general business data bank accounts

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51. In
regard to the investigation of variances under uncertainty, which of the
following is not a positive (i.e., desirable) combination of courses
of action
and states of nature?

A.
Investigate; a random fluctuation has
occurred.

B.
Do not investigate; a
random fluctuation has occurred.

C.
Do not investigate; a
noncontrollable fluctuation has occurred.

D.
Investigate; a nonrandom
fluctuation has occurred.

52. The
difference between the total factory overhead cost in the flexible budget for
the actual units produced and the amount of factory overhead cost applied to
products using the standard overhead rate is called the factory overhead
______________

A.
Flexible-budget variance.

B.
Production-volume
variance.

C.
Total fixed cost
variance.

D.
Efficiency variance.

E.
Controllable variance.

53. The
difference between total factory overhead cost incurred during a period and the
total standard factory overhead cost assigned to production of the period is
the ______________

A.
Flexible-budget variance.

B.
Production-volume
variance.

C.
Total factory overhead
variance.

D.
Overhead efficiency
variance.

E.
Total overhead spending
variance.

54.
For product-costing purposes, which of the following statements is true?

A.
It is necessary to “unitize”
fixed overhead costs, under the absorption or full-costing approach.

B.
The amount of standard
fixed overhead costs for product-costing and control purposes is the same.

C.
Only standard variable
overhead costs are included since these costs change in response to cost
drivers.

D.
Standard costing is not
permissible under generally accepted accounting principles.

E.
Total fixed overhead
costs are applied as a “lump-sum” amount.

55.
All of the following
choices exist for defining the denominator volume (denominator activity level)
for assigning fixed overhead costs in a standard cost system, except:

A.
Budgeted capacity utilization.

B.
Actual capacity
utilization.

C.
Theoretical capacity.

D.
Practical capacity.

E.
Normal capacity.

56.
In terms of allocating fixed overhead cost to products, generally accepted
accounting principles:

A.
Require that such allocations be based
on normal capacity.

B.
Allow for the use of
either practical capacity or theoretical capacity.

C.
Don’t apply since the
resulting data are used only internally (for control purposes).

D.
Specify only that such
costs be “reasonably allocated” to outputs.

57.
For internal reporting purposes, it is recommended that fixed overhead
allocation rates in a standard costing system be based on:

A.
Budgeted capacity usage.

B.
Theoretical capacity
since this is the level required under generally accepted accounting
principles.

C.
Actual capacity
utilization.

D.
Expected capacity usage.

E.
Practical capacity.

58.
The “death-spiral” effect refers to:

A.
The allocation of fixed overhead costs
over time to an increasing volume of output.

B.
A possible consequence
when variable, not full, costing is used.

C.
A likely consequence
when fixed overhead allocation rates are based on practical capacity.

D.
The continual raising of
prices in an attempt to recover fixed costs.

E.
Increases in product
demand over time in response to increases in fixed promotional costs.

59.
Which one of the following journal entries in a standard cost system is needed
to record the completion of production for the period?

.
A debit to Work-in-Process Inventory, at
standard cost.

B.
A debit to
Work-in-Process Inventory, at actual cost.

C.
A credit to Cost of
Goods Sold, at standard cost.

D.
A debit to Finished
Goods Inventory, at standard cost.

E.
A debit to Finished
Goods Inventory, at actual cost.

60.
Which one of the
following journal entries in a standard cost system is needed at the end of the
period to close out to Cost of Goods Sold an unfavorable production-volume
variance?

A.
A credit to Finished Goods Inventory, at
standard cost.

B.
A credit to Cost of
Goods sold, at standard cost.

C.
A credit to Cost of
Goods sold, at actual cost.

D.
A debit to the
Production-Volume Variance account.

E.
A debit to Cost of Goods
sold.

61.
Which one of the following journal entries in a standard cost system would be
used to apply factory overhead costs to production?

A.
A debit to the factory overhead account,
at standard cost.

B.
A credit to the factory
overhead account, at standard cost.

C.
A debit to WIP
inventory, at actual cost.

D.
A credit to Finished
Goods Inventory, at standard cost.

62. Some
accountants would argue that any variances from standard costs, when such
standards are current, should be written off to cost of goods sold. The
principal rationale for this treatment is:

A.
This is the treatment required currently
under generally accepted accounting principles.

B.
To allocate such
variances implies that asset values on the balance sheet (i.e., inventories)
contain the cost of inefficiencies.

C.
The negligible effect
this treatment has on total cost of goods sold for the period.

D.
Consistency with current
income tax provisions.

63.
If standard cost
variances are allocated (i.e., prorated) to inventory and cost of goods sold
(CGS) accounts at the end of a period, which of the following is correct?

A. Conceptually,
the amount allocated to each account is based on the relative amount of the
current period’s standard cost in the end-of-period balance in each account.

