Management Accounting: Concepts, Techniques & Controversial Issues
Chapter 10 Extra MC Questions

James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Chapter 10 | MAAW's Textbook Table of Contents

1. Direct material price variances are classified as unfavorable when

a. the purchasing department buys more material than needed for production.
b. standard material prices are greater than actual prices.
c. purchased quantities are less than actual quantities used in production.
d. actual material prices are greater than standard prices.
e. none of these.

2. Which of the following is not a potential behavioral problem associated with using material price variances as a single basis for evaluating the purchasing department?

a. Buying larger quantities of materials than needed.
b. Buying lower quality materials than standard.
c. Using less quantity than needed in the production process.
d. Using too many vendors or suppliers.
e. Failure to investigate and determine vendor product quality before purchasing.

3. A direct labor efficiency variance is classified as favorable when

a. actual direct labor hours are less than the original master budget direct labor hours.
b. actual direct labor hours are greater than the original master budget direct labor hours.
c. actual direct labor hours are less than the budgeted direct labor hours allowed for the actual output.
d. actual direct labor hours are greater than the budgeted direct labor hours allowed for the actual output.
e. none of the above.

4. Which of these statements is true? When direct labor hours are used as the overhead allocation basis, direct labor and variable overhead efficiency variances

a. always have the same designation as favorable or unfavorable.
b. may either have the same or opposite designations as favorable or unfavorable.
c. are interpreted in the same way.
d. are equally interpretable and useful to management.
e. all of the above.

5. The unplanned production volume variance will be favorable if

a. the actual production volume variance is favorable.
b. the actual production volume variance is less unfavorable or more favorable than the planned production volume variance.
c. if actual units produced are less than denominator units.
d. the idle capacity variance is favorable.
e. none of these.

6. Which of the following represent potential behavioral problems associated with labor and overhead efficiency variances and production volume variances when they are used to evaluate production managers?

a. They tend to create a bias towards over production.
b. They tend to support a lack of emphasis on quality.
c. They tend to motivate managers to use non production labor on the production line to build production without increasing actual direct labor hours.
d. They tend to create conflicts between the production and maintenance departments.
e. All of the above.

7. Material quantity variances that fall outside the upper control limits on a statistical control chart could be caused by

a. unusually high quality direct materials.
b. manufacturing equipment that is not maintained properly.
c. production line labor that is more highly trained than the budget allowed.
d. random variation.
e. none of these.

8. Using material price variances exclusively to evaluate the purchasing department may motivate purchasing agents to

a. buy excess materials to obtain quantity discounts.
b. buy low quality materials to obtain lower prices.
c. deal with too many vendors which increases total purchasing costs.
d. all of the above.
e. none of the above.

9. Evaluating the performance of the production department managers exclusively on the basis of departmental variances may result in

a. the production of less inventory than needed to meet demand.
b. pushing defective or spoiled units on to the next department.
c. more emphasis being placed on product quality.
d. more cooperation between production departments.
e. none of the above.

10. Labor efficiency variances that fall outside the upper control limits on a statistical control chart could be caused by

a. a mix of workers that is more highly trained or more experienced than the average used in the budget.
b. a well managed preventive maintenance program for manufacturing equipment.
c. random variability.
d. All of the above.
e. None of the above.

11. The traditional interpretation of the variable overhead efficiency is that it represents

a. the quantity variance for the variable indirect resources.
b. a mixed price and quantity variance for the variable indirect resources.
c. the quantity variance for the variable indirect resources that is caused by the efficiency or inefficiency of the allocation basis.
d. the quantity variance for the variable indirect resources that is caused by the difference between actual and denominator levels of capacity.
e. none of these.

12. If the unplanned production volume variance is favorable

a. the actual production level must be greater than the denominator production level.
b. the actual production level must be less than the denominator production level.
c. the actual production level must be greater than the budgeted production level.
d. the actual production level must be less than the budgeted production level.
e. none of the above.

13. When direct labor hours are used as the overhead allocations basis, the difference between the idle capacity variance and the production volume variance is based on the difference between

a. denominator hours and budgeted hours.
b. actual hours and denominator hours.
c. denominator hours and standard hours.
d. standard hours and actual hours.
e. none of these.

14. The traditional interpretation of the variable overhead spending variance is that it represents

a. the price variance for the variable indirect resources.
b. the quantity variance for the variable indirect resources.
c. the variance in the variable indirect resource costs caused by the difference between actual and budgeted levels of production.
d. the price variance for variable indirect resources plus any quantity variance for these resources not caused by the efficiency or inefficiency of the allocation basis.
e. none of these.

