

B)

 

a static budget  

C)

 

developed at the end of the period  

D)

 

based on the actual level of output  

 

50)

 

A flexible budget:  

A)

 

is another name for management by exception  

B)

 

is developed at the end of the period  

C)

 

is based on the budgeted level of output  

D)

 

provides favorable operating results  

 

51)

 

Management by exception is the practice of concentrating on:  

A)

 

the master budget  

B)

 

areas not operating as anticipated  

C)

 

favorable variances  

D)

 

unfavorable variances  

 

52)

 

A variance is:  

A)

 

the gap between an actual result and a benchmark amount  

B)

 

the required number of inputs for one standard output  

C)

 

the difference between an actual result and a budgeted amount  

D)

 

the difference between a budgeted amount and a standard amount  

 

53)

 

An unfavorable variance indicates that:  

A)

 

actual costs are less than budgeted costs  

B)

 

actual revenues exceed budgeted revenues  

C)

 

the actual amount decreased operating income relative to the budgeted amount  

D)

 

All of these answers are correct.  

 

54)

 

A favorable variance indicates that:  

A)

 

budgeted costs are less than actual costs  

B)

 

actual revenues exceed budgeted revenues  

C)

 

the actual amount decreased operating income relative to the budgeted amount  

D)

 

All of these answers are correct.  

 

Answer the following questions using the information below:

 

Abernathy Corporation used the following data to evaluate their current operating system. The company sells items for $10 each and used a budgeted selling price of $10 per unit.

 

            Actual Budgeted

            Units sold       92,000 units    90,000 units

            Variable costs  $450,800         $432,000

            Fixed costs      $ 95,000          $100,000

 

55)

 

What is the static-budget variance of revenues?  

A)

 

$20,000 favorable  

B)

 

$20,000 unfavorable  

C)

 

$2,000 favorable  

D)

 

$2,000 unfavorable  

 

56)

 

What is the static-budget variance of variable costs?  

A)

 

$1,200 favorable  

B)

 

$18,800 unfavorable  

C)

 

$20,000 favorable  

D)

 

$1,200 unfavorable  

 

57)

 

What is the static-budget variance of operating income?  

A)

 

$3,800 favorable  

B)

 

$3,800 unfavorable  

C)

 

$6,200 favorable  

D)

 

$6,200 unfavorable  

 

 

 

Answer the following questions using the information below:

 

Bates Corporation used the following data to evaluate their current operating system. The company sells items for $10 each and used a budgeted selling price of $10 per unit.

 

            Actual Budgeted

            Units sold       495,000 units  500,000 units

            Variable costs  $1,250,000      $1,500,000

            Fixed costs      $ 925,000        $ 900,000

 

58)

 

What is the static-budget variance of revenues?  

A)

 

$50,000 favorable  

B)

 

$50,000 unfavorable  

C)

 

$5,000 favorable  

D)

 

$5,000 unfavorable  

 

59)

 

What is the static-budget variance of variable costs?  

A)

 

$200,000 favorable  

B)

 

$50,000 unfavorable  

C)

 

$250,000 favorable  

D)

 

$250,000 unfavorable  

 

60)

 

What is the static-budget variance of operating income?  

A)

 

$175,000 favorable  

B)

 

$195,000 unfavorable  

C)

 

$225,000 favorable  

D)

 

$325,000 unfavorable  

 

Answer the following questions using the information below:

 

Racine Filter Corporation used the following data to evaluate their current operating system. The company sells items for $14.50 each and had used a budgeted selling price of $15 per unit.

 

            Actual Budgeted

            Units sold       206,000 units  200,000 units

            Variable costs  $965,000         $950,000

            Fixed costs      $ 53,000          $ 50,000

 

61)

 

What is the static-budget variance of revenues?  

A)

 

$90,000 favorable  

B)

 

$13,000 favorable  

C)

 

$13,000 unfavorable  

D)

 

$6,000 favorable  

 

62)

 

What is the static-budget variance of variable costs?  

