Q. A company has a budgeted sales volume of 10,000 units at $20 each. If actual sales are 9,000 units at $22 each, what is the sales volume variance?
A.
$2,000 Favorable
B.
$2,000 Unfavorable
C.
$10,000 Favorable
D.
$10,000 Unfavorable
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Solution
Sales volume variance = (Actual units - Budgeted units) * Budgeted price = (9,000 - 10,000) * $20 = -$20,000, which is $2,000 Favorable.
Correct Answer:
A
— $2,000 Favorable
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Q. If a company has a budgeted overhead of $100,000 and actual overhead of $120,000, what is the overhead variance?
A.
$20,000 Favorable
B.
$20,000 Unfavorable
C.
$100,000 Favorable
D.
$100,000 Unfavorable
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Solution
Overhead variance = Actual Overhead - Budgeted Overhead = $120,000 - $100,000 = $20,000 Unfavorable.
Correct Answer:
B
— $20,000 Unfavorable
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Q. If a company has a contribution margin of $30 per unit and fixed costs of $150,000, how many units must be sold to break even?
A.
5,000 units
B.
4,000 units
C.
3,000 units
D.
6,000 units
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Solution
Break-even point in units = Fixed Costs / Contribution Margin per unit = $150,000 / $30 = 5,000 units.
Correct Answer:
A
— 5,000 units
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Q. If a company has a contribution margin of $30 per unit and fixed costs of $90,000, how many units must be sold to break even?
A.
3,000 units
B.
2,000 units
C.
1,500 units
D.
4,000 units
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Solution
To calculate the break-even point in units, divide total fixed costs by the contribution margin per unit: $90,000 / $30 = 3,000 units.
Correct Answer:
A
— 3,000 units
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Q. If a company has a standard cost of $50 per unit and produces 1,000 units, what is the total standard cost?
A.
$50,000
B.
$5,000
C.
$500
D.
$1,000
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Solution
Total standard cost is calculated as standard cost per unit multiplied by the number of units: $50 * 1,000 = $50,000.
Correct Answer:
A
— $50,000
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Q. If a company has a static budget of $100,000 for 10,000 units and actual production is 12,000 units, what is the flexible budget amount for actual production?
A.
$120,000
B.
$100,000
C.
$80,000
D.
$150,000
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Solution
The flexible budget is calculated by adjusting the static budget based on actual production. Therefore, $100,000 / 10,000 units = $10 per unit; for 12,000 units, it is $10 * 12,000 = $120,000.
Correct Answer:
A
— $120,000
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Q. If the budgeted fixed costs are $50,000 and the actual fixed costs are $55,000, what is the fixed cost variance?
A.
$5,000 Favorable
B.
$5,000 Unfavorable
C.
$50,000 Favorable
D.
$50,000 Unfavorable
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Solution
The fixed cost variance is calculated as Actual Fixed Costs - Budgeted Fixed Costs, which is $55,000 - $50,000 = $5,000 Unfavorable.
Correct Answer:
B
— $5,000 Unfavorable
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Q. In a standard costing system, what is the purpose of setting standard costs?
A.
To provide a benchmark for measuring performance
B.
To eliminate all variances
C.
To increase actual costs
D.
To simplify the budgeting process
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Solution
Standard costs are set to provide a benchmark for measuring performance and to help in variance analysis.
Correct Answer:
A
— To provide a benchmark for measuring performance
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Q. In a variance analysis, what does a favorable variance indicate?
A.
Costs are higher than budgeted
B.
Revenues are lower than budgeted
C.
Costs are lower than budgeted or revenues are higher than budgeted
D.
No impact on financial performance
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Solution
A favorable variance indicates that costs are lower than budgeted or revenues are higher than budgeted, improving financial performance.
Correct Answer:
C
— Costs are lower than budgeted or revenues are higher than budgeted
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Q. In variance analysis, what is the formula for calculating the sales volume variance?
A.
(Actual Sales - Budgeted Sales) * Budgeted Contribution Margin
B.
(Budgeted Sales - Actual Sales) * Actual Contribution Margin
C.
(Actual Sales - Budgeted Sales) * Actual Contribution Margin
D.
(Budgeted Sales - Actual Sales) * Budgeted Contribution Margin
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Solution
The sales volume variance is calculated by taking the difference between actual and budgeted sales and multiplying it by the budgeted contribution margin.
Correct Answer:
A
— (Actual Sales - Budgeted Sales) * Budgeted Contribution Margin
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Q. What does a negative direct labor efficiency variance indicate?
A.
Workers are more efficient than expected
B.
Workers are less efficient than expected
C.
Labor costs are lower than budgeted
D.
Labor costs are higher than budgeted
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Solution
A negative direct labor efficiency variance indicates that workers are less efficient than expected, leading to higher labor costs.
Correct Answer:
B
— Workers are less efficient than expected
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Q. What is the effect of an increase in variable costs on the break-even point?
A.
It decreases the break-even point
B.
It has no effect on the break-even point
C.
It increases the break-even point
D.
It eliminates the break-even point
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Solution
An increase in variable costs raises the break-even point because it reduces the contribution margin per unit.
Correct Answer:
C
— It increases the break-even point
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Q. What is the formula for calculating the direct materials price variance?
A.
(Actual Price - Standard Price) x Actual Quantity
B.
(Standard Price - Actual Price) x Standard Quantity
C.
(Actual Quantity - Standard Quantity) x Standard Price
D.
(Standard Quantity - Actual Quantity) x Actual Price
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Solution
The direct materials price variance is calculated using the formula: (Actual Price - Standard Price) x Actual Quantity.
Correct Answer:
A
— (Actual Price - Standard Price) x Actual Quantity
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Q. What is the primary focus of variance analysis?
A.
To determine the profitability of products
B.
To identify the reasons for deviations from the budget
C.
To set future budgets
D.
To calculate the break-even point
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Solution
The primary focus of variance analysis is to identify the reasons for deviations from the budget, helping management make informed decisions.
Correct Answer:
B
— To identify the reasons for deviations from the budget
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Q. What is the primary purpose of a flexible budget?
A.
To compare actual costs to standard costs
B.
To adjust budgeted costs based on actual activity levels
C.
To set fixed costs for the period
D.
To eliminate variances in financial statements
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Solution
A flexible budget adjusts budgeted costs based on actual activity levels, allowing for a more accurate comparison of performance.
Correct Answer:
B
— To adjust budgeted costs based on actual activity levels
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