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Question;1. Cost;behavior for variable overhead is more difficult to predict than for direct;material or direct labor cost for all the following reasons except;A.;Multiple cost drivers are involved with;variable overhead.;B.;Direct material and;direct labor contain no semi-variable component.;C.;The variable portion of;overhead must first be separated from the fixed portion.;D.;Variable overhead is a;relatively small part of total overhead.;2. Finding a single cost driver that changes in;the same proportion as variable factory overhead costs is;A.;Simplified by breaking out the fixed;portion of overhead cost.;B.;The first step in;variable overhead cost assignment.;C.;Difficult but manageable;using advanced statistical techniques.;D.;An important goal of;effective cost system design.;E.;Virtually impossible;because of the underlying nature of variable overhead costs.;3. An activity-based cost (ABC) driver applies;factory overhead to products or services according to the;A.;Activity output as measured by the units;produced.;B.;Activity level of hours;of direct labor.;C.;Resource;demands/resource consumption of the firm's outputs.;D.;Budgeted activity level;for the period.;E.;Volume of output (i.e.;units produced) during the period.;4.;A manufacturing company;that uses standard costs and flexible budgets can break the variable factory;overhead flexible-budget variance down into;A.;Volume and efficiency components.;B.;Spending and efficiency;variances.;C.;Spending and production;volume variances.;D.;Spending variances only.;5. Which of the following factors is not usually;important when deciding whether to investigate a variance?;A.;Magnitude of the variance.;B.;Trend of the variance;over time.;C.;Whether the variance is;favorable or unfavorable.;D.;Cost of investigating;the variance.;E.;Likelihood that the;variance will recur in the future.;6. A;standard costing system will produce the same income as an actual costing;system when end-of-period standard cost variances are assigned;A.;Only to work-in-process (WIP) inventory.;B.;Only to finished goods;inventory.;C.;To work-in-process and;finished goods inventories.;D.;Entirely to cost of;goods sold.;E.;To cost of goods sold;and all inventory accounts.;7. Many firms feel a strong obligation to;establish and use a standard rate for fixed factory overhead for all the following;reasons except;A.;Generally accepted accounting principles;require full costing for financial reporting.;B.;The mandate to include;fixed factory overhead in pricing for federal government contract bidding.;C.;Because of current;income tax provisions in the U.S.;D.;Improved performance;measurement.;8. Because fixed factory overhead does not vary;with changes in output;A.;The amount used in the control budget;for a period is a lump-sum amount.;B.;There is no way to;assign fixed overhead cost to products for product-costing purposes.;C.;Most companies treat;such costs as period, rather than as product, costs.;D.;There is no;justification for fixed overhead cost application.;E. Generally;accepted accounting principles permit companies to use variable rather than;absorption (full) costing for external reporting purposes.;9. In a standard cost system, an unfavorable production-volume;variance would result if;A.;There is an unfavorable labor efficiency;variance.;B.;There is an unfavorable;labor rate variance.;C.;Actual production is;less than the "denominator volume.;D.;There is an unfavorable;manufacturing overhead spending variance.;E.;Actual fixed overhead;costs are greater than budgeted fixed overhead costs.;10.;The fixed factory overhead production-volume variance represents;A.;Money lost or gained because of achieved;production levels.;B.;An artifact of unitizing;fixed overhead costs for product-costing purposes.;C.;Information regarding the effectiveness;of the organization in meeting sales targets.;D.;Information that;management can use for cost-control purposes.;E.;Important information;for companies pursuing a JIT production philosophy.;11.;Factors contributing to the fixed factory overhead spending variance can;include all except;A.;Inaccurate budget estimates for these;costs.;B.;Inadequate control of;fixed overhead costs.;C.;Misclassification of;cost items by the accounting system.;D.;Operating inefficiency.;E.;Unanticipated increases;in costs such as factory insurance.;12. The;difference between actual overhead costs incurred during the period and the;overhead in the flexible budget based on the output for the period is called;the;A.;Total overhead spending variance.;B.;Total overhead;efficiency variance.;C.;Production-volume;variance.;D.;Overhead flexible-budget;variance.;E.;Total overhead variance.;13.;Manufacturing companies;using a standard cost system often can achieve more effective control when;factory overhead variance analysis is done with;A.;A two-variance approach.;B.;A three-variance;approach.;C.;A four-variance;approach.;D.;A single cost driver.;E.;Multiple cost drivers.;14.;If inventories in a;business using a standard cost system are insignificant, the firm would be;justified (in a practical sense) by disposing of variances each year;A.;As an adjustment to the finished goods;inventory only.;B.;As an adjustment to cost;of goods sold only.;C.;As adjustments to both;inventory accounts and the cost of goods sold for the period.;D.;As a special item (gain;or loss) on the income statement for the period.;E.;As an adjustment to the;work-in-process (WIP) inventory only.;15.;Proration of;manufacturing cost variances among ending inventories and cost of goods sold;has the effect of carrying the cost (savings) of inefficient (efficient);operations of a period to;A.;Only the balance sheet of the current;period.;B.;Only the income;statement of the current period.;C.;The balance sheets of;future periods only.;D.;The income statement of;the current period and the balance sheet of the current period.;16.;Among characteristics that distinguish service and manufacturing firms are the;A.;Absence of output inventory in service;firms.;B.;Existence of;labor-intensive products in manufacturing firms.;C.;Rendering of identical;services in a service firm.;D.;Capital intensiveness of;service firms.;E.;Organizational structure;of service firms.;17.;Intangible attributes;often play dominant roles in determining the value of outputs from a service;organization. These characteristics often lead service firms to rely on;A.;Input-related measures for measuring and;monitoring operations.;B.;Intuitive judgment in;monitoring operations.;C.;Quantitative measures of;output.;D.;Qualitative measures;exclusively for measuring and monitoring operations.;E.;Output-related measures;for measuring and monitoring operations.;18.;In firms using activity-based costing (ABC), budgeted total factory overhead;varies with changes in;A.;A single cost driver for applying;overhead.;B.;Several cost drivers.;C.;The selected denominator;activity level.;D.;The quantity of input;resources used in operations of the period.;19.;Using an activity-based costing system (ABC) enables a firm to calculate;overhead variances for;A.;Sales volume and production volume.;B.;Spending and selling;price.;C.;Each activity-based cost;driver.;D.;Semi-variable overhead;costs.;E.;Federal income tax;purposes.;20. The;production-volume variance should generally not be calculated and reported for;control purposes because, unless interpreted properly, it can;A.;Distract top management.;B.;Give information that only top management should have. C. Distort other;variable-cost variances.;D.;Encourage overproduction by managers to achieve a favorable volume variance. E.;Encourage underproduction by managers to avoid an unfavorable variance.;21.;As long as the organization is making good progress toward achieving an ideal;standard, its management may not need to;A.;Modify its standards.;B.;Curtail spending on variable costs. C. Curtail spending on fixed costs.;D.;Take any corrective action if the variance for the period is large.;E.;Take any corrective action, even if the variance for the period is rather;substantial in amount. 22. Which of the following statements is correct?;A.;Random variances are typically investigated because they can repeat. B.;Systematic variances are considered uncontrollable.;C.;Most standard cost variances call for investigation and corrective action. D.;Random variances are typically not investigated.;E.;Most variances from ideal standards will be favorable.;23.;Causes of random variances are beyond the control of management, and are;most often found in;A.;Fixed costs.;B.;Commodity products exchanged in open markets. C. Wages and salaries.;D.;Depreciation charges. E. Specialized industries.;24. Systematic;variances are persistent and most likely;A.;Will disappear over time.;B.;Average out to a steady-state amount over time. C. Will recur unless corrected.;D.;Are small in amount. E. Are large in amount.;25.;In deciding whether to further investigate a variance, managers usually;A.;Investigate all variances determined to be systematic in nature. B. Investigate;all variances under a prescribed percentage limit.;C. Investigate all;variances associated with factory overhead spending. D. Investigate all;variances over a given dollar amount or percentage. E. Investigate all;flexible-budget but not volume-related variances.;26.;In deciding whether to further investigate a variance, an organization needs to;weigh the costs of investigation against the;A.;Ongoing time constraints. B. Size of the variance.;C.;Nature of the variance.;D.;Difficulty of the investigation.;E.;Anticipated benefits from the investigation. 27. Random variances are;A.;Often considered as uncontrollable from;the standpoint of management.;B.;Likely to recur until;corrected.;C.;The result of failing to;include all relevant variables in the analysis.;D.;The result of including;wrong or irrelevant variables in the variance-investigation model.;E.;Controlled through the;use of six sigma and other techniques from operations management.;28. A;statistical control chart;A.;Sets control limits on the basis of managerial intuition and experience with;the process. B. Is useful for identifying random versus systematic variances.;C.;Is useful for identifying in-control but not out-of-control observations.;D.;Depicts the expected mean (or target) value of a process, but not the allowable;range around that value. E. Determines control limits (both upper and lower);heuristically.;29.;Which of the following is not a plausible cause of a systematic;variance?;A.;Prediction error. B. Modeling error.;C.;Implementation error. D. Measurement error. E. Random error.;30.;Which of the following tools is helpful in addressing the;variance-investigation problem under uncertainty?;A.;Statistical control charts. B. Pay-off tables.;C.;Regression analysis.;D.;Sensitivity analysis.;E.;Run charts.;31.;If I = the cost;of conducting an investigation, C = the estimated cost to correct the;cause of a variance, and L = loss associated with not investigating a;variance, what is the formula for determining the indifference probability, p?;A.;p= I/(L + C).;B.;p=;(L - C)/I.;C.;p=;(L + C)/I.;D.;p=;I/(L - C).;32. If;there is a 90 percent chance that an observed variance is random, the cost of;conducting an investigation is $1,000, the cost to correct a variance if the;investigation reveals a nonrandom cause, and the amount of loss a company;expects to incur if it does not investigate a variance that had a nonrandom;cause is $30,000, what is the expected cost of not investigating the;variance?;A.;$30,000.;B.;$1,500.;C.;$0.;D.;$3,900.;E.;$3,000.;33.;The fixed factory overhead application rate (for product-costing purposes) is;equal to;A.;The denominator activity divided by;budgeted fixed factory overhead.;B.;The denominator activity;divided by budgeted variable factory overhead.;C.;Budgeted variable;factory overhead divided by denominator activity.;D.;Budgeted fixed factory;overhead divided by budgeted variable factory overhead.;E.;Budgeted fixed factory;overhead divided by denominator activity.;34. A;payoff table for variance investigation that measures the cost of two states of;nature and possible alternative actions by management will have;A.;Four combinations.;B.;Three combinations.;C.;Only two realistic;combinations.;D.;Only idealistic;combinations.;E.;One combination for each;probability level.;35.;Which of the following statements about the standard variable factory overhead;application rate is true?;A.;The rate is a function of the;denominator volume chosen.;B.;The rate is used for;cost-control, but not product-costing purposes.;C.;The rate is used for;product-costing, but not cost-control purposes.;D.;The same rate is used;for both product-costing and cost-control purposes.;E.;Generally speaking, the;rate will be independent of the allocation base chosen to apply overhead.;36.;The difference between variable overhead incurred and total standard variable;overhead for the output of the period is called the;A.;Variable factory overhead;flexible-budget variance.;B.;Variable factory;overhead spending variance.;C.;Variable factory;overhead rate variance.;D.;Variable factory;overhead efficiency variance.;E.;Variable factory;overhead usage variance.;37.;The difference between;total variable overhead cost incurred and the standard variable overhead cost;based on the actual quantity of the cost driver used to apply variable overhead;is the;A.;Total