A)

 

$13,000 favorable  

B)

 

$13,000 unfavorable  

C)

 

$15,000 favorable  

D)

 

$15,000 unfavorable  

 

63)

 

What is the static-budget variance of operating income?  

A)

 

$31,000 unfavorable  

B)

 

$26,000 favorable  

C)

 

$28,000 favorable  

D)

 

$28,000 unfavorable  

 

64)

 

Regier Company had planned for operating income of $10 million in the master budget but actually achieved operating income of only $7 million.  

A)

 

The static-budget variance for operating income is $3 million favorable.  

B)

 

The static-budget variance for operating income is $3 million unfavorable.  

C)

 

The flexible-budget variance for operating income is $3 million favorable.  

D)

 

The flexible-budget variance for operating income is $3 million unfavorable.  

 

65)

 

The flexible budget contains:  

A)

 

budgeted amounts for actual output  

B)

 

budgeted amounts for planned output  

C)

 

actual costs for actual output  

D)

 

actual costs for planned output  

 

66)

 

The following items are the same for the flexible budget and the master budget EXCEPT the same:  

A)

 

variable cost per unit  

B)

 

total fixed costs  

C)

 

units sold  

D)

 

sales price per unit  

 

67)

 

The sales-volume variance is due to:  

A)

 

using a different selling price from that budgeted  

B)

 

inaccurate forecasting of units sold  

C)

 

poor production performance  

D)

 

Both A and B are correct.  

 

68)

 

An unfavorable sales-volume variance could result from:  

A)

 

decreased demand for the product  

B)

 

competitors taking market share  

C)

 

customer dissatisfaction with the product  

D)

 

All of these answers are correct.  

 

69)

 

If a sales-volume variance was caused by poor-quality products, then the ________ would be in the best position to explain the variance.  

A)

 

production manager  

B)

 

sales manager  

C)

 

purchasing manager  

D)

 

management accountant  

 

70)

 

The variance that is BEST for measuring operating performance is the:  

A)

 

static-budget variance  

B)

 

flexible-budget variance  

C)

 

sales-volume variance  

D)

 

selling-price variance  

 

71)

 

An unfavorable flexible-budget variance for variable costs may be the result of:  

A)

 

using more input quantities than were budgeted  

B)

 

paying higher prices for inputs than were budgeted  

C)

 

selling output at a higher selling price than budgeted  

D)

 

Both A and B are correct.  

 

72)

 

An unfavorable variance:  

A)

 

may suggest investigation is needed  

B)

 

is conclusive evidence of poor performance  

C)

 

demands that standards be recomputed  

D)

 

indicates continuous improvement is needed  

 

73)

 

All of the following are needed to prepare a flexible budget EXCEPT determining the:  

A)

 

budgeted variable cost per output unit  

B)

 

budgeted fixed costs  

C)

 

actual selling price per unit   

D)

 

actual quantity of output units 

 

74)

 

The variance that LEAST affects cost control is the: 

A)

 

flexible-budget variance  

B)

 

direct-material-price variance  

C)

 

sales-volume variance  

D)

 

direct manufacturing labor efficiency variance  

 

75)

 

A flexible-budget variance is $800 favorable for unit-related costs. This indicates that costs were:  

A)

 

$800 more than the master budget  

B)

 

$800 less than for the planned level of activity  

C)

 

$800 more than standard for the achieved level of activity  

D)

 

$800 less than standard for the achieved level of activity  

 

Answer the following questions using the information below:

 

JJ White planned to use $82 of material per unit but actually used $80 of material per unit, and planned to make 1,200 units but actually made 1,000 units.

 

76)

 

The flexible-budget amount is:  

A)

 

$80,000  

B)

 

$82,000  

C)

 

$96,000  

D)

 

$98,400  

 

77)

 

The flexible-budget variance is:  

A)

 

$2,000 favorable  

B)

 

$14,000 unfavorable  

C)

 

$16,400 unfavorable  

D)

 

$2,400 favorable  

 

78)

 

The sales-volume variance is:  

A)

 

$2,000 favorable  

B)

 

$14,000 unfavorable  

C)

 

$16,400 unfavorable  

D)

 

$2,400 favorable  

 

79)

 

Aebi Corporation currently produces cardboard boxes in an automated process. Expected production per month is 20,000 units, direct-material costs are $0.60 per unit, and manufacturing overhead costs are $9,000 per month. Manufacturing overhead is allocated based on units of production. What is the flexible budget for 10,000 and 20,000 units, respectively?  

