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141. When is a variance considered to be ‘material’? a. When it is large compared to the actual cost b. When it is infrequent c. When it is unfavorable d. When it could have been controlled more effectively 142. Variance reports are a. external financial reports. b. SEC financial reports. c. internal reports for management. d. all of these. 143. In using variance reports, management looks for a. total assets invested. b. significant variances. c. competitors’ costs in comparison to the company’s costs. d. more efficient ways of valuing inventories. 144. Parnell Company prepared its income statement for internal use. How would amounts for cost of goods sold and variances appear? a. Cost of goods sold would be at actual costs, and variances would be reported separately. b. Cost of goods sold would be combined with the variances, and the net amount reported at standard cost. c. Cost of goods sold would be at standard costs, and variances would be reported separately. d. Cost of goods sold would be combined with the variances, and the net amount reported at actual cost. 145. Alex Co. prepared its income statement for management using a standard cost accounting system. Which of the following appears at the “standard” amount? a. Sales b. Selling expenses c. Gross profit d. Cost of goods sold 146. The costing of inventories at standard cost for external financial statement reporting purposes is a. not permitted. b. preferable to reporting at actual costs. c. in accordance with generally accepted accounting principles if significant differences exist between actual and standard costs. d. in accordance with generally accepted accounting principles if significant differences do not exist between actual and standard costs. 147. Income statements prepared internally for management often show cost of goods sold at standard cost and variances are a. separately disclosed. b. deducted as other expenses and revenues. c. added to cost of goods sold. d. closed directly to retained earnings. 148. In Zero Company’s income statement, they report gross profit of $55,000 at standard and the following variances: Materials price $ 420 F Materials quantity 600 F Labor price 420 U Labor quantity 1,000 F Overhead 900 F Zero would report actual gross profit of a. $51,660. b. $52,500. c. $57,500. d. $58,340. 149. In Zero Company’s income statement, they report actual gross profit of $52,500 and the following variances: Materials price $ 420 F Materials quantity 600 F Labor price 420 U Labor quantity 1,000 F Overhead 900 F Zero would report gross profit at standard of a. $46,660. b. $47,500. c. $55,000. d. $53,340. 150. The balanced scorecard a. incorporates financial and nonfinancial measures in an integrated system. b. is based on financial measures. c. is based on nonfinancial measures. d. does not use financial or nonfinancial measures. 151. Which is not one of the four most commonly used perspectives on a balanced scorecard? a. The financial perspective b. The customer perspective c. The external process perspective d. The learning and growth perspective 152. The balanced scorecard approach a. uses only financial measures to evaluate performance. b. uses rather vague, open statements when setting objectives in order to allow managers and employees flexibility. c. normally sets the financial objectives first, and then sets the objectives in the other perspectives to accomplish the financial objectives. d. evaluates performance using about 10 different perspectives in order to effectively incorporate all areas of the organization. 153. The customer perspective of the balanced scorecard approach a. is the most traditional view of the company. b. evaluates the internal operating processes critical to the success of the organization. c. evaluates how well the company develops and retains its employees. d. evaluates the company from the viewpoint of those people who buy its products or services. 154. The perspectives included in the balanced scorecard approach include all of the following except the a. internal process perspective. b. capacity utilization perspective. c. learning and growth perspective. d. customer perspective. a155. If 10,000 pounds of direct materials are purchased for $9,300 on account and the standard cost is $.90 per pound, the journal entry to record the purchase is a. Raw Materials Inventory……………………………………………….. 9,300 Accounts Payable………………………………………………… 9,300 b. Work In Process Inventory……………………………………………. 9,300 Accounts Payable………………………………………………… 9,000 Materials Quantity Variance………………………………….. 300 c. Raw Materials Inventory……………………………………………….. 9,300 Accounts Payable………………………………………………… 9,000 Materials Price Variance………………………………………. 300 d. Raw Materials Inventory……………………………………………….. 9,000 Materials Price Variance………………………………………………. 