Deck 17: Additional Topics in Variance Analysis

Question 1

The market share variance is more controllable by the marketing department than the industry volume variance.

Answer 1

True

Question 2

The production cost yield variance is conceptually the same as the sales quantity variance.

Answer 2

True

Question 3

The direct material price variance is based on the quantity of materials purchased when the quantity purchased is different from the quantity used.

Answer 3

True

Question 4

The only variances that should be investigated are those for which the expected benefits of correction exceed the costs of investigating and correcting.

Question 5

Labor variances are more important than material variances in service organizations.

Question 6

The production mix variance measures the impact of substituting one material for another material during the production process.

Question 7

The direct labor yield variance is unfavorable when the total hours worked during a period are less than the total standard hours allowed for the actual number of units produced.

Question 8

If variances are not prorated at the end of the accounting period,they are closed to the Cost of Goods Sold.

Question 9

The industry volume variance is the portion of the sales activity variance due to a change in the company's proportion of sales in the markets in which they operate.

Question 10

If the number of units produced exceeds the number of units sold,the full-absorption operating profit will be lower than variable costing operating profit.

Question 11

If a company sells two products,it is possible for both products to have a favorable sales mix variance.another.

Question 12

Two important characteristics to consider when deciding how many variances to review are how large the variance is and the extent to which the variance can be managed.

Question 13

Professional accounting firms could not compute a labor mix and labor yield variance for their auditors because labor in accounting is not substitutable.

Question 14

The basic variance analysis framework used for manufacturing companies can also be used in service organizations.

Question 15

Output is usually defined as sales units in merchandising,but service organi­zations use measures of activity units,like patient days.

Question 16

An increase in an industry's volume and a decrease in a company's market share implies that the company's sales price variance is unfavorable.

Question 17

The general approach in variance analysis is to separate the variance into components based on a budgeting formula.

Question 18

The variable production cost variances are computed using the units produced instead of the units sold.

Question 19

If a company sells two products,it is possible for both products to have an unfavorable sales quantity variance.

Question 20

The sales quantity variance is the same as the sales activity variance on a flexible budget performance report.

Question 21

The Fantasy Gifts Company,a maker of Holiday novelties,needs your help immediately.The company's accountant resigned without leaving adequate records or explanations for what she did.In reviewing the records,you find the following information for May:
$$\begin{array} { | l | r | } \hline \text { Materials Purchased } & 20,000 \text { units } \\\hline \text { Materials Used } & 15,000 \text { units } \\\hline\end{array}$$ You find a copy of the budget which shows that materials were budgeted at $0.60/unit.You know that the materials price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers,which indicate the following:

$$\begin{array} { | l | c | } \hline \text { Materials price variance } & \$ 200 \mathrm {~F} \\\hline \text { Materials efficiency (quantity) variance } & \$ 600 \mathrm {~F} \\\hline\end{array}$$ What was the total standard cost of direct materials allowed during May?

A) $8,260.
B) $8,400.
C) $9,440.
D) $9,600.

Question 22

Which of the following statements is(are)false?
(A)All variances should be prorated to inventories and cost of goods sold at the end of the accounting period.
(B)If the number of units produced exceeds the number of units sold,the full-absorption operating profit will be lower than variable costing operating profit.

A) Only A is false.
B) Only B is false.
C) Both A and B are false.
D) Neither A nor B is false.

Question 23

In a standard cost system,overhead is applied to production on a basis of:

A) the denominator hours chosen for the period.
B) the budgeted hours for the normal production level of activity.
C) the actual hours required to complete the output of the period.
D) the standard hours allowed to complete the output of the perioD.
Standard costing uses standard hours,not actual or budgeteD.

Question 24

Ingredient A12H is a raw material used to make Calvin Corporation's major product.The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output.Data concerning the compound for October appear below:
$$\begin{array} { | l | r | } \hline \text { Cost of material purchased in October, per ounce } & \$ 23.10 \\\hline \text { Material purchased in October, ounces } & 2,300 \\\hline \text { Material used in production in October, ounces } & 2,120 \\\hline \text { Actual output in October, units } & 600 \\\hline\end{array}$$ The raw material was purchased on account.The Materials Quantity Variance for October would be recorded as a:

A) credit of $3,680.
B) debit of $4,140.
C) credit of $4,140.
D) debit of $3,680.

Question 25

Which of the following sales variances is further analyzed into the market size and industry volume variances?

A) Quantity.
B) Efficiency.
C) Mix.
D) Activity.

Question 26

Ingredient A12H is a raw material used to make Calvin Corporation's major product.The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output.Data concerning the compound for October appear below:
$$\begin{array} { | l | r | } \hline \text { Cost of material purchased in October, per ounce } & \$ 23.10 \\\hline \text { Material purchased in October, ounces } & 2,300 \\\hline \text { Material used in production in October, ounces } & 2,120 \\\hline \text { Actual output in October, units } & 600 \\\hline\end{array}$$ The raw material was purchased on account.The Materials Price Variance for October would be recorded as a:

A) debit of $230.
B) credit of $212.
C) debit of $212.
D) credit of $230.

Question 27

Ingredient B4376 is used to make Razor Corporation's major product.The standard cost of Ingredient B4376 is $24.50 per ounce and the standard quantity is 6.1 ounces per unit of output.In the most recent month,5,030 ounces of the compound were used to make 700 units of the output.When recording the use of materials in production,Raw Materials would be:

A) credited for $123,235.
B) debited for $123,235.
C) debited for $104,615.
D) credited for $104,615.

Question 28

Some variances are the result of accounting errors and omissions,including timing differences.

Question 29

When the actual amount of a raw material used in production is greater than the standard amount allowed for the actual output,the journal entry would include:

A) debit to Raw Materials;credit to Materials Quantity Variance.
B) debit to Work-In-Process;credit to Materials Quantity Variance.
C) debit to Raw Materials;debit to Materials Quantity Variance.
D) debit to Work-In-Process;debit to Materials Quantity Variance.

Question 30

Which of the following statements is(are)true? (A)If variances are prorated at the end of the accounting period,an unfavorable direct materials price variance will,when prorated,increase the value of the Finished Goods Inventory.
(B)Insignificant variances are not generally prorated at the end of the accounting period and are closed to the Cost of Goods Sold.

A) Only A is true.
B) Only B is true.
C) Both A and B are true.
D) Neither A nor B is true.

Question 31

Some variances are the result of standards that are inaccurate or do not reflect the current production process.

Question 32

Barium Corporation has provided the following data concerning its most important raw material,Compound XYY2:
$$\begin{array} { | l | r | } \hline \text { Standard cost, per liter } & \$ 23.80 \\\hline \text { Standard quantity, liters per unit of output } & 5.7 \\\hline \text { Material used in production in August, liters } & 2,350 \\\hline \text { Actual output in August, units } & 400 \\\hline\end{array}$$ When recording the use of materials in production,Raw Materials would be:

A) debited for $55,930.
B) debited for $54,264.
C) credited for $55,930.
D) credited for $54,264.

Question 33

Standard costs should be based on:

A) perfect performance.
B) an average of past costs.
C) most likely level of performance.
D) reasonably attainable levels of efficiency.

Question 34

If raw materials are carried in the Direct Materials Inventory at standard cost,then it is reasonable to assume that the:

A) price variance is recognized when materials are purchased.
B) price variance is recognized when materials are placed into production.
C) company does not follow generally accepted accounting principles.
D) efficiency variance is recognized when the materials are purchaseD.
To be carried at standard,price variations need to be removeD.
Standard cost for materials inventory means standard price × actual quantities in the inventory.

Question 35

Which of the following statements is(are)true?
(A)The market share variance is more controllable by the marketing department than the industry volume variance.
(B)The industry volume variance is the portion of the sales activity variance due to a change in the company's proportion of sales in the markets in which they operate.

A) Only A is true.
B) Only B is true.
C) Both A and B are true.
D) Neither A nor B is true.

Question 36

Ingredient A12H is a raw material used to make Calvin Corporation's major product.The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output.Data concerning the compound for October appear below:
$$\begin{array} { | l | r | } \hline \text { Cost of material purchased in October, per ounce } & \$ 23.10 \\\hline \text { Material purchased in October, ounces } & 2,300 \\\hline \text { Material used in production in October, ounces } & 2,120 \\\hline \text { Actual output in October, units } & 600 \\\hline\end{array}$$ The raw material was purchased on account.The debit to the Raw Materials account for October would total:

A) $52,900.
B) $52,440.
C) $48,760.
D) $53,130.

Question 37

Ingredient A12H is a raw material used to make Calvin Corporation's major product.The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output.Data concerning the compound for October appear below:
$$\begin{array} { | l | r | } \hline \text { Cost of material purchased in October, per ounce } & \$ 23.10 \\\hline \text { Material purchased in October, ounces } & 2,300 \\\hline \text { Material used in production in October, ounces } & 2,120 \\\hline \text { Actual output in October, units } & 600 \\\hline\end{array}$$ The raw material was purchased on account.The credit to the Raw Materials account for October would total:

A) $52,440.
B) $48,760.
C) $52,900.
D) $53,130.

Question 38

The Fantasy Gifts Company,a maker of Holiday novelties,needs your help immediately.The company's accountant resigned without leaving adequate records or explanations for what she did.In reviewing the records,you find the following information for May:
$$\begin{array} { | l | r | } \hline \text { Materials Purchased } & 20,000 \text { units } \\\hline \text { Materials Used } & 15,000 \text { units } \\\hline\end{array}$$ You find a copy of the budget which shows that materials were budgeted at $0.60/unit.You know that the materials price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers,which indicate the following:

$$\begin{array} { | l | c | } \hline \text { Materials price variance } & \$ 200 \mathrm {~F} \\\hline \text { Materials efficiency (quantity) variance } & \$ 600 \mathrm {~F} \\\hline\end{array}$$ What was the total standard cost of direct materials purchased during May?

A) $9,150.
B) $11,800.
C) $12,000.
D) $12,200.

Question 39

One feature of a standard cost system is that it:

A) makes the record keeping process more complex and difficult.
B) never requires updating if standard costs have been carefully determined.
C) reduces the amount of information available to a manager.
D) simplifies the record keeping process by allowing amounts to be carried at standard cost rather than actual cost in the accounting records.

Question 40

The Fantasy Gifts Company,a maker of Holiday novelties,needs your help immediately.The company's accountant resigned without leaving adequate records or explanations for what she did.In reviewing the records,you find the following information for May:
$$\begin{array} { | l | r | } \hline \text { Materials Purchased } & 20,000 \text { units } \\\hline \text { Materials Used } & 15,000 \text { units } \\\hline\end{array}$$
You find a copy of the budget which shows that materials were budgeted at $0.60/unit.You know that the materials price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers,which indicate the following:

$$\begin{array} { | l | c | } \hline \text { Materials price variance } & \$ 200 \mathrm {~F} \\\hline \text { Materials efficiency (quantity) variance } & \$ 600 \mathrm {~F} \\\hline\end{array}$$ What was the total actual cost of the direct materials purchased during May?

