Deck 8: Performance Evaluation

Question 1

Burruss Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 8,000 units: $\begin{array}{|l|r|}\hline & {\text { Per unit }} \\\hline \text { Revenue } & \$ 4.00 \\\hline \text { Vanable costs } & \underline { 1.50} \\\hline \text { Contribution margin } & \$ 2.50 \\\hline \text { Fixed costs } & \underline { 2.00 }\\\hline \text { Net income } & \underline { \$ 0.50} \\\hline & \\\hline\end{array}$ If actual production totals 10,000 units which is within the relevant range,the flexible budget would show fixed costs of:

A) $16,000.
B) $2 per unit.
C) $20,000.
D) None of these answers is correct.

Answer 1

$16,000.

Question 2

Sometimes the sales staff will deliberately underestimate the amount of expected sales.This practice is known as:

A) making the numbers.
B) cooking the books.
C) lowballing.
D) budget slack.

Answer 2

C

Question 3

Jones Company developed the following static budget at the beginning of the company's accounting period: $\begin{array}{|l|r|}\hline \\\hline \text { Revenue (8,000 units) } &\$ 16,000 \\\hline \text { Variable costs } & \underline { 4,000} \\\hline \text { Contribution margin } & \$ 12,000 \\\hline \text { Fixed costs } & \underline { 4,000} \\\hline \text { Net income } & \underline { \$ 8,000} \\\hline &\\\hline\end{array}$ If actual production totals 8,200 units,the flexible budget would show total costs of:

A) $8,000.
B) $8,100.
C) $8,200.
D) None of these is correct.

Answer 3

$8,100.

Question 4

Select the incorrect statement.

A) If both the flexible budget and actual results are based on the actual volume of activity,the flexible budget sales variance will be attributable to sales price,not sales volume.
B) Budget slack is the difference between deflated and realistic standards.
C) Gamesmanship is decreased if superiors and subordinates participate sincerely in setting mutually agreeable,attainable standards.
D) For performance evaluation,management should compare actual results to a flexible budget based on the actual volume of activity.

Question 5

The following static budget is provided: $\begin{array}{|l|l|ll|} \hline \text {Units} &\text { } && \underline { 20,000 \text { units } }\\\hline \text { Sales } &\text { } &\$ & 200,000 \\\hline \text { Less variable costs: } \\\hline \text { } &\text { Manufacturing costs } &\$ & 70,000 \\\hline \text { } &\text { Selling and administrative costs } &\$ & \underline { 40,000 }\\\hline \text { Contribution Margin } &\text { } &\$ & 90,000 \\\hline \text {Less fixed costs:} \\\hline \text { } &\text { Manufacturing costs } &\$ & 22,000 \\\hline \text { } &\text {Selling and administrative costs } &\$ & \underline { 17,000 }\\\hline \text { Net Income } &\text { } &\$ &\underline { 51,000}\\\hline \end{array}$ What will budgeted net income equal if 21,000 units are produced and sold? (Do not round intermediate calculations. )

A) $53,550
B) $55,500
C) $94,500
D) $210,000

Question 6

A budget prepared at a single volume of activity is referred to as a:

A) Strategic budget.
B) Standard budget.
C) Static budget.
D) Flexible budget.

Question 7

When would a variance be labeled as unfavorable?

A) When standard costs are more than actual costs
B) When expected sales are less than actual sales
C) When actual sales are equal to expected sales
D) None of these answers is correct.

Question 8

Which of the following applications is most suited for developing flexible budgets?

A) Database
B) Graphics
C) Spreadsheet
D) Word processing

Question 9

Which of the following income statement formats is most commonly used with flexible budgeting?

A) Sales - Variable costs = Contribution margin;Contribution margin - Fixed costs = Net income
B) Sales - Cost of goods sold = Gross margin;Gross margin - Operating expenses = Net income
C) Sales - Manufacturing costs - Selling and administrative costs = Net income
D) None of these answers is correct.

Question 10

Select the incorrect statement regarding flexible budgets.

