38) The Fantasy Gifts Company, a maker of Holiday novelties, needs your help immediately.
The company’s accountant resigned without leaving adequate records or explanations for what
she did. In reviewing the records, you find the following information for May:
Materials Purchased 20,000 units
Materials Used 15,000 units
You find a copy of the budget which shows that materials were budgeted at $0.60/unit. You
know that the material price variance is recorded at the time of purchase and you find some
handwritten notes among the accountant’s work papers, which indicate the following:
Material price variance $ 200 F
Material efficiency variance $ 600 F
What was the total standard cost of direct materials purchased during May?
A) $8,260.
B) $8,400.
C) $9,440.
D) $9,600.
39) Which of the following sales variances is further analyzed into the market share and industry
volume variances?
A) Quantity.
B) Efficiency.
C) Mix.
D) Activity.
40) Which of the following statements is (are) true?
(A)The market share variance is more controllable by the marketing department than the industry
volume variance.
(B)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.
A) Only A is true.
B) Only B is true.
C) Both of these are true.
D) Neither of these is true.
41) The sales activity variance is equal to the sum of the market share variance and the:
A) selling price variance.
B) industry volume variance.
C) sales quantity variance.
D) sales mix variance.
42) Using the abbreviations listed below, what is the formula for the industry volume variance?
AMS = actual market share
BMS = budgeted market share
BCM = budgeted contribution margin per unit
ACM = actual contribution margin per unit
ATM = actual total market
BTM = budgeted total market
A) (ATM − BTM) (BMS) (ACM)
B) (ATM – BTM) (BMS) (BCM)
C) (AMS – BMS) (ATM) (ACM)
D) (AMS – BMS) (ATM) (BCM)
43) Using the abbreviations listed below, what is the market share variance?
AMS = actual market share
BMS = budgeted market share
BCM = budgeted contribution margin per unit
ACM = actual contribution margin per unit
ATM = actual total market
BTM = budgeted total market
A) (ATM − BTM) (BMS) (ACM)
B) (ATM − BTM) (BMS) (BCM)
C) (AMS −BMS) (ATM) (ACM)
D) (AMS − BMS) (ATM) (BCM)
44) The budget for a given cost during a given period was $80,000. The actual cost for the period
was $72,000. Considering these facts, the plant manager has done a better-than-expected job in
controlling the cost if: (CPA adapted)
A) the cost is variable and actual production was 90% of budgeted production.
B) the cost is variable and actual production equals budgeted production.
C) the cost is variable and actual production was 80% of budgeted production.
D) the cost is a discretionary fixed cost and actual production equals budgeted production.
45) The exhibit below reflects a summary of performance for a single item of a retail store’s
inventory for the month ended April 30: (CIA adapted)
The sales activity variance is:
A) $20,000 favorable.
B) $20,000 unfavorable.
C) $11,000 favorable.
D) $12,000 unfavorable.
46) Danner Fashions sells a line of women’s dresses. Danner’s performance report for November
is shown below: (CMA adapted)
The company uses a flexible budget to analyze its performance and to measure the effect on
operating income of the various factors affecting the difference between budgeted and actual
operating income.
The effect of the sales activity variance on the contribution margin for November is:
A) $30,000 unfavorable.
B) $18,000 unfavorable.
C) $20,000 unfavorable.
D) $15,000 unfavorable.
47) Danner Fashions sells a line of women’s dresses. Danner’s performance report for November
is shown below: (CMA adapted)
The company uses a flexible budget to analyze its performance and to measure the effect on
operating income of the various factors affecting the difference between budgeted and actual
operating income.
The sales price variance for November is:
A) $30,000 unfavorable.
B) $18,000 unfavorable.
C) $20,000 unfavorable.
D) $15,000 unfavorable.
48) Danner Fashions sells a line of women’s dresses. Danner’s performance report for November
is shown below: (CMA adapted)
The company uses a flexible budget to analyze its performance and to measure the effect on
operating income of the various factors affecting the difference between budgeted and actual
operating income.
The variable costs flexible budget variance for November is:
A) $5,000 favorable.
B) $5,000 unfavorable.
C) $4,000 favorable.
D) $4,000 unfavorable.
49) Danner Fashions sells a line of women’s dresses. Danner’s performance report for November
is shown below: (CMA adapted)
The company uses a flexible budget to analyze its performance and to measure the effect on
operating income of the various factors affecting the difference between budgeted and actual
operating income.
What additional information is needed for Danner to calculate the dollar impact of a change in
market share on operating income for November? (CMA adapted)
A) Danner’s budgeted market share and the budgeted total market size.
B) Danner’s budgeted market share, the budgeted total market size, and average market selling
price.
C) Danner’s budgeted market share and the actual total market size.
D) Danner’s actual market share and the actual total market size.
50) For a company that produces more than one product, the sales activity variance can be
divided into which two of the following additional variances? (CMA adapted)
A) Sales price variance and flexible budget variance.
B) Sales mix variance and sales price variance.
C) Sales efficiency variance and sales price variance.
D) Sales quantity variance and sales mix variance.
51) Actual and budgeted information about the sales of a product are presented below for June:
(CIA adapted)
Actual Budget
Units 8,000 10,000
Sales Revenue $ 92,000 $ 105,000
The sales price variance for June was:
A) $8,000 favorable.
B) $8,000 unfavorable.
C) $10,000 unfavorable.
D) $10,500 unfavorable.
52) Which of the following income statement items is analyzed using the sales mix and the sales
quantity variances?
A) Operating expenses.
B) Cost of goods sold.
C) Gross margin.
D) Contribution margin.
53) The sales mix variance would be:
A) favorable when a company sells relatively fewer of the products that have contribution
margins lower than average.
B) favorable when a company sells relatively more of the products that have contribution
margins higher than average.
C) unfavorable when a company sells relatively fewer of the products that have selling prices
higher than average.
D) unfavorable when a company sells more of the products that have selling prices lower than
average.
54) The sales quantity variance would be favorable when a company sells:
A) relatively fewer of the products bearing contribution margins lower than average.
B) relatively more of the products bearing contribution margins higher than average.
C) more total units than budgeted, holding the sales mix constant.
D) less total units than budgeted, holding the sales mix constant.
55) The Morton Company gathered the following information for the year.
Product K Product R Total
Budgeted sales mix (units) 40 % 60 % 100 %
Budgeted and actual sales price $ 48 $ 36
Budgeted variable cost per unit $ 32 $ 24
Actual sales (units) 126,000
Actual sales mix 60 % 40 % 100 %
Fixed costs $ 80,000
What is the total sales mix variance?
A) $705,600.
B) $403,200.
C) $302,400.
D) $100,800.
56) A machine distributor sells two models, basic and deluxe. The following information relates
to its master budget.
Basic Deluxe
Sales (units) 8,000 2,000
Sales price per unit $ 8,000 $ 12,000
Variable costs per unit $ 6,400 $ 9,000
Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the
same as the budgeted sales prices for both models.
What is the sales activity variance for the basic model?
A) $1,280,000.
B) $1,600,000.
C) $11,200,000.
D) $12,800,000.
57) A machine distributor sells two models, basic and deluxe. The following information relates
to its master budget.
Basic Deluxe
Sales (units) 8,000 2,000
Sales price per unit $ 8,000 $ 12,000
Variable costs per unit $ 6,400 $ 9,000
Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the
same as the budgeted sales prices for both models.
Is the sales activity variance for the basic model favorable or unfavorable?
A) Favorable.
B) Unfavorable.
58) A machine distributor sells two models, basic and deluxe. The following information relates
to its master budget.
Basic Deluxe
Sales (units) 8,000 2,000
Sales price per unit $ 8,000 $ 12,000
Variable costs per unit $ 6,400 $ 9,000
Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the
same as the budgeted sales prices for both models.
What is the sales activity variance for the deluxe model?
A) $400,000.
B) $800,000.
C) $1,600,000.
D) $2,400,000.
59) A machine distributor sells two models, basic and deluxe. The following information relates
to its master budget.
Basic Deluxe
Sales (units) 8,000 2,000
Sales price per unit $ 8,000 $ 12,000
Variable costs per unit $ 6,400 $ 9,000
Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the
same as the budgeted sales prices for both models.
Is the sales activity variance for the deluxe model favorable or unfavorable?
A) Favorable.
B) Unfavorable.
60) A machine distributor sells two models, basic and deluxe. The following information relates
to its master budget.
Basic Deluxe
Sales (units) 8,000 2,000
Sales price per unit $ 8,000 $ 12,000
Variable costs per unit $ 6,400 $ 9,000
Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the
same as the budgeted sales prices for both models.
What is the sales mix variance for the basic model?
A) $256,000.
B) $1,344,000.
C) $1,600,000.
D) $2,520,000.
61) A machine distributor sells two models, basic and deluxe. The following information relates
to its master budget.
Basic Deluxe
Sales (units) 8,000 2,000
Sales price per unit $ 8,000 $ 12,000
Variable costs per unit $ 6,400 $ 9,000
Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the
same as the budgeted sales prices for both models.
Is the sales mix variance for the basic model favorable or unfavorable?
A) Favorable.
B) Unfavorable.
62) A machine distributor sells two models, basic and deluxe. The following information relates
to its master budget.
Basic Deluxe
Sales (units) 8,000 2,000
Sales price per unit $ 8,000 $ 12,000
Variable costs per unit $ 6,400 $ 9,000
Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the
same as the budgeted sales prices for both models.
What is the sales quantity variance for the basic model?
A) $120,000.
B) $256,000.
C) $1,344,000.
D) $1,600,000.
63) A machine distributor sells two models, basic and deluxe. The following information relates
to its master budget.
Basic Deluxe
Sales (units) 8,000 2,000
Sales price per unit $ 8,000 $ 12,000
Variable costs per unit $ 6,400 $ 9,000
Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the
same as the budgeted sales prices for both models.
Is the sales quantity variance for the basic model favorable or unfavorable?
A) Favorable.
B) Unfavorable.