Question 1

Which manager is usually held responsible for materials price variances?

Accepted Answer

The purchasing agent is responsible for negotiating prices and securing raw materials for production, therefore they are usually held responsible for materials price variances.

Question 2

Select the correct statement regarding flexible budgets.

Accepted Answer

A flexible budget is designed to show revenues and costs at a variety of activity levels, allowing management to adjust their financial planning based on actual levels of activity. Option A is incorrect because flexible budgets are designed to account for multiple levels of activity. Option B is incorrect because flexible budgets are used for planning as well as for performance evaluation. Option D is incorrect because the master budget refers to the comprehensive financial plan for the entire organization, which includes both a static and flexible budget.

Question 3

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

Accepted Answer

The answer of Which of the following equations can be...

Question 4

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

Accepted Answer

Variable GS&A costs can have price variances, which occur when the cost per unit changes, but they cannot have usage variances as the quantity of inputs used is determined by the level of activity. Cost variances are not generally computed for fixed GS&A costs as their costs remain constant irrespective of the level of activity.

Question 5

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:

Accepted Answer

The sales volume variance is calculated as (Actual units sold - Estimated units sold) x Estimated selling price. Here, (105,000 - 100,000) x $6.00 = $30,000 favorable.

Question 6

Which of the following is an incorrect statement regarding variances?

Accepted Answer

A variance is favorable when actual sales are more than expected sales, not the other way around.

Question 7

Which of the following statements is true?

Accepted Answer

All the statements are true because each department can influence the respective variances through their actions. The purchasing agent can affect the materials price variance through the prices they negotiate, the production supervisor can influence the materials usage variance through how efficiently materials are used, and the personnel department can impact the labor usage variance through the quality and efficiency of the workforce they recruit and manage.

Question 8

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:

Accepted Answer

Sales revenue flexible budget variance = (Actual selling price - Budgeted selling price) x Actual units sold

Here,

Actual selling price = $5.95
Budgeted selling price = $6.00
Actual units sold = 105,000

Sales revenue flexible budget variance = ($5.95 - $6.00) x 105,000 = $5,250 unfavorable.

Therefore, the correct answer is D) $5,250 unfavorable.

Question 9

The following standard cost card is provided for Navid Company's Product A: $\begin{array}{lr}
\text { Direct material (2 lbs.@\$5.00 per lb.) } & \$ 10.00 \
\text { Direct labor }(1 \mathrm{hr} @ \$ 8.00 \text { per hr.) } & 8.00 \
\text { Variable overhead (1 hr. @\$3.00 per hr.) } & 3.00 \
\text { Fixed overhead (1 hr. @ \$2.00 per hr.) } & \underline{2.00} \
\text { Total standard cost per unit } &  \underline{\$ 23.00} \
\end{array}$  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.)

Accepted Answer

The actual manufacturing cost per unit is calculated by adding the actual costs of direct material, direct labor, and overhead, then dividing by the number of units produced. Actual direct material cost = 12,200 lbs * $4.80/lb = $58,560Actual direct labor cost = 5,950 hrs * $8.00/hr = $47,600Actual overhead cost = $29,920Total actual cost = $58,560 + $47,600 + $29,920 = $136,080Actual cost per unit = $136,080 / 5,800 units = $23.46

Question 10

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:

Accepted Answer

The flexible budget for sales revenue is calculated based on actual units sold at the budgeted selling price. Therefore, the flexible budget for sales revenue is 149,000 units * $6.00 = $894,000. The actual sales revenue is 149,000 units * $6.12 = $911,880. The variance is $911,880 - $894,000 = $17,880, which is favorable because the actual revenue is higher than the budgeted revenue.

Question 11

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.

Accepted Answer

The total direct labor variance is calculated by adding the direct labor price variance and the direct labor usage variance. Since the price variance is favorable at $4,000 and the usage variance is unfavorable at $1,500, the total variance is $2,500 favorable ($4,000 - $1,500).

Question 12

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

Accepted Answer

The answer of Which manager is normally held responsible for...

Question 13

Which manager is usually held responsible for labor price variances?

Accepted Answer

Labor price variances occur due to the differences between the actual labor cost and the standard cost. The production supervisor is the person responsible for hiring and managing the workers, planning the production process, and maintaining productivity levels. Therefore, they are the ones who can control the labor price variances to a considerable extent.

Question 14

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

Accepted Answer

The main difference between a static and a flexible budget is that a static budget is based on a single estimate of volume, while a flexible budget shows estimated costs and revenues at a variety of activity levels. Option A is incorrect because both static and flexible budgets can have fixed costs, but flexible budgets allow for changes in fixed costs at different activity levels. Option B is incorrect because both static and flexible budgets are based on per-unit variable amounts, but flexible budgets allow for different per-unit variable amounts at different activity levels. Option D is incorrect because there is a difference between static and flexible budgets.

Question 15

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

Accepted Answer

The direct materials price variance can be calculated by subtracting the actual direct material cost from the standard direct material cost and then adjusting for the usage variance. Here, the total variance is $4,000 favorable ($24,000 - $20,000), and since the usage variance is $3,000 favorable, the price variance must be $1,000 favorable.

Question 16

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:

Accepted Answer

The sales volume variance is calculated as (Actual units sold - Estimated units sold) x Estimated selling price. Here, it is (149,000 - 150,000) x $6.00 = -1,000 x $6.00 = -$6,000, which is unfavorable.

Question 17

When would a sales variance be listed as favorable?

Accepted Answer

A sales variance would be listed as favorable when actual sales exceed budgeted or expected sales, as this means that the company has generated more revenue than anticipated.

Question 18

When would a cost variance be listed as unfavorable?

Accepted Answer

A cost variance is listed as unfavorable when actual costs exceed budgeted costs, as this represents a higher than expected expenditure and potential deviation from the planned budget.

Question 19

Which manager is usually held responsible for materials usage variances?

Accepted Answer

The production supervisor is responsible for overseeing the use of materials during production processes and would therefore be held accountable for any significant variances in materials usage. Marketing managers would not be directly involved in the production process, and while purchasing agents may be responsible for procuring materials, they would not typically be held accountable for materials usage variances.

Question 20

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

Accepted Answer

All of these reasons are valid and contribute to the usefulness of flexible budgets as planning tools. Flexible budgets provide managers with the ability to anticipate results under different scenarios, which can offer insight into potential outcomes and inform decision-making. They can also help managers determine whether the company's resources, such as materials and storage facilities, are appropriate for different production levels. Additionally, flexible budgets can aid in assessing the company's cash position and ensuring that it is sufficient for its needs.

Quiz 8: Performance Evaluation