A) $9,000.
B) $11,800.
C) $12,000.
D) $12,200.

Question 41

A machine distributor sells two models,basic and deluxe.The following information relates to its master budget.Actual sales were 7,000 basic models and 2,800 deluxe models.The actual sales prices were the same as the budgeted sales prices for both models. $$\begin{array} { | l | r | r | } \hline & \text { Basic } & \text { Deluse } \\\hline \text { Sales (units) } & 8,000 & 2,000 \\\hline \text { Sales price per unit } & \$ 8,000 & \$ 12,000 \\\hline \text { Variable costs per unit } & \$ 6,400 & \$ 9,000 \\\hline\end{array}$$ What is the sales activity variance for the basic model?

A) $1,280,000.
B) $1,600,000.
C) $11,200,000.
D) $12,800,000.

Question 42

Actual and budgeted information about the sales of a product are presented below for June: (CIA adapted)
$$\begin{array} { | l | r | r | } \hline & \text { Actual } & \text { Budget } \\\hline \text { Units } & 8,000 & 10,000 \\\hline \text { Sales Revenue } & \$ 92,000 & \$ 105,000 \\\hline\end{array}$$ The sales price variance for June was:

A) $8,000 favorable.
B) $8,000 unfavorable.
C) $10,000 unfavorable.
D) $10,500 unfavorable.

Question 43

A machine distributor sells two models,basic and deluxe.The following information relates to its master budget.Actual sales were 7,000 basic models and 2,800 deluxe models.The actual sales prices were the same as the budgeted sales prices for both models. $$\begin{array} { | l | r | r | } \hline & \text { Basic } & \text { Deluse } \\\hline \text { Sales (units) } & 8,000 & 2,000 \\\hline \text { Sales price per unit } & \$ 8,000 & \$ 12,000 \\\hline \text { Variable costs per unit } & \$ 6,400 & \$ 9,000 \\\hline\end{array}$$ What is the sales mix variance for the basic model?

A) $256,000.
B) $1,344,000.
C) $1,600,000.
D) $2,520,000.

Question 44

The budget for a given cost during a given period was $80,000.The actual cost for the period was $72,000.Considering these facts,the plant manager has done a better-than-expected job in controlling the cost if: (CPA adapted)

A) the cost is variable and actual production was 90% of budgeted production.
B) the cost is variable and actual production equals budgeted production.
C) the cost is variable and actual production was 80% of budgeted production.
D) the cost is a discretionary fixed cost and actual production equals budgeted production.

Question 45

The sales activity variance is equal to the sum of the market share variance and the:

A) selling price variance.
B) industry volume variance.
C) sales quantity variance.
D) sales mix variance.

Question 46

The exhibit below reflects a summary of performance for a single item of a retail store's inventory for the month ended April 30: (CIA adapted) T
he sales volume variance is:

A) $20,000 favorable.
B) $20,000 unfavorable.
C) $11,000 favorable.
D) $12,000 unfavorable.

Question 47

Using the abbreviations listed below,what is the formula for the industry volume variance? AMS = actual market share
BMS = budgeted market share
BCM = budgeted contribution margin per unit
ACM = actual contribution margin per unit
ATM = actual total market
BTM = budgeted total market

A) (ATM - BTM)(BMS)(ACM)
B) (ATM - BTM)(BMS)(BCM)
C) (AMS - BMS)(ATM)(ACM)
D) (AMS - BMS)(ATM)(BCM)

Question 48

The Morton Company gathered the following information for the year. $$\begin{array} { | l | r | r | r | } \hline & \begin{array} { r } \text { Procuct } \\\text { Product }\end{array} & \text { Total } \\\hline \begin{array} { l } \text { Budgeted sales mix (units) }\end{array} & 40 \% & 60 \% & 100 \% \\\hline \begin{array} { l } \text { Budgeted and actual sales } \\\text { price }\end{array} & \$ 48 & \$ 36 & \\\hline \begin{array} { l } \text { Budgeted variable cost per } \\\text { unit }\end{array} & \$ 32 & \$ 24 & \\\hline \text { Actual sales (units) } & & & 126,000 \\\hline \text { Actual sales mix } & 60 \% & 40 \% & 100 \% \\\hline \text { Fixed costs } & & & \$ 80,000 \\\hline\end{array}$$ What is the total sales mix variance?

A) $705,600.
B) $403,200.
C) $302,400.
D) $100,800.

Question 49

Danner Fashions sells a line of women's dresses.Danner's performance report for November is shown below: (CMA adapted) The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.
$$\begin{array} { | l | r | r | } \hline & \text { Actual } & \text { Budget } \\\hline \text { Dresses sold } & 5,000 & 6,000 \\\hline \text { Sales } & \$ 235,000 & \$ 300,000 \\\hline \text { Variable costs } & \underline { ( 145,000 ) } & \underline { ( 180,000 ) } \\\hline \text { Contribution margin } & \$ 90,000 & 120,000 \\\hline \text { Fixed Costs } & \underline { ( 84,000 ) } & \underline { ( 80,000 ) } \\\hline \text { Operating inc ome } & \underline { \$ 6,000} &\underline { \$ 40,000 }\\\hline\end{array}$$ The effect of the sales quantity variance on the contribution margin for November is:

A) $30,000 unfavorable.
B) $18,000 unfavorable.
C) $20,000 unfavorable.
D) $15,000 unfavorable.