15. Direct material price variances are

a. the difference between the standard and budgeted prices multiplied by the quantity purchased.
b. the difference between the standard and actual prices multiplied by the standard quantity allowed.
c. the difference between the standard and actual prices multiplied by the quantity purchased.
d. the difference between the standard and actual prices multiplied by the quantity used.
e. either c or d.

16. An underlying concept of standard cost systems is

a. the concept of statistical control limits.
b. the concept of continuous improvement.
c. the concept of quality at the source.
d. the concept of responsibility accounting.
e. the concept of employee empowerment.

17. Overhead spending variances are usually interpreted as

a. price variances.
b. quantity variances.
c. mixed price and quantity variances.
d. mixed price, quantity and volume variances.
e. none of these.

18. When direct labor hours are used as the overhead allocation basis, variable overhead efficiency variances represent attempts to

a. measure the effect of labor efficiency, or inefficiency, on indirect resource costs.
b. measure the effect of overhead efficiency, or inefficiency, on indirect resource costs.
c. measure the effect of production volume on indirect resource costs.
d. b and c.
e. none of these.

19. In a standard cost system, the production volume variance is

a. the difference between actual fixed overhead and applied fixed overhead.
b. the difference between budgeted fixed overhead and applied fixed overhead.
c. the difference between budgeted fixed overhead and actual fixed overhead.
d. the difference between the total overhead variance and the total spending variance.
e. none of these.

20. If budgeted units to be produced for the month are 99,000, denominator production is 100,000 and actual production for the month is 101,000, then

a. the planned production volume variance is favorable, the actual production volume variance is unfavorable and the unplanned production volume variance is unfavorable.
b. the planned, actual and unplanned production volume variances are all favorable.
c. the planned, actual and unplanned production volume variances are all unfavorable.
d. the planned production volume variance is unfavorable, the actual production volume variance is favorable and the unplanned production volume variance is favorable.
e. none of these.

21. Which variance(s) is (are) considered uncontrollable?

a. Variable overhead spending.
b. Variable overhead efficiency.
c. Fixed overhead spending.
d. Production volume.
e. c and d.

The following problem extends Problems 9-6 and 10-4 to March and is continued from the budget problem in Chapter 9 extra MC questions. The Microtable Company uses Standard Full Absorption Costing. Budgeted or standard costs are as follows:

* Robot (machine) hours.

Overhead rates are based on a capacity level of 500 machine hours per month and overhead is applied on the basis of robot (machine) hours. During March 6,000 tables were manufactured and 5,400 were sold at an average sales price of $252 per table.

Choose the correct journal entry to record the following.

22. Direct material purchases assuming that material price variances are based on the quantity purchased.

a. Debit Materials control 378,200, credit Accounts payable or cash 378,200.
b. Debit Materials control 366,000, debit Material price variance 12,200, credit Accounts payable or cash 378,200.
c. Debit Materials control 378,200, credit accounts payable or cash 366,000, credit material price variance 12,200.
d. Debit materials control 364,500, debit materials price variance 13,700, credit accounts payable or cash 378,200.
e. None of these.

23. Direct material used during March.

a. Debit work in process 364,500, credit materials control 364,500.
b. Debit work in process 364,500, credit materials control 360,000, credit material quantity variance 4,500.
c. Debit work in process 360,000, debit material quantity variance 4,500, credit materials control 364,500.
d. Debit work in process 360,000, debit material quantity variance 6,000, credit materials control 366,000.
e. None of the above.

24. Applied factory overhead.

a. Debit work in process 263,500, credit factory overhead 263,500.
b. Debit work in process 295,000, credit factory overhead 295,000.
c. Debit work in process 295,000, credit factory overhead 263,500, credit total overhead variance 31,500.
d. Debit work in process 300,000, credit factory overhead 300,000.
e. Some other entry.

25. The transfer of completed units to finished goods.

a. Debit finished goods 660,000, credit work in process 660,000.
b. Debit finished goods 641,700, credit work in process 641,700.
c. Debit work in process 641,700, credit finished goods 641,700.
d. Debit work in process 660,000, credit finished goods 660,000.
e. None of the above.

26. Cost of goods sold for March.

a. Debit cost of goods sold 577,530, credit finished goods 577,530.
b Debit cost of goods sold 660,000, credit finished goods 660,000.
c. Debit finished goods 577,530, credit cost of goods sold 577,530.
d. Debit cost of goods sold 594,000, credit finished goods 594,000.
e. None of these.

27. The total overhead variance for March is

a. 31,500 unfavorable.
b. 31,500 favorable.
c. 36,500 favorable.
d. 36,500 unfavorable.
e. none of the above.

28. The total variable overhead variance for March is

a. 500 favorable.
b. 1,500 favorable.
c. 1,000 favorable.
d. 3,500 unfavorable.
e. None of these.

29. The total controllable variance for March is

a. 36,500 favorable.
b. 1,500 favorable.
c. 4,500 unfavorable.
d. 3,500 favorable.
e. None of the above.

30. The fixed overhead spending variance for March is

a. zero.
b. 31,000 favorable.
c. 5,000 favorable.
d. 5,000 unfavorable.
e. None of these.

31. The total fixed overhead variance for March is

a. Zero.
b. 40,000 favorable.
c. 40,000 unfavorable.
d. 35,000 favorable.
e. None of the above.

32. If the unplanned production volume variance is favorable,

a. the actual production level must be greater than the denominator production level.
b. the actual production level must be less than the denominator production level.
c. the actual production level must be greater than the budgeted production level.
d. the actual production level must be less than the budgeted production level.
e. none of the above.

33. Which of the overhead variances below is designed to measure the effect direct labor efficiency has on overhead cost?

a. Variable overhead spending.
b. Fixed overhead spending.
c. Variable overhead efficiency.
d. Production Volume variance.
e. None of the above.

34. Direct material price variances are the responsibility of

a. the purchasing department.
b. the production department.
c. the marketing department.
d. the product design department.
e. None of the above.

35. Direct material quantity variances are the responsibility of

a. the purchasing department.
b. the production departments.
c. the marketing department.
d. the product design department.
e. None of the above.

36. Which of the following would not cause unfavorable direct material quantity variances?

a. below standard or inferior materials.
b. improperly adjusted machines.
c. inexperienced labor.
d. higher material prices than standard.
e. water damage resulting from a leaky roof.

37. If direct materials price variances are based on quantity used rather than quantity purchased,

a. the direct material quantity variances may be different.
b. the direct material price variance may not be as useful to management.
c. The direct material price variance will be easier to calculate.
d. a and b
e. b and c

38. Which of the following would be likely to cause an unfavorable direct labor rate variance?

a. improperly adjusted machines.
b. materials that do not meet engineering specifications.
c. a different mix of direct labor including more experienced workers.
d. when newer, inexperienced workers are used.
e. None of these.

39. Which of the following would be likely to cause a favorable direct labor efficiency variance?

a. a different mix of direct labor including more experienced workers.
b. properly adjusted machines.
c. materials that meet engineering specifications.
d. standards that are reasonable.
e. All of these.

40. Which two variances always have the same status as favorable or unfavorable.

a. variable overhead spending variance and variable overhead efficiency variance.
b. variable overhead spending variance and fixed overhead spending variance.
c. fixed overhead spending variance and production volume variance.
d. direct labor efficiency variance and variable overhead efficiency variance.
e. production volume variance and idle capacity variance.

41. Variable overhead efficiency variances are usually interpreted as

a. the total variable overhead quantity variance.
b. a mixed price and quantity variance for variable overhead.
c. that part of the variable overhead quantity variance caused by the efficiency or inefficiency of the overhead driver or allocation basis.
d. the variance caused by the efficiency or inefficiency of the indirect resources represented by the variable overhead cost.
e. none of these.

VERA Company continued from the budget problem in Chapter 9 extra MC questions. The VERA Company produces and sells a single product with budgeted or standard unit costs as follows:

Overhead rates are based on a capacity level of 1,350 direct labor hours per month. During February 880 units were manufactured and sold at an average sales price of $632 per unit.

Choose the general journal entry to record the following:

42. Direct material purchases. Assume that material price variances are based on quantity purchased.

a. Debit materials control 27,540, credit accounts payable or cash 27,540.
b. Debit materials control 27,540, credit accounts payable or cash 27,000, credit materials price variance 540.
c. Debit materials control 27,000, debit material price variance 540, credit accounts payable or cash 27,540.
d. Debit materials control 26,400, debit material price variance 1,140, credit accounts payable or cash 27,540.
e. None of these.

