Q1) A favorable variance indicates that:
A) budgeted costs are less than actual costs
B) actual revenues exceed budgeted revenues
C) the actual amount decreased operating income relative to the budgeted amount
D) All of these answers are correct.
Q2) The process by which a company's products or services are measured relative to the best possible levels of performance is known as:
A) benchmarking
B) a standard costing system
C) efficiency
D) variance analysis
Q3) The master budget is:
A) developed at the end of the period
B) based on the actual level of output
C) a static budget
D) a flexible budget
Answer the following questions using the information below:
Bowden Corporation used the following data to evaluate their current operating system. The company sells items for $20 each and used a budgeted selling price of $20 per unit.
Actual Budgeted
Units sold 46,000 units 45,000 units
Variable costs $225,400 $216,000
Fixed costs $47,500 $50,000
Q4) What is the static-budget variance of revenues?
A) $20,000 favorable
B) $20,000 unfavorable
C) $2,000 favorable
D) $2,000 unfavorable
Q5) The variable overhead flexible-budget variance can be further subdivided into the:
A) price variance and the efficiency variance
B) static-budget variance and sales-volume variance
C) spending variance and the efficiency variance
D) sales-volume variance and the spending variance
Q6) In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are:
A) allocated costs
B) variable costs
C) fixed costs
D) budgeted costs
Answer the following questions using the information below:
Willis Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:
Budgeted output units 30,000 units
Budgeted machine-hours 10,000 hours
Budgeted variable manufacturing overhead costs for 15,000 units $322,500
Actual output units produced 44,000 units
Actual machine-hours used 14,400 hours
Actual variable manufacturing overhead costs $484,000
Q7) What is the budgeted variable overhead cost rate per output unit?
A) $32.25
B) $48.40
C) $10.75
D) $11.00
Q8) Variable overhead costs include:
A) the plant manager's salary
B) machine maintenance
C) depreciation on plant equipment
D) plant-leasing costs
Q9) The fixed overhead cost variance can be further subdivided into the:
A) spending variance and flexible-budget variance
B) production-volume variance and the efficiency variance
C) flexible-budget variance and the production-volume variance
D) price variance and the efficiency variance
Q10) The variable overhead flexible-budget variance measures the difference between:
A) actual variable overhead costs and the flexible budget for variable overhead costs
B) actual variable overhead costs and the static budget for variable overhead costs
C) the static budget for variable overhead costs and the flexible budget for variable overhead costs
D) None of these answers is correct.
Q11) For variable manufacturing overhead, there is no:
A) spending variance
B) flexible-budget variance
C) efficiency variance
D) production-volume variance
Q12) Luke's Football Manufacturing Company reported:
Actual fixed overhead $400,000
Fixed manufacturing overhead spending variance $10,000 favorable
Fixed manufacturing production-volume variance $15,000 unfavorable
To isolate these variances at the end of the accounting period, John would debit Fixed
Manufacturing Overhead Allocated for:
A) $390,000
B) $395,000
C) $400,000
D) $405,000
Q13) The difference between operating incomes under variable costing and absorption costing centers on how to account for:
A) fixed manufacturing costs
B) variable manufacturing costs
C) direct materials costs
D) Both B and C are correct.
Q14) Many companies have switched from absorption costing to variable costing for internal reporting:
A) so the denominator level is more accurate
B) to reduce the undesirable incentive to build up inventories
C) to comply with external reporting requirements
D) to increase bonuses for managers
Q15) The gross-margin format of the income statement:
A) calculates contribution margin
B) is used with absorption costing
C) is used with variable costing
D) distinguishes variable costs from fixed costs
Answer the following questions using the information below:
Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit. In the first month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes:
Variable manufacturing costs $20.00 per unit
Variable marketing costs $ 3.00 per unit
Fixed manufacturing costs $ 7.00 per unit
Administrative expenses, all fixed $15.00 per unit
Ending inventories:
Direct materials -0-
WIP -0-
Finished goods 250 units
Q16) What is contribution margin using variable costing?
A) $96,250
B) $91,000
C) $104,000
D) $110,000
Q17) What is cost of goods sold per unit using variable costing?
A) $20
B) $23
C) $30
D) $45
Q18) What is operating income using variable costing?
A) $47,000
B) $52,500
C) $65,750
D) $78,750
Q19) What is cost of goods sold using variable costing?
A) $35,000
B) $40,000
C) $47,250
D) $54,000
Q20) ________ provides the lowest estimate of denominator-level capacity.
A) Master-budget capacity utilization
B) Practical capacity
C) Theoretical capacity
D) Normal capacity utilization
Q21) ________ is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs and all fixed manufacturing costs are excluded.
A) Mixed costing
B) Variable costing
C) Standard costing
D) Absorption costing
Q22) A car purchased last year is an example of a(n):
A) differential cost
B) sunk cost
C) avoidable cost
D) relevant cost
Q23) A decision model involves:
A) only quantitative analyses
B) a manager's instinct
C) only qualitative analyses
D) both quantitative and qualitative analyses
Q24) Historical costs are helpful:
A) for decision making
B) because they are quantitative
C) for making future predictions
D) None of these answers is correct.
Q25) Opportunity cost(s):
A) are most important to financial accountants
B) are recorded as an expense in the accounting records
C) should be maximized by organizations
D) of a resource with excess capacity is zero
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
Q26) Bach Table Company manufactures tables for schools. The 2011 operating budget is based on sales of 40,000 units at $50 per table. Operating income is anticipated to be $120,000. Budgeted variable costs are $32 per unit, while fixed costs total $600,000. Actual income for 2011 was a surprising $354,000 on actual sales of 42,000 units at $52 each. Actual variable costs were $30 per unit and fixed costs totaled $570,000.
Required: Prepare a variance analysis report with both flexible-budget and sales-volume variances.
Q27) Different management levels in Bates, Inc., require varying degrees of managerial accounting information. Because of the need to comply with the managers' requests, four different variances for manufacturing overhead are computed each month. The information for the September overhead expenditures is as follows:
Budgeted output units 3,200 units
Budgeted fixed manufacturing overhead $20,000
Budgeted variable manufacturing overhead $5 per direct labor hour
Budgeted direct manufacturing labor hours 2 hours per unit
Fixed manufacturing costs incurred $26,000
Direct manufacturing labor hours used 7,200
Variable manufacturing costs incurred $35,600
Actual units manufactured 3,400
Required:
a. Compute a 4-variance analysis for the plant controller.
b. Compute a 3-variance analysis for the plant manager.
c. Compute a 2-variance analysis for the corporate controller.
d. Compute the flexible-budget variance for the manufacturing vice president.
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
Q28) The textbook discusses a five-step decision process. Briefly explain each of the five steps.