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Exam 16: Fundamentals of Variance Analysis

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Question 31

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The standard cost for a unit of output is the standard price per unit of input times the standard number of inputs per one unit of output.This is the definition of standard cost.

A) True
B) False

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Question 32

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Which one of the following variances is of least significance from a behavioral control perspective? (CMA adapted)

A) Unfavorable materials quantity variance amounting to 20% of the quantity allowed for the output attained.
B) Unfavorable labor efficiency variance amounting to 10% more than the budgeted hours for the output attained.
C) Favorable materials price variance obtained by purchasing raw materials from a new vendor.
D) Fixed factory overhead volume variance resulting from management's decision midway through the fiscal year to reduce its budgeted output by 20%.

E) B) and C)
F) A) and B)

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Question 33

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Which of the following is not an alternative name for the production volume variance?

A debit balance in the labor-efficiency variance account indicates that:

When are the following direct materials variances ideally reported?

Data on Goodman Company's direct-labor costs are given below: What was Goodman's standard direct-labor rate?

The fixed factory overhead application rate is a function of a predetermined activity level.If standard hours allowed for good output equal this predetermined activity level for a given period,the volume variance will be: (CPA adapted)

Which of the following direct labor variances uses the standard hours allowed for the actual number of units produced?

The difference between operating profits in the master budget and operating profits in the flexible budget is called a sales price variance.This is a sales activity variance.

A favorable variance is not necessarily good,and an unfavorable variance is not necessarily bad.A favorable or unfavorable variance in one period may have long term impacts in the opposite direction.

Information on Barber Company's direct labor costs for the month of January is as follows: What is Barber's direct labor price (rate) variance?

The Landry Company has developed standards for labor.During June,75 units were scheduled and 100 were produced.Data related to labor are: What is the labor rate variance for June?

Which of the following statements is (are) true? (A) A favorable variance is not necessarily good,and an unfavorable variance is not necessarily bad.(B) The master budget includes operating budgets (e.g. ,production budget) and financial budgets (e.g. ,cash budget) .

Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost.Arrow has established the following standards for the prime costs of one unit of product. During November,Arrow purchased 160,000 pounds of direct materials at a total cost of $304,000.The total factory wages for November were $42,000,90% of which were for direct labor.Arrow manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours.What is the direct labor price (rate) variance for November?

Blue Company produces Trivets.Based on its master budget,the company should produce 1,000 Trivets each month,working 2,500 direct labor hours.During May,only 900 Trivets were produced.The company worked 2,400 direct labor hours.The standard hours allowed for May production would be:

Which of the following is the most probable reason a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance?

If the budgeted activity level is greater than the actual activity level,then the total budgeted costs of the master budget will be greater than the total budgeted costs of the flexible budget.The master budget is based on the budgeted activity level,while the flexible budget is based on the actual activity level.

In general,the terms favorable and unfavorable are used to describe the effect of a variance on:

In analyzing company operations,the controller of the Jason Corporation found a $250,000 favorable flexible budget revenue variance.The variance was calculated by comparing the actual results with the flexible budget.This variance can be wholly explained by: (CMA adapted)

When a manager is concerned with monitoring total cost,total revenue,and net profit conditioned upon the level of productivity,an accountant should normally recommend: (CPA adapted)