300 Accounts Payable………………………………………………… 9,300 a 156. Debit balances in variance accounts represent a. unfavorable variances. b. favorable variances. c. favorable for price variances; unfavorable for quantity variances. d. favorable for quantity variances; unfavorable for price variances. a 157. If a company purchases raw materials on account for $19,830 when the standard cost is $18,900, it will a. debit Materials Price Variance for $930. b. credit Materials Price Variance for $930. c. debit Materials Quantity Variance for $930. d. credit Material Quantity Variance for $930. a158. If a company issues raw materials to production at a cost of $18,900 when the standard cost is $18,300, it will a. debit Materials Price Variance for $600. b. credit Materials Price Variance for $600. c. debit Materials Quantity Variance for $600. d. credit Material Quantity Variance for $600. a159. If a company incurs direct labor cost of $82,000 when the standard cost is $84,000, it will a. debit Labor Price Variance for $2,000. b. credit Labor Price Variance for $2,000. c. debit Labor Quantity Variance for $2,000. d. credit Labor Quantity Variance for $2,000. a160. If a company assigns factory labor to production at a cost of $84,000 when standard cost is $80,000, it will a. debit Labor Price Variance for $4,000. b. credit Labor Price Variance for $4,000. c. debit Labor Quantity Variance for $4,000. d. credit Labor Quantity Variance for $4,000. a161. The overhead variances measure whether overhead costs Are Effectively Managed Were Used Effectively a. Controllable Controllable and Volume b. Controllable Volume c. Controllable and Volume Controllable d. Volume Controllable a162. The overhead volume variance is a. actual overhead less overhead budgeted for actual hours. b. actual overhead less overhead budgeted for standard hours allowed. c. overhead budgeted for actual hours less applied overhead. d. the fixed overhead rate times the difference between normal capacity hours and standard hours allowed. a163. Budgeted overhead for Cinnabar Industries at normal capacity of 30,000 direct labor hours is $6 per hour variable and $4 per hour fixed. In May, $310,000 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed. The overhead controllable variance is a. $5,000 favorable. b. $2,000 favorable. c. $10,000 favorable. d. $10,000 unfavorable. a164. Budgeted overhead for Cinnabar Industries at normal capacity of 30,000 direct labor hours is $6 per hour variable and $4 per hour fixed. In May, $310,000 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed. The overhead volume variance is a. $8,000 favorable. b. $11,000 favorable. c. $5,000 favorable. d. $10,000 favorable. a165. Budgeted overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $310,000 of overhead was incurred in working 63,000 hours when 64,000 standard hours were allowed. The overhead controllable variance is a. $5,000 favorable. b. $2,000 favorable. c. $10,000 favorable. d. $10,000 unfavorable. a166. Budgeted overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $310,000 of overhead was incurred in working 63,000 hours when 64,000 standard hours were allowed. The overhead volume variance is a. $8,000 favorable. b. $11,000 favorable. c. $5,000 favorable. d. $10,000 favorable. a167. An overhead volume variance is calculated as the difference between normal capacity hours and standard hours allowed a. times the total predetermined overhead rate. b. times the predetermined variable overhead rate. c. times the predetermined fixed overhead rate. d. divided by actual number of hours worked. a168. Which of the following statements is false? a. The overhead volume variance indicates whether plant facilities were used efficiently during the period. b. The costs that cause the overhead volume variance are usually controllable costs. c. The overhead volume variance relates solely to fixed costs. d. The overhead volume variance is favorable if standard hours allowed for output are greater than the standard hours at normal capacity. a169. If the standard hours allowed are less than the standard hours at normal capacity, a. the overhead volume variance will be unfavorable. b. variable overhead costs will be underapplied. c. the overhead controllable variance will be favorable. d. variable overhead costs will be overapplied. a170. Which of the following statements about overhead variances is false? a. Standard hours allowed are used in calculating the controllable variance. b. Standard hours allowed are used in calculating the volume variance. c. The controllable variance pertains solely to fixed costs. d. The total overhead variance pertains to both variable and fixed costs. a171. The overhead volume variance relates only to a. variable overhead costs. b. fixed overhead costs. c. both variable and fixed overhead costs. d. all manufacturing costs. a172. What does the controllable variance measure? a. Whether a company incurred more or less fixed overhead costs compared to the amount of overhead applied b. Whether a company incurred more or less overhead costs than allowed c. The efficiency of using variable overhead resources d. Whether the production manager is able to control the production facility a173. The overhead controllable variance is calculated as the difference between actual overhead costs incurred and the budgeted a. overhead costs for the standard hours allowed. b. overhead costs applied to the product. c. overhead costs at the normal level of activity. d. fixed overhead costs. a174. If the standard hours allowed are less than the standard hours at normal capacity, the volume variance a. cannot be calculated. b. will be favorable. c. will be unfavorable. d. will be greater than the controllable variance. a175. The budgeted overhead costs for standard hours allowed and the overhead costs applied to the product are the same amount a. for both variable and fixed overhead costs. b. only when standard hours allowed are less than normal capacity. c. for variable overhead costs. d. for fixed overhead costs. a176. The following information was taken from the annual manufacturing overhead cost budget of Fergie Manufacturing. Variable manufacturing overhead costs $92,400 Fixed manufacturing overhead costs $55,440 Normal production level in labor hours 30,800 Normal production level in units 5,775 Standard labor hours per unit 4 During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Fergie’s total overhead rate is a. $2.40.

