Chapter 7 Flashcards
The master budget is: A) a flexible budget B) a static budget C) developed at the end of the period D) based on the actual level of output
B) a static budget
A flexible budget:
A) is another name for management by exception
B) is developed at the end of the period
C) is based on the budgeted level of output
D) provides favorable operating results
B) is developed at the end of the period
Management by exception is the practice of concentrating on: A) the master budget B) areas not operating as anticipated C) favorable variances D) unfavorable variances
B) areas not operating as anticipated
A variance is:
A) the gap between an actual result and a benchmark amount
B) the required number of inputs for one standard output
C) the difference between an actual result and a budgeted amount
D) the difference between a budgeted amount and a standard amount
C) the difference between an actual result and a budgeted amount
An unfavorable variance indicates that:
A) actual costs are less than budgeted 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.
C) the actual amount decreased operating income relative to the budgeted amount
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.
B) actual revenues exceed budgeted revenues
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
7) What is the static-budget variance of revenues?
A) $20,000 favorable
B) $20,000 unfavorable
C) $2,000 favorable
D) $2,000 unfavorable
A) (46,000 units × $20) - (45,000 units × $20) = $20,000 F
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
What is the static-budget variance of variable costs? A) $1,200 favorable B) $9,400 unfavorable C) $20,000 favorable D) $1,200 unfavorable
B) $225,400- $216,000 = $9,400 U
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
What is the static-budget variance of operating income? A) $10,600 favorable B) $10,600 unfavorable C) $13,100 favorable D) $13,100 unfavorable
C) $13,100 favorable
Actual Static Static-budget Results Budget Variance Units sold 46,000 45,000 0 Revenues $920,000 $900,000 $20,000 F Variable costs 225,400 216,000 9,400 U Contribution margin$694,600 $684,000 10,600 F Fixed costs 47,500 50,000 (2,500) F Operating income $647,100 $634,000 $13,100 F
Caan 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 200,000 units 203,000 units
Variable costs $1,250,000 $1,500,000
Fixed costs $ 925,000 $ 900,000
10) What is the static-budget variance of revenues?
A) $60,000 favorable
B) $60,000 unfavorable
C) $6,000 favorable
D) $6,000 unfavorable
B) (200,000 units × $20) - (203,000 units × $20) = $60,000 U
Caan 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 200,000 units 203,000 units
Variable costs $1,250,000 $1,500,000
Fixed costs $ 925,000 $ 900,000
What is the static-budget variance of variable costs? A) $200,000 favorable B) $50,000 unfavorable C) $250,000 favorable D) $250,000 unfavorable
C) $1,250,000 - $1,500,000= $250,000 F
Caan 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 200,000 units 203,000 units
Variable costs $1,250,000 $1,500,000
Fixed costs $ 925,000 $ 900,000
What is the static-budget variance of operating income? A) $165,000 favorable B) $190,000 unfavorable C) $60,000 favorable D) $60,000 unfavorable
A) Actual Static Static-budget
Results Budget Variance
Units sold 200,000 203,000
Revenues $4,000,000 $4,060,000 $(60,000) U
Variable costs 1,250,000 1,500,000 (250,000) F
Contribution margin$2,750,000 $2,560,000 190,000 F
Fixed costs 925,000 900,000 25,000 U
Operating income $1,825,000 $1,660,000 $165,000 F
Everclean Filter Corporation used the following data to evaluate their current operating system. The
company sells items for $10 each and had used a budgeted selling price of $11 per unit.
Actual Budgeted
Units sold 306,000 units 300,000 units
Variable costs $965,000 $950,000
Fixed costs $ 53,000 $ 50,000
13) What is the static-budget variance of revenues?
A) $60,000 favorable
B) $30,000 unfavorable
C) $30,000 favorable
D) $6,000 favorable
C) (306,000 units × $10) - (300,000 units × $11) = $30,000 F
Everclean Filter Corporation used the following data to evaluate their current operating system. The
company sells items for $10 each and had used a budgeted selling price of $11 per unit.
Actual Budgeted
Units sold 306,000 units 300,000 units
Variable costs $965,000 $950,000
Fixed costs $ 53,000 $ 50,000
What is the static-budget variance of variable costs? A) $13,000 favorable B) $13,000 unfavorable C) $15,000 favorable D) $15,000 unfavorable
D) $965,000 - $950,000= $15,000 U
Everclean Filter Corporation used the following data to evaluate their current operating system. The
company sells items for $10 each and had used a budgeted selling price of $11 per unit.
Actual Budgeted
Units sold 306,000 units 300,000 units
Variable costs $965,000 $950,000
Fixed costs $ 53,000 $ 50,000
What is the static-budget variance of operating income? A) $12,000 unfavorable B) $12,000 favorable C) $15,000 favorable D) $15,000 unfavorable
$12,000 favorable
Regier Company had planned for operating income of $10 million in the master budget but actually
achieved operating income of only $7 million.
A) The static-budget variance for operating income is $3 million favorable.
B) The static-budget variance for operating income is $3 million unfavorable.
C) The flexible-budget variance for operating income is $3 million favorable.
D) The flexible-budget variance for operating income is $3 million unfavorable.
B) The static-budget variance for operating income is $3 million unfavorable.
The master budget is one type of flexible budget.
false
A flexible budget is calculated at the end of the budget period.
TRUE
Information regarding the causes of variances is provided when the master budget is compared with
actual results.
FALSE
A variance is the difference between the actual cost for the current and expected (or budgeted)
performance
TRUE
A favorable variance results when actual costs exceed budgeted costs
FALSE
Management by exception is the practice of concentrating on areas not operating as anticipated
(such as a cost overrun) and placing less attention on areas operating as anticipated.
TRUE
The essence of variance analysis is to capture a departure from what was expected.
TRUE
A favorable variance should be ignored by management.
FALSE
An unfavorable variance may be due to poor planning rather than due to inefficiency.
TRUE
The flexible budget contains: A) budgeted amounts for actual output B) budgeted amounts for planned output C) actual costs for actual output D) actual costs for planned output
A) budgeted amounts for actual output
The following items are the same for the flexible budget and the master budget EXCEPT for: A) variable cost per unit B) total fixed costs C) units sold D) sales price per unit
C) units sold
The sales-volume variance is due to: A) using a different selling price from that budgeted B) inaccurate forecasting of units sold C) poor production performance D) Both A and B are correct.
B) inaccurate forecasting of units sold
An unfavorable sales-volume variance could result from:
A) decreased demand for the product
B) competitors taking market share
C) customer dissatisfaction with the product
D) All of these answers are correct.
D) All of these answers are correct.
If a sales-volume variance was caused by poor-quality products, then the \_\_\_\_\_\_\_\_ would be in the best position to explain the variance. A) production manager B) sales manager C) purchasing manager D) management accountant
A) production manager
The variance that is best for measuring operating performance is the: A) static-budget variance B) flexible-budget variance C) sales-volume variance D) selling-price variance
B) flexible-budget variance
An unfavorable flexible-budget variance for variable costs may be the result of:
A) using more input quantities than were budgeted
B) paying higher prices for inputs than were budgeted
C) selling output at a higher selling price than budgeted
D) Both A and B are correct.
D) Both A and B are correct.
An unfavorable variance:
A) may suggest investigation is needed
B) is conclusive evidence of poor performance
C) demands that standards be recomputed
D) indicates continuous improvement is needed
A) may suggest investigation is needed
All of the following are needed to prepare a flexible budget EXCEPT determining the:
A) budgeted variable cost per output unit
B) budgeted fixed costs
C) actual selling price per unit
D) actual quantity of output units
C) actual selling price per unit
The variance that LEAST affects cost control is the:
A) flexible-budget variance
B) direct-material-price variance
C) sales-volume variance
D) direct manufacturing labor efficiency variance
C) sales-volume variance
A flexible-budget variance is $600 favorable for unit-related costs. This indicates that costs were:
A) $600 more than the master budget
B) $600 less than for the planned level of activity
C) $600 more than standard for the achieved level of activity
D) $600 less than standard for the achieved level of activity
D) $600 less than standard for the achieved level of activity
JJ Abrams planned to use $164 of material per unit but actually used $160 of material per unit, and
planned to make 1,200 units but actually made 1,000 units.
12) The flexible-budget amount is:
A) $160,000
B) $164,000
C) $192,000
D) $196,800
B) 1,000 units × $164 = $164,000
JJ Abrams planned to use $164 of material per unit but actually used $160 of material per unit, and
planned to make 1,200 units but actually made 1,000 units.
The flexible-budget variance is: A) $4,000 favorable B) $28,000 unfavorable C) $32,800 unfavorable D) $4,800 favorable
A) ($160 - $164) × 1,000 = $4,000 F
JJ Abrams planned to use $164 of material per unit but actually used $160 of material per unit, and
planned to make 1,200 units but actually made 1,000 units.
The sales-volume variance is:
A) $4,000 favorable
B) $28,000 unfavorable
C) $32,800 unfavorable
D) $4,800 favorable
C) (1,000 - 1,200) × $164 = $32,800 U
Bebee Corporation currently produces cardboard boxes in an automated process. Expected
production per month is 40,000 units, direct-material costs are $0.60 per unit, and manufacturing
overhead costs are $18,000 per month. Manufacturing overhead is all fixed costs. What is the flexible
budget for 20,000 and 40,000 units, respectively?
A) $21,000; $33,000
B) $21,000; $42,000
C) $30,000; $42,000
D) None of these answers are correct.
Explanation: C) 20,000 units 40,000 units
Materials ($0.60) $ 12,000 $24,000
Machinery 18,000 18,000
$30,000 $42,000
Brennen Incorporated planned to use $24 of material per unit but actually used $25 of material per unit,
and planned to make 2,000 units but actually made 2,400 units.
The flexible-budget amount is:
A) $48,000
B) $50,000
C) $57,600
D) $60,000
C) 2,400 units × $24 = $57,600
Brennen Incorporated planned to use $24 of material per unit but actually used $25 of material per unit,
and planned to make 2,000 units but actually made 2,400 units.
The flexible-budget variance is:
A) $9,600 favorable
B) $2,400 unfavorable
C) $10,000 unfavorable
D) $12,000 favorable
B) ($25 - $24) × 2,400 = $2,400 U
Brennen Incorporated planned to use $24 of material per unit but actually used $25 of material per unit,
and planned to make 2,000 units but actually made 2,400 units.
The sales-volume variance is:
A) $9,600 favorable
B) $2,400 unfavorable
C) $10,000 unfavorable
D) $12,000 favorable
A) (2,400 - 2,000) × $24 = $9,600 F
Melville Incorporated planned to use $37.50 of material per unit but actually used $36.75 of material per
unit, and planned to make 1,800 units but actually made 1,600 units
The flexible-budget amount is:
A) $60,000
B) $67,500
C) $59,200
D) $1,200
A) 1,600 units × $37.50 = $60,000
Melville Incorporated planned to use $37.50 of material per unit but actually used $36.75 of material per
unit, and planned to make 1,800 units but actually made 1,600 units
The flexible-budget variance is:
A) $7,500 favorable
B) $7,500 unfavorable
C) $1,200 unfavorable
D) $1,200 favorable
D) ($36.75 - $37.50) × 1,600 = $1,200 F
Melville Incorporated planned to use $37.50 of material per unit but actually used $36.75 of material per
unit, and planned to make 1,800 units but actually made 1,600 units
The sales-volume variance is:
A) $7,500 favorable
B) $7,500 unfavorable
C) $1,200 unfavorable
D) $1,200 favorable
B) (1,600 - 1,800) × $37.50 = $7,500 U
Hemberger Corporation currently produces baseball caps in an automated process. Expected
production per month is 20,000 units, direct material costs are $3.00 per unit, and manufacturing
overhead costs are $46,000 per month. Manufacturing overhead is entirely fixed costs. What is the
flexible budget for 10,000 and 20,000 units, respectively?
A) $53,000; $83,000
B) $53,000; $106,000
C) $76,000; $106,000
D) None of these answers are correct.
Explanation: C) 10,000 units 20,000 units
Materials ($3.00) $30,000 $60,000
Machinery 46,000 46,000
$76,000 $106,000
The actual information pertains to the month of September. As part of the budgeting process, Kriger
Fencing Company developed the following static budget for September. Kriger is in the process of
preparing the flexible budget and understanding the results.
Actual Flexible Static
Results Budget Budget
Sales volume (in units) 10,000 ________12,500
Sales revenues $500,000 _________ $625,000
Variable costs 256,000 $ ________ 300,000
Contribution margin 244,000 _______$ 325,000
Fixed costs 229,000 $ ________ 225,000
Operating profit $ 15,000 $ _________$ 100,000
The flexible budget will report \_\_\_\_\_\_\_\_ for the fixed costs. A) $229,000 B) $225,000 C) $180,000 D) $286,250
B) $225,000, given in the static budget
The actual information pertains to the month of September. As part of the budgeting process, Kriger
Fencing Company developed the following static budget for September. Kriger is in the process of
preparing the flexible budget and understanding the results.
Actual Flexible Static
Results Budget Budget
Sales volume (in units) 10,000 ________12,500
Sales revenues $500,000 _________ $625,000
Variable costs 256,000 $ ________ 300,000
Contribution margin 244,000 _______$ 325,000
Fixed costs 229,000 $ ________ 225,000
Operating profit $ 15,000 $ _________$ 100,000
The flexible budget will report \_\_\_\_\_\_\_\_ for variable costs. A) $256,000 B) $300,000 C) $240,000 D) $320,000
C) 10,000 units × $300,000/12,500 = $240,000
The actual information pertains to the month of September. As part of the budgeting process, Kriger
Fencing Company developed the following static budget for September. Kriger is in the process of
preparing the flexible budget and understanding the results.
Actual Flexible Static
Results Budget Budget
Sales volume (in units) 10,000 ________12,500
Sales revenues $500,000 _________ $625,000
Variable costs 256,000 $ ________ 300,000
Contribution margin 244,000 _______$ 325,000
Fixed costs 229,000 $ ________ 225,000
Operating profit $ 15,000 $ _________$ 100,000
The flexible-budget variance for variable costs is: A) $16,000 unfavorable B) $60,000 unfavorable C) $16,000 favorable D) $60,000 favorable
A) $256,000 - (10,000 × $300,000/12,500) = $16,000 U
The static-budget variance can be subdivided into the flexible-budget variance and the sales-volume
variance.
TRUE
The flexible-budget variance may be the result of inaccurate forecasting of units sold.
FALSE
Decreasing demand for a product may create a favorable sales-volume variance.
FALSE
An unfavorable variance is conclusive evidence of poor performance.
FALSE
A company would NOT need to use a flexible budget if it had perfect foresight about actual output
units
TRUE
The flexible-budget variance for direct-cost inputs is subdivided into two detailed variances, the
efficiency variance and the price variance.
TRUE
The actual information pertains to the month of September. As part of the budgeting process, Kriger
Fencing Company developed the following static budget for September. Kriger is in the process of
preparing the flexible budget and understanding the results.
Actual Flexible Static
Results Budget Budget
Sales volume (in units) 10,000________ 12,500
Sales revenues $500,000 $_______ $625,000
Variable costs 256,000 $ ________ 300,000
Contribution margin 244,000 $_______ 325,000
Fixed costs 229,000 $ ________ 225,000
Operating profit $ 15,000 $_________ $ 100,000
The primary reason for low operating profits was: A) the variable-cost variance B) increased fixed costs C) a poor management accounting system D) lower sales volume than planned
D) lower sales volume than planned
The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy
Department of Wooden Figurines Incorporated had developed the following static budget for the third
quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results.
Actual Flexible Static
Results Budget Budget
Sales volume (in units) 13,000 ________12,000
Sales revenues $257,500 $_________ $250,000
Variable costs 154,000 $ ________ 175,000
Contribution margin 103,500 $__________ 75,000
Fixed costs 50,500 $ ________ 49,500
Operating profit $ 53,000 $ $______ 25,500
The flexible budget will report \_\_\_\_\_\_\_\_ for variable costs. A) $154,000 B) $189,583 C) $175,000 D) $13,583
B) 13,000 units × $175,000/12,000 = $189,583
The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy
Department of Wooden Figurines Incorporated had developed the following static budget for the third
quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results.
Actual Flexible Static
Results Budget Budget
Sales volume (in units) 13,000 ________12,000
Sales revenues $257,500 $_________ $250,000
Variable costs 154,000 $ ________ 175,000
Contribution margin 103,500 $__________ 75,000
Fixed costs 50,500 $ ________ 49,500
Operating profit $ 53,000 $ $______ 25,500
The flexible budget will report \_\_\_\_\_\_\_\_ for the fixed costs. A) $50,500 B) $49,500 Favorable C) $49,500 D) $1,000 Unfavorable
C) $49.500, given in the static budget
The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy
Department of Wooden Figurines Incorporated had developed the following static budget for the third
quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results.
Actual Flexible Static
Results Budget Budget
Sales volume (in units) 13,000 ________12,000
Sales revenues $257,500 $_________ $250,000
Variable costs 154,000 $ ________ 175,000
Contribution margin 103,500 $__________ 75,000
Fixed costs 50,500 $ ________ 49,500
Operating profit $ 53,000 $ $______ 25,500
The flexible-budget variance for variable costs is: A) $21,000 favorable B) $13,583 unfavorable C) $35,583 unfavorable D) $35,583 favorable
D) [(13,000 × $175,000/12,000)] - $154,000 = $35,583 F
The primary reason for high actual operating profits was: A) the variable-cost variance B) increased fixed costs C) higher sales volume than planned D) lower sales volume than planned
A) the variable-cost variance
Act. Results Flex. Bud. Variances Flex Bud.
Units Sold 450k ——– 450k
Revenues 168,320 4k F (A)
Variable Costs (C) 800 U 63,440
Fixed Costs 33120 3440 F 36560
Op. Inc. 70960 (D) 64320
Sales-Vol. Vari. Static Budget Units Sold -------- 412,500 Revenues 5600 U (B) Vari. Costs 9,360 F 72,800 Fixed Costs 0 36560 Op. Inc. (E) 60560
What amounts are reported for revenues in the flexible-budget (A) and the static-budget (B), respectively? A) $164,320; $158,720 B) $164,320; $169,920 C) $169,920; $177,920 D) $169,920; $166,720
B) $164,320; $169,920
Act. Results Flex. Bud. Variances Flex Bud.
Units Sold 450k ——– 450k
Revenues 168,320 4k F (A)
Variable Costs (C) 800 U 63,440
Fixed Costs 33120 3440 F 36560
Op. Inc. 70960 (D) 64320
Sales-Vol. Vari. Static Budget Units Sold -------- 412,500 Revenues 5600 U (B) Vari. Costs 9,360 F 72,800 Fixed Costs 0 36560 Op. Inc. (E) 60560
What are the actual variable costs (C)? A) $72,800 B) $64,240 C) $62,640 D) $54,080
B) $64,240
Act. Results Flex. Bud. Variances Flex Bud.
Units Sold 450k ——– 450k
Revenues 168,320 4k F (A)
Variable Costs (C) 800 U 63,440
Fixed Costs 33120 3440 F 36560
Op. Inc. 70960 (D) 64320
Sales-Vol. Vari. Static Budget Units Sold -------- 412,500 Revenues 5600 U (B) Vari. Costs 9,360 F 72,800 Fixed Costs 0 36560 Op. Inc. (E) 60560
What is the total flexible-budget variance (D)? A) $240 unfavorable B) $0 C) $1,360 favorable D) $6,640 favorable
D) $6,640 favorable
Act. Results Flex. Bud. Variances Flex Bud.
Units Sold 450k ——– 450k
Revenues 168,320 4k F (A)
Variable Costs (C) 800 U 63,440
Fixed Costs 33120 3440 F 36560
Op. Inc. 70960 (D) 64320
Sales-Vol. Vari. Static Budget Units Sold -------- 412,500 Revenues 5600 U (B) Vari. Costs 9,360 F 72,800 Fixed Costs 0 36560 Op. Inc. (E) 60560
What is the total sales-volume variance (E)? A) $14,960 unfavorable B) $5,600 unfavorable C) $3,760 favorable D) $14,960 favorable
C) $3,760 favorable
Act. Results Flex. Bud. Variances Flex Bud.
Units Sold 450k ——– 450k
Revenues 168,320 4k F (A)
Variable Costs (C) 800 U 63,440
Fixed Costs 33120 3440 F 36560
Op. Inc. 70960 (D) 64320
Sales-Vol. Vari. Static Budget Units Sold -------- 412,500 Revenues 5600 U (B) Vari. Costs 9,360 F 72,800 Fixed Costs 0 36560 Op. Inc. (E) 60560
What is the total static-budget variance? A) $10,400 favorable B) $6,640 favorable C) $3,760 unfavorable D) $3,760 favorable
A) $10,400 favorable
The flexible-budget variance pertaining to revenues is often called a selling-price variance.
TRUE
Cost control is the focus of the sales-volume variance.
FALSE
The flexible-budget variance for direct cost inputs can be further subdivided into a:
A) static-budget variance and a sales-volume variance
B) sales-volume variance and an efficiency variance
C) price variance and an efficiency variance
D) static-budget variance and a price variance
C) price variance and an efficiency variance
2) Budgeted input quantity information may be obtained from:
A) actual input quantities used last period
B) standards developed by your company
C) data from other companies that have similar processes
D) All of these answers are correct.
D) All of these answers are correct.
When actual input data from past periods is used to develop a budget:
A) past inefficiencies are excluded
B) expected future changes are incorporated
C) information is available at a low cost
D) audited financial information must be used
C) information is available at a low cost
When standards are used to develop a budget:
A) past inefficiencies are excluded
B) benchmarking must also be used
C) information is available at a low cost
D) flexible-budget amounts are difficult to determine
A) past inefficiencies are excluded
The term budget indicates:
A) that standards have been used to develop the budget
B) that actual input data from past periods have been used to develop the budget
C) that engineering studies have been used to develop the budget
D) planned amounts for a future accounting period
D) planned amounts for a future accounting period
A standard input:
A) is a carefully determined price, cost, or quantity
B) is usually expressed on a per unit basis
C) may be developed using engineering studies
D) All of these answers are correct.
D) All of these answers are correct.
Ideal standards: A) assume peak operating conditions B) allow for normal machine breakdowns C) greatly improve employee motivation and performance D) All of these answers are correct
A) assume peak operating conditions
Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII
estimated the following standard costs for one of their major products, the 10-gallon plastic container.
Budgeted quantity Budgeted price Direct materials 0.10 pounds $30 per pound Direct labor 0.05 hours $15 per hour
During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an
average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25 per hour.
June's direct material efficiency variance is: A) $1,860 unfavorable B) $600 favorable C) $1,360 favorable D) None of these answers are correct.
B) $30 × (980 - 1,000) = $600 F
Managers generally have more control over price variances than efficiency variances.
FALSE
To prepare budgets based on actual data from past periods is preferred since past inefficiencies are
EXCLUDED.
FALSE
All budgets are based on standard costs.
FALSE
A standard is attainable through efficient operations but allows for normal disruptions such as
machine breakdowns and defective production.
TRUE
One advantage of using standard times to develop a budget is they are simple to compile, are based
solely on the past actual history, and do NOT require expected future changes to be taken into account.
FALSE
A favorable price variance for direct materials indicates that:
A) a lower price than planned was paid for materials
B) a higher price than planned was paid for materials
C) less material was used during production than planned for actual output
D) more material was used during production than planned for actual output
A) a lower price than planned was paid for materials
A favorable efficiency variance for direct manufacturing labor indicates that:
A) a lower wage rate than planned was paid for direct labor
B) a higher wage rate than planned was paid for direct labor
C) less direct manufacturing labor-hours were used during production than planned for actual output
D) more direct manufacturing labor-hours were used during production than planned for actual output
C) less direct manufacturing labor-hours were used during production than planned for actual output
An unfavorable price variance for direct materials might indicate:
A) that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory
methods
B) congestion due to scheduling problems
C) that the purchasing manager skillfully negotiated a better purchase price
D) that the market had an unexpected oversupply of those materials
A) that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory
methods
A favorable efficiency variance for direct materials might indicate:
A) that lower-quality materials were purchased
B) an overskilled workforce
C) poor design of products or processes
D) a lower-priced supplier was used
B) an overskilled workforce
A favorable price variance for direct manufacturing labor might indicate that:
A) employees were paid more than planned
B) budgeted price standards are too tight
C) underskilled employees are being hired
D) an efficient labor force
C) underskilled employees are being hired
An unfavorable efficiency variance for direct manufacturing labor might indicate that:
A) work was efficiently scheduled
B) machines were not properly maintained
C) budgeted time standards are too lax
D) more higher-skilled workers were scheduled than planned
B) machines were not properly maintained
Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII
estimated the following standard costs for one of their major products, the 10-gallon plastic container.
Budgeted quantity Budgeted price Direct materials 0.10 pounds $30 per pound Direct labor 0.05 hours $15 per hour
During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an
average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25
per hour.
June's direct material flexible-budget variance is: A) $1,860 unfavorable B) $600 favorable C) $1,360 unfavorable D) None of these answers are correct.
C) (980 × $32) - (10,000 × 0.10 × $30) = $1,360 U
Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII
estimated the following standard costs for one of their major products, the 10-gallon plastic container.
Budgeted quantity Budgeted price Direct materials 0.10 pounds $30 per pound Direct labor 0.05 hours $15 per hour
During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an
average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25
per hour.
June's direct material price variance is: A) $1,960 unfavorable B) $600 favorable C) $1,360 favorable D) None of these answers are correct.
A) 980 × ($32 - $30) = $1,960 U
Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII
estimated the following standard costs for one of their major products, the 10-gallon plastic container.
Budgeted quantity Budgeted price Direct materials 0.10 pounds $30 per pound Direct labor 0.05 hours $15 per hour
During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an
average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25
per hour.
June's direct manufacturing labor price variance is: A) $125 unfavorable B) $125 favorable C) $7,623.50 unfavorable D) None of these answers are correct.
A) 500 dlh × ($15.25 - $15.00) = $125 U
Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII
estimated the following standard costs for one of their major products, the 10-gallon plastic container.
Budgeted quantity Budgeted price Direct materials 0.10 pounds $30 per pound Direct labor 0.05 hours $15 per hour
During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an
average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25
per hour.
June's direct manufacturing labor efficiency variance is: A) $125 unfavorable B) $125 favorable C) $7,623.50 unfavorable D) None of these answers are correct.
D) 500 dlh - (10,000 × 0.05)] × $15 = Zero
Sawyer Industries, Inc. (SII), developed standard costs for direct material and direct labor. In 2011, SII
estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic
container.
Budgeted quantity Budgeted price Direct materials 0.20 pounds $25 per pound Direct labor 0.10 hours $15 per hour
During July, SII produced and sold 5,000 containers using 1,100 pounds of direct materials at an
average cost per pound of $24 and 525 direct manufacturing labor hours at an average wage of $14.75
per hour
July's direct material flexible-budget variance is: A) $1,400 unfavorable B) $21,100 favorable C) $2,500 unfavorable D) None of these answers are correct
A) (1,100 × $24) - (5,000 × 0.20 × $25) = $1,400 U
Sawyer Industries, Inc. (SII), developed standard costs for direct material and direct labor. In 2011, SII
estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic
container.
Budgeted quantity Budgeted price Direct materials 0.20 pounds $25 per pound Direct labor 0.10 hours $15 per hour
During July, SII produced and sold 5,000 containers using 1,100 pounds of direct materials at an
average cost per pound of $24 and 525 direct manufacturing labor hours at an average wage of $14.75
per hour
July's direct material price variance is: A) $1,400 favorable B) $1,100 favorable C) $2,500 unfavorable D) None of these answers are correct.
B) 1,100 × ($24 - $25) = $1,100 F
Sawyer Industries, Inc. (SII), developed standard costs for direct material and direct labor. In 2011, SII
estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic
container.
Budgeted quantity Budgeted price Direct materials 0.20 pounds $25 per pound Direct labor 0.10 hours $15 per hour
During July, SII produced and sold 5,000 containers using 1,100 pounds of direct materials at an
average cost per pound of $24 and 525 direct manufacturing labor hours at an average wage of $14.75
per hour
C) $25 × [1,100 - (5,000 × 0.20)] = $2,500 U
Sawyer Industries, Inc. (SII), developed standard costs for direct material and direct labor. In 2011, SII
estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic
container.
Budgeted quantity Budgeted price Direct materials 0.20 pounds $25 per pound Direct labor 0.10 hours $15 per hour
During July, SII produced and sold 5,000 containers using 1,100 pounds of direct materials at an
average cost per pound of $24 and 525 direct manufacturing labor hours at an average wage of $14.75
per hour
July's direct manufacturing labor flexible-budget variance is: A) $375.00 unfavorable B) $131.25 favorable C) $243.75 unfavorable D) None of these answers are correct.
C) (525 × $14.75) - (5,000 × 0.10 × $15) = $243.75 U
Sawyer Industries, Inc. (SII), developed standard costs for direct material and direct labor. In 2011, SII
estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic
container.
Budgeted quantity Budgeted price Direct materials 0.20 pounds $25 per pound Direct labor 0.10 hours $15 per hour
During July, SII produced and sold 5,000 containers using 1,100 pounds of direct materials at an
average cost per pound of $24 and 525 direct manufacturing labor hours at an average wage of $14.75
per hour
July's direct manufacturing labor price variance is: A) $375.00 unfavorable B) $131.25 favorable C) $243.75 favorable D) None of these answers are correct.
B) 525 dlh × ($14.75 - $15.00) = $131.25 F
Sawyer Industries, Inc. (SII), developed standard costs for direct material and direct labor. In 2011, SII
estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic
container.
Budgeted quantity Budgeted price Direct materials 0.20 pounds $25 per pound Direct labor 0.10 hours $15 per hour
During July, SII produced and sold 5,000 containers using 1,100 pounds of direct materials at an
average cost per pound of $24 and 525 direct manufacturing labor hours at an average wage of $14.75
per hour
July's direct manufacturing labor efficiency variance is: A) $375.00 unfavorable B) $131.25 favorable C) $243.75 favorable D) None of these answers are correct.
A) [525 dlh - (5,000 × 0.10)] × $15 = $375 U
Apple Valley Orchards, Inc. (AVO), developed standard costs for direct material and direct labor. In
2011, AVO estimated the following standard costs for one of their most well loved products, the AVO
classic Grandma’s large apple pie which had a brown sugar coating on the top of the crust as well as
including cranberry and mince ingredients in addition to the apples.
Budgeted quantity Budgeted price Direct materials 1.5 pounds $7.25 per pound Direct labor 0.25 hours $14.00 per hour
During September, AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an
average cost per pound of $7.00 and 280 direct labor hours at an average wage of $14.25 per hour.
September's direct material flexible-budget variance is: A) $100.00 unfavorable B) $100.00 favorable C) $75.00 unfavorable D) None of these answers are correct.
C) (1,875 × $7.00) - (1,200 × 1.5 × $7.25) = $75.00 U
Apple Valley Orchards, Inc. (AVO), developed standard costs for direct material and direct labor. In
2011, AVO estimated the following standard costs for one of their most well loved products, the AVO
classic Grandma’s large apple pie which had a brown sugar coating on the top of the crust as well as
including cranberry and mince ingredients in addition to the apples.
Budgeted quantity Budgeted price Direct materials 1.5 pounds $7.25 per pound Direct labor 0.25 hours $14.00 per hour
During September, AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an
average cost per pound of $7.00 and 280 direct labor hours at an average wage of $14.25 per hour.
September's direct material price variance is: A) $468.75 favorable B) $468.75 unfavorable C) $75.00 unfavorable D) None of these answers are correct.
A) 1,875 × ($7.00 - $7.25) = $468.75 F
Apple Valley Orchards, Inc. (AVO), developed standard costs for direct material and direct labor. In
2011, AVO estimated the following standard costs for one of their most well loved products, the AVO
classic Grandma’s large apple pie which had a brown sugar coating on the top of the crust as well as
including cranberry and mince ingredients in addition to the apples.
Budgeted quantity Budgeted price Direct materials 1.5 pounds $7.25 per pound Direct labor 0.25 hours $14.00 per hour
During September, AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an
average cost per pound of $7.00 and 280 direct labor hours at an average wage of $14.25 per hour.
September's direct material efficiency variance is: A) $468.75 favorable B) $468.75 unfavorable C) $543.75 favorable D) $543.75 unfavorable
D) $7.25 × [1,875 - (1,200 × 1.5)] = $543.75 U
Apple Valley Orchards, Inc. (AVO), developed standard costs for direct material and direct labor. In
2011, AVO estimated the following standard costs for one of their most well loved products, the AVO
classic Grandma’s large apple pie which had a brown sugar coating on the top of the crust as well as
including cranberry and mince ingredients in addition to the apples.
Budgeted quantity Budgeted price Direct materials 1.5 pounds $7.25 per pound Direct labor 0.25 hours $14.00 per hour
During September, AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an
average cost per pound of $7.00 and 280 direct labor hours at an average wage of $14.25 per hour.
September's direct labor flexible-budget variance is: A) $210.00 favorable B) $210.00 unfavorable C) $280.00 favorable D) $280.00 unfavorable.
A) (280 × $14.25) - (1,200 × 0..25 × $14) = $210.00 F
Apple Valley Orchards, Inc. (AVO), developed standard costs for direct material and direct labor. In
2011, AVO estimated the following standard costs for one of their most well loved products, the AVO
classic Grandma’s large apple pie which had a brown sugar coating on the top of the crust as well as
including cranberry and mince ingredients in addition to the apples.
Budgeted quantity Budgeted price Direct materials 1.5 pounds $7.25 per pound Direct labor 0.25 hours $14.00 per hour
During September, AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an
average cost per pound of $7.00 and 280 direct labor hours at an average wage of $14.25 per hour.
September's direct labor price variance is: A) $210.00 unfavorable B) $210.00 favorable C) $70.00 unfavorable D) $70.00 favorable
C) 280 dlh × ($14.25 - $14.00) = $70 U
Apple Valley Orchards, Inc. (AVO), developed standard costs for direct material and direct labor. In
2011, AVO estimated the following standard costs for one of their most well loved products, the AVO
classic Grandma’s large apple pie which had a brown sugar coating on the top of the crust as well as
including cranberry and mince ingredients in addition to the apples.
Budgeted quantity Budgeted price Direct materials 1.5 pounds $7.25 per pound Direct labor 0.25 hours $14.00 per hour
During September, AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an
average cost per pound of $7.00 and 280 direct labor hours at an average wage of $14.25 per hour.
September's direct labor efficiency variance is: A) $280.00 favorable B) $280.00 unfavorable C) $210.00 favorable D) $210.00 unfavorable
[280 dlh - (1,200 × 0.25)] × $14 = $280 F
These questions refer to flexible-budget variance formulas with the following descriptions for the
variables: A = Actual; B = Budgeted; P = Price; Q = Quantity.
The best label for the formula (AQ - BQ) BP is the: A) efficiency variance B) price variance C) total flexible-budget variance D) spending variance
A) efficiency variance
The best label for the formula (AP - BP) AQ is the: A) efficiency variance B) price variance C) total flexible-budget variance D) spending variance
B) price variance
The best label for the formula [(AP)(AQ) - (BP)(AQ)] is the: A) efficiency variance B) price variance C) total flexible-budget variance D) spending variance
B) price variance
The best label for the formula [(AP)(AQ) - (BP)(BQ)] is the: A) efficiency variance. B) price variance C) total flexible-budget variance D) spending variance
total flexible-budget variance
Berman’s Camera Shop has prepared the following flexible budget for September and is in the process
of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
Flexible Variances
Budget Price Efficiency
Material A $40,000 $1,000F $3,000U
Material B 60,000 500U 1,500F
Direct
manufacturing 80,000 500U 2,500F
labor
The most likely explanation of the above variances for Material A is that:
A) a lower price than expected was paid for Material A
B) higher-quality raw materials were used than were planned
C) the company used a higher-priced supplier
D) Material A used during September was $2,000 less than expected
A) a lower price than expected was paid for Material A
Berman’s Camera Shop has prepared the following flexible budget for September and is in the process
of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
Flexible Variances
Budget Price Efficiency
Material A $40,000 $1,000F $3,000U
Material B 60,000 500U 1,500F
Direct
manufacturing 80,000 500U 2,500F
labor
The actual amount spent for Material B was: A) $58,000 B) $59,000 C) $60,000 D) $61,000
B) $60,000 + $500 U - $1,500 F = $59,000
Berman’s Camera Shop has prepared the following flexible budget for September and is in the process
of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
Flexible Variances
Budget Price Efficiency
Material A $40,000 $1,000F $3,000U
Material B 60,000 500U 1,500F
Direct
manufacturing 80,000 500U 2,500F
labor
The actual amount spent for direct manufacturing labor was: A) $80,000 B) $83,000 C) $82,000 D) $78,000
D) $80,000 + $500 U - $2,500 F = $78,000
Berman’s Camera Shop has prepared the following flexible budget for September and is in the process
of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
Flexible Variances
Budget Price Efficiency
Material A $40,000 $1,000F $3,000U
Material B 60,000 500U 1,500F
Direct
manufacturing 80,000 500U 2,500F
labor
The most likely explanation of the above direct manufacturing labor variances is that:
A) the average wage rate paid to employees was less than expected
B) employees did not work as efficiently as expected to accomplish the job
C) the company may have assigned more experienced employees this month than originally planned
D) management may have a problem with budget slack and might be using lax standards for both labor wage rates and expected efficiency
C)
Hector’s Camera Shop has prepared the following flexible budget for September and is in the process of
interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
Flexible Variances
Budget Price - Efficiency
Material A $20,000 $1,000U $1,200F
Material B 30,000 500F 800U
Material C 40,000 1,400U 1,000F
The actual amount spent for Material A was: A) $18,800 B) $20,200 C) $19,800 D) $21,000
C) $20,000 + 1,000 U - $1,200 F = $19,800
Hector’s Camera Shop has prepared the following flexible budget for September and is in the process of
interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
Flexible Variances
Budget Price - Efficiency
Material A $20,000 $1,000U $1,200F
Material B 30,000 500F 800U
Material C 40,000 1,400U 1,000F
The actual amount spent for Material B was: A) $29,700 B) $30,800 C) $30,500 D) $30,300
D) $30,000 - $500 F + $800 U = $30,300
Hector’s Camera Shop has prepared the following flexible budget for September and is in the process of
interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
Flexible Variances
Budget Price - Efficiency
Material A $20,000 $1,000U $1,200F
Material B 30,000 500F 800U
Material C 40,000 1,400U 1,000F
The explanation that lower-quality materials were purchased is most likely for: A) Material A B) Material B C) Material C D) both Material A and C
B) Material B
The presumed cause of a material price variance will determine how a company responds
TRUE
The price variance is the difference between the actual price and the budgeted price of the input,
multiplied by the actual quantity of input.
TRUE
For any actual level of output, the efficiency variance is the difference between actual quantity of
input used and the budgeted quantity of input allowed to produce actual output, multiplied by the
budgeted price.
TRUE
The use of high-quality raw materials is likely to result in a favorable efficiency variance and an
unfavorable price variance.
TRUE
The direct manufacturing labor price variance is likely to be unfavorable if lower-skilled workers are
put on a job.
FALSE
Although computed separately, price variances and efficiency variances should NOT be analyzed
separately from each other.