Question 50

Using the abbreviations listed below,what is the market share variance? AMS = actual market share
BMS = budgeted market share
BCM = budgeted contribution margin per unit
ACM = actual contribution margin per unit
ATM = actual total market
BTM = budgeted total market

A) (ATM - BTM)(BMS)(ACM)
B) (ATM - BTM)(BMS)(BCM)
C) (AMS - BMS)(ATM)(ACM)
D) (AMS - BMS)(ATM)(BCM)

Question 51

A machine distributor sells two models,basic and deluxe.The following information relates to its master budget.Actual sales were 7,000 basic models and 2,800 deluxe models.The actual sales prices were the same as the budgeted sales prices for both models. $$\begin{array} { | l | r | r | } \hline & \text { Basic } & \text { Deluse } \\\hline \text { Sales (units) } & 8,000 & 2,000 \\\hline \text { Sales price per unit } & \$ 8,000 & \$ 12,000 \\\hline \text { Variable costs per unit } & \$ 6,400 & \$ 9,000 \\\hline\end{array}$$ What is the sales quantity variance for the basic model?

A) $120,000.
B) $256,000.
C) $1,344,000.
D) $1,600,000.

Question 52

Which of the following income statement items is analyzed using the sales mix and the sales quantity variances?

A) Operating expenses.
B) Cost of goods sold.
C) Gross margin.
D) Contribution margin.

Question 53

Danner Fashions sells a line of women's dresses.Danner's performance report for November is shown below: (CMA adapted) The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.T
$$\begin{array} { | l | r | r | } \hline & \text { Actual } & \text { Budget } \\\hline \text { Dresses sold } & 5,000 & 6,000 \\\hline \text { Sales } & \$ 235,000 & \$ 300,000 \\\hline \text { Variable costs } & \underline { ( 145,000 ) } & \underline { ( 180,000 ) } \\\hline \text { Contribution margin } & \$ 90,000 & 120,000 \\\hline \text { Fixed Costs } & \underline { ( 84,000 ) } & \underline { ( 80,000 ) } \\\hline \text { Operating inc ome } & \underline { \$ 6,000 }&\underline { \$ 40,000} \\\hline\end{array}$$ he variable cost flexible budget variance for November is:

A) $5,000 favorable.
B) $5,000 unfavorable.
C) $4,000 favorable.
D) $4,000 unfavorable.

Question 54

The sales mix variance would be:

A) favorable when a company sells relatively fewer of the products that have contribution margins lower than average.
B) favorable when a company sells relatively more of the products that have contribution margins higher than average.
C) unfavorable when a company sells relatively fewer of the products that have selling prices higher than average.
D) unfavorable when a company sells more of the products that have selling prices lower than average.

Question 55

A machine distributor sells two models,basic and deluxe.The following information relates to its master budget.Actual sales were 7,000 basic models and 2,800 deluxe models.The actual sales prices were the same as the budgeted sales prices for both models. $$\begin{array} { | l | r | r | } \hline & \text { Basic } & \text { Deluse } \\\hline \text { Sales (units) } & 8,000 & 2,000 \\\hline \text { Sales price per unit } & \$ 8,000 & \$ 12,000 \\\hline \text { Variable costs per unit } & \$ 6,400 & \$ 9,000 \\\hline\end{array}$$ What is the sales activity variance for the deluxe model?

A) $400,000.
B) $800,000.
C) $1,600,000.
D) $2,400,000.

Question 56

The sales quantity variance would be favorable when a company sells:

A) relatively fewer of the products bearing contribution margins lower than average.
B) relatively more of the products bearing contribution margins higher than average.
C) more total units than budgeted,holding the sales mix constant.
D) less total units than budgeted,holding the sales mix constant.

Question 57

A machine distributor sells two models,basic and deluxe.The following information relates to its master budget.Actual sales were 7,000 basic models and 2,800 deluxe models.The actual sales prices were the same as the budgeted sales prices for both models. $$\begin{array} { | l | r | r | } \hline & \text { Basic } & \text { Deluse } \\\hline \text { Sales (units) } & 8,000 & 2,000 \\\hline \text { Sales price per unit } & \$ 8,000 & \$ 12,000 \\\hline \text { Variable costs per unit } & \$ 6,400 & \$ 9,000 \\\hline\end{array}$$ What is the sales mix variance for the deluxe model based?

A) $1,176,000.
B) $1,344,000.
C) $2,400,000.
D) $2,520,000.

Question 58

Danner Fashions sells a line of women's dresses.Danner's performance report for November is shown below: (CMA adapted) The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.
$$\begin{array} { | l | r | r | } \hline & \text { Actual } & \text { Budget } \\\hline \text { Dresses sold } & 5,000 & 6,000 \\\hline \text { Sales } & \$ 235,000 & \$ 300,000 \\\hline \text { Variable costs } & \underline { ( 145,000 ) } & \underline { ( 180,000 ) } \\\hline \text { Contribution margin } & \$ 90,000 & 120,000 \\\hline \text { Fixed Costs } & \underline { ( 84,000 ) } & \underline { ( 80,000 ) } \\\hline \text { Operating inc ome } &\underline { \$ 6,000} & \underline {\$ 40,000} \\\hline\end{array}$$ The sales price variance for November is:

A) $30,000 unfavorable.
B) $18,000 unfavorable.
C) $20,000 unfavorable.
D) $15,000 unfavorable.

Question 59

For a company that produces more than one product,the sales volume variance can be divided into which two of the following additional variances? (CMA adapted)

A) Sales price variance and flexible budget variance.
B) Sales mix variance and sales price variance.
C) Sales efficiency variance and sales price variance.
D) Sales quantity variance and sales mix variance.

