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Exam 8: Performance Evaluation

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Question 31

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Unfavorable flexible budget variances are those that are the result of lower than expected sales volume.

A) True
B) False

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Question 32

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Indicate whether each of the following statements is true or false. Standards for direct materials and direct labor should be set by a company's accounting department.______ Standards for direct materials and direct labor should be reevaluated frequently in order to remain relevant and useful.______ Historical information is of little use in establishing standards.______ A standard represents what should be,not what is or was.______ Managers should consider behavioral implications when developing standards.______

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Standards for direct materials and direc...

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Question 33

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Indicate whether each of the following statements is true or false. Managerial performance can be evaluated by comparing actual amounts with standard amounts.______ Differences between standard and actual amounts are called variances.______ When the static budget is compared to a flexible budget based on actual volume of activity,any variances result from differences between standard and actual per-unit amounts.______ If the actual sales price per unit is higher than the standard,a company's sales price variance is unfavorable.______ Differences between flexible budget costs and revenues and the actual results are price variances.______

Which manager is usually held responsible for materials price variances?

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

Spark Company's static budget is based on a planned activity level of 45,000 units.At the same time the static budget was prepared,the management accountant prepared two additional budgets,one based on 40,000 units and one based on 50,000.The company actually produced and sold 49,000 units.In evaluating its performance,management should compare the company's actual revenues and costs to which of the following budgets?

If the master budget prepared at a volume level of 20,000 units includes factory rent of $40,000,a flexible budget based on a volume of 21,000 units would include factory rent of $40,000.

Which manager is generally held responsible for the sales volume variance?

The total sales variance includes both price and volume variances.

Which of the following statements is incorrect?

$\begin{array} { l r c } \text { Item to Classify } & \text { Starddard } & \text { Actual } \\\text { Sales Reveruse } & 820,000 & 835,000 \\\text { Wages } & 125,000 & 128,000 \\\text { S\&A Expenses } & 400,000 & 408,000 \\\text { Cost of Goods Sold } & 608,000 & 600,000\end{array}$ Which of the following statements is incorrect?

The Wentworth Company,estimating its sales to be 40,000 units for the upcoming period,prepared the following static budget: $\begin{array}{lr}\text {Units:}&40,000\\\text {Sales}&\$400,00\\\text {Tess variable costs.}\\\text { Manufacturing costs } & 140,000 \\\text { Selling and administrative costs } & \underline{80,000} \\ \text { Contribution margin } & \$ 180,000\\\text { Less fixed costs: } &\\\text { Manufacturing costs } & 44,000 \\\text { Selling and administrative costs } & \underline{34,000}\\\text { Net income } & \underline{ \$ 102,000}\end{array}$ The owner of the business is not so sure about the 40,000 unit sales volume and has requested additional budgets. Required: In the table provided,prepare two additional budgets,one at 90% of the static budget volume level and one at 110% of the static budget volume level.

Which of the following is a difference between a static and a flexible budget?

Dandridge Company established a direct materials standard of 4 pounds at $4.50 per pound for one of its products.During April,Dandridge produced 22,000 units of the product,using 86,000 pounds of material. 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?

To assess the importance of a variance,managers should consider,not just the materiality of the amount,but also the type of variance being analyzed.

Which manager is normally held responsible for fixed cost volume variances?

In most cases,the production manager should be held accountable for fixed cost volume variances.

Select the correct statement from the following,assuming Carmichael Company had a favorable direct materials price variance of $3,000 and an unfavorable direct materials usage variance of $2,000.

Which of the following statements is correct?

The following information is provided by the Atlas Company: $\begin{array} { l l } \text { Actual direct material cost } & \$ 20,000 \\\text { Standard direct material cost } & \$ 24,000 \\\text { Direct material usage variance } & \$ 3,000 \text { favorable }\end{array}$ What is the direct materials price variance?