multiple choice - chapter 8

Question 1

Which of the following amounts of a flexible budget remains constant, within the specified relevant range, when the sales volume changes?
A) total contribution margin
B) total fixed costs
C) total variable costs
D) total sales revenue

Answer 1

B) total fixed costs

Question 2

Which of the following amounts of a flexible budget changes, within the specified relevant range, with changes in sales volume?
A) sales price per unit
B) total fixed costs
C) variable cost per unit
D) total contribution margin

Answer 2

D) total contribution margin

Question 3

3 The sales volume variance is the difference between the ________.
A) actual results and the expected results in the flexible budget for the actual units sold
B) expected results in the flexible budget for the actual units sold and the static budget
C) static budget and actual amounts due to differences in sales price
D) flexible budget and static budget due to differences in fixed costs

Answer 3

B) expected results in the flexible budget for the actual units sold and the static budget

Question 4

Bear Creek Golf Center reported actual operating income for the current year as $65,000. The flexible budget operating income for actual volume is $59,000, while the static budget operating income is $60,000. What is the flexible budget variance for operating income?
A) $6000 favorable
B) $6000 unfavorable
C) $1000 unfavorable
D) $1000 favorable

Answer 4

A) $6000 favorable

Question 5

A company is setting its direct materials and direct labor standards for its leading product. Direct materials cost from the supplier are $8 per square foot, net of purchase discount. Sales tax is $.60 per square foot. Freight-in amounts to $0.10 per square foot. Basic wages of the assembly line personnel are $18 per hour. Payroll taxes are approximately 25% of wages. Benefits amount to $4 per hour. How much is the direct materials cost standard per square foot?
A) $8.10
B) $8.70
C) $22.00
D) $8.60

Answer 5

B) $8.70

Question 6

Oak Valley Company, a custom cabinet manufacturing company, is setting standard costs for one of its products. The main material is cedar wood, sold by the square foot. The current cost of cedar wood is $8.00 per square foot from the supplier. Delivery costs from the supplier to Oak Valley are $0.25 per square foot. Carpenters’ wages are $25.00 per hour. Payroll costs are $3.60 per hour, and benefits are $6.00 per hour. How much is the direct materials standard cost per square foot?
A) $14.25
B) $11.85
C) $8.25
D) $8.00

Answer 6

C) $8.25

Question 7

Cedar Designs Company, a custom cabinet manufacturing company, is setting standard costs for one of its products. The main material is cedar wood, sold by the square foot. The current cost of cedar wood is $6.00 per square foot from the supplier. Delivery costs are $0.25 per square foot. Carpenters’ wages are $30.00 per hour. Payroll costs are $3.60 per hour, and benefits are $6.00 per hour. How much is the direct labor standard cost per hour?
A) $30.00
B) $9.60
C) $33.60
D) $39.60

Answer 7

D) $39.60

Question 8

Which of the following will result in an unfavorable direct materials efficiency variance?
A) The actual cost per unit of direct materials exceeds the standard cost of direct materials.
B) The actual cost per unit of direct materials is less than the standard cost per unit of direct materials.
C) The actual quantity of direct materials used per unit exceeds the standard quantity of direct materials allowed per unit.
D) The actual quantity of direct materials used per unit is less than the standard quantity of direct materials allowed per unit.

Answer 8

c

Question 9

The purchasing manager was able to bring down the cost of direct materials by purchasing direct materials of a slightly lower grade quality than the company had used previously. The lower grade of direct materials, however, meant a higher defect rate on the assembly line and a higher waste of direct materials during production, which in turn lowered operating income. This would have led to a(n) ________.
A) unfavorable direct materials cost variance
B) favorable direct labor cost variance
C) favorable direct labor efficiency variance
D) unfavorable direct materials efficiency variance

Answer 9

d