Question 60

Danner Fashions sells a line of women's dresses.Danner's performance report for November is shown below: (CMA adapted) The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.
$$\begin{array} { | l | r | r | } \hline & \text { Actual } & \text { Budget } \\\hline \text { Dresses sold } & 5,000 & 6,000 \\\hline \text { Sales } & \$ 235,000 & \$ 300,000 \\\hline \text { Variable costs } & ( 145,000 ) & \underline { ( 180,000 ) } \\\hline \text { Contribution margin } & \$ 90,000 & 120,000 \\\hline \text { Fixed Costs } & \underline { ( 84,000 ) } & \underline { ( 80,000 ) } \\\hline \text { Operating inc ome } &\underline {\$6 , 000} &\underline { \$ 40,000 }\\\hline\end{array}$$ What additional information is needed for Danner to calculate the dollar impact of a change in market share on operating income for November? (CMA adapted)

A) Danner's budgeted market share and the budgeted total market size.
B) Danner's budgeted market share,the budgeted total market size,and average market selling price.
C) Danner's budgeted market share and the actual total market size.
D) Danner's actual market share and the actual total market size.

Question 61

A company makes a product using two materials,one of which is interchangeable with a third material.The standards for producing one 200-pound batch are presented below.The last 200-pound batch was produced using 140 pounds of M and 90 pounds of O.The price of M was $0.03 per pound and the actual price of O was $0.10. $$\begin{array} { | l | r | r | r | } \hline \text { Material } & \begin{array} { r } \text { Standard } \\\text { Quantity (lbs) }\end{array} & \begin{array} { r } \text { LBS Standard } \\\text { Costrb }\end{array} & \text { Total Cost } \\\hline \mathrm { O } & 0 & \$ .10 & \$ 0 \\\hline \mathrm { H } & 80 & .08 & 6.40 \\\hline \mathrm { M } & 120 & .02 & 2.40 \\\hline &\underline{ 200} & &\underline{ \$ 8.80} \\\hline\end{array}$$ What is the materials yield variance?

A) $1.12.
B) $1.68.
C) $3.00.
D) $1.32.

Question 62

A credit balance in the labor yield variance implies:

A) the total units produced was greater than the expected number of units given the total labor hours actually used.
B) the total units produced was less than the expected number of units given the total labor hours actually used.
C) the total units produced was greater than the expected number of units given the total standard hours allowed.
D) the total units produced was less than the expected number of units given the total standard hours alloweD.
This would be a favorable variance.

Question 63

What is the correct journal entry to record direct labor when the actual labor mix is favorable and the total standard hours allowed is greater than the total actual hours worked?

A)
$$\begin{array} { | l | c | c | } \hline \text { Work in Process Inventory } & \times \times \times & \\\hline \text { Direct labor yield variance } & \times \times \times & \\\hline \text { Direct labor mix variance } & \times\times \times & \\\hline \text { Wages Payable } & & \times \times \times \\\hline\end{array}$$
B)
$$\begin{array} { | l | c | c | } \hline \text { Work in Process Inventory } & \times\times \times & \\\hline \text { Direct labor yield variance } & & \times \times\times \\\hline \text { Direct labor mix variance } & & \times \times \times \\\hline \text { Wages Payable } & & \times \times \times \\\hline\end{array}$$
C) $$\begin{array} { | l | c | c | } \hline \text { Finished Goods Inventory } & \times \times \times & \\\hline \text { Direct labor mox variance } & \times \times \times & \\\hline \text { Direct labor yield variance } & & \times \times \times \\\hline \text { Work in Process Inventory } & & \times \times \times \\\hline\end{array}$$
D)
$\begin{array}{|l|l|l|}\hline \begin{array}{l}\text { Finished Goods } \\\text { Inventory }\end{array} & \text{xxx} & \\\hline \text { Direct labor yield } & &\text{xxx} \\\text { variance } & & \\\hline \text { Direct labor mix } & &\text{xxx} \\\text { variance } & & \\\hline \text { Work in Process } & & \\ \text { Inventory } & & \text{xxx}\\\hline\end{array}$

Question 64

The Becton Enterprises (BE)produces a gasoline additive,Charger Power.This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process.Careful controls are required during the production process to insure that the proper mix of input chemicals is achieved and that evaporation is controlled.Loss of output and efficiency may result if the controls are not effective.The standard cost of producing a 500-liter batch of Charger Power is $135.The standard materials mix and related standard cost of each chemical used in a 500-liter batch are: $$\begin{array} { | l | r | r | r | } \hline \text { Chemical } & \begin{array} { r } \text { Std imput } \\\text { cuantly }\end{array} & \begin{array} { r } \text { Std cost } \\\text { per liter }\end{array} & \begin{array} { r } \text { Total } \\\text { cost }\end{array} \\\hline \text { Echol } & 200 & \$ 0.200 & \$ 40.00 \\\hline \text { Protex } & 100 & 0.425 & 42.50 \\\hline \text { Benz } & 250 & 0.150 & 37.50 \\\hline \text { CT-40 } & 50 & 0.300 & 15.00 \\\hline & \underline{600} & & \underline{\$ 135.00 }\\\hline\end{array}$$ The quantities of chemicals purchased and used during the current production period are shown in the schedule below.A total of 140 batches of Charger Power were manufactured during the current production period.The controller of BE has determined its costs and chemical usage variations at the end of the production period.


$$\begin{array} { | l | r | r | r | } \hline \text { Chemical } & \text { Quantity Purchased } & \text { Total Cost } & \text { Quantity Used } \\\hline \text { Echol } & 25,000 & \$ 5,365 & 26,600 \\\hline \text { Protex } & 13,000 & 6,240 & 12,880 \\\hline \text { Benz } & 40,000 & 5,840 & 37,800 \\\hline \text { CT-40 } &\underline{ 7,500} & 2,220 &\underline{ 7,140 }\\\hline & 85,500 & & 84,420 \\\hline\end{array}$$ If BE recognizes all variances at the earliest possible moment,what is the total material price variance?

A) $160.
B) $540.
C) $890.
D) $1,270.

Question 65

The next year's budget for Trend,Inc. ,a multi-product company,is given below: $$\begin{array} { | l | r | r | } \hline & \text { Product } A & \text { Product B } \\\hline \text { Sales } & \$ 1,890,000 & \$ 1,377,000 \\\hline \text { Variable costs } & 926,100 & 596,700 \\\hline \text { Fixed costs } & 500,000 & 500,000 \\\hline \text { Net income } & \underline{463,900} & \underline{280,300} \\\hline \text { Units } & 252,000 & 108,000 \\\hline\end{array}$$ At the end of the year,the total fixed costs and the variable costs per unit were exactly as budgeted,but the following units per product line were sold.Trend,Inc.analyzes the effects its sales variances have on the profitability of the company.

$$\begin{array} { | c | c | r | } \hline \text { Product Lines } & \text { Units } & \text { Sales } \\\hline \text { A } & 253,230 & \$ 1,848,579 \\\hline \text { B } & 113,770 & \$ 1,479,010 \\\hline\end{array}$$ What is the total sales price variance?

A) $22,203.50.
B) $28,442.50.
C) $50,646.50.
D) $79,088.50.

Question 66

A manufacturer of industrial equipment has a standard costing system based on standard direct labor-hours (DLHs)as the measure of activity.Data from the company's flexible budget for manufacturing overhead are given below:
$$\begin{array} { | l | r | l | } \hline \text { Level of activity' } & 2,500 & \mathrm { DLHs } \\\hline \text { Overhead costs at the denominator } & & \\\text { activity lev' el: } & & \\\hline \text { Variable overhead cost } & \$ 8,500 & \\\hline \text { Fred overhead cost } & \$ 34,625 & \\\hline\end{array}$$
The following data pertain to operations for the most recent period:
How much overhead was applied to products during the period to the nearest dollar?

A) $44,712.
B) $44,125.
C) $43,125.
D) $44,850.

Question 67

The Vargas Company had the following expectations for the year:
$$\begin{array} { | l | r | } \hline \text { Total market for the product } & 175,000 \text { units } \\\text { XYZ's budgeted sales } & \$ 1,763,125 \\\hline \text { Variable costs per unit } & \$ 18.75 \\\hline \text { Selling price per unit } & \$ 32.50 \\\hline \text { Actual results for the year vere: } & \\\hline \text { Total market for the product } & 166,250 \text { units } \\\hline \text { XYZ's actual sales } & 56,525 \\\hline \text { Total Variable costs } & \$ 1,073,975 \\\hline \text { Total sales } & \$ 1,752,275 \\\hline\end{array}$$ What is Vargas' market share variance?

A) $37,296.88.
B) $40,906.25.
C) $35,700.00.
D) $32,550.00.

Question 68

The Becton Enterprises (BE)produces a gasoline additive,Charger Power.This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process.Careful controls are required during the production process to insure that the proper mix of input chemicals is achieved and that evaporation is controlled.Loss of output and efficiency may result if the controls are not effective.The standard cost of producing a 500-liter batch of Charger Power is $135.The standard materials mix and related standard cost of each chemical used in a 500-liter batch are: $$\begin{array} { | l | r | r | r | } \hline \text { Chemical } & \begin{array} { r } \text { Std imput } \\\text { cuantly }\end{array} & \begin{array} { r } \text { Std cost } \\\text { per liter }\end{array} & \begin{array} { r } \text { Total } \\\text { cost }\end{array} \\\hline \text { Echol } & 200 & \$ 0.200 & \$ 40.00 \\\hline \text { Protex } & 100 & 0.425 & 42.50 \\\hline \text { Benz } & 250 & 0.150 & 37.50 \\\hline \text { CT-40 } & 50 & 0.300 & 15.00 \\\hline & \underline{ 600 }& & \underline{\$ 135.00} \\\hline\end{array}$$

The quantities of chemicals purchased and used during the current production period are shown in the schedule below.A total of 140 batches of Charger Power were manufactured during the current production period.The controller of BE has determined its costs and chemical usage variations at the end of the production period.
$$\begin{array} { | l | r | r | r | } \hline \text { Chemical } & \text { Quantity Purchased } & \text { Total Cost } & \text { Quantity Used } \\\hline \text { Echol } & 25,000 & \$ 5,365 & 26,600 \\\hline \text { Protex } & 13,000 & 6,240 & 12,880 \\\hline \text { Benz } & 40,000 & 5,840 & 37,800 \\\hline \text { CT-40 } &\underline{ 7,500} & 2,220 &\underline{ 7,140} \\\hline & 85,500 & & 84,420 \\\hline\end{array}$$ What is the total materials mix variance?

A) $476.00.
B) $420.00.
C) $388.50.
D) $280.00.

Question 69

What is the correct journal entry to record a favorable materials mix variance assuming all material variances are recognized when the direct materials are issued to production?