B.
The resulting balances
represent relative actual cost in each of the affected accounts.

C.
There is a presumption
that the net variance for the period is immaterial in amount.

D.
The amount allocated to
inventories is generally larger than the amount allocated to CGS.

64.
Which of the following
statement is true regarding choice of the denominator volume level in
conjunction with the process of allocating fixed manufacturing costs to
production?

A.
The choice typically will affect
end-of-period asset values, but not the production-volume variance for the
period.

B.
The choice is important
only if the company in question uses variable costing.

C.
Under absorption (full)
costing, this choice can affect reported profits for the period.

D.
This choice has no
effect on the standard overhead cost-allocation rate.

E.
The choice affects the
standard overhead cost-allocation rate but not product cost.

65.
When a company uses
absorption costing, there is the potential for income manipulation based on
choice of the denominator volume for setting the fixed overhead allocation
rate. In which case is this manipulation-potential manifested?

A.
When sales volume > production
volume, and the production-volume variance is prorated to inventories and cost
of goods sold at the end of the period.

B.
When sales volume <
production volume, and the production-volume variance is prorated to
inventories and cost of goods sold at the end of the period.

C.
When the
production-volume variance is written off entirely as an adjustment to cost of
goods sold at the end of the period.

D.
When budgeted output is
used to develop the standard overhead cost-allocation rate.

66.
The following budget data pertain to the Machining Department of Yolkenverst
Co.:

The
company prepared the budget at 85% of the maximum capacity level. The
department uses machine hours as the basis for applying standard factory
overhead costs to production. The standard fixed overhead application rate for
the Machining Department is:

A.
$2.89 per machine hour.

B.
$3.40 per machine hour.

C.
$3.47 per machine hour.

D.
$4.08 per machine hour.

E.
$8.50 per machine hour.

67.The
following budget data pertain to the Machining Department of Yolkenverst Co.:

The company prepared the budget at 85%
of the maximum capacity level. The department uses machine hours as the basis
for applying

standard
factory overhead costs to production. The budgeted total factory overhead for
the Machining Department is:

A.
$617,100.

B.
$875,000.

C.
$883,500.

D.
$892,500.

E.
$1,050,000.

A.
The following budget data pertain to the
Machining Department of Yolkenverst Co.:

The
company prepared the budget at 85% of the maximum capacity level. The
department uses machine hours as the basis for applying standard factory
overhead costs to production. During the year the Machining Department produced
50,000 units, consuming 127,500 machine hours and incurring $433,500 of fixed
overhead. For the current year the department has a production-volume variance
of:

A.
$0.

B.
$3,400 unfavorable.

C.
$3,600 unfavorable.

D.
$7,000 unfavorable.

E.
$8,500 unfavorable.

69.
The following information is available from Thinnews Co., a company that uses
machine hours to apply factory overhead:

The total actual
variable factory overhead cost incurred during the year was:

A.
$13,000.

B.
$14,000.

C.
$14,100.

D.
$14,400.

E.
$15,000.

F.
A

70.
The following information is available from Thinnews Co., a company that uses
machine hours to apply factory overhead:

The standard
fixed overhead application rate is:

A.
$1.00 per machine hour.

B.
$2.00 per machine hour.

C.
$3.00 per machine hour.

D.
$4.00 per machine hour.

E.
$5.00 per machine hour.

71.
The following information is available from Thinnews Co., a company that uses
machine hours to apply factory overhead:

The variable
overhead spending variance is:

A.
$600 unfavorable.

B.
$1,000 favorable.

C.
$1,400 unfavorable.

D.
$1,500 favorable.

E.
$2,100 favorable.

72.

The
following information is available from Thinnews Co., a company that uses
machine hours to apply factory overhead:

The variable
factory overhead efficiency variance is:

A.
$600 unfavorable.

B.
$1,000 favorable.

C.
$1,400 unfavorable.

D.
$1,500 favorable.

E.
$2,100 favorable.

73.
The following information is available from Thinnews Co., a company that uses
machine hours to apply factory overhead:

The factory
overhead production-volume variance is:

A.
$600 unfavorable.

B.
$1,000 favorable.

C.
$1,400 unfavorable.

D.
$1,500 favorable.

E.
$2,100 favorable.

74.
The following information is available from Thinnews Co., a company that uses
machine hours to apply factory overhead:

Under
a three-variance breakdown (decomposition) of the total factory overhead
variance, the total factory overhead spending variance is:

A.
$0.

B.
$600 unfavorable.

C.
$1,400 favorable.

D.
$1,400 unfavorable.

E.
$2,000 favorable.

75.
The following information is available from Thinnews Co., a company that uses
machine hours to apply factory overhead:

Under a three-variance
breakdown (decomposition) of the total factory overhead variance, the factory
overhead efficiency variance is:

A.
$400 favorable.

B.
$600 unfavorable.

C.
$1,400 favorable.

D.
$1,400 unfavorable.

E.
$2,000 favorable.

76.

