Question 1

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

Accepted Answer

This statement is true. The market share variance reflects the portion of the market that a company captures, which is influenced by factors such as the company's product offerings, pricing, advertising, and promotion strategies. These factors are largely controllable by the marketing department. In contrast, the industry volume variance relates to changes in the overall market size or demand, which can be affected by macroeconomic factors or competitive activity beyond the control of the company's marketing team.

Question 2

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

Accepted Answer

The production cost yield variance and the sales quantity variance are both measures of the difference between the actual and expected output of a process. The production cost yield variance measures the difference between the actual and expected cost of producing a unit of output, while the sales quantity variance measures the difference between the actual and expected number of units sold. Both variances can be used to identify areas where a process can be improved.

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.

Accepted Answer

The statement correctly defines the direct material price variance as it is affected by the difference between the quantity purchased and the quantity used. It also correctly links the price variance to the purchasing activity and emphasizes the importance of relating it to the units purchased.

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.

Accepted Answer

The statement correctly defines the basic principle of cost-benefit analysis which states that only the variances that have a higher benefit of correction compared to the cost of investigating and correcting should be considered for investigation.

Question 5

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

Accepted Answer

In service organizations, the majority of the work is performed by labor, so labor variances have a greater impact on overall costs than material variances. Therefore, labor variances are more important to monitor and control in service organizations.

Question 6

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

Accepted Answer

The statement correctly defines the production mix variance as measuring the impact of substituting one material for another material during the production process. It can apply to both materials and labor.

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.

Accepted Answer

The statement is incorrect. The direct labor yield variance is unfavorable when the total hours worked during a period are more than the total standard hours allowed for the actual number of units produced. If fewer hours are worked, it would result in a favorable variance.

Question 8

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

Accepted Answer

If variances are not prorated at the end of the accounting period, they are closed to the Cost of Goods Sold, which means that they are treated as period costs. This is because the variances represent the difference between the actual costs incurred and the standard costs, and they are not allocated to specific products or production runs. Therefore, they are considered as an expense of the period and are included in 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.

Accepted Answer

The industry volume variance is the portion of the sales activity variance due to changes in the overall market size, not the company's proportion of sales.

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.

Accepted Answer

When units produced exceed units sold, full-absorption costing defers some fixed manufacturing costs to inventory, resulting in higher operating profit compared to variable costing, which expenses all fixed costs in the period incurred.

Question 11

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

Accepted Answer

The answer of If a company sells two products,it is...

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.

Accepted Answer

This statement is true. The size of a variance and its controllability are important factors to consider when deciding how many variances to review.

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.

Accepted Answer

Professional accounting firms can compute labor mix and labor yield variances as these variances help in analyzing the efficiency and effectiveness of labor utilization, even if labor is not easily substitutable.

Question 14

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

Accepted Answer

The basic variance analysis framework can be applied to both manufacturing and service organizations. Although there may be differences in terms of what is being analyzed (e.g. labor and overhead costs may be more significant in service organizations), the overall framework remains the same.

Question 15

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

Accepted Answer

The statement is true as stated. Merchandisers use sales units as output measures, while service organizations use activity units, such as 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.

Accepted Answer

The statement is incorrect. An increase in industry volume and a decrease in a company's market share may not always result in an unfavorable sales price variance. Additionally, the statement confuses market share with sales price variance. The relationship between market size and price is irrelevant to the given scenario, and the correct relationship is between market size and sales quantity.

Question 17

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

Accepted Answer

Separating the variance into components based on a budgeting formula is indeed the general approach for variance analysis. The example given in the statement shows the budgeted revenues expressed as the product of selling price (SP) and sales quantity (SQ).

Question 18

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

Accepted Answer

The statement is true, as production cost variances are calculated based on the units produced and not on the units sold. The reason for this is that production cost variances account for the difference between the actual cost of producing the units and the expected or standard cost of producing those units, which is determined based on the production plan. Therefore, the variances are based on the amount and cost of materials, labor, and overhead used in the production process, regardless of whether the units were sold or not.

Question 19

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

Accepted Answer

It is possible for both products to have an unfavorable sales quantity variance if the actual sales for both products were lower than the budgeted sales. This could happen if there was a decrease in demand, pricing issues, or other factors affecting sales.

Question 20

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

Accepted Answer

The sales quantity variance and the sales activity variance are two different variances on a flexible budget performance report. The sales quantity variance measures the effect of the difference between actual sales quantity and budgeted sales quantity, while the sales activity variance measures the effect of the difference between actual sales activity (quantity and mix) and the budgeted sales activity (quantity and mix). Therefore, the formula for sales activity variance is Sales Quantity Variance + Sales Mix Variance.

Quiz 17: Additional Topics in Variance Analysis

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

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

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

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

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

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

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.

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

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.

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.

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

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.

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

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

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

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.

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

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

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

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

Quiz 17: Additional Topics in Variance Analysis

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

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

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

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

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

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

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.

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

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.

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.

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

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.

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

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

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

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.

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

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

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

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

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