Cost Exam 3 (Ch. 8-10)

Question 1

Labor Efficiency Variance Formula

Answer 1

SR (AH - (SH * Activity))

Question 2

Labor Rate Variance Formula

Answer 2

AH (AR-SR)

Question 3

Materials Quantity Variance Formula

Answer 3

SP (AQU - (SQ * Activity))

Question 4

Materials Price Variance Formula

Answer 4

AQP (AP-SP)

Question 5

Variable Overhead Efficiency Variance Formula

Answer 5

SR (AH - (SH * Activity))

Question 6

Variable Overhead Rate Variance Formula

Answer 6

AH (AR - SR)

Question 7

Static Planning Budget Formula

Answer 7

Fixed + (Variable * Budgeted Quantity)

Question 8

Flexible Budget Formula

Answer 8

Fixed + (Variable * Actual Quantity)

Question 9

Activity Variance Formula

Answer 9

Flexible Budget - Static Planning Budget

Question 10

Revenue & Spending Variance Formula

Answer 10

Actual Spending - Flexible Budget

Question 11

What are the 2 purposes of budgeting?

Answer 11

Planning, Controlling

Question 12

What is responsibility accounting?

Answer 12

When managers are held responsible for the items they can control.

Question 13

What is a continuous or perpetual budget?

Answer 13

One in which another month is added to the end as one month ends.

Question 14

What are 3 advantages of a self-imposed budget?

Answer 14

Accurate, reliable, motivating

Question 15

What is the disadvantage of a self-imposed budget?

Answer 15

Budgetary slack

Question 16

A sales budget is constructed by multiplying __ ___ ___ by the ___ ___.

Answer 16

budgeted unit sales

selling price

Question 17

What does the sales budget determine?

Answer 17

How many units need to be produced

Question 18

What 3 budgets make up the production budget?

Answer 18

Direct materials budget
Direct labor budget
Manufacturing overhead budget

Question 19

What are the 4 sections of a cash budget?

Answer 19

Receipts
Disbursements
Excess/Deficiency
Financing

Question 20

An estimate of what revenues and costs should have been, given the actual level of activity, is called a ___ ____.

Answer 20

Flexible budget

Question 21

The level of input that should be used to make a product or provide a service is called a ____ ____.

Answer 21

Quantity standard

Question 22

What is a standard?

Answer 22

A benchmark that measures performance

Question 23

What is the difference between an ideal standard and a practical standard?

Answer 23

An ideal standard is only attainable under the best circumstances. A practical standard is tight, but attainable.

Question 24

The amount that should be paid for each unit of input (material, labor, factory overhead) is a ____ ___.

Answer 24

Price standard

or cost standard

Question 25

Standard Direct Materials Cost Formula

Answer 25

Standard price x Standard quantity

Question 26

Standard Direct Labor Cost Formula

Answer 26

Standard rate x Standard hours

Question 27

The ___ __ _____ distinguishes between allowed cost, normal variance, and extraordinary variance.

Answer 27

Principle of Exception

Question 28

The __ __ _____ identifies causes of variances.

Answer 28

Principle of Exception

Question 29

The __ __ ____ focuses on areas where actual results deviate from expected results.

Answer 29

Principle of Exception

Question 30

Unfavorable variances are debits/credits.

Answer 30

debits

Question 31

Favorable variances are debits/credits.

Answer 31

credits

Question 32

Writing off an unfavorable variance increases/decreases operating income.

Answer 32

decreases

Question 33

Writing off a favorable variance increases/decreases operating income.

Answer 33

increases

Question 34

For a favorable variance, which of the following are debits and which are credits?

Work in Process
Materials Quantity Variance
Raw Materials

Answer 34

WIP - Debit
MQV - Credit
Raw Materials - Credit

Question 35

For an unfavorable variance, which of the following are debits and which are credits?

Work in Process
Materials Quantity Variance
Raw Materials

Answer 35

WIP - Debit
MQV - Debit
Raw Materials - Credit

Question 36

For fixed manufacturing overhead, what is the formula for a budget variance?

Answer 36

Actual fixed overhead - budgeted fixed overhead

Question 37

For fixed manufacturing overhead, what is the formula for a volume variance?

Answer 37

Budgeted fixed overhead - fixed overhead applied to work in process