The following
information is available from Thinnews Co., a company that uses machine hours
to apply factory overhead:

Under
a three-variance breakdown (decomposition) of the total factory overhead
variance, the factory overhead production-volume variance is:

A.
$400 favorable.

B.
$600 unfavorable.

C.
$1,400 favorable.

D.
$1,400 unfavorable.

E.
$2,000 favorable.

77.
The following information is available from Thinnews Co., a company that uses
machine hours to apply factory overhead:

Under
a two-variance breakdown (decomposition) of the total factory overhead
variance, the factory overhead controllable variance (i.e., total
flexible-budget variance) is:

A.
$400 favorable.

B.
$600 unfavorable.

C.
$1,400 favorable.

D.
$1,400 unfavorable.

E.
$2,000 favorable.

78.
The following information is available from Thinnews Co., a company that uses
machine hours to apply factory overhead:

Under a
two-variance breakdown (decomposition) of the total factory overhead variance,
the factory overhead efficiency variance is:

A.
$0.

B.
$400 favorable.

C.
$600 unfavorable.

D.
$1,400 favorable.

E.
$1,400 unfavorable.

79.
The following information is available from Thinnews Co., a company that uses
machine hours to apply factory overhead:

Under
a two-variance breakdown (decomposition) of the total factory overhead
variance, the factory overhead production-volume variance is:

A.
$400 favorable.

B.
$600 unfavorable.

C.
$1,400 favorable.

D.
$1,400 unfavorable.

E.
$2,000 favorable.

80.
Bonehead Co. has the following factory overhead costs:

The
total overhead flexible-budget (FB) variance is:

A.
$4,000 unfavorable.

B.
$7,000 favorable.

C.
$10,000 favorable.

D.
$11,000 unfavorable.

E.
$14,000 unfavorable.

81.
Bonehead Co. has the following factory overhead costs:

The factory
overhead production-volume variance is:

A.
$4,000 unfavorable.

B.
$7,000 favorable.

C.
$10,000 favorable.

D.
$11,000 unfavorable.

E.
$14,000 unfavorable.

82.
Bonehead Co. has the following factory overhead costs:

The total
underapplied or overapplied factory overhead for the period is:

A.
$4,000 underapplied.

B.
$7,000 overapplied.

C.
$10,000 overapplied.

D.
$11,000 underapplied.

E.
$14,000 underapplied.

83.
Bluecap Co. uses a standard cost system and flexible budgets for control
purposes. The following budgeted information pertains to 2010:

During
2010, Bluecap worked 28,000 direct labor hours and manufactured 9,600 units.
The actual factory overhead was $14,000 greater than the flexible budget amount
for the units produced, of which $6,000 was due to fixed factory overhead. In
preparing a budget for 2011 Bluecap decided to raise the level of operation to
90% of capacity, to manufacture 9,000 units at a budgeted total of 27,000
direct labor hours. The standard variable overhead application rate per direct
labor hour in 2010 was:

A.
$4.30.

B.
$4.50.

C.
$6.90.

D.
$9.30.

E.
$9.60.

84.
Bluecap Co. uses a standard cost system and flexible budgets for control
purposes. The following budgeted information pertains to 2010:

During
2010, Bluecap worked 28,000 direct labor hours and manufactured 9,600 units.
The actual factory overhead was $14,000 greater than the flexible budget amount
for the units produced, of which $6,000 was due to fixed factory overhead. In
preparing a budget for 2011 Bluecap decided to raise the level of operation to
90% of capacity, to manufacture 9,000 units at a budgeted total of 27,000
direct labor hours. The total budget for fixed factory overhead in 2010 was:

A.
$230,400.

B.
$259,200.

C.
$265,200.

D.
$276,480.

E.
$288,000.

85.

Bluecap Co. uses
a standard cost system and flexible budgets for control purposes. The following
budgeted information pertains to 2010:

During
2010, Bluecap worked 28,000 direct labor hours and manufactured 9,600 units.
The actual factory overhead was $14,000 greater than the flexible budget amount
for the units produced, of which $6,000 was due to fixed factory overhead. In
preparing a budget for 2011 Bluecap decided to raise the level of operation to
90% of capacity, to manufacture 9,000 units at a budgeted total of 27,000
direct labor hours. Under the assumption that the total budgeted fixed overhead
for 2011 is the same as it was for 2010, what is the standard fixed overhead
application rate per direct labor hour for 2011?

