Chapter 9&10 Quiz

Question 1

The activity variance for revenue is favorable if the revenue in the flexible budget exceeds the revenue in the static planning budget. True or False?

Answer 1

True.

Question 2

If activity is higher than expected, total fixed costs should be higher than expected. If the activity is lower than expected, total fixed costs should be lower than expected. True or False?

Answer 2

False.

Question 3

A flexible budget performance report contains activity variances but not revenue or spending variances. True or False?

Answer 3

False.

Question 4

The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity. True or False?

Answer 4

True.

Question 5

Actual costs are determined by plugging the actual level of activity for the period into the cost formulas used in flexible budgets. True or False?

Answer 5

False.

Question 6

Which of the following may appear on a flexible budget performance report?

A) A favorable revenue variance.
B) An unfavorable spending variance.
C) An unfavorable activity variance.
D) All of the above may appear on a flexible budget performance report.

Answer 6

All of the above may appear on a flexible budget performance report.

Question 7

A budget that is based on the activity level of a period is known as a:

A) Static Budget
B) Flexible Budget
C) Continuous Budget
D) Master Budget

Answer 7

Flexible Budget

Question 8

An activity variance is calculated by comparing the:

A) Planning budget to the flexible budget.
B) Planning budget to the actual results.
C) Static budget to the actual results.
D) Flexible budget to the actual results.

Answer 8

Planning budget to the flexible budget.

Question 9

A revenue variance is calculated by comparing the:

A) Planning budget to the flexible budget.
B) Flexible budget to the actual results.
C) Static budget to the actual results.
D) Planning budget to the actual results.

Answer 9

Flexible budget to the actual results.

Question 10

Which of the following statements is true?

A) The activity variance for a fixed expense will equal zero.
B) The activity variance for a fixed expense can be favorable or unfavorable depending on the actual level of activity.
C) The activity variance for a fixed expense will usually be favorable.
D) The activity variance for a fixed expense will usually be unfavorable.

Answer 10

The activity variance for a fixed expense will equal zero.

Question 11

A planning budget is usually prepared:

A) During the period.
B) After the flexible budget is prepared.
C) After the period ends.
D) Before the period begins.

Answer 11

Before the period begins.

Question 12

An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period. True or False?

Answer 12

False.

Question 13

Material price variances are often isolated at the time materials are purchased, rather than when they are placed into production, to facilitate earlier recognition of variances. True or False.

Answer 13

True.

Question 14

The labor efficiency variance is labeled favorable (F) if the actual hours used is less than the standard hours allowed for the actual output. True or False?

Answer 14

True.

Question 15

When more hours of labor time are necessary to complete a job than the standard allows, the labor efficiency variance is unfavorable. True or False?

Answer 15

True.

Question 16

The standard price per unit for direct materials should reflect the final, delivered cost of the materials. True or False?

Answer 16

True.

Question 17

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will be:

A) Either favorable or unfavorable.
B) Zero
C) Unfavorable.
D) Favorable.

Answer 17

Favorable.

Question 18

The production department should generally be responsible for materials price variances that resulted from:

A) Purchase of the wrong grade of materials.
B) Rush orders arising from poor scheduling.C) Purchases made in uneconomical lot-sizes.
D) Changes in the market prices of raw materials.

Answer 18

Rush orders arising from poor scheduling.

Question 19

The standard direct labor cost per unit of finished goods is computed in which of the following ways?

A) Standard hours per unit of finished goods ÷ standard rate per hour
B) Standard hours per unit of finished goods − standard rate per hour
C) Standard hours per unit of finished goods × standard rate per hour
D) Standard hours per unit of finished goods × (standard rate per hour − actual rate per hour)

Answer 19

Standard hours per unit of finished goods x Standard rate per hour.

Question 20

A standard cost card does not explicitly mention which of the following?

A) Standard variable manufacturing overhead cost per unit
B) Standard direct labor cost per unit
C) Standard indirect materials cost per unit
D) Standard direct materials cost per unit

Answer 20

Standard indirect materials cost per unit.