43. Direct material used during the month.

a. Debit work in process 26,400, debit materials quantity variance 450, credit materials control 26,850.
b. Debit work in process 26,850, credit materials control 26,850.
c. Debit work in process 26,850, credit materials quantity variance 450, credit materials control 26,400.
d. Debit work in process 26,850, debit materials quantity variance 690, credit materials control 27,540.
e. None of these.

44. Direct labor used during the month. Assume the factory payroll has already been recorded.

a. Debit work in process 26,860, credit factory payroll 26,860.
b. Debit work in process 26,800, debit direct labor rate variance 340, credit factory payroll 26,400, credit direct labor efficiency variance 800.
c. Debit work in process 27,000, debit direct labor efficiency variance 600, credit direct labor rate variance 740, credit factory payroll 26,860.
d. Debit work in process 26,400, debit direct labor efficiency variance 800, credit direct labor rate variance 340, credit factory payroll 26,860.
e. None of these.

45. Applied factory overhead.

a. Debit work in process 232,000, credit factory overhead 232,000.
b. Debit work in process 224,400. credit factory overhead 224,400.
c. Debit work in process 229,500, credit factory overhead 229,500.
d. Debit work in process 227,700, credit factory overhead 227,700.
e. None of these.

46. The transfer of completed goods to finished goods inventory.

a. Debit finished goods 285,710, credit work in process 285,710.
b. Debit finished goods 277,200, credit work in process 277,200.
c. Debit finished goods 285,710, credit materials control 26,850, credit factory payroll 26,860, credit factory overhead 232,000.
d. Debit finished goods 277,200, credit materials control 26,400, credit factory payroll 26,400, credit factory overhead 224,400.
e. None of these.

47. Cost of goods sold.

a. Debit cost of goods sold 277,200, credit finished goods 277,200.
b. Debit cost of goods sold 285,710, credit finished goods 285,710.
c. Debit cost of goods sold 277,200, debit factory variances 8,510, credit finished goods 285,710.
d. Debit finished goods 285,710, credit cost of goods sold 285,710.
e. Debit cost of goods sold 280,350, credit finished goods 280,350.

48. The total overhead variance for February is

a. 2,500 favorable.
b. 2,500 unfavorable.
c. 7,600 favorable.
d. 7,600 unfavorable.
e. None of these.

49. The total variable overhead variance for February is

a. 400 favorable.
b. 400 unfavorable.
c. 2,800 unfavorable.
d. 2,800 favorable.
e. None of these.

50. The fixed overhead spending variance for February is

a. 1,500 favorable.
b. 1,500 unfavorable.
c. 400 favorable.
d. 400 unfavorable.
e. None of these.

51. The production volume variance for February is

a. 4,800 unfavorable.
b. 4,800 favorable.
c. 3,300 favorable.
d. 3,300 unfavorable.
e. None of these.

52. The unplanned production volume variance for February is

a. 10,980 unfavorable.
b. 8,100 unfavorable.
c. 8,100 favorable.
d. 4,290 unfavorable.
e. 4,290 favorable.

Brace Company problem continued from the budget problem in Chapter 9 extra MC questions.

Overhead rates are based on 5,000 standard direct labor hours per month. Selling and administrative expenses include $40 per unit for variable costs and $50,000 per month for fixed costs. Brace Company uses a standard cost system where standard costs are charged to work in process and materials price variances are based on quantity purchased. The actual results for March are as follows:

53. The debit to materials control to record materials purchases is

a. 67,980
b. 65,000
c. 66,000
d. 65,250
e. None of the above.

54. The material price variance is

a. 1,980 favorable.
b. 1,980 unfavorable.
c. 1,965 favorable.
d. 1,965 unfavorable.
e. Some other amount.

55. The debit to work in process to record material usage is

a. 65,250
b. 65,500
c. 66,000
d. 67,980
e. None of these.

56. The material quantity variance is

a. 500 favorable.
b. 500 unfavorable.
c. 250 favorable.
d. 250 unfavorable.
e. Some other amount.

57. The debit to work in process for direct labor usage is

a. 46,280
b. 46,980
c. 46,800
d. 46,458
e. None of the above.

58. The direct labor rate variance is

a. 522 favorable.
b. 522 unfavorable.
c. 520 favorable.
d. 520 unfavorable.
e. Some other amount.

59. The direct labor efficiency variance is

a. 180 favorable.
b. 180 unfavorable.
c. 178 favorable.
d. 178 unfavorable.
e. 700 favorable.