A)

 

$10,500; $16,500  

B)

 

$10,500; $21,000  

C)

 

$15,000; $21,000  

D)

 

None of these answers are correct.  

 

Answer the following questions using the information below:

 

McKenna Incorporated planned to use $24 of material per unit but actually used $25 of material per unit, and planned to make 1,000 units but actually made 1,200 units.

 

80)

 

The flexible-budget amount is:  

A)

 

$24,000  

B)

 

$25,000  

C)

 

$28,800  

D)

 

$30,000  

 

81)

 

The flexible-budget variance is:  

A)

 

$4,800 favorable  

B)

 

$1,200 unfavorable  

C)

 

$5,000 unfavorable  

D)

 

$6,000 favorable  

 

82)

 

The sales-volume variance is:  

A)

 

$4,800 favorable  

B)

 

$1,200 unfavorable  

C)

 

$5,000 unfavorable  

D)

 

$6,000 favorable  

 

Answer the following questions using the information below:

 

Seldon Incorporated planned to use $37.50 of material per unit but actually used $36.75 of material per unit, and planned to make 900 units but actually made 800 units.

 

83)

 

The flexible-budget amount is:  

A)

 

$30,000  

B)

 

$33,750  

C)

 

$29,400  

D)

 

$600   

 

84)

 

The flexible-budget variance is:  

A)

 

$3,750 favorable  

B)

 

$3,750 unfavorable  

C)

 

$600 unfavorable  

D)

 

$600 favorable  

 

85)

 

The sales-volume variance is:  

A)

 

$3,750 favorable  

B)

 

$3,750 unfavorable  

C)

 

$600 unfavorable  

D)

 

$600 favorable  

 

86)

 

Hemberger Corporation currently produces baseball caps in an automated process. Expected production per month is 20,000 units, direct material costs are $1.50 per unit, and manufacturing overhead costs are $23,000 per month. Manufacturing overhead is allocated based on units of production. What is the flexible budget for 10,000 and 20,000 units, respectively?  

A)

 

$26,500; $41,500  

B)

 

$26,500; $53,000  

C)

 

$38,000; $53,000  

D)

 

None of these answers are correct. 

 

Answer the following questions using the information below:

 

The actual information pertains to the month of August. As part of the budgeting process, Alloway's Fencing Company developed the following static budget for August. Alloway is in the process of preparing the flexible budget and understanding the results.

 

            Actual Flexible            Static

            Results            Budget Budget

Sales volume (in units)            20,000                         25,000

 

Sales revenues $1,000,000      $          $1,250,000

Variable costs  512,000           $ ________     600,000

 

Contribution margin    488,000           $          650,000

 

Fixed costs      458,000           $ ________     450,000

Operating profit          $ 30,000          $                      $ 200,000

 

87)

 

The flexible budget will report ________ for variable costs.  

A)

 

$512,000  

B)

 

$600,000  

C)

 

$480,000  

D)

 

$640,000  

 

88)

 

The flexible budget will report ________ for the fixed costs.  

A)

 

$458,000  

B)

 

$450,000  

C)

 

$360,000  

D)

 

$572,500  

 

89)

 

The flexible-budget variance for variable costs is:  

A)

 

$32,000 unfavorable  

B)

 

$120,000 unfavorable  

C)

 

$32,000 favorable  

D)

 

$120,000 favorable  

 

90)

 

The PRIMARY reason for low operating profits was:  

A)

 

the variable-cost variance  

B)

 

increased fixed costs  

C)

 

a poor management accounting system  

D)

 

lower sales volume than planned  

 

 

 

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