141. When is a variance considered to be ‘material’?

a. When it is large compared to the actual cost

b. When it is infrequent

c. When it is unfavorable

d. When it could have been controlled more effectively

142. Variance reports are

a. external financial reports.

b. SEC financial reports.

c. internal reports for management.

d. all of these.

143. In using variance reports, management looks for

a. total assets invested.

b. significant variances.

c. competitors’ costs in comparison to the company’s costs.

d. more efficient ways of valuing inventories.

144. Parnell Company prepared its income statement for internal use. How would amounts for cost of goods sold and variances appear?

a. Cost of goods sold would be at actual costs, and variances would be reported separately.

b. Cost of goods sold would be combined with the variances, and the net amount reported at standard cost.

c. Cost of goods sold would be at standard costs, and variances would be reported separately.

d. Cost of goods sold would be combined with the variances, and the net amount reported at actual cost.

145. Alex Co. prepared its income statement for management using a standard cost accounting system. Which of the following appears at the “standard” amount?

a. Sales

b. Selling expenses

c. Gross profit

d. Cost of goods sold

146. The costing of inventories at standard cost for external financial statement reporting purposes is

a. not permitted.

b. preferable to reporting at actual costs.

c. in accordance with generally accepted accounting principles if significant differences exist between actual and standard costs.

d. in accordance with generally accepted accounting principles if significant differences do not exist between actual and standard costs.

147. Income statements prepared internally for management often show cost of goods sold at standard cost and variances are

a. separately disclosed.

b. deducted as other expenses and revenues.

c. added to cost of goods sold.

d. closed directly to retained earnings.

148. In Zero Company’s income statement, they report gross profit of $55,000 at standard and the following variances:

Materials price $ 420 F

Materials quantity 600 F

Labor price 420 U

Labor quantity 1,000 F

Overhead 900 F

Zero would report actual gross profit of

a. $51,660.

b. $52,500.

c. $57,500.

d. $58,340.

149. In Zero Company’s income statement, they report actual gross profit of $52,500 and the following variances:

Materials price $ 420 F

Materials quantity 600 F

Labor price 420 U

Labor quantity 1,000 F

Overhead 900 F

Zero would report gross profit at standard of

a. $46,660.

b. $47,500.

c. $55,000.

d. $53,340.

150. The balanced scorecard

a. incorporates financial and nonfinancial measures in an integrated system.

b. is based on financial measures.

c. is based on nonfinancial measures.

d. does not use financial or nonfinancial measures.

151. Which is not one of the four most commonly used perspectives on a balanced scorecard?

a. The financial perspective

b. The customer perspective

c. The external process perspective

d. The learning and growth perspective

152. The balanced scorecard approach

a. uses only financial measures to evaluate performance.

b. uses rather vague, open statements when setting objectives in order to allow managers and employees flexibility.

c. normally sets the financial objectives first, and then sets the objectives in the other perspectives to accomplish the financial objectives.

d. evaluates performance using about 10 different perspectives in order to effectively incorporate all areas of the organization.

153. The customer perspective of the balanced scorecard approach

a. is the most traditional view of the company.

b. evaluates the internal operating processes critical to the success of the organization.

c. evaluates how well the company develops and retains its employees.

d. evaluates the company from the viewpoint of those people who buy its products or services.

154. The perspectives included in the balanced scorecard approach include all of the following except the

a. internal process perspective.

b. capacity utilization perspective.

c. learning and growth perspective.

d. customer perspective.

a155. If 10,000 pounds of direct materials are purchased for $9,300 on account and the standard cost is $.90 per pound, the journal entry to record the purchase is

a. Raw Materials Inventory……………………………………………….. 9,300

Accounts Payable………………………………………………… 9,300

b. Work In Process Inventory……………………………………………. 9,300

Accounts Payable………………………………………………… 9,000

Materials Quantity Variance………………………………….. 300

c. Raw Materials Inventory……………………………………………….. 9,300

Accounts Payable………………………………………………… 9,000

Materials Price Variance………………………………………. 300

d. Raw Materials Inventory……………………………………………….. 9,000

Materials Price Variance………………………………………………. 300

Accounts Payable………………………………………………… 9,300

a 156. Debit balances in variance accounts represent

a. unfavorable variances.

b. favorable variances.

c. favorable for price variances; unfavorable for quantity variances.

d. favorable for quantity variances; unfavorable for price variances.

a 157. If a company purchases raw materials on account for $19,830 when the standard cost is $18,900, it will

a. debit Materials Price Variance for $930.

b. credit Materials Price Variance for $930.

c. debit Materials Quantity Variance for $930.

d. credit Material Quantity Variance for $930.

a158. If a company issues raw materials to production at a cost of $18,900 when the standard cost is $18,300, it will

a. debit Materials Price Variance for $600.

b. credit Materials Price Variance for $600.

c. debit Materials Quantity Variance for $600.

d. credit Material Quantity Variance for $600.

a159. If a company incurs direct labor cost of $82,000 when the standard cost is $84,000, it will

a. debit Labor Price Variance for $2,000.

