1		Which of the following statements regarding budgets is true?
			A)	A flexible budget is often referred to as a static budget.
			B)	Amounts on a flexible budget do not change because the budget is prepared using one expected level of activity.
			C)	The master budget is an extension of a flexible budget.
			D)	A flexible budget reflects expected revenues and costs at varying levels of activity.
2		Flexible budgets:
			A)	use varying total fixed costs as the level of volume changes.
			B)	use a constant per unit standard cost regardless of volume.
			C)	use a constant total variable cost regardless of volume.
			D)	use a constant fixed cost per unit regardless of volume.
3		The static (master budget) of Devin, Inc., reflected a production and sales volume of 40,000 units. At 40,000 units, total budgeted fixed costs were $100,000 and total budgeted variable costs were $300,000. According to a flexible budget, total cost for an expected volume of 50,000 units would be:
			A)	$400,000.
			B)	$425,000.
			C)	$475,000.
			D)	$500,000.
4		The differences between standard amounts and actual results are referred to as:
			A)	deviations.
			B)	variances.
			C)	static changes.
			D)	flexible changes.
5		Which of the following will always result in an unfavorable variance?
			A)	Actual sales exceed expected sales.
			B)	Actual costs exceed standard costs.
			C)	Actual costs are less than standard costs.
			D)	Actual volume is greater than expected volume.
6		The ability to attain the sales volume indicated in the master budget is usually referred to as:
			A)	creating the numbers.
			B)	making the numbers.
			C)	budgetary slack.
			D)	achieving the numbers.
7		According to the master budget, Broadside, Inc., expected to sell 30,000 units of its product for $60 per unit. It actually sold 29,000 units at a sales price of $61. What is the total sales variance?
			A)	$29,000 favorable
			B)	$31,000 favorable
			C)	$31,000 unfavorable
			D)	$60,000 favorable
8		The purpose of identifying variances is to:
			A)	praise or punish managers.
			B)	help management improve efficiency and productivity.
			C)	assign rewards.
			D)	encourage low-balling.
9		Standards that are easily attainable or accomplished with minimal effort are referred to as:
			A)	ideal standards.
			B)	lax standards.
			C)	practical standards.
			D)	budgetary standards.
10		Standards which are based on the best possible circumstances and are very difficult to achieve for most if not all employees are referred to as:
			A)	ideal standards.
			B)	lax standards.
			C)	practical standards.
			D)	budgetary standards.
11		The management philosophy whereby managers focus on areas not performing as expected is known as:
			A)	control.
			B)	management by exception.
			C)	budgeting.
			D)	expectation management.
12		Which of the following is not a benefit of a standard cost system?
			A)	A standard cost system brings trouble spots to management’s attention.
			B)	A standard cost system can motivate employees and boost their morale.
			C)	A standard cost system efficiently uses management’s talent to control costs.
			D)	A standard cost system eliminates the need for planning.

Use the following information to answer questions 13 and 14.

The manufacturing costs incurred by Hills Company in 2006 are as follows:

	Actual	Standard
Variable materials cost per unit of product	$ 15.30	$ 15.00
Variable labor cost per unit of product	11.20	11.40
Variable overhead cost per unit of product	7.85	8.10
Total units produced	25,000	25,000
Fixed manufacturing cost	175,000	183,000

13		What is the total variable manufacturing cost variance?
			A)	$3,750 favorable
			B)	$3,750 unfavorable
			C)	$18,750 favorable
			D)	$18,750 unfavorable
14		What is the total manufacturing cost variance?
			A)	$4,250 favorable
			B)	$4,250 unfavorable
			C)	$11,750 favorable
			D)	$11,750 unfavorable
15		Who is normally held accountable for a materials price variance?
			A)	The production supervisor
			B)	The marketing manager
			C)	The assembly workers
			D)	The purchasing agent
16		Who is normally held accountable for a labor variance?
			A)	The production supervisor
			B)	The marketing manager
			C)	The assembly workers
			D)	The purchasing agent

Use the following information to answer questions 17 through 20.

	Actual Data	Standard Data
Price per pound of material	$2.45	$2.50
Quantity of materials per unit of product	11 pounds	10 pounds
Price per hour for direct labor	$9.50	$10.00
Quantity of labor per unit of product	2.1 hours	2 hours

During the period the company produced and sold 24,000 units.

17		What is the materials price variance?
			A)	$12,000 favorable
			B)	$12,000 unfavorable
			C)	$13,200 favorable
			D)	$13,200 unfavorable
18		What is the materials usage variance? Need a Hint?
			A)	$58,800 favorable
			B)	$58,800 unfavorable
			C)	$60,000 favorable
			D)	$60,000 unfavorable
19		What is the labor rate variance?
			A)	$24,000 favorable
			B)	$24,000 unfavorable
			C)	$25,200 favorable
			D)	$25,200 unfavorable
20		What is the labor usage variance?
			A)	$22,800 favorable
			B)	$22,800 unfavorable
			C)	$24,000 favorable
			D)	$24,000 unfavorable
21		The difference between the actual fixed overhead costs and the budgeted fixed overhead costs is the:
			A)	spending variance.
			B)	volume variance.
			C)	price variance.
			D)	usage variance.

Use the following information to answer questions 22 and 23.

Daniels Company prepared a flexible budget, which reflected a planned volume of 30,000 units and budgeted fixed overhead of $366,000. Actual volume and fixed overhead were 31,500 units and $362,400, respectively.

22		What is Daniels Company’s spending variance?
			A)	$3,600 favorable
			B)	$3,600 unfavorable
			C)	$18,300 favorable
			D)	$18,300 unfavorable
23		What is Daniels Company’s volume variance?
			A)	$3,600 favorable
			B)	$3,600 unfavorable
			C)	$18,300 favorable
			D)	$18,300 unfavorable
24		An unfavorable volume variance indicates that:
			A)	the company spent more on fixed overhead than expected.
			B)	the company spent less on fixed overhead than expected.
			C)	the company underutilized its manufacturing facilities.
			D)	the company overutilized its manufacturing facilities.
25		Who is typically held accountable for a fixed overhead volume variance?
			A)	The production supervisor
			B)	The marketing manager
			C)	The assembly workers
			D)	The purchasing agent