Response to the following multiple choice questions:
1. For performance reporting, it is best to compare actual costs with budgeted costs using
a. Flexible budgets.
b. Static budgets.
c. Master budgets.
d. Short-term budgets.
e. None of the above.
2. To create a meaningful performance report, actual costs and expected costs should be compared
a. At the budgeted level of activity.
b. Weekly.
c. At the actual level of activity.
d. At the average level of activity.
e. Hourly.
3. To help deal with uncertainty, managers should use
a. A static budget.
b. A master budget.
c. An after-the-fact flexible budget.
d. A before-the-fact flexible budget.
e. None of the above.
4. To help assess performance, managers should use
a. A static budget.
b. A master budget.
c. An after-the-fact flexible budget.
d. A before-the-fact flexible budget.
e. None of the above.
5. A firm comparing the actual variable costs of producing 10,000 units with the total variable costs of a static budget based on 9,000 units would probably see
a. No variances.
b. Small favorable variances.
c. Small unfavorable variances.
d. Large favorable variances.
e. Large unfavorable variances.
6. The total variable overhead variance is the difference between
a. The budgeted variable overhead and the actual variable overhead.
b. The actual variable overhead and the applied variable overhead.
c. The budgeted variable overhead and the applied variable overhead.
d. The applied variable overhead and the budgeted total overhead.
e. None of the above.
7. A variable overhead spending variance can occur because
a. Prices for individual overhead items have increased.
b. Prices for individual overhead items have decreased.
c. More of an individual overhead item was used than expected.
d. Less of an individual overhead item was used than expected.
e. All of the above.
8. Because the calculation of both variances is based on direct labor hours, an unfavorable labor efficiency variance implies that
a. The variable overhead efficiency variance will also be unfavorable.
b. The variable overhead efficiency variance will be favorable.
c. There will be no variable overhead efficiency variance.
d. The variable overhead spending variance will be unfavorable.
e. The variable overhead is overapplied.
9. The total variable overhead variance can be expressed as the sum of
a. The underapplied variable overhead and the spending variance.
b. The efficiency variance and the overapplied variable overhead.
c. The spending and efficiency variances.
d. The spending, efficiency, and volume variances.
e. None of the above.