b. credit Labor Price Variance for $2,000.

c. debit Labor Quantity Variance for $2,000.

d. credit Labor Quantity Variance for $2,000.

a160. If a company assigns factory labor to production at a cost of $84,000 when standard cost is $80,000, it will

a. debit Labor Price Variance for $4,000.

b. credit Labor Price Variance for $4,000.

c. debit Labor Quantity Variance for $4,000.

d. credit Labor Quantity Variance for $4,000.

a161. The overhead variances measure whether overhead costs

Are Effectively Managed Were Used Effectively

a. Controllable Controllable and Volume

b. Controllable Volume

c. Controllable and Volume Controllable

d. Volume Controllable

a162. The overhead volume variance is

a. actual overhead less overhead budgeted for actual hours.

b. actual overhead less overhead budgeted for standard hours allowed.

c. overhead budgeted for actual hours less applied overhead.

d. the fixed overhead rate times the difference between normal capacity hours and standard hours allowed.

a163. Budgeted overhead for Cinnabar Industries at normal capacity of 30,000 direct labor hours is $6 per hour variable and $4 per hour fixed. In May, $310,000 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed. The overhead controllable variance is

a. $5,000 favorable.

b. $2,000 favorable.

c. $10,000 favorable.

d. $10,000 unfavorable.

a164. Budgeted overhead for Cinnabar Industries at normal capacity of 30,000 direct labor hours is $6 per hour variable and $4 per hour fixed. In May, $310,000 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed. The overhead volume variance is

a. $8,000 favorable.

b. $11,000 favorable.

c. $5,000 favorable.

d. $10,000 favorable.

a165. Budgeted overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $310,000 of overhead was incurred in working 63,000 hours when 64,000 standard hours were allowed. The overhead controllable variance is

a. $5,000 favorable.

b. $2,000 favorable.

c. $10,000 favorable.

d. $10,000 unfavorable.

a166. Budgeted overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $310,000 of overhead was incurred in working 63,000 hours when 64,000 standard hours were allowed. The overhead volume variance is

a. $8,000 favorable.

b. $11,000 favorable.

c. $5,000 favorable.

d. $10,000 favorable.

a167. An overhead volume variance is calculated as the difference between normal capacity hours and standard hours allowed

a. times the total predetermined overhead rate.

b. times the predetermined variable overhead rate.

c. times the predetermined fixed overhead rate.

d. divided by actual number of hours worked.

a168. Which of the following statements is false?

a. The overhead volume variance indicates whether plant facilities were used efficiently during the period.

b. The costs that cause the overhead volume variance are usually controllable costs.

c. The overhead volume variance relates solely to fixed costs.

d. The overhead volume variance is favorable if standard hours allowed for output are greater than the standard hours at normal capacity.

a169. If the standard hours allowed are less than the standard hours at normal capacity,

a. the overhead volume variance will be unfavorable.

b. variable overhead costs will be underapplied.

c. the overhead controllable variance will be favorable.

d. variable overhead costs will be overapplied.

a170. Which of the following statements about overhead variances is false?

a. Standard hours allowed are used in calculating the controllable variance.

b. Standard hours allowed are used in calculating the volume variance.

c. The controllable variance pertains solely to fixed costs.

d. The total overhead variance pertains to both variable and fixed costs.

a171. The overhead volume variance relates only to

a. variable overhead costs.

b. fixed overhead costs.

c. both variable and fixed overhead costs.

d. all manufacturing costs.

a172. What does the controllable variance measure?

a. Whether a company incurred more or less fixed overhead costs compared to the amount of overhead applied

b. Whether a company incurred more or less overhead costs than allowed

c. The efficiency of using variable overhead resources

d. Whether the production manager is able to control the production facility

a173. The overhead controllable variance is calculated as the difference between actual overhead costs incurred and the budgeted

a. overhead costs for the standard hours allowed.

b. overhead costs applied to the product.

c. overhead costs at the normal level of activity.

d. fixed overhead costs.

a174. If the standard hours allowed are less than the standard hours at normal capacity, the volume variance

a. cannot be calculated.

b. will be favorable.

c. will be unfavorable.

d. will be greater than the controllable variance.

a175. The budgeted overhead costs for standard hours allowed and the overhead costs applied to the product are the same amount

a. for both variable and fixed overhead costs.

b. only when standard hours allowed are less than normal capacity.

c. for variable overhead costs.

d. for fixed overhead costs.

a176. The following information was taken from the annual manufacturing overhead cost budget of Fergie Manufacturing.

Variable manufacturing overhead costs $92,400

Fixed manufacturing overhead costs $55,440

Normal production level in labor hours 30,800

Normal production level in units 5,775

Standard labor hours per unit 4

During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Fergie’s total overhead rate is

a. $2.40.

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