A.
$4.30.

B.
$4.50.

C.
$6.90.

D.
$9.30.

E.
$9.60.

86.
Bluecap Co. uses a standard cost system and flexible budgets for control
purposes. The following budgeted information pertains to 2010:

During
2010, Bluecap worked 28,000 direct labor hours and manufactured 9,600 units.
The actual factory overhead was $14,000 greater than the flexible budget amount
for the units produced, of which $6,000 was due to fixed factory overhead. In
preparing a budget for 2011 Bluecap decided to raise the level of operation to
90% of capacity, to manufacture 9,000 units at a budgeted total of 27,000
direct labor hours. The variable overhead efficiency variance in 2010 is:

A.
$3,440 favorable.

B.
$8,000 unfavorable.

C.
$9,200 favorable.

D.
$11,440 unfavorable.

E.
$17,200 unfavorable.

87.
Bluecap Co. uses a standard cost system
and flexible budgets for control purposes. The following budgeted information
pertains to 2010:

During
2010, Bluecap worked 28,000 direct labor hours and manufactured 9,600 units.
The actual factory overhead was $14,000 greater than the flexible budget amount
for the units produced, of which $6,000 was due to fixed factory overhead. In
preparing a budget for 2011 Bluecap decided to raise the level of operation to
90% of capacity, to manufacture 9,000 units at a budgeted total of 27,000
direct labor hours.

The factory overhead
spending variance in 2010, based on a three-variance breakdown (decomposition)
of the total overhead variance is:

A.
$3,200 favorable.

B.
$11,440 unfavorable.

C.
$15,040 favorable.

D.
$17,280 favorable.

E.
$17,440 unfavorable.

88.
Bluecap Co. uses a standard cost system
and flexible budgets for control purposes. The following budgeted information
pertains to 2010:

During
2010, Bluecap worked 28,000 direct labor hours and manufactured 9,600 units.
The actual factory overhead was $14,000 greater than the flexible budget amount
for the units produced, of which $6,000 was due to fixed factory overhead. In
preparing a budget for 2011 Bluecap decided to raise the level of operation to
90% of capacity, to manufacture 9,000 units at a budgeted total of 27,000
direct labor hours. The variable overhead spending variance in 2010 is:

A.
$6,000 unfavorable.

B.
$8,000 unfavorable.

C.
$9,200 favorable.

D.
$11,440 unfavorable.

E.
$17,440 unfavorable.

89.

Bluecap Co. uses
a standard cost system and flexible budgets for control purposes. The following
budgeted information pertains to 2010:

During
2010, Bluecap worked 28,000 direct labor hours and manufactured 9,600 units.
The actual factory overhead was $14,000 greater than the flexible budget amount
for the units produced, of which $6,000 was due to fixed factory overhead. In
preparing a budget for 2011 Bluecap decided to raise the level of operation to
90% of capacity, to manufacture 9,000 units at a budgeted total of 27,000
direct labor hours. The fixed overhead production-volume variance in 2010 is:

A.
$11,280 favorable.

B.
$17,280 favorable.

C.
$28,800 unfavorable.

D.
$34,800 unfavorable.

E.
$51,840 favorable.

90.
Bluecap Co. uses a standard cost system and flexible budgets for control
purposes. The following budgeted information pertains to 2010:

During
2010, Bluecap worked 28,000 direct labor hours and manufactured 9,600 units.
The actual factory overhead was $14,000 greater than the flexible budget amount
for the units produced, of which $6,000 was due to fixed factory overhead. In
preparing a budget for 2011 Bluecap decided to raise the level of operation to
90% of capacity, to manufacture 9,000 units at a budgeted total of 27,000
direct labor hours. The total overhead variance in 2010 is:

A.
$14,000 unfavorable.

B.
$15,040 favorable.

C.
$17,280 favorable.

D.
$37,840 favorable.

E.
$37,840 unfavorable.

91.
Neptune Inc. uses a standard cost system and has the following information for
April:

The total
underapplied or overapplied factory overhead is:

A.
$1,900 underapplied.

B.
$1,900 overapplied.

C.
$3,200 underapplied.

D.
$3,200 overapplied.

E.
$5,100 overapplied.

92.
Neptune Inc. uses a standard cost system and has the following information for
April:

The total
factory overhead spending variance is:

A.
$940 unfavorable.

B.
$1,040 favorable.

C.
$1,980 favorable.

D.
$2,160 favorable.

E.
$3,200 favorable.

93.
Neptune Inc. uses a standard cost system and has the following information for
April:

The factory
overhead production-volume variance is:

.
$940 unfavorable.

B.
$1,040 favorable.

C.
$1,980 favorable.

D.
$2,160 favorable.

E.
$3,200 favorable.

94.
Neptune Inc. uses a standard cost system and has the following information for
April:

The variable
factory overhead efficiency variance is:

A.
$940 unfavorable.

B.
$1,040 favorable.

C.
$1,980 favorable.

D.
$2,160 favorable.

E.
$3,200 favorable.

95.
Neptune Inc. uses a standard cost system and has the following information for
April:

The total
factory overhead flexible-budget variance is:

A.
$940 unfavorable.

B.
$1,040 favorable.

C.
$1,980 favorable.

D.
$2,160 favorable.

96. At
the denominator activity level, Norland Company’s total overhead budget for
25,000 units of production shows variable overhead costs of $36,000 and fixed
overhead costs of $32,000. During the most recent period, the company incurred
total overhead costs of $61,400 to manufacture 20,000 units. The total factory
overhead flexible-budget variance is:

A.
$200 favorable.

B.
$600 unfavorable.

C.
$6,000 unfavorable.

D.
$6,600 favorable.

E.
$7,000 unfavorable.

97. At
the denominator activity level, Norland Company’s total overhead budget for
25,000 units of production shows variable overhead costs of $36,000 and fixed
overhead costs of $32,000. During the most recent period, the company incurred
total overhead costs of $61,400 to manufacture 20,000 units. The total factory
overhead variance is:

A.
$200 favorable.

B.
$600 unfavorable.

C.
$6,000 unfavorable.

D.
$6,600 favorable.

E.
$7,000 unfavorable.

98. Xero
Company’s standard factory overhead rate is $3.75 per direct labor hour (DLH),
calculated at 90% capacity = 900 standard DLHs. In December, the company
operated at 80% of capacity, or 800 standard DLHs. Budgeted factory overhead at
80% of capacity is $3,150, of which $1,350 is fixed overhead. For December, the
actual factory overhead cost was $3,800 for 840 actual DLHs, of which $1,300
was for fixed factory overhead. What is the factory overhead production-volume
variance for December?

A.
$0.

B.
$150 unfavorable.

C.
$225 favorable.

D.
$425 unfavorable.

E.
$650 unfavorable.

99. Xero
Company’s standard factory overhead rate is $3.75 per direct labor hour (DLH),
calculated at 90% capacity = 900 standard DLHs. In December, the company
operated at 80% of capacity, or 800 standard DLHs. Budgeted factory overhead at
80% of capacity is $3,150, of which $1,350 is fixed overhead. For December, the
actual factory overhead cost was $3,800 for 840 actual DLHs, of which $1,300
was for fixed factory overhead. If the company uses a two-way breakdown
(decomposition) of the total overhead variance, what is the total factory
overhead flexible-budget variance for December?

A.
N/A—this variance doesn’t exist under a
two-way breakdown of the total overhead variance.

B.
$225 favorable.

C.
$425 unfavorable.

D.
$650 unfavorable.

E.
$690 unfavorable.

. Xero
Company’s standard factory overhead rate is $3.75 per direct labor hour (DLH),
calculated at 90% capacity = 900 standard DLHs. In December, the company
operated at 80% of capacity, or 800 standard DLHs. Budgeted factory overhead at
80% of capacity is $3,150, of which $1,350 is fixed overhead. For December, the
actual factory overhead cost was $3,800 for 840 actual DLHs, of which $1,300
was for fixed factory overhead. Assuming the use of a two-way breakdown
(decomposition) of the total overhead variance, what is the factory overhead
efficiency variance for December?

A.
N/A—this variance does not exist under a
two-way breakdown of the total overead variance.

B.
$90 unfavorable.

C.
$150 unfavorable.

D.
$225 favorable.

E.
$425 unfavorable.

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general business data bank accounts

$3.00

Description

1. Cost
behavior for variable overhead is more difficult to predict than for direct
material or direct labor cost for all the following reasons except:

A.
Multiple cost drivers are involved with
variable overhead.

B.
Direct material and
direct labor contain no semi-variable component.

C.
The variable portion of
overhead must first be separated from the fixed portion.

D.
Variable overhead is a
relatively small part of total overhead.

2. Finding a single cost driver that changes in
the same proportion as variable factory overhead costs is:

A.
Simplified by breaking out the fixed
portion of overhead cost.

B.
The first step in
variable overhead cost assignment.

C.
Difficult but manageable
using advanced statistical techniques.

D.
An important goal of
effective cost system design.

E.
Virtually impossible
because of the underlying nature of variable overhead costs.

3. An activity-based cost (ABC) driver applies
factory overhead to products or services according to the:

A.
Activity output as measured by the units
produced.

B.
Activity level of hours
of direct labor.

C.
Resource
demands/resource consumption of the firm’s outputs.

D.
Budgeted activity level
for the period.

E.
Volume of output (i.e.,
units produced) during the period.

4.
A manufacturing company
that uses standard costs and flexible budgets can break the variable factory
overhead flexible-budget variance
down into:

A.
Volume and efficiency components.

B.
Spending and efficiency
variances.

C.
Spending and production
volume variances.

D.
Spending variances only.

5. Which of the following factors is not usually
important when deciding whether to investigate a variance?

A.
Magnitude of the variance.

B.
Trend of the variance
over time.

C.
Whether the variance is
favorable or unfavorable.

D.
Cost of investigating
the variance.

E.
Likelihood that the
variance will recur in the future.

6. A
standard costing system will produce the same income as an actual costing
system when end-of-period standard cost variances are assigned:

A.
Only to work-in-process (WIP) inventory.

B.
Only to finished goods
inventory.

C.
To work-in-process and
finished goods inventories.

D.
Entirely to cost of
goods sold.

E.
To cost of goods sold
and all inventory accounts.

7. Many firms feel a strong obligation to
establish and use a standard rate for fixed factory overhead for all the following
reasons except:

A.
Generally accepted accounting principles
require full costing for financial reporting.

B.
The mandate to include
fixed factory overhead in pricing for federal government contract bidding.

C.
Because of current
income tax provisions in the U.S.

D.
Improved performance
measurement.

8. Because fixed factory overhead does not vary
with changes in output:

A.
The amount used in the control budget
for a period is a lump-sum amount.

B.
There is no way to
assign fixed overhead cost to products for product-costing purposes.

C.
Most companies treat
such costs as period, rather than as product, costs.

D.
There is no
justification for fixed overhead cost application.

E. Generally
accepted accounting principles permit companies to use variable rather than
absorption (full) costing for external reporting purposes.

9. In a standard cost system, an unfavorable production-volume
variance
would result if:

A.
There is an unfavorable labor efficiency
variance.

B.
There is an unfavorable
labor rate variance.

C.
Actual production is
less than the “denominator volume.”

D.
There is an unfavorable
manufacturing overhead spending variance.

E.
Actual fixed overhead
costs are greater than budgeted fixed overhead costs.

10.
The fixed factory overhead production-volume variance represents:

A.
Money lost or gained because of achieved
production levels.

B.
An artifact of unitizing
fixed overhead costs for product-costing purposes.

.
Information regarding the effectiveness
of the organization in meeting sales targets.

D.
Information that
management can use for cost-control purposes.

E.
Important information
for companies pursuing a JIT production philosophy.

11.
Factors contributing to the fixed factory overhead spending variance can
include all except:

A.
Inaccurate budget estimates for these
costs.

B.
Inadequate control of
fixed overhead costs.

C.
Misclassification of
cost items by the accounting system.

D.
Operating inefficiency.

E.
Unanticipated increases
in costs such as factory insurance.

12. The
difference between actual overhead costs incurred during the period and the
overhead in the flexible budget based on the output for the period is called
the:

A.
Total overhead spending variance.

B.
Total overhead
efficiency variance.

C.
Production-volume
variance.

D.
Overhead flexible-budget
variance.

E.
Total overhead variance.

13.
Manufacturing companies
using a standard cost system often can achieve more effective control when
factory overhead variance analysis is done with:

A.
A two-variance approach.

B.
A three-variance
approach.

C.
A four-variance
approach.

D.
A single cost driver.

E.
Multiple cost drivers.

14.
If inventories in a
business using a standard cost system are insignificant, the firm would be
justified (in a practical sense) by disposing of variances each year:

A.
As an adjustment to the finished goods
inventory only.

B.
As an adjustment to cost
of goods sold only.

C.
As adjustments to both
inventory accounts and the cost of goods sold for the period.

D.
As a special item (gain
or loss) on the income statement for the period.

E.
As an adjustment to the
work-in-process (WIP) inventory only.

15.
Proration of
manufacturing cost variances among ending inventories and cost of goods sold
has the effect of carrying the cost (savings) of inefficient (efficient)
operations of a period to:

A.
Only the balance sheet of the current
period.

B.
Only the income
statement of the current period.

C.
The balance sheets of
future periods only.

D.
The income statement of
the current period and the balance sheet of the current period.

16.
Among characteristics that distinguish service and manufacturing firms are the:

A.
Absence of output inventory in service
firms.

B.
Existence of
labor-intensive products in manufacturing firms.

C.
Rendering of identical
services in a service firm.

D.
Capital intensiveness of
service firms.

E.
Organizational structure
of service firms.

17.
Intangible attributes
often play dominant roles in determining the value of outputs from a service
organization. These characteristics often lead service firms to rely on:

A.
Input-related measures for measuring and
monitoring operations.

B.
Intuitive judgment in
monitoring operations.

C.
Quantitative measures of
output.

D.
Qualitative measures
exclusively for measuring and monitoring operations.

E.
Output-related measures
for measuring and monitoring operations.

18.
In firms using activity-based costing (ABC), budgeted total factory overhead
varies with changes in:

A.
A single cost driver for applying
overhead.

B.
Several cost drivers.

C.
The selected denominator
activity level.

D.
The quantity of input
resources used in operations of the period.

19.
Using an activity-based costing system (ABC) enables a firm to calculate
overhead variances for:

A.
Sales volume and production volume.

B.
Spending and selling
price.

C.
Each activity-based cost
driver.

D.
Semi-variable overhead
costs.

E.
Federal income tax
purposes.

20. The
production-volume variance should generally not be calculated and reported for
control purposes because, unless interpreted properly, it can:

.
Distract top management.

B.
Give information that only top management should have. C. Distort other
variable-cost variances.

D.
Encourage overproduction by managers to achieve a favorable volume variance. E.
Encourage underproduction by managers to avoid an unfavorable variance.