A) Flexible budgets often show the estimated revenues and costs at multiple volume levels.
B) A flexible budget is used to compare actual to budgeted amounts.
C) A flexible budget is also known as a master budget.
D) Standard prices and costs are used in preparing a flexible budget.

Question 11

A difference between the static budget based on planned volume and a flexible budget prepared at actual volume is called a:

A) Flexible budget variance.
B) Static budget variance.
C) Production activity variance.
D) Volume variance.

Question 12

Sometimes employees will deliberately overstate the amount of materials and/or labor that should be required to complete a job.The difference between inflated and realistic standards is known as:

A) Budget slack.
B) Making the numbers.
C) Lowballing.
D) Cooking the books.

Question 13

When would a variance be labeled as favorable?

A) When actual costs are less than standard costs
B) When standard costs are equal to actual costs
C) When standard costs are less than actual costs
D) When estimated costs are greater than actual costs

Question 14

Static and flexible budgets are similar in that:

A) They both are based on the same per unit variable amounts and the same fixed costs.
B) They both concentrate solely on costs.
C) They both are prepared for multiple activity levels.
D) None of these answers is correct.

Question 15

The following static budget is provided: $\begin{array}{|l|r|r|}\hline & \underline{\text { Per Unit }} & {\text { Total }} \\\hline \text { Sales } & \$ 60 & \$ 900,000 \\\hline \text { Less variable costs: } & & \\\hline {\text { Manufacturing costs }} & 30 & 450,000 \\\hline \text { Selling and administrative costs } & \underline{10} & \underline{150,000} \\\hline \text { Contribution margin } & \$ 20 & \$ 300,000 \\\hline \text { Less fixed costs: } & & \\\hline \text { Manufacturing costs } & &75,000 \\\hline \text { Selling and administrative costs } & & \underline{125,000} \\\hline \text { Total fixed costs } & &\underline{200,000} \\\hline \text { Net income } & &\$ 100,000 \\\hline & & \\\hline\end{array}$ What will be the overall volume variance if 12,000 units are produced and sold?

A) $80,000 F
B) $80,000 U
C) $60,000 U
D) $160,000 U

Question 16

Volume variances are computed for which of the following costs?

A) Fixed manufacturing costs only
B) Variable selling and administrative costs only
C) Variable manufacturing and selling and administrative costs
D) Variable manufacturing costs only

Question 17

Assuming actual volume is 10,000 units and planned volume is 12,000 units,the sales volume variance in units:

A) Equals 2,000 units unfavorable.
B) Equals 2,000 units favorable.
C) Cannot be determined without additional information.
D) None of these answers is correct.

Question 18

Spark Company's static budget is based on a planned activity level of 45,000 units.At the same time the static budget was prepared,the management accountant prepared two additional budgets,one based on 40,000 units and one based on 50,000.The company actually produced and sold 49,000 units.In evaluating its performance,management should compare the company's actual revenues and costs to which of the following budgets?

A) A budget based on 40,000 units
B) A budget based on 45,000 units
C) A budget based on 49,000 units
D) A budget based on 50,000 units

Question 19

Which of the following can reduce the amount of employees' budget gamesmanship?

A) Have superiors and subordinates participate in the standard-setting process.
B) Incorporate standards into the firm's evaluation system.
C) Avoid using standards for punitive purposes.
D) All of these answers are correct.

Question 20

Select the incorrect statement concerning the human factor of performance evaluation.

A) Variances should not be used to single out managers for punishment.
B) Variances must be analyzed carefully to ensure that they are fully understood.
C) Just because a cost variance is labeled as favorable doesn't necessarily mean that the manager should be commended for a job well done.
D) Managers should always be punished for unfavorable variances.

Question 21

The Russell Company provides the following standard cost data per unit of product: $\begin{array}{ll} \text {Direct material ( 3 gallons @\$ 6 per gallon) } & \text { \$ 18.00 } \\ \text {Direct labor ( 2 hours @ \$ 10 per hour) } & \text { \$ 20.00 } \end{array}$ During the period,the company produced and sold 22,000 units incurring the following costs: $\begin{array}{ll} \text {Direct material } & \text { 68,000 gallons@ \$ 5.90 per gallon } \\ \text {Direct labor } & \text {45,500 hours @ \$ 9.75 per hour } \end{array}$ The direct material price variance was:

A) $6,600 unfavorable.
B) $6,600 favorable.
C) $6,800 unfavorable.
D) $6,800 favorable.

Question 22

Which of the following is not an advantage of using a standard cost system?

A) Promotes the efficient use of management talent to control costs
B) Provides immediate feedback that permits rapid response to problems
C) The easiest cost system to develop and maintain
D) Can boost morale and motivate employees

Question 23

Which of the following equations can be used to compute the total materials variance? (A = Actual;S = Standard;Q = Quantity;P = Price)

A) (AQ × AP)- (SQ × SP)
B) (SQ × SP)- (SQ × SP)
C) (AQ × AP)- (AQ × SP)
D) (AQ × SP)- (SQ × SP)

Question 24

Standard cost systems facilitate the management practice known as:

A) Management by the numbers.
B) Management development.
C) Managing by exception.
D) Just-in-time management.

Question 25

Shia Company makes a product that is expected to require 2 hours of labor per unit of product.The standard cost of labor is $5.20.Shia actually used 2.1 hours of labor per unit of product.The actual cost of labor was $5.30 per hour.Shia made 1,000 units of product during the period.Based on this information alone,the labor price variance is:

A) $200 unfavorable.
B) $200 favorable.
C) $210 favorable.
D) $210 unfavorable.

Question 26

Which of the following factors should be considered in establishing standards for use with a standard costing system?

A) Historical data
B) Current and planned technology,plant layout,and operating procedures
C) Behavioral implications
D) All of these answers are correct.

Question 27

The Russell Company provides the following standard cost data per unit of product: $\begin{array}{ll } \text {Direct material ( 3 gallons @ \$ 6 per gallon) } & \$ 18.00 \\ \text { Direct labor ( 2 hours @ \$ 10 per hour) } &\$ 20.00 \end{array}$
During the period,the company produced and sold 22,000 units incurring the following costs: $\begin{array}{ll} \text {Direct material } & \text { 68,000 gallons @ \$ 5.90 per gallon } \\ \text { Direct labor } & \text { 45,500 hours @ \$ 9.75 per hour } \end{array}$
The direct material usage variance was:

A) $12,000 unfavorable.
B) $12,000 favorable.
C) $11,800 unfavorable.
D) $11,800 favorable.

Question 28

The resources used in the manufacturing process are frequently called:

A) Variances.
B) Standards.
C) Inputs.
D) Outputs.

Question 29

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00.Actual sales for April were 149,000 units and average selling price was $6.12. The sales revenue flexible budget variance was:

A) $6,120 favorable.
B) $6,000 unfavorable.
C) $17,880 favorable.
D) $17,880 unfavorable.

Question 30

White Company budgeted for $200,000 of fixed overhead cost and volume of 40,000 units.During the year,the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The fixed overhead cost volume variance is:

A) $10,000 favorable.
B) $10,000 unfavorable.
C) $5,000 favorable.
D) $5,000 unfavorable.

Question 31

Select the correct statement from the following,assuming Carmichael Company had a favorable direct materials price variance of $3,000 and an unfavorable direct materials usage variance of $2,000.

A) The total direct materials variance is $1,000 unfavorable.
B) The total direct materials variance is $5,000 favorable.
C) The total direct materials variance is $5,000 unfavorable.
D) The total direct materials variance is $1,000 favorable.

Question 32

The Landrum Company provides the following standard cost data per unit of product: $\begin{array}{ll} \text { Variable overhead } & \text { \$ 8.00 } \\\end{array}$ Landrum anticipated that they would produce and sell 24,000 units.During the period,the company produced and sold 25,000 units incurring $210,000 of variable overhead costs. The variable overhead flexible budget variance was:

A) $8,000 unfavorable.
B) $10,000 unfavorable.
C) $8,000 favorable.
D) $10,000 favorable.