TRUE
A purchasing manager’s performance is best evaluated using the:
A) direct materials price variance
B) direct materials flexible-budget variance
C) direct manufacturing labor flexible-budget variance
D) affect the manager’s action has on total costs for the entire company
D) affect the manager’s action has on total costs for the entire company
One of the primary reasons for using cost variances is:
A) they diagnose the cause of a problem and what should be done to correct it
B) for superiors to communicate expectations to lower-level employees
C) to administer appropriate disciplinary action
D) for financial control of operating activities and understanding why variances arise
D) for financial control of operating activities and understanding why variances arise
A favorable cost variance of significant magnitude:
A) is the result of good planning
B) if investigated, may lead to improved production methods
C) indicates management does not need to be concerned about lax standards
D) does not need to be investigated
B) if investigated, may lead to improved production methods
The variances that should be investigated by management include:
A) only unfavorable variances
B) only favorable variances
C) all variances, both favorable and unfavorable
D) both favorable and unfavorable variances considered significant in amount for the company
D) both favorable and unfavorable variances considered significant in amount for the company
Typically, managers have the LEAST control over:
A) the direct material price variance
B) the direct material efficiency variance
C) machine maintenance
D) the scheduling of production
A) the direct material price variance
If manufacturing machines are breaking down more than expected, this will contribute to a(n):
A) favorable direct manufacturing labor price variance
B) unfavorable direct manufacturing labor price variance
C) favorable direct manufacturing labor efficiency variance
D) unfavorable direct manufacturing labor efficiency variance
D) unfavorable direct manufacturing labor efficiency variance
A single variance:
A) signals the cause of a problem
B) should be evaluated in isolation from other variances
C) may be the result of many different problems
D) should be used for performance evaluation
C) may be the result of many different problems
Variance analysis should be used:
A) to understand why variances arise
B) as the sole source of information for performance evaluation
C) to punish employees that do not meet standards
D) to encourage employees to focus on meeting standards
A) to understand why variances arise
Variances should be investigated:
A) when they are kept below a certain amount
B) when there is a small variance for critical items such as product defects
C) even though the cost of investigation exceeds the benefit
D) when there is an in-control occurrence
B) when there is a small variance for critical items such as product defects
When continuous improvement budgeted costing is implemented, cost reductions can result from:
A) price reductions
B) reducing materials waste
C) producing products faster and more efficiently
D) All of these answers are correct.
D) All of these answers are correct.
Nonfinancial performance measures:
A) are usually used in combination with financial measures for control purposes
B) are used to evaluate overall cost efficiency
C) allow managers to make informed tradeoffs
D) are often the sole basis of a manager’s performance evaluations
A) are usually used in combination with financial measures for control purposes
Unfavorable direct material price variances are:
A) always credits
B) always debits
C) credited to the Materials Control account
D) credited to the Accounts Payable Control account
B) always debits
Favorable direct manufacturing labor efficiency variances are:
A) always credits
B) always debits
C) debited to the Work-in-Process Control account
D) debited to the Wages Payable Control account
A) Always credits
From the perspective of control, the direct materials efficiency variance should be isolated at the time of: A) purchase B) use C) completion of the entire product D) sale of the product
B) use
Standard costing systems are a useful tool when using:
A) just-in-time systems
B) total quality management
C) computer-integrated manufacturing systems
D) All of these answers are correct.
D) All of these answers are correct.
Repeatedly identifying causes of variances, initiating corrective actions, and evaluating results of actions is an example of A) efficiency. B) effectiveness. C) continuous improvement. D) All of these answers are correct.
B) effectiveness.
The relative amount of inputs used to achieve a given output level is known as A) efficiency. B) effectiveness. C) continuous improvement. D) All of these answers are correct.
A) efficiency.
A favorable variance can be automatically interpreted as “good news.”
FALSE
Variances often affect each other.
TRUE
If variance analysis is used for performance evaluation, managers are encouraged to meet targets
using creativity and resourcefulness.
FALSE
When using variance for performance evaluation, managers often focus on effectiveness and
efficiency as two of the common attributes used in comparing expected results with actual results.
TRUE
For critical items such as product defects, a small variance may prompt investigation.
TRUE
A particular variance generally signals one particular problem
FALSE
If budgets contain slack, cost variances will tend to be favorable.
TRUE
Continuous improvement budgeted costs target price reductions and efficiency improvements.
TRUE
Improvement opportunities are easier to identify when products have been on the market for a
considerable period of time.
FALSE
It is best to rely totally on financial performance measures rather than using a combination of
financial and nonfinancial performance measures.
FALSE
From the perspective of control, the direct materials price variance should be isolated at the time of
purchase.
TRUE
The goal of variance analysis is for managers to understand why variances arise, to learn, and to
improve future performance.
TRUE
Employees logging in to production floor terminals and other modern technologies greatly facilitate
the use of a standard costing system.
TRUE
Possible operational causes of an unfavorable direct materials efficiency variance include poor
design of products or processes.
TRUE
Effectiveness is the relative amount of inputs used to achieve a given output level.
FALSE
The process by which a company's products or services are measured relative to the best possible levels of performance is known as: A) efficiency B) benchmarking C) a standard costing system D) variance analysis
B) benchmarking
When benchmarking:
A) the best levels of performance are usually found in companies that are within different industries
B) finding appropriate benchmarks is a minor issue
C) comparisons can highlight areas for better future cost management
D) Both A and C are correct.
C) comparisons can highlight areas for better future cost management
Ensuring benchmark numbers are comparable can be difficult because differences can exist across companies with: A) overall company strategy B) depreciation methods C) inventory methods D) All of these answers are correct.
D) All of these answers are correct.
When benchmarking, management accountants are MOST valuable when they:
A) present differences in the benchmarking data to management
B) highlight differences in the benchmarking data to management
C) provide insight into why costs or revenues differ across companies
D) provide complex mathematical analysis
C) provide insight into why costs or revenues differ across companies
Benchmarking is the continuous process of measuring products, services, and activities against the
best possible levels of performance, either inside or outside the organization.
TRUE
When benchmarking, the best levels of performance are typically found in companies that are totally
different.
FALSE
One problem with benchmarking is ensuring that numbers are comparable.
TRUE
When benchmarking it is best when management accountants simply analyze the costs and allow
management to provide the insight as to why the revenues and costs differ between companies.
FALSE
