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Exam 8: Performance Evaluation

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Question 41

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Which of the following statements is incorrect regarding variable overhead variances?

A) Variable overhead variances are based on the same general formulas used to compute the materials and labor price variances.
B) Variable overhead costs represent many inputs such as supplies, utilities and indirect labor.
C) All companies must calculate price and usage variances for variable overhead costs.
D) None of these answers is correct.

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

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Question 42

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The Ferguson Company estimated that October sales would be 100,000 units with an average selling price of $6.00. Actual sales for October were 105,000 units and average selling price was $5.95.The sales revenue flexible budget variance was:

A) $5,000 favorable.
B) $5,000 unfavorable.
C) $5,250 favorable.
D) $5,250 unfavorable.

E) None of the above
F) A) and C)

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Question 43

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Which of the following can reduce the amount of employees' budget gamesmanship?

Management by exception means that only unfavorable cost variances are investigated.

Heartwood Company reported a $4,000 favorable direct labor price variance and a $1,500 unfavorable direct labor usage variance. Select the correct statement from the following.

The Russell Company provides the following standard cost data per unit of product: During the period, the company produced and sold 22,000 units incurring the following costs: The direct material price variance was: $\begin{array} {| l|l| }\hline\text { Direct material ( } 3 \text { gallons }(a) \$ 6 \text { per gallon) }&\$18.00\\\hline\text { Direct labor ( } 2 \text { hours (a) } \$ 10 \text { per hour) }&\$20.00\\\hline\end{array}$ $\begin{array} {| l|l| }\hline \text { Direct material}&68,000 \text { gallons } @ \$ 5.90 \text { per gallon }\\\hline\text { Direct labor }&45,500 \text { hours } a \$ 9.75 \text { per hour }\\\hline\end{array}$

Cruz Company established a direct labor standard of 0.5 hour per unit at $12 per hour for one of its products. In April, Cruz produced 16,000 units and used 8,100 direct labor hours.Required: Based on this information, (a) Which variance can you calculate? (b) What is the dollar amount of the variance? (c) Is the variance favorable or unfavorable? (d) Do you consider the variance to be sufficiently material that managers should investigate to discover the cause of the variance?

Select the incorrect statement.

Multiplying the difference between actual materials price per unit and the standard materials price per unit by actual quantity of materials used is known as the:

The Bach Company provides the following standard and actual cost relating to material price and labor usage.Based on the above information, which statement is correct? $\begin{array}{lll}\text { Item to Classify }&\text {Standard}&\text { Actual }\\\text { Materials Price } & 8.50 \text { per gallon } & 8.35 \text { per gallon } \\\text { Labor Usage } & 30,000 \text { hours } & 28.500 \text { hours }\end{array}$

A static budget is one that shows estimated revenues and costs at multiple activity levels.

With respect to cost variances, managers seek to achieve actual costs that are higher than standard costs.

All of the following variances are unfavorable except? $\begin{array}{ccc}\text { Item to Classify }&\text {Standard}&\text { Actual }\\\text { Sales volume } & 100.000 \text { units } & 96.000 \text { units } \\\text { Sales price } & \$ 4 \text { per unit } & \$ 3.90 \text { per unit } \\\text { Materials usage } & 40,000 \text { gallons } & 42.000 \text { gallons } \\\text { Labor price } & 12.50 \text { per Hour } & 12.45 \text { per hour }\end{array}$

The resources used in the manufacturing process are frequently called:

The total sales variance includes both price and volume variances.

Indicate whether each of the following statements is true or false.The difference between the actual fixed costs and budgeted fixed costs is the spending variance.For fixed costs, there is no flexible budget variance.Companies generally do not calculate a volume variance for fixed overhead costs.The volume variance is the difference between budgeted fixed cost and the applied fixed cost for the period.If the amount of fixed overhead applied to production is greater than the budgeted fixed overhead, the result is an unfavorable overhead volume variance.

Which of the following equations can be used to compute the total materials variance? (A = Actual; S = Standard; Q = Quantity; P = Price)

When a comparison of static and flexible budgets shows an unfavorable sales volume variance, the variable cost volume variances will also be unfavorable.

For a product made by George Company, last year's standards for labor were 2 hours at $12 per hour. Which of the following considerations should George take into account in setting the standards for this year?

Standard cost systems facilitate the management practice known as: