Q. If a company has a budgeted profit of $100,000 and an actual profit of $80,000, what is the profit variance?
-
A.
$20,000 Favorable
-
B.
$20,000 Unfavorable
-
C.
$30,000 Favorable
-
D.
$30,000 Unfavorable
Solution
Profit variance = Actual Profit - Budgeted Profit = $80,000 - $100,000 = -$20,000, which is Unfavorable.
Correct Answer:
B
— $20,000 Unfavorable
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Q. If a company has a budgeted profit of $100,000 and an actual profit of $90,000, what is the profit variance?
-
A.
$10,000 Favorable
-
B.
$10,000 Unfavorable
-
C.
$20,000 Favorable
-
D.
$20,000 Unfavorable
Solution
Profit variance = Actual Profit - Budgeted Profit = $90,000 - $100,000 = -$10,000, which is unfavorable.
Correct Answer:
B
— $10,000 Unfavorable
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Q. If a company has a budgeted sales of $500,000 and actual sales of $450,000, what is the sales variance?
-
A.
$50,000 Favorable
-
B.
$50,000 Unfavorable
-
C.
$100,000 Favorable
-
D.
$100,000 Unfavorable
Solution
Sales variance = Actual Sales - Budgeted Sales = $450,000 - $500,000 = -$50,000, which is Unfavorable.
Correct Answer:
B
— $50,000 Unfavorable
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Q. If the budgeted overhead is $200,000 and the actual overhead is $180,000, what is the overhead variance?
-
A.
$20,000 Favorable
-
B.
$20,000 Unfavorable
-
C.
$40,000 Favorable
-
D.
$40,000 Unfavorable
Solution
Overhead variance = Actual Overhead - Budgeted Overhead = $180,000 - $200,000 = -$20,000, which is favorable.
Correct Answer:
A
— $20,000 Favorable
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Q. If the budgeted overhead is $200,000 and the actual overhead is $220,000, what is the overhead variance?
-
A.
$20,000 Favorable
-
B.
$20,000 Unfavorable
-
C.
$40,000 Favorable
-
D.
$40,000 Unfavorable
Solution
Overhead variance = Actual Overhead - Budgeted Overhead = $220,000 - $200,000 = $20,000 Unfavorable.
Correct Answer:
B
— $20,000 Unfavorable
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Q. In variance analysis, what is the formula for calculating the material 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
Solution
Material price variance is calculated as (Actual Price - Standard Price) x Actual Quantity.
Correct Answer:
A
— (Actual Price - Standard Price) x Actual Quantity
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Q. What does a favorable variance indicate?
-
A.
Costs are higher than budgeted
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B.
Sales are lower than budgeted
-
C.
Costs are lower than budgeted or sales are higher than budgeted
-
D.
No impact on financial performance
Solution
A favorable variance indicates that actual costs are lower than budgeted or actual sales are higher than budgeted.
Correct Answer:
C
— Costs are lower than budgeted or sales are higher than budgeted
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Q. What is the main focus of flexible budgeting?
-
A.
To compare actual costs with fixed costs
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B.
To adjust budgets based on actual activity levels
-
C.
To eliminate all variances
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D.
To set sales targets
Solution
Flexible budgeting adjusts the budget based on the actual level of activity, allowing for better comparison of actual costs.
Correct Answer:
B
— To adjust budgets based on actual activity levels
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Q. What is the primary purpose of budgeting in an organization?
-
A.
To increase sales revenue
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B.
To control costs and allocate resources
-
C.
To improve employee morale
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D.
To enhance customer satisfaction
Solution
Budgeting helps organizations plan their financial resources effectively, control costs, and allocate resources efficiently.
Correct Answer:
B
— To control costs and allocate resources
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Q. Which of the following is a fixed cost in a manufacturing budget?
-
A.
Raw materials
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B.
Direct labor
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C.
Factory rent
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D.
Sales commissions
Solution
Factory rent is a fixed cost as it does not change with the level of production.
Correct Answer:
C
— Factory rent
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Q. Which of the following is NOT a component of a master budget?
-
A.
Operating budget
-
B.
Financial budget
-
C.
Sales budget
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D.
Variance budget
Solution
A variance budget is not a component of a master budget; it is a tool used for analysis after the budget is implemented.
Correct Answer:
D
— Variance budget
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