A)
$$\begin{array} { | l | c | c | } \hline \text { Work in Process Inventory } & \times \times \times & \\\hline \text { Direct Materials Mo. Variance } & \times \times\times & \\\hline \text { Direct material inventory } & & \times \times \times \\\hline\end{array}$$
B)
$$\begin{array} { | l | l | l | } \hline \text { Work in Process Inventory } & \times \times \times & \\\hline \text { Direct Materials Mix Variance } & & \times \times \times \\\hline \text { Direct material inventory } & & \times \times\times \\\hline\end{array}$$
C)
$$\begin{array} { | c | c | c | } \hline \text { Finished Goods Inventory } & \times \times \times & \\\hline \text { Direct Materials Mo Variance } & \times \times \times & \\\hline \text { Work in Process Inventory } & & \times \times\times \\\hline\end{array}$$
D)
$\begin{array} { | l | l | l | } \hline \begin{array} { l } \text { Direct Materials Mix } \\\text { Variance }\end{array} & X X X & \\\hline \begin{array} { c } \text { Work in Process } \\\text { Inventory }\end{array} & & X X X \\\hline\end{array}$

Question 70

The labor yield variance is actual total hours at:

A) actual mix times actual labor rates less actual total hours at actual mix times standard labor rates.
B) actual mix times standard labor rates less standard total hours at standard mix times standard labor rates.
C) actual mix times standard labor rates less actual total hours at standard mix times standard labor rates.
D) standard mix times standard labor rates less standard total hours at standard mix times standard labor rates.

Question 71

A manufacturer of industrial equipment has a standard costing system based on standard direct labor-hours (DLHs)as the measure of activity.Data from the company's flexible budget for manufacturing overhead are given below:
$$\begin{array} { | l | r | l | } \hline \text { Level of activity' } & 2,500 & \mathrm { DLHs } \\\hline \text { Overhead costs at the denominator } & & \\\text { activity lev' el: } & & \\\hline \text { Variable overhead cost } & \$ 8,500 & \\\hline \text { Fred overhead cost } & \$ 34,625 & \\\hline\end{array}$$ The following data pertain to operations for the most recent period:
$$\begin{array} { | l | r | r | } \hline \begin{array} { l } \text { Actual hours } \\\text { Standard hours allowed for the actual } \\\text { output }\end{array} & 2,600 & \mathrm { DLHs } \\\hline \begin{array} { l } \text { Actual total variable manufacturing } \\\text { overhead cost }\end{array} & 2,692 & \mathrm { DLHs } \\\hline \begin{array} { l } \text { Actual total fixed manufacturing overhead } \\\text { cost }\end{array} & \$ 9,100 & \\\hline\end{array}$$ What is the predetermined overhead rate to the nearest cent?

A) $16.97.
B) $17.25.
C) $16.59.
D) $17.65.

Question 72

The labor mix variance is actual total hours at:

A) actual mix times actual labor rates less actual total hours at actual mix times standard labor rates.
B) actual mix times standard labor rates less standard total hours at standard mix times standard labor rates.
C) actual mix times standard labor rates less actual total hours at standard mix times standard labor rates.
D) standard mix times standard labor rates less standard total hours at standard mix times standard labor rates.

Question 73

A machine distributor sells two models,basic and deluxe.The following information relates to its master budget.Actual sales were 7,000 basic models and 2,800 deluxe models.The actual sales prices were the same as the budgeted sales prices for both models. $$\begin{array} { | l | r | r | } \hline & \text { Basic } & \text { Deluse } \\\hline \text { Sales (units) } & 8,000 & 2,000 \\\hline \text { Sales price per unit } & \$ 8,000 & \$ 12,000 \\\hline \text { Variable costs per unit } & \$ 6,400 & \$ 9,000 \\\hline\end{array}$$ What is the sales quantity variance for the deluxe model?

A) $120,000.
B) $256,000.
C) $1,344,000.
D) $1,600,000.

Question 74

Bonner Company's direct labor cost for March was as follows:
$$\begin{array} { | l | r | r | } \hline \text { Actual direct labor hours } & 30,000 & \\\hline \text { Standard direct labor hours } & 31,500 & \\\hline \text { Rate variance } & \$ 4,500 & \text { U } \\\hline \text { Total payroll } & \$ 189,000 & \\\hline \text { Labor mix variance } & \$ 4,225 & \text { U } \\\hline\end{array}$$ What was Bonner's direct labor yield variance?

A) $13,450.
B) $9,675.
C) $9,225.
D) $5,000.

Question 75

The next year's budget for Trend,Inc. ,a multi-product company,is given below: $$\begin{array} { | l | r | r | } \hline & \text { Product } A & \text { Product B } \\\hline \text { Sales } & \$ 1,890,000 & \$ 1,377,000 \\\hline \text { Variable costs } & 926,100 & 596,700 \\\hline \text { Fixed costs } & 500,000 & 500,000 \\\hline \text { Net income } & \underline{463,900} & \underline{280,300 }\\\hline \text { Units } & 252,000 & 108,000 \\\hline\end{array}$$

At the end of the year,the total fixed costs and the variable costs per unit were exactly as budgeted,but the following units per product line were sold.Trend,Inc.analyzes the effects its sales variances have on the profitability of the company.
$$\begin{array} { | c | c | r | } \hline \text { Product Lines } & \text { Units } & \text { Sales } \\\hline \text { A } & 253,230 & \$ 1,848,579 \\\hline \text { B } & 113,770 & \$ 1,479,010 \\\hline\end{array}$$ What is the total sales quantity variance?

A) $3,570.00.
B) $20,815.00.
C) $33,915.00.
D) $40,553.50.