Question 21

Using a flexible budget, actual results can be compared to what costs should have been at the actual level of activity. True or False?

Answer 21

True.

Question 22

In a flexible budget, when the activity declines, the total variable cost also declines. True or False?

Answer 22

True.

Question 23

Differences between the static planning budget and the flexible budget show what should have happened because the actual level of activity differed from what had been planned. True or False?

Answer 23

True.

Question 24

In a flexible budget, what will happen to fixed costs as the activity level increases?

A) The fixed cost per unit will decrease.
B) The fixed cost per unit will remain unchanged.
C) The fixed cost per unit will increase.
D) Fixed costs are not included in a flexible budget.

Answer 24

The fixed cost per unit will decrease.

Question 25

Which of the following statements is true?

A) A planning budget is prepared before the period begins and is valid for only the actual level of activity.
B) A planning budget is prepared after the period ends and is valid for only the planned level of activity.
C) A planning budget is prepared before the period begins and is valid for only the planned level of activity.
D) A planning budget is prepared after the period ends and is valid for only the actual level of activity.

Answer 25

A planning budget is prepared before the period begins and is valid for only the planned level of activity.

Question 26

A spending variance is calculated by comparing the:

A) Flexible budget to the actual results.
B) Planning budget to the flexible budget.
C) Planning budget to the actual results.
D) Static budget to the actual results.

Answer 26

Flexible budget to the actual results.

Question 27

A quantity standard indicates how much of an input should be used to make a unit of product or provide a unit of service. True or False?

Answer 27

True.

Question 28

A favorable labor rate variance indicates that:

A) Actual hours exceed standard hours.
B) Standard hours exceed actual hours.
C) The actual rate exceeds the standard rate.
D) The standard rate exceeds the actual rate.

Answer 28

The standard rate exceeds the actual rate.

Question 29

The standard cost per unit for all three variable manufacturing costs is computed in which of the following ways?

A) Standard quantity or hours − standard price or rate
B) Standard quantity or hours × standard price or rate
C) Standard quantity or hours ÷ standard price or rate.
D) Standard quantity or hours × (standard price or rate − actual price or rate)

Answer 29

Standard quantity or hours x Standard price or rate.

Question 30

When using a flexible budget, a decrease in activity within the relevant range:

A) Decreases variable cost per unit.
B) Increases variable cost per unit.
C) Decreases total costs.
D) Increases total costs.

Answer 30

Decreases total cost.

Question 31

Which of the following statements is true?

A) A flexible budget is a comparison of actual revenues and costs at the actual level of activity to the actual revenues and costs incurred at the planned level of activity.
B) A flexible budget is a comparison of actual revenues and costs to what they should have been given the planned level of activity.
C) A flexible budget is an estimate of what revenues and costs should have been given the planned level of activity for the period.
D) A flexible budget is an estimate of what revenues and costs should have been given the actual level of activity for the period.

Answer 31

A flexible budget is an estimate of what revenues and costs should have been given the actual level of activity for the period.

Question 32

When the materials price variance is recorded at the time of purchase, raw materials are recorded as inventory at standard cost. True of False?

Answer 32

True.

Question 33

In general, the production manager is responsible for the materials price variance. True or False?

Answer 33

False.

Question 34

The materials price variance is computed based on the amount of materials purchased during the period. True or False?

Answer 34

True.

Question 35

A revenue variance is the difference between what the total sales revenue should be, given the actual level of activity of the period, and the actual total sales revenue. True or False?

Answer 35

True.

Question 36

The standard quantity or standard hours allowed refers to the amount of the input that should have been used to produce the actual output of the period. True or False?

Answer 36

True.

Question 37

The standard direct labor cost per unit of finished goods is computed in which of the following ways?

A) Standard hours per unit of finished goods × standard rate per hour
B) Standard hours per unit of finished goods − standard rate per hour
C) Standard hours per unit of finished goods ÷ standard rate per hour
D) Standard hours per unit of finished goods × (standard rate per hour − actual rate per hour)

Answer 37

Standard hours per unit of finished goods x Standard rate per hour.