60. The debit to work in process for factory overhead is

a. 157,420
b. 160,000
c. 161,200
d. 161,820
e. Some other amount

61. The debit to finished goods for the cost of goods manufactured is

a. 274,260
b. 273,000
c. 274,050
d. 273,745
e. None of the above

62. The debit to cost of goods sold is

a. 274,260
b. 273,000
c. 274,050
d. 273,745
e. 375,000

63. The total spending variance for factory overhead is

a. 3,020 unfavorable.
b. 2,800 unfavorable.
c. 2,580 unfavorable.
d. 1,820 unfavorable.
e. None of the above.

64. The variable overhead spending variance is

a. 2,800 unfavorable.
b. 2,580 unfavorable.
c. 800 unfavorable.
d. 580 unfavorable.
e. None of these.

65. The fixed overhead spending variance is

a. 2,400 favorable.
b. 2,400 unfavorable.
c. 2,000 favorable.
d. 2,000 unfavorable.
e. Some other amount.

66. The variable overhead efficiency variance is

a. 6,820 favorable.
b. 1,020 unfavorable.
c. 580 unfavorable.
d. 220 favorable.
e. None of these.

67. The production volume variance is

a. 2,400 favorable.
b. 2,400 unfavorable.
c. 4,620 unfavorable.
d. 4,400 unfavorable.
e. 4,400 favorable.

68. The unplanned production volume variance is

a. Zero.
b. 400 favorable.
c. 400 unfavorable.
d. 4,400 favorable.
e. 4,400 unfavorable.

69. The controllable overhead variance is

a. 1,820 favorable
b. 2,800 unfavorable
c. 4,400 favorable
d. 2,580 unfavorable
e. None of these

70. In a situation where the unplanned production volume variance is unfavorable,

a. the actual production level must be greater than the denominator production level.
b. the actual production level must be less than the denominator production level.
c. the actual production level must be greater than the budgeted production level.
d. the actual production level must be less than the budgeted production level.
e. none of the above.

71. Which of the variances below is or are based on two flexible budget calculations?

a. Direct material quantity.
b. Direct labor efficiency.
c. variable overhead efficiency.
d. all of the above.
e. none of the above.

72. Which of the following would tend to cause unfavorable direct material quantity variances?

a. higher quality materials than engineering standards.
b. improperly adjusted machines.
c. experienced labor.
d. higher material prices than standard.
e. none of these.

73. Which of the following would be likely to cause an unfavorable direct labor rate variance?

a. properly adjusted machines.
b. using salaried workers such as engineers on the production line.
c. a different mix of direct labor including more experienced workers.
d. b and c.
e. None of these.

74. Which of the following would be likely to cause a favorable direct labor efficiency variance?

a. properly adjusted machines.
b. using salaried workers such as engineers on the production line.
c. a different mix of direct labor including more inexperienced workers.
d. a and c.
e. None of these.

75. Which of the variances below are based on labor efficiency?

a. variable overhead spending variance.
b. variable overhead efficiency variance.
c. fixed overhead spending variance.
d. production volume variance.
e. none of the above.

76. Which variances tend to promote acquiring or producing something that is not currently needed?

a. Direct material price variances.
b. Direct labor rate variances.
c. Direct labor efficiency variances.
d. a. and c.
e. all of the above.

77. Which of the overhead variances below always have the same status, e.g., if one is favorable the other must also be favorable.

a. Direct labor efficiency and variable overhead efficiency.
b. Idle capacity and production volume variance.
c. Variable overhead spending and fixed overhead spending.
d. a and b.
e. None of the above.

78. Which of the overhead variances below measure capacity utilization?

a. Direct labor efficiency and variable overhead efficiency.
b. Idle capacity and production volume.
c. Variable overhead spending and fixed overhead spending.
d. a and b.
e. None of the above.

79. If the unplanned production volume variance is favorable,

a. the actual production level must be greater than the denominator production level.
b. the actual production level must be less than the denominator production level.
c. the actual production level must be greater than the budgeted production level.
d. the actual production level must be less than the budgeted production level.
e. None of these.

80. If the unplanned production volume variance is zero,

a. the actual production level must be equal to the denominator production level.
b. the actual production level must be equal to the budgeted production level.
c. the denominator direct labor hours must be equal to the standard direct labor hours.
d. the budgeted production level must be zero.
e. None of these.