Question 76

The next year's budget for Trend,Inc. ,a multi-product company,is given below: $$\begin{array} { | l | r | r | } \hline & \text { Product } A & \text { Product B } \\\hline \text { Sales } & \$ 1,890,000 & \$ 1,377,000 \\\hline \text { Variable costs } & 926,100 & 596,700 \\\hline \text { Fixed costs } & 500,000 & 500,000 \\\hline \text { Net income } & \underline{463,900} &\underline{ 280,300 }\\\hline \text { Units } & 252,000 & 108,000 \\\hline\end{array}$$
At the end of the year,the total fixed costs and the variable costs per unit were exactly as budgeted,but the following units per product line were sold.Trend,Inc.analyzes the effects its sales variances have on the profitability of the company.

$$\begin{array} { | c | c | r | } \hline \text { Product Lines } & \text { Units } & \text { Sales } \\\hline \text { A } & 253,230 & \$ 1,848,579 \\\hline \text { B } & 113,770 & \$ 1,479,010 \\\hline\end{array}$$ What is the total sales mix variance?

A) $12,478.00.
B) $20,815.00.
C) $33,915.00.
D) $40,553.50.

Question 77

The Shum Company makes a product,Z,from two materials: X and Y.The standard prices and quantities are as follows:
$$\begin{array} { | l | r | r | } \hline & X & Y \\\hline \text { Price per pound } & \$ 6 & \$ 9 \\\hline \text { Pounds per unit of product Z } & 10 & 5 \\\hline\end{array}$$
In May,21,000 units of Z were produced by Shum Company,with the following actual prices and quantities of materials used:

$$\begin{array} { | l r | r | } \hline & x & Y \\\hline \text { Price per pound } & \$ 5.70 & \$ 8.40 \\\hline \text { Pounds used } & 216,000 & 114,000 \\\hline\end{array}$$ What is the total direct material yield variance for May?

A) $45,000.
B) $81,000.
C) $109,800.
D) $117,000.

Question 78

A company makes a product using two materials,one of which is interchangeable with a third material.The standards for producing one 200-pound batch are presented below.The last 200-pound batch was produced using 140 pounds of M and 90 pounds of O.The price of M was $0.03 per pound and the actual price of O was $0.10. $$\begin{array} { | l | r | r | r | } \hline \text { Material } & \begin{array} { r } \text { Standard } \\\text { Quantity (lbs) }\end{array} & \begin{array} { r } \text { LBS Standard } \\\text { Costrb }\end{array} & \text { Total Cost } \\\hline \mathrm { O } & 0 & \$ .10 & \$ 0 \\\hline \mathrm { H } & 80 & .08 & 6.40 \\\hline \mathrm { M } & 120 & .02 & 2.40 \\\hline &\underline{ 200 }& & \underline{\$ 8.80} \\\hline\end{array}$$ What is the materials mix variance?

A) $1.68.
B) $3.00.
C) $1.32.
D) $0.84.

Question 79

The Shum Company makes a product,Z,from two materials: X and Y.The standard prices and quantities are as follows:
$$\begin{array} { | l | r | r | } \hline & X & Y \\\hline \text { Price per pound } & \$ 6 & \$ 9 \\\hline \text { Pounds per unit of product Z } & 10 & 5 \\\hline\end{array}$$
In May,21,000 units of Z were produced by Shum Company,with the following actual prices and quantities of materials used:

$$\begin{array} { | l r | r | } \hline & x & Y \\\hline \text { Price per pound } & \$ 5.70 & \$ 8.40 \\\hline \text { Pounds used } & 216,000 & 114,000 \\\hline\end{array}$$ What is the total direct materials mix variance for May?

A) $12,000.
B) $24,000.
C) $36,000.
D) $60,000.

Question 80

The Becton Enterprises (BE)produces a gasoline additive,Charger Power.This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process.Careful controls are required during the production process to insure that the proper mix of input chemicals is achieved and that evaporation is controlled.Loss of output and efficiency may result if the controls are not effective.The standard cost of producing a 500-liter batch of Charger Power is $135.The standard materials mix and related standard cost of each chemical used in a 500-liter batch are: $$\begin{array} { | l | r | r | r | } \hline \text { Chemical } & \begin{array} { r } \text { Std imput } \\\text { cuantly }\end{array} & \begin{array} { r } \text { Std cost } \\\text { per liter }\end{array} & \begin{array} { r } \text { Total } \\\text { cost }\end{array} \\\hline \text { Echol } & 200 & \$ 0.200 & \$ 40.00 \\\hline \text { Protex } & 100 & 0.425 & 42.50 \\\hline \text { Benz } & 250 & 0.150 & 37.50 \\\hline \text { CT-40 } & 50 & 0.300 & 15.00 \\\hline &\underline{ 600 }& &\underline{ \$ 135.00} \\\hline\end{array}$$
The quantities of chemicals purchased and used during the current production period are shown in the schedule below.A total of 140 batches of Charger Power were manufactured during the current production period.The controller of BE has determined its costs and chemical usage variations at the end of the production period.

$$\begin{array} { | l | r | r | r | } \hline \text { Chemical } & \text { Quantity Purchased } & \text { Total Cost } & \text { Quantity Used } \\\hline \text { Echol } & 25,000 & \$ 5,365 & 26,600 \\\hline \text { Protex } & 13,000 & 6,240 & 12,880 \\\hline \text { Benz } & 40,000 & 5,840 & 37,800 \\\hline \text { CT-40 } & \underline{7,500} & 2,220 & \underline{7,140} \\\hline & 85,500 & & 84,420 \\\hline\end{array}$$ What is the total materials yield variance?

A) $388.50.
B) $294.50.
C) $280.00.
D) $94.50.