Question

q1: On the basis of the budget reports,

management analyzes differences between actual and planned results.

management may take corrective action.

management may modify the future plans.

All of these answers are correct.

q2: Which one of the statements is correct about controllable costs?

More costs are controllable as one moves downward in management levels.

Variable costs are controllable and fixed costs are not.

A cost is controllable if it is incurred directly in a manager’s division or segment.

Allocated costs are controllable.

q3: In developing a flexible budget within a relevant range of activity,

it is necessary to prepare a budget at 1,000 unit increments.

only fixed costs are included.

it is necessary to relate variable cost data to the activity index chosen.

variable and fixed costs are combined and are reported as a total cost.

q4: The formula for the materials quantity variance is

(AQ × AP) – (AQ × SP).

(AQ × AP) – (SQ × SP).

(AQ × SP) – (SQ × SP).

(SQ × AP) – (SQ × SP).

q5: Using standard costs

makes management by exception more difficult.

increases clerical costs.

makes employees less “cost-conscious.”

provides a basis for evaluating cost control

q6: An unfavorable labor quantity variance may be caused by

worker fatigue or carelessness.

higher pay rates mandated by union contracts.

misallocation of workers.

paying workers higher wages than expected.

q7:Unfavorable materials price and quantity variances are generally the responsibility of the

Price

Quantity

Production department Production Department

Production Department Purchasing Department

Purchasing department Purchasing Department

Purchasing department Production Department

q8: The standard rate of pay is $20 per direct labor hour. If the actual direct labor payroll was $137200 for 7000 direct labor hours worked, the direct labor price (rate) variance is

$3500 favorable.

$3500 unfavorable.

$2800 unfavorable.

$2800 favorable.

q9: The per-unit standards for direct labor are 2 direct labor hours at $15 per hour. If in producing 2500 units, the actual direct labor cost was $73600 for 4600 direct labor hours worked, the total direct labor variance is

$2500 unfavorable.

$1400 favorable.

$1400 unfavorable.

$875 unfavorable.

q10: Sheridan Companyplanned to use 1 yard of plastic per unit budgeted at $96 a yard. However, the plastic actually cost $95 per yard. The company actually made 4600 units, although it had planned to make only 3800 units. Total yards used for production were 4660. How much is the total materials variance?

$76800 U

$4660 F

$1100 U

$7680 U

Answer 1

QUESTION 1 .
All of these answers are correct.
QUESTION 2 .
Variable costs are controllable and fixed costs are not.
QUESTION 3
It is necessary to relate variable cost data to the activity index chosen.
QUESTION 4
(AQ × SP) – (SQ × SP)
QUESTION 5
Provides a basis for evaluating cost control
QUESTION 6
Paying workers higher wages than expected.
QUESTION 7
Purchasing department & Production Department
QUESTION 8
ACTUAL RATE = WAGES/TOTAL HOURS = 137200/7000 = 19.6
LABOR RATE VARIANCE = (STANDARD RATE – ACTUAL RATE ) * ACTUAL HOURS
= (20- 19.6) 7000
= 0.4 * 7000 = 2800 FAVORABLE
QUESTION 9
TOTAL LABOR VARIANCE = STANDARD COST – ACTUAL COST
= 2 direct labor hours * 2500 units * 15 per hour – 73600
=75000-73600
=1400 FAVORABLE
QUESTION 10
TOTAL MATERIAL VARIANCE = STANDARD COST FOR ACTUAL QUANTITY – ACTUAL COST
STANDARD COST FOR ACTUAL QUANTITY = 4660*96 = 447360
ACTUAL COST = 4660 * 9 = 442700
TOTAL MATERIAL VARIANCE = 447360-442700 = 4660 F