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| 1.
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A favourable variance occurs when a good or service costs less than the amount of cost expected or budgeted. |
| | A) | True |
| | B) | False |
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| 2.
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To prepare a flexible budget, each type of cost must be examined to determine whether it should be classified as a fixed cost or a variable cost. |
| | A) | True |
| | B) | False |
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| 3.
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Variance analysis is most appropriately used when the analysis is made of the actual results of operations (actual performance) compared to a fixed budget. |
| | A) | True |
| | B) | False |
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| 4.
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The budgeted cost for direct materials is determined by multiplying the standard price per unit of material by the standard quantity budgeted for the production level planned. |
| | A) | True |
| | B) | False |
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| 5.
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Standards are determined after the accounting period has ended, so comparisons can be made between standard costs (budgeted costs) and actual total costs and actual unit costs. |
| | A) | True |
| | B) | False |
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| 6.
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Preparation of flexible budgets does not involve the use of standard costs. |
| | A) | True |
| | B) | False |
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| 7.
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Favourable variances are not analyzed for possible cause. |
| | A) | True |
| | B) | False |
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| 8.
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The price variance for materials is the difference between the actual quantity of materials at the standard price and the standard quantity of materials at the standard price. |
| | A) | True |
| | B) | False |
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| 9.
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When the total direct labour cost variance is unfavourable, the direct labour rate variance will (must) also be unfavourable. |
| | A) | True |
| | B) | False |
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| 10.
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The labour efficiency variance is the difference between the actual quantity of hours at the standard rate and the standard direct labour hours at the standard rate. |
| | A) | True |
| | B) | False |
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| 11.
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The level of production that a company uses to establish the overhead rate per hour is more than likely at some capacity less than 100%. |
| | A) | True |
| | B) | False |
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| 12.
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The controllable variance for overhead is the combined total of the variable overhead spending and efficiency variances and the fixed overhead spending and volume variances. |
| | A) | True |
| | B) | False |
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| 13.
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If a company's actual fixed overhead is $145,560 and its budgeted fixed overhead at the level of capacity achieved is $144,000, the fixed overhead spending variance is an unfavourable variance of $1,560. |
| | A) | True |
| | B) | False |
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| 14.
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If a company's actual variable overhead is $135,600 and the actual hours (AH) multiplied by the standard variable rate (SVR) per hour equals $134,000, the variable overhead spending variance is favourable. |
| | A) | True |
| | B) | False |
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| 15.
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If a company's applied fixed overhead is $125,000 and its budgeted fixed overhead is $124,600, the fixed overhead volume variance is favourable. |
| | A) | True |
| | B) | False |
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| 16.
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When management investigates the cause of every variance, whether favourable or unfavourable, it is using a management technique known as 'management by exception.' |
| | A) | True |
| | B) | False |
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| 17.
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The techniques of determining material and labour cost variances can be applied to many selling and administrative expenses. |
| | A) | True |
| | B) | False |
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| 18.
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While standard costs can be used solely in the preparation of management reports, in most standard cost systems such costs and resulting variances are recorded in the accounts. |
| | A) | True |
| | B) | False |
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| 19.
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A flexible budget is a report based on predicted amounts of revenues and expenses corresponding to the actual level of output. Therefore, the primary purpose of a flexible budget is to help managers predict future performance. |
| | A) | True |
| | B) | False |
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| 20.
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Standard costs are amounts incurred at the actual level of production for the period. This is also called practical standard. |
| | A) | True |
| | B) | False |
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| 21.
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The labour efficiency variance is an indication of how efficiently the variable overhead is used. |
| | A) | True |
| | B) | False |
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| 22.
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The overhead volume variance is considered favorable when the applied overhead is higher than the budgeted overhead. |
| | A) | True |
| | B) | False |
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