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Chapter 10 Extra MC Solution

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

d. actual material prices are greater than standard prices.

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?

c. Using less quantity than needed in the production process.

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

c. actual direct labor hours are less than the budgeted direct labor hours allowed for the actual output.

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.

5. The unplanned production volume variance will be favorable if

b. the actual production volume variance is less unfavorable or more favorable than the planned production volume variance.

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?

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

b. manufacturing equipment that is not maintained properly.

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

d. all of the above.

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

b. pushing defective or spoiled units on to the next department.

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

c. random variability.

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

c. the quantity variance for the variable indirect resources that is caused by the efficiency or inefficiency of the allocation basis.

12. If the unplanned production volume variance is favorable

c. the actual production level must be greater than the budgeted production level.

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

d. standard hours and actual hours.

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

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.

15. Direct material price variances are

e. either c or d.

16. An underlying concept of standard cost systems is

d. the concept of responsibility accounting.

17. Overhead spending variances are usually interpreted as

c. mixed price and quantity variances.

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.

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

b. the difference between budgeted fixed overhead and applied fixed overhead.

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

d. the planned production volume variance is unfavorable, the actual production volume variance is favorable and the unplanned production volume variance is favorable.

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

d. Production volume.

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:

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

b. Debit Materials control 366,000, debit Material price variance 12,200, credit Accounts payable or cash 378,200.

23. Direct material used during March.

c. Debit work in process 360,000, debit material quantity variance 4,500, credit materials control 364,500.

24. Applied factory overhead.

d. Debit work in process 300,000, credit factory overhead 300,000.

25. The transfer of completed units to finished goods.

a. Debit finished goods 660,000, credit work in process 660,000.

26. Cost of goods sold for March.

d. Debit cost of goods sold 594,000, credit finished goods 594,000.

27. The total overhead variance for March is

c. 36,500 favorable.

28. The total variable overhead variance for March is

b. 1,500 favorable.

29. The total controllable variance for March is

e. None of the above.

30. The fixed overhead spending variance for March is

d. 5,000 unfavorable.

31. The total fixed overhead variance for March is

d. 35,000 favorable.

32. If the unplanned production volume variance is favorable,

c. the actual production level must be greater than the budgeted production level.

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

c. Variable overhead efficiency.

34. Direct material price variances are the responsibility of

a. the purchasing department.

35. Direct material quantity variances are the responsibility of

b. the production departments.

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

d. higher material prices than standard.

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

b. the direct material price variance may not be as useful to management.

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

c. a different mix of direct labor including more experienced workers.

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.

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

d. direct labor efficiency variance and variable overhead efficiency variance.

41. Variable overhead efficiency variances are usually interpreted as

c. that part of the variable overhead quantity variance caused by the efficiency or inefficiency of the overhead driver or allocation basis.

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:

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

c. Debit materials control 27,000, debit material price variance 540, credit accounts payable or cash 27,540.

43. Direct material used during the month.

a. Debit work in process 26,400, debit materials quantity variance 450, credit materials control 26,850.

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

d. Debit work in process 26,400, debit direct labor efficiency variance 800, credit direct labor rate variance 340, credit factory payroll 26,860.

45. Applied factory overhead.

b. Debit work in process 224,400. credit factory overhead 224,400.

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

b. Debit finished goods 277,200, credit work in process 277,200.

47. Cost of goods sold.

a. Debit cost of goods sold 277,200, credit finished goods 277,200.

48. The total overhead variance for February is

d. 7,600 unfavorable.

49. The total variable overhead variance for February is

c. 2,800 unfavorable.

50. The fixed overhead spending variance for February is

b. 1,500 unfavorable.

51. The production volume variance for February is

d. 3,300 unfavorable.

52. The unplanned production volume variance for February is

e. 4,290 favorable.

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

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

c. 66,000

54. The material price variance is

b. 1,980 unfavorable.

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

a. 65,250.

56. The material quantity variance is

d. 250 unfavorable.

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

b. 46,980.

58. The direct labor rate variance is

c. 520 favorable.

59. The direct labor efficiency variance is

a. 180 favorable.

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

d. 161,820

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

c. 274,050

62. The debit to cost of goods sold is

b. 273,000

63. The total spending variance for factory overhead is

b. 2,800 unfavorable.

64. The variable overhead spending variance is

c. 800 unfavorable.

65. The fixed overhead spending variance is

d. 2,000 unfavorable.

66. The variable overhead efficiency variance is

d. 220 favorable.

67. The production volume variance is

e. 4,400 favorable.

68. The unplanned production volume variance is

a. Zero.

69. The controllable overhead variance is

d. 2,580 unfavorable.

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

d. the actual production level must be less than the budgeted production level.

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

d. all of the above.

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

b. improperly adjusted machines.

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

c. a different mix of direct labor including more experienced workers.

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

b. using salaried workers such as engineers on the production line.

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

b. variable overhead efficiency variance.

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

d. a. and c.

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.

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

b. Idle capacity and production volume.

79. If the unplanned production volume variance is favorable,

c. the actual production level must be greater than the budgeted production level.

80. If the unplanned production volume variance is zero,

b. the actual production level must be equal to the budgeted production level.

Chapter 10 Extra MC Questions