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42. The difference between the standard cost of a product and its actual cost is called a variance.
a.
True
b.
False
43. A budget performance report compares actual results with the budgeted amounts and reports differences for possible
investigation.
a.
True
b.
False
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44. A favorable cost variance occurs when actual cost is less than budgeted cost at actual volumes.
a.
True
b.
False
45. An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost.
a.
True
b.
False
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46. Standards are designed to evaluate price and quantity variances separately.
a.
True
b.
False
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47. If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at
$17, the time variance was $1,500 favorable.
a.
True
b.
False
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48. If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at
$17, the rate variance was $1,200 favorable.
a.
True
b.
False
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49. If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600
units at $13, the direct materials quantity variance was $4,800 favorable.
a.
True
b.
False
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50. If the standard to produce a given amount of product is 900 units of direct materials at $11 and the actual was 800
units at $12, the direct materials quantity variance was $1,100 unfavorable.
a.
True
b.
False
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51. If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800
units at $12, the direct materials price variance was $800 favorable.
a.
True
b.
False
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52. If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800
units at $12, the direct materials price variance was $1,000 favorable.
a.
True
b.
False
53. If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800
units at $12, the direct materials quantity variance was $2,200 favorable.
a.
True
b.
False
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54. If the standard to produce a given amount of product is 600 direct labor hours at $17 and the actual was 500 hours at
$15, the direct labor time variance was $1,700 favorable.
a.
True
b.
False
55. The direct labor time variance measures the efficiency of the direct labor force.
a.
True
b.
False
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56. Using a standard costing system for nonmanufacturing expenses is easily administered because the expenses generally
relate to a repetitive, measurable output.
a.
True
b.
False
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57. Standards are more widely used for nonmanufacturing expenses than for manufacturing costs.
a.
True
b.
False
58. Nonmanufacturing activities are usually controlled using a static budget rather than a standard costing system.
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a.
True
b.
False
59. Process yield measures the efficiency of a process.
a.
True
b.
False
60. Many service businesses use process yield for assessing performance and the efficient use of assets.
a.
True
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b.
False
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61. The difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed cost for the
actual units produced is termed volume variance.
a.
True
b.
False
62. The difference between the actual amount of variable factory overhead cost incurred and the amount of variable
factory overhead budgeted for the standard product is termed as variable factory overhead controllable variance.
a.
True
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b.
False
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63. If the standard to produce certain quantity of product is 16,000 hours at a factory overhead rate of $5 ($3 fixed, $2
variable), actual variable factory overhead is $26,400, actual fixed factory overhead is $45,000, and 100% of productive
capacity is 15,000 hours, the volume variance is $3,000 favorable.
a.
True
b.
False
64. If the standard to produce a given amount of product is 12,000 hours at a factory overhead rate of $5 ($3 fixed, $2
variable), actual variable factory overhead was $26,400, actual fixed factory overhead was $45,000, and 100% of
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productive capacity is 15,000 hours, the volume variance was $9,000 favorable.
a.
True
b.
False
65. The most effective means of presenting standard factory overhead cost variance data is through a selling overhead cost
budget.
a.
True
b.
False
66. The most effective means of presenting standard factory overhead cost variance data is through a factory overhead
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cost variance report.
a.
True
b.
False
67. Since the controllable variance measures the efficiency of using variable overhead resources, if budgeted variable
overhead exceeds actual results, the variance is favorable.
a.
True
b.
False
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68. An unfavorable volume variance may be due to a failure of supervisors to maintain an even flow of work.
a.
True
b.
False
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69. Favorable volume variances are never harmful since achieving them encourages managers to run the factory above
normal capacity.
a.
True
b.
False
Chapter 13
70. Which of the following processes is involved in budgeting?
a.
Assessing the utilization rate of assets
b.
Identifying the industry standards of stock returns
c.
Periodically comparing actual results with the goals
d.
Dismissing all managers who fail to achieve operational goals specified in the budget
71. Managers plan _____ in a budget in order to provide a cushion for unexpected events or improve the appearance of
operations.
a.
budgetary slack
b.
favorable variance
c.
budgetary margin
d.
opportunity gap
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72. The process of developing budget estimates by requiring all levels of management to estimate sales, production, and
other operating data as though operations were being initiated for the first time is referred to as:
a.
flexible budgeting.
b.
continuous budgeting.
c.
zero-based budgeting.
d.
master budgeting.
73. A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is
termed:
a.
flexible budgeting.
b.
master budgeting.
c.
zero-based budgeting.
d.
continuous budgeting.
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74. Microgen Company static budget for 12,000 units of production includes $48,000 for direct materials, $36,000 for
direct labor, utilities of $6,000, and supervisor salaries of $18,000. A flexible budget for 14,000 units of production would
show:
a.
the same cost structure in total.
b.
direct materials of $56,000, direct labor of $42,000, utilities of $7,000, and supervisor salaries of $18,000.
c.
total variable costs of $126,800.
d.
direct materials of $50,000, direct labor of $37,500, utilities of $6,250, and supervisor salaries of $21,000.
75. A _____ shows the expected results of a responsibility center for only one activity level.
a.
break-even budget
b.
standard costs system
c.
static budget
d.
budgetary slack
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76. The _____ budget shows the expected results of a responsibility center for several activity levels.
a.
flexible
b.
standard
c.
break-even
d.
static
77. For February, sales revenue is $300,000; sales commissions are 5% of sales; the sales manager’s salary is $40,000;
advertising expenses are $13,000; shipping expenses total 1% of sales; and miscellaneous selling expenses are $1,100 plus
1/2 of 1% of sales. Total selling expenses for the month of February are:
a.
$71,000.
b.
$55,000.
c.
$58,600.
d.
$73,600.
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78. The _____ estimates the number of units to be manufactured to meet budgeted sales and desired inventory levels.
a.
capital expenditures budget
b.
production budget
c.
sales budget
d.
cash budget
79. The _____ is an integrated set of operating, investing, and financing budgets for a period of time.
a.
standard budget
b.
budget performance report
c.
zero-based budget
Multiple Choice
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d.
master budget
80. The first budget customarily prepared as part of an entity’s master budget is the:
a.
production budget.
b.
cash budget.
c.
sales budget.
d.
direct materials purchases.
81. Below is budgeted production and sales information for Octofic Cans, Inc. for the month of March: