39 variance analysis is an important tool because a it helps management determine wh 4313367

39 variance analysis is an important tool because a it helps management determine wh 4313367


39.Variance analysis is an important tool because:

A.It helps management determine where bottlenecks in the production process occurred

B.It helps management determine better pricing strategies

C.It helps management determine why actual profits varied from budgeted profits

D.It helps management determine which department operated most efficiently.

40.A favorable materials price variance will occur when:

A.Actual costs of materials were less than budgeted

B.More material was used than was budgeted

C.Actual cost of materials were greater than budgeted

D.Less material was used than was budgeted

41.The formula for calculating an input price variance is:

A.(Actual volume less budgeted volume) x actual price.

B.(Budgeted volume less actual volume) x budgeted price.

C.(Budgeted price less actual price) x actual volume.

D.(Actual price less budgeted price) x budgeted volume,

42.Which of the following would not result in a variance from budget:

A.A machine breaks down.

B.Budgets are set in a manner making them difficult to achieve.

C.A supplier raises prices.

D.The Chief Executive Officer takes a week of vacation.

43.Sales commissions for the Grant Company are budgeted based on a percent of sales.  The sales department budgeted sales of $150,000 for total commissions of $4,500.  If actual sales totaled $170,000 the flexible budget will show total commissions of:





44.The Farmington Company has a flexible budget based on direct labor hours.  At the 100,000 hours level, the budget shows the following variable overhead costs:

Indirect materials$16,000

Indirect labor$44,000

At an activity level of 120,000 hours, total variable costs will be:





45. Jackie’s Jewelry Company reported the following budgeted and actual results based on sales of 100 units of product:

Flexible Budget“As if” BudgetActual Results

Direct Labor$800$700$850

Direct Materials$400$450$450


A.$50 favorable.

B.$160 unfavorable.

C.$150 favorable.

D.$50 unfavorable.

46.The following material budgets have been developed for the Criders Company.

Price per pound$6.50

Pounds per unit1

Purchase price variance$3,200 unfavorable





47.For what purpose is a flexible budget used?

A.To provide various possible outcomes for management to consider.

B.To adjust input prices so that future variances are eliminated.

C.To insure that profit does not drop below a predetermined level.

D. To identify the sources of variances.

48.Which of the following items would differ in amount when comparing the master and flexible budgets for a freight company in which actual sales resulted in $2,500,000 based on 8,000 shipments during a period that 7,800 shipments were budgeted?

A.Total sales revenue.

B.Equipment costs.


D.All of the above will differ.

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