21.
As long as the organization is making good progress toward achieving an ideal
standard, its management may not need to:

A.
Modify its standards.

B.
Curtail spending on variable costs. C. Curtail spending on fixed costs.

D.
Take any corrective action if the variance for the period is large.

E.
Take any corrective action, even if the variance for the period is rather
substantial in amount. 22. Which of the following statements is correct?

A.
Random variances are typically investigated because they can repeat. B.
Systematic variances are considered uncontrollable.

C.
Most standard cost variances call for investigation and corrective action. D.
Random variances are typically not investigated.

E.
Most variances from ideal standards will be favorable.

23.
Causes of random variances are beyond the control of management, and are
most often found in:

A.
Fixed costs.

B.
Commodity products exchanged in open markets. C. Wages and salaries.

D.
Depreciation charges. E. Specialized industries.

24. Systematic
variances
are persistent and most likely:

A.
Will disappear over time.

B.
Average out to a steady-state amount over time. C. Will recur unless corrected.

D.
Are small in amount. E. Are large in amount.

25.
In deciding whether to further investigate a variance, managers usually:

A.
Investigate all variances determined to be systematic in nature. B. Investigate
all variances under a prescribed percentage limit.

C. Investigate all
variances associated with factory overhead spending. D. Investigate all
variances over a given dollar amount or percentage. E. Investigate all
flexible-budget but not volume-related variances.

26.
In deciding whether to further investigate a variance, an organization needs to
weigh the costs of investigation against the:

A.
Ongoing time constraints. B. Size of the variance.

C.
Nature of the variance.

D.
Difficulty of the investigation.

E.
Anticipated benefits from the investigation. 27. Random variances are:

A.
Often considered as uncontrollable from
the standpoint of management.

B.
Likely to recur until
corrected.

C.
The result of failing to
include all relevant variables in the analysis.

D.
The result of including
wrong or irrelevant variables in the variance-investigation model.

E.
Controlled through the
use of six sigma and other techniques from operations management.

28. A
statistical control chart:

A.
Sets control limits on the basis of managerial intuition and experience with
the process. B. Is useful for identifying random versus systematic variances.

C.
Is useful for identifying in-control but not out-of-control observations.

D.
Depicts the expected mean (or target) value of a process, but not the allowable
range around that value. E. Determines control limits (both upper and lower)
heuristically.

29.
Which of the following is not a plausible cause of a systematic
variance?

A.
Prediction error. B. Modeling error.

C.
Implementation error. D. Measurement error. E. Random error.

30.
Which of the following tools is helpful in addressing the
variance-investigation problem under uncertainty?

A.
Statistical control charts. B. Pay-off tables.

.
Regression analysis.

D.
Sensitivity analysis.

E.
Run charts.

31.
If I = the cost
of conducting an investigation, C = the estimated cost to correct the
cause of a variance, and L = loss associated with not investigating a
variance, what is the formula for determining the indifference probability, p?

A.
p= I/(L + C).

B.
p=
(L – C)/I.

C.
p=
(L + C)/I.

D.
p=
I/(L – C).

32. If
there is a 90 percent chance that an observed variance is random, the cost of
conducting an investigation is $1,000, the cost to correct a variance if the
investigation reveals a nonrandom cause, and the amount of loss a company
expects to incur if it does not investigate a variance that had a nonrandom
cause is $30,000, what is the expected cost of not investigating the
variance?

A.
$30,000.

B.
$1,500.

C.
$0.

D.
$3,900.

E.
$3,000.

33.
The fixed factory overhead application rate (for product-costing purposes) is
equal to:

A.
The denominator activity divided by
budgeted fixed factory overhead.

B.
The denominator activity
divided by budgeted variable factory overhead.

C.
Budgeted variable
factory overhead divided by denominator activity.

D.
Budgeted fixed factory
overhead divided by budgeted variable factory overhead.

E.
Budgeted fixed factory
overhead divided by denominator activity.

34. A
payoff table for variance investigation that measures the cost of two states of
nature and possible alternative actions by management will have:

A.
Four combinations.

B.
Three combinations.

C.
Only two realistic
combinations.

D.
Only idealistic
combinations.

E.
One combination for each
probability level.

35.
Which of the following statements about the standard variable factory overhead
application rate is true?

A.
The rate is a function of the
denominator volume chosen.

B.
The rate is used for
cost-control, but not product-costing purposes.

C.
The rate is used for
product-costing, but not cost-control purposes.

D.
The same rate is used
for both product-costing and cost-control purposes.

E.
Generally speaking, the
rate will be independent of the allocation base chosen to apply overhead.

36.
The difference between variable overhead incurred and total standard variable
overhead for the output of the period is called the:

A.
Variable factory overhead
flexible-budget variance.

B.
Variable factory
overhead spending variance.

C.
Variable factory
overhead rate variance.

D.
Variable factory
overhead efficiency variance.

E.
Variable factory
overhead usage variance.

37.
The difference between
total variable overhead cost incurred and the standard variable overhead cost
based on the actual quantity of the cost driver used to apply variable overhead
is the:

A.
Total variable overhead variance.

B.
Variable overhead
spending variance.

C.
Variable overhead rate
variance.

D.
Variable overhead
efficiency variance.

E.
Variable overhead
flexible-budget variance.

38.
The difference between
the standard variable overhead cost for the actual quantity of the cost driver
used for applying variable overhead and the standard variable overhead cost for
the units manufactured during the period is the:

A.
Total variable overhead variance.

B.
Variable overhead
spending variance.

C.
Variable overhead rate
variance.

D.
Variable overhead
efficiency variance.

E.
Variable overhead
flexible-budget variance.

39.
Which one of the following reflects both price (rate) as well as efficiency (quantity)
effects regarding variable overhead items?

A.
Variable overhead production-volume
variance.

B.
Variable overhead rate
variance.

C.
Variable overhead
spending variance.

D.
Variable usage variance.

E.
Variable overhead
efficiency variance.

40.

Which
one of the following factory overhead variances reflects the effect of
deviation in input quantities only if the cost driver for

applying
variable overhead is a perfect predictor of variable overhead cost?

A.
Total variable overhead variance.

B.
Variable overhead rate
variance.

C.
Variable overhead
spending variance.

D.
Variable overhead
flexible-budget variance.

E.
Variable overhead
efficiency variance.

41. Determining
the standard fixed factory overhead applied to production for a period involves
all of the following essential elements except:

A.
The actual amount of fixed overhead cost
incurred during the period.

B.
A cost driver (or
drivers) for applying the fixed overhead.

C.
The standard fixed
overhead application rate.

D.
An output level, as
reflected by the quantity of the cost driver for applying the fixed overhead
(i.e., the denominator activity level for the period).

E.
The total budgeted fixed
overhead cost for the period.

42.
The difference between the actual fixed overhead cost incurred during a period
and the budgeted fixed overhead cost for the period is the:

A.
Fixed overhead efficiency variance.

B.
Fixed overhead
production-volume variance.

C.
Fixed overhead spending
variance.

D.
Fixed overhead rate
variance.

E.
Fixed overhead
sales-volume variance.

43.
The difference between
budgeted fixed factory overhead for a period and the amount of the fixed
factory overhead applied to production during the period is the:

A.
Fixed factory overhead efficiency
variance.

B.
Fixed factory overhead
production-volume variance.

C.
Fixed factory overhead
spending variance.

D.
Fixed factory overhead
sales-volume variance.

E.
Fixed factory overhead
flexible budget variance.

44.
The difference between
the total actual overhead cost incurred during a period and budgeted total
factory overhead for the actual quantity of the cost driver used to apply
overhead is equal to the:

A.
Total overhead spending variance.

B.
Total overhead efficiency
variance.

C.
Factory overhead
production-volume variance.

D.
Total overhead rate
variance.

E.
Total overhead variance.

45.
In a standard cost system, when production is greater than the denominator
volume level, there will be:

A.
An unfavorable production-volume
variance.

B.
An unfavorable total
spending variance.

C.
A favorable
production-volume variance.

D.
A favorable sales-volume
variance.

E.
A favorable overhead
budget variance.

46.
Which of the following statements about variable overhead costs is true?

A.
The underlying model for control and
product-costing purposes is the same for variable overhead.

B.
The amount of variable
overhead applied to production is a function of the denominator output volume
and the actual quantity of the cost-allocation base (cost driver) used to apply
overhead.

C.
The total variable
overhead cost variance can be decomposed into a production-volume variance and
a flexible-budget variance.

D.
For control purposes,
the actual quantity of the cost-allocation base (cost driver) is used.

E.
Standard costs can be
used for control, but not product-costing, purposes.

47. A
deviation from standard because of an inaccurate estimation of the amounts of
variables used in the standard-setting process is an example of a(n):

A.
Random error.

B.
Prediction error.

C.
Implementation error.

D.
Modeling error.

E.
Measurement error.

48. A
deviation from standard because of the failure to include one or more relevant
variables, or the inclusion of the wrong or irrelevant variables in the
standard-setting process is an example of a(n):

A.
Random error.

B.
Prediction error.

C.
Implementation error.

D.
Modeling error.

E.
Measurement error.

49. A
deviation from standard that occurs because of an incorrect number resulting
from improper or inaccurate accounting systems or procedures is an example of
a(n):

.
Random error.

B.
Prediction error.

C.
Implementation error.

D.
Modeling error.

E.
Accounting error.

50. A
deviation from standard that occurs during operations as a result of operator
errors is an example of a(n):

A.
Random error.

B.
Prediction error.

C.
Implementation error.

D.
Modeling error.

E.
Accounting error.

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