Question 33

The Russell Company provides the following standard cost data per unit of product: $\begin{array}{llcc} \text { Direct material ( 3 gallons @ \$ 6 per gallon) } & \$ 18.00 \\ \text {Direct labor ( 2 hours @ \$ 10 per hour) } & \$ 20.00\end{array}$
During the period,the company produced and sold 22,000 units incurring the following costs: $\begin{array}{llcc} \text {Direct material } & \text { 68,000 gallons @ \$ 5.90 per gallon } \\ \text { Direct labor } &\text { 45,500 hours @ \$ 9.75 per hour } \end{array}$
The direct labor price variance was:

A) $11,000 unfavorable.
B) $11,000 favorable.
C) $11,375 unfavorable.
D) $11,375 favorable.

Question 34

Abbot Company spent less than expected for materials and more than expected for labor.Select the incorrect statement from the following.

A) You can always expect unfavorable labor variances if you have favorable material variances.
B) In order to facilitate cost control,it will be necessary to analyze the price and quantity of each resource used in production.
C) It cannot be determined from the information provided whether employees were paid higher wages or if they worked more hours.
D) It cannot be determined from the information provided whether the company paid a lower purchase price for materials or if workers used less materials.

Question 35

Which range of difficulty should normally be used to develop standards?

A) Practical standards
B) Lax standards
C) Ideal standards
D) Inflated standards

Question 36

Kokko Company makes a product that is expected to require 2 hours of labor per unit of product.The standard cost of labor is $6.00.Kokko actually used 2.1 hours of labor per unit of product.The actual cost of labor was $6.25 per hour.Kokko made 1,100 units of product during the period.Based on this information alone,the labor usage variance is:

A) $190 favorable.
B) $660 unfavorable.
C) $600 favorable.
D) $660 favorable.

Question 37

The standard amount of materials required to make one unit of Product Q is 4 pounds.Tusa's static budget showed a planned production of 3,800 units.During the period the company actually produced 4,100 units of product.The actual amount of materials used averaged 3.9 pounds per unit.The standard price of material is $1 per pound.Based on this information,the materials usage variance was:

A) $410 favorable.
B) $380 unfavorable.
C) $410 unfavorable.
D) $380 favorable.

Question 38

Global Company makes a product that is expected to use 2.2 pounds of material per unit of product.The material has a standard cost of $2 per pound.Global actually used 2.3 pounds of material per unit of product made in January.The actual cost of material was $1.95 per pound.Based on this information alone,the materials variances for the January production would be:

A) Favorable for price and unfavorable for usage.
B) Unfavorable for price and favorable for usage.
C) Unfavorable for price and unfavorable for usage.
D) Favorable for price and favorable for usage.

Question 39

The Russell Company provides the following standard cost data per unit of product: $\begin{array}{llcc} \text { Direct material ( 3 gallons @ \$ 6 per gallon) } & \$ 18.00 \\ \text {Direct labor ( 2 hours @ \$ 10 per hour) } &\$ 20.00\end{array}$
During the period,the company produced and sold 22,000 units incurring the following costs: $\begin{array}{llcc} \text {Direct material } & \text {68,000 gallons @ \$ 5.90 per gallon} \\ \text {Direct labor } & \text {45,500 hours @ \$ 9.75 per hour}\end{array}$
The direct labor usage variance was:

A) $15,000 unfavorable.
B) $15,000 favorable.
C) $14,625 unfavorable.
D) $14,625 favorable.

Question 40

All of the following factors should influence the decision to investigate a variance except:

A) Frequency of occurrence.
B) Materiality of the variance amount.
C) The direction of the variance (favorable or unfavorable).
D) Capacity for management to control.

Question 41

Which of the following statements is true?

A) An unfavorable materials price variance could have resulted from actions taken by the purchasing agent.
B) An unfavorable materials usage variance could have resulted from actions taken by the production supervisor.
C) An unfavorable labor usage variance could have resulted from actions taken by the personnel department.
D) All of these answers are correct.

Question 42

The Ferguson Company estimated that October sales would be 100,000 units with an average selling price of $6.00.Actual sales for October were 105,000 units and average selling price was $5.95. The sales volume variance was:

A) $30,000 favorable.
B) $30,000 unfavorable.
C) $29,750 favorable.
D) $29,750 unfavorable.

Question 43

Which manager is usually held responsible for materials usage variances?

A) Production supervisor
B) Marketing manager
C) Purchasing agent
D) None of these answers is correct.

Question 44

Which manager is usually held responsible for labor price variances?

A) Sales manager
B) Purchasing agent
C) Marketing manager
D) Production supervisor

Question 45

Which of the following reason(s)cause flexible budgets to be useful planning tools?

A) Flexible budgets allow managers to anticipate results under a variety of scenarios.
B) Flexible budgets can help determine if a company's cash position is adequate.
C) Flexible budgets can help managers judge if materials and storage facilities are appropriate for various production levels.
D) All of these answers are correct.

Question 46

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00.Actual sales for April were 149,000 units and average selling price was $6.12. The sales volume variance was:

A) $6,120 favorable.
B) $6,000 unfavorable.
C) $17,880 favorable.
D) $17,880 unfavorable.

Question 47

Which manager is usually held responsible for materials price variances?

A) Plant manager
B) Purchasing agent
C) Production supervisor
D) Marketing manager

Question 48

Which manager is normally held responsible for fixed cost volume variances?

A) Production supervisor
B) Upper level marketing managers
C) Plant manager
D) Purchasing agent

Question 49

Which of the following is a difference between a static and a flexible budget?

A) Static budgets use the same fixed cost amounts,whereas flexible budgets change the amount of fixed costs at different levels of activity.
B) Static budgets are based on the same per unit variable amount,whereas flexible budgets are based on multiple per unit variable amounts.
C) Static budgets are based on single estimate of volume,whereas flexible budgets show estimated costs and revenues at a variety of activity levels.
D) None of these answers is correct.

Question 50

When would a sales variance be listed as favorable?

A) When actual sales exceed budgeted or expected sales
B) When actual sales are less than budgeted or expected sales
C) When actual sales are equal to budgeted or expected sales
D) None of these answers is correct.

Question 51

The Ferguson Company estimated that October sales would be 100,000 units with an average selling price of $6.00.Actual sales for October were 105,000 units and average selling price was $5.95. The sales revenue flexible budget variance was:

A) $5,000 favorable.
B) $5,000 unfavorable.
C) $5,250 favorable.
D) $5,250 unfavorable.

Question 52

The following information is provided by the Atlas Company: $\begin{array}{ll}\text { Actual direct material cost } & \$ 20,000 \\\text { Standard direct material cost } & \$ 24,000 \\ \text { Direct material usage variance } & \$ 3,000 \text { favorable }\end{array}$ What is the direct material price variance?

A) $1,000 favorable
B) $1,000 unfavorable
C) $5,000 unfavorable
D) Not enough information is provided

Question 53

The sales volume variance is the difference between the:

A) static budget (based on actual volume)and the flexible budget (based on planned volume).
B) static budget (based on planned volume)and the flexible budget (based on actual volume).
C) static budget (based on planned volume)and actual revenue or cost.
D) flexible budget (based on actual volume)and actual or revenue or cost.

Question 54

When would a cost variance be listed as unfavorable?

A) When actual costs are less than budgeted costs
B) When actual costs exceed budgeted costs
C) When actual costs are equal to budgeted costs
D) When actual sales are less than budgeted sales

Question 55

Select the correct statement regarding general,selling,and administrative (GS&A)costs.

A) Variable general,selling,and administrative costs can have price variances.
B) Variable general,selling,and administrative costs cannot have usage variances.
C) Cost variances are not generally computed for fixed general,selling,and administrative costs.
D) All of these answers are correct.

Question 56

Select the correct statement regarding flexible budgets.

A) A flexible budget can only be prepared for a single level of activity.
B) A flexible budget is not used for planning.
C) A flexible budget shows expected revenues and costs at a variety of activity levels.
D) A flexible budget is also known as the master budget.

Question 57

Heartwood Company reported a $4,000 favorable direct labor price variance and a $1,500 unfavorable direct labor usage variance.Select the correct statement from the following.

A) It took the employees less time to produce the outputs than expected.
B) The total direct labor variance is $2,500 favorable.
C) The actual direct labor rate must have exceeded the standard direct labor rate.
D) It is probable that the supervisor attempted to use more highly skilled (and paid)employees than allowed for by the direct labor standards.

Question 58

The following standard cost card is provided for Navid Company's Product A: $\begin{array}{|l|r|}\hline \text { Direct material (2lbs.@\$5.00 per lb.) } & \$ 10.00 \\\hline \text { Direct labor (1hr@ } \$ 8.00 \text { per hr.) } & 8.00 \\\hline \text { Variable overhead (1 hr.@ } \$ 3.00 \text { per hr.) } & 3.00 \\\hline \text { Fixed overhead (1 hr.@\$2.00 per hr.) } & \underline {2.00} \\\hline \text { Total standard cost per unit } & \underline {\$ 23.00} \\\hline\end{array}$ The fixed overhead rate is based on total budgeted fixed overhead of $12,000.During the period,the company produced and sold 5,800 units at the following costs: Direct material 12,200 pounds @ $4.80 per pound
Direct labor 5,950 hours @ $8.00 per hour
Overhead $29,920
The standard manufacturing cost per unit is $23.00.What is the actual manufacturing cost per unit? (Do not round intermediate calculations. )

A) $23.46.
B) $36.16.
C) $17.96.
D) Cannot be determined from the information provided.

Question 59

Which of the following equations can be used to compute a labor price variance? (A = Actual;S = Standard;H = Hour;P = Price)

A) (AH × AP)- (AH × SP)
B) (AH × SP)- (SH × SP)
C) (AH × AP)- (SH × SP)
D) (SH × SP)- (SH × SP)

Question 60

Which of the following is an incorrect statement regarding variances?

A) A variance is favorable when expected sales are more than actual sales.
B) A variance is a difference between budgeted and actual amounts.
C) A variance can be calculated for both revenues and expenses.
D) A variance can be both favorable and unfavorable.

Question 61

Jared expects to charge $60 per hour for his industrial maintenance business during the following year.He expects to reach 50,000 hours at that price.Jared's partner disagrees with the estimate and expects closer to 40,000 hours. What should Jared do when preparing the budget for the year?

A) Create a flexible budget showing a range of outcomes between 40,000 hours and 50,000 hours.
B) Create two master budgets,one at 50,000 hours and one at 40,000 hours.
C) Create only one budget at the more optimistic volume of 50,000 hours.
D) Create a volume budget based on actual performance.

Question 62

Which of the following statements is incorrect?

A) In deciding whether to investigate a variance,managers should not consider the materiality of the variance.
B) A material variance is one that will influence stockholders' investment decisions.
C) The primary advantage of a standard cost system is to price products consistently.
D) None of these answers is correct.

Question 63

For a product made by George Company,last year's standards for labor were 2 hours at $12 per hour.Which of the following considerations should George take into account in setting the standards for this year?

A) George should revisit the prior year standards.
B) George should consider whether or not the prior year standards were achieved.
C) George should consider any changes that may influence worker productivity.
D) All of these answers are correct.

Question 64

Achieving the sales volume in the master budget is known as:

A) making the numbers.
B) lowballing.
C) cooking the books.
D) budget slack.

Question 65

Stafford Company prepared a static budget for a production and sales volume of 10,000 units. $\begin{array}{l}\begin{array}{|l|}\hline\\\hline \text { Number of units }\\\hline \text { }\\\hline \text { Sales revenue }\\\hline \text { Variable manufacturing costs: }\\\hline \text { Materials }\\\hline \text { Labor }\\\hline \text { Overhead }\\\hline \text { Variable general, selling, and administrative costs }\\\hline \text { Contribution margin }\\\hline \text { Fixed costs }\\\hline \text { Manufacturing overhead }\\\hline \text { General, selling, and administrative costs }\\\hline \text { Net income }\\\hline\end{array}\begin{array}{l|}\hline \\\hline \\ \hline \text { Per unit standards}\\\hline \$ 65.00 \\\hline \\\hline\$ 11.00 \\\hline\$ 9.00 \\\hline\$ 4.20 \\\hline\$ 11.00 \\ \hline \\\hline \\\hline \\\hline \\\hline \\\hline\end{array}\begin{array}{l|}\hline \text {Static Budget}\\\hline \$ \quad 10,000 \\\hline \\\hline \$ \quad 650,000 \\\hline \\\hline 110,000 \\\hline 90,000 \\\hline 42,000 \\\hline \underline{110,000}\\\hline {\$ \quad 298,000}\\\hline \\\hline 100,800\\\hline \underline{45,000}\\\hline {\$ \quad 152,200}\\\hline\end{array}\end{array}$ What is net income if 9,000 units are sold?

A) $152,100
B) $152,400
C) $137,300
D) $122,400

Question 66

Timberlake Company planned for a production and sales volume of 12,000 units.However,the company actually makes and sells 13,000 units. $\begin{array}{l}\begin{array}{|l|}\hline\\\hline \text { Number of units }\\\hline \text { }\\\hline \text { Sales revenue }\\\hline \text { Variable manufacturing costs: }\\\hline \text { Materials }\\\hline \text { Labor }\\\hline \text { Overhead }\\\hline \text { Variable G,S\&A }\\\hline \text { Contribution margin }\\\hline \text { Fixed costs }\\\hline \text { Manufacturing overhead }\\\hline \text { G,S\&A }\\\hline \text { Net income }\\\hline\end{array}\begin{array}{l|}\hline \\\hline \\ \hline \text { Per unit standards}\\\hline \$ 65.00 \\\hline \\\hline\$ 11.00 \\\hline\$ 9.00 \\\hline\$ 4.20 \\\hline\$ 11.00 \\ \hline \\\hline \\\hline \\\hline \\\hline \\\hline\end{array}\begin{array}{l|}\hline \text {Static Budget}\\\hline12,000\\\hline\\\hline \$ 780,000 \\\hline\\\hline 132,000 \\\hline 108,000 \\ \hline50,400 \\\hline \underline {132,000} \\\hline \$ 357,600 \\\hline\\\hline 100,800 \\\hline \underline {45,000} \\\hline \$ 211,800\\\hline\end{array}\begin{array}{l|}\hline \text { Flexible Budget}\\\hline 13,000\\\hline\\\hline \$ 845,000 \\\hline\\\hline 143,000 \\\hline 117,000 \\\hline 54,600 \\\hline \underline {143,000} \\\hline \$ 387,400 \\\hline\\\hline 100,800 \\\hline \underline {45,000 }\\\hline \$ 241,600\\\hline\end{array}\end{array}$ What was the sales volume variance?

A) $65,000 favorable
B) $65,000 unfavorable
C) $29,800 unfavorable
D) $29,800 favorable

Question 67

Multiplying the difference between actual materials price per unit and the standard materials price per unit by actual quantity of materials used is known as the:

A) Sales volume variance.
B) Materials price variance.
C) Labor price variance.
D) Materials usage variance.

Question 68

Standards that do allow for normal down time and can be achieved with reasonable amounts of effort are known as:

A) Ideal standards.
B) Lax standards.
C) Practical standards.
D) Exceptional standards.

Question 69

What is the result when the actual rate paid for labor is less than the standard rate?

A) A favorable labor price variance
B) An unfavorable labor price variance
C) A favorable labor usage variance
D) An unfavorable labor usage variance

Question 70

The Bach Company provides the following standard and actual cost relating to material price and labor usage. $\begin{array}{ccc}\underline { \text {Item to Classify } }&\underline { \text {Standard } }&\underline { \text { Actual } }\\\\\\\text { Materials Price } & 8.50 \text { per gallon } & 8.35 \text { per gallon } \\\text { Labor Usage } & 30,000 \text { hours } & 28,500 \text { hours }\end{array}$ Based on the above information,which statement is correct?

A) Both the material price variance and the labor usage variance are unfavorable.
B) Both the materials price variance and the labor usage variance are favorable.
C) The labor usage variance is unfavorable.
D) The materials price variance is unfavorable.

Question 71

A static budget is one that shows estimated revenues and costs at multiple activity levels.

Question 72

Timberlake Company planned for a production and sales volume of 12,000 units.However,the company actually makes and sells 13,000 units. $\begin{array}{l}\begin{array}{|l|}\hline\\\hline \text { Number of units }\\\hline \text { }\\\hline \text { Sales revenue }\\\hline \text { Variable manufacturing costs: }\\\hline \text { Materials }\\\hline \text { Labor }\\\hline \text { Overhead }\\\hline \text { Variable G,S\&A }\\\hline \text { Contribution margin }\\\hline \text { Fixed costs }\\\hline \text { Manufacturing overhead }\\\hline \text { G,S\&A }\\\hline \text { Net income }\\\hline\end{array}\begin{array}{l|}\hline \\\hline \\ \hline \text { Per unit standards}\\\hline \$ 65.00 \\\hline \\\hline\$ 11.00 \\\hline\$ 9.00 \\\hline\$ 4.20 \\\hline\$ 11.00 \\ \hline \\\hline \\\hline \\\hline \\\hline \\\hline\end{array}\begin{array}{l|}\hline \text {Static Budget}\\\hline12,000\\\hline\\\hline \$ 780,000 \\\hline\\\hline 132,000 \\\hline 108,000 \\ \hline50,400 \\\hline \underline {132,000} \\\hline \$ 357,600 \\\hline\\\hline 100,800 \\\hline \underline {45,000} \\\hline \$ 211,800\\\hline\end{array}\begin{array}{l|}\hline \text { Flexible Budget}\\\hline 13,000\\\hline\\\hline \$ 845,000 \\\hline\\\hline 143,000 \\\hline 117,000 \\\hline 54,600 \\\hline \underline {143,000} \\\hline \$ 387,400 \\\hline\\\hline 100,800 \\\hline \underline {45,000 }\\\hline \$ 241,600\\\hline\end{array}\end{array}$ What was the total variable cost volume variance?

A) $29,800 unfavorable
B) $29,800 favorable
C) $35,200 unfavorable
D) $35,200 favorable

Question 73

For performance evaluation,the amount of costs actually incurred should be compared to the costs that would have been incurred at the actual volume of activity rather than at the planned volume of activity.

Question 74

When would a sales price variance be listed as unfavorable?

A) When the actual sales price is less than the standard sales price.
B) When the actual sales price is equal to the standard sales price.
C) When the actual sales price is greater than the standard sales price.
D) When the actual sales volume is less than the budgeted sales volume.

Question 75

Which of the following is not an example of budget gamesmanship that may occur in a company?

A) Lowballing
B) Budget slack
C) Making the numbers
D) None of these answers is correct.

Question 76

Which of the following statements is incorrect regarding variable overhead variances?

A) Variable overhead variances are based on the same general formulas used to compute the materials and labor price variances.
B) Variable overhead costs represent many inputs such as supplies,utilities and indirect labor.
C) All companies must calculate price and usage variances for variable overhead costs.
D) None of these answers is correct.

Question 77

What is the result when the quantity of materials used is less than the standard quantity?

A) A favorable materials usage variance
B) A favorable materials price variance
C) An unfavorable materials usage variance
D) An unfavorable materials price variance

Question 78

Which of the following statements is correct?

A) Establishing standards is the least difficult aspect of using a standard cost system.
B) Managers should be praised or punished based on variances.
C) A favorable variance may indicate the existence of unfavorable conditions.
D) Budget slack exists when performance standards are set at an ideal,unachievable level.

Question 79

Standards that do not allow for normal down time,waste of materials,or machine breakdowns are known as:

A) Lax standards.
B) Practical standards.
C) Exceptional standards.
D) Ideal standards.

Question 80

Which manager is generally held responsible for the sales volume variance?

A) Purchasing agent
B) Marketing manager
C) Plant manager
D) Production manager