variable overhead variance.;B.;Variable overhead;spending variance.;C.;Variable overhead rate;variance.;D.;Variable overhead;efficiency variance.;E.;Variable overhead;flexible-budget variance.;38.;The difference between;the standard variable overhead cost for the actual quantity of the cost driver;used for applying variable overhead and the standard variable overhead cost for;the units manufactured during the period is the;A.;Total variable overhead variance.;B.;Variable overhead;spending variance.;C.;Variable overhead rate;variance.;D.;Variable overhead;efficiency variance.;E.;Variable overhead;flexible-budget variance.;39.;Which one of the following reflects both price (rate) as well as efficiency (quantity);effects regarding variable overhead items?;A.;Variable overhead production-volume;variance.;B.;Variable overhead rate;variance.;C.;Variable overhead;spending variance.;D.;Variable usage variance.;E.;Variable overhead;efficiency variance.;40.;Which;one of the following factory overhead variances reflects the effect of;deviation in input quantities only if the cost driver for;applying;variable overhead is a perfect predictor of variable overhead cost?;A.;Total variable overhead variance.;B.;Variable overhead rate;variance.;C.;Variable overhead;spending variance.;D.;Variable overhead;flexible-budget variance.;E.;Variable overhead;efficiency variance.;41. Determining;the standard fixed factory overhead applied to production for a period involves;all of the following essential elements except;A.;The actual amount of fixed overhead cost;incurred during the period.;B.;A cost driver (or;drivers) for applying the fixed overhead.;C.;The standard fixed;overhead application rate.;D.;An output level, as;reflected by the quantity of the cost driver for applying the fixed overhead;(i.e., the denominator activity level for the period).;E.;The total budgeted fixed;overhead cost for the period.;42.;The difference between the actual fixed overhead cost incurred during a period;and the budgeted fixed overhead cost for the period is the;A.;Fixed overhead efficiency variance.;B.;Fixed overhead;production-volume variance.;C.;Fixed overhead spending;variance.;D.;Fixed overhead rate;variance.;E.;Fixed overhead;sales-volume variance.;43.;The difference between;budgeted fixed factory overhead for a period and the amount of the fixed;factory overhead applied to production during the period is the;A.;Fixed factory overhead efficiency;variance.;B.;Fixed factory overhead;production-volume variance.;C.;Fixed factory overhead;spending variance.;D.;Fixed factory overhead;sales-volume variance.;E.;Fixed factory overhead;flexible budget variance.;44.;The difference between;the total actual overhead cost incurred during a period and budgeted total;factory overhead for the actual quantity of the cost driver used to apply;overhead is equal to the;A.;Total overhead spending variance.;B.;Total overhead efficiency;variance.;C.;Factory overhead;production-volume variance.;D.;Total overhead rate;variance.;E.;Total overhead variance.;45.;In a standard cost system, when production is greater than the denominator;volume level, there will be;A.;An unfavorable production-volume;variance.;B.;An unfavorable total;spending variance.;C.;A favorable;production-volume variance.;D.;A favorable sales-volume;variance.;E.;A favorable overhead;budget variance.;46.;Which of the following statements about variable overhead costs is true?;A.;The underlying model for control and;product-costing purposes is the same for variable overhead.;B.;The amount of variable;overhead applied to production is a function of the denominator output volume;and the actual quantity of the cost-allocation base (cost driver) used to apply;overhead.;C.;The total variable;overhead cost variance can be decomposed into a production-volume variance and;a flexible-budget variance.;D.;For control purposes;the actual quantity of the cost-allocation base (cost driver) is used.;E.;Standard costs can be;used for control, but not product-costing, purposes.;47. A;deviation from standard because of an inaccurate estimation of the amounts of;variables used in the standard-setting process is an example of a(n);A.;Random error.;B.;Prediction error.;C.;Implementation error.;D.;Modeling error.;E.;Measurement error.;48. A;deviation from standard because of the failure to include one or more relevant;variables, or the inclusion of the wrong or irrelevant variables in the;standard-setting process is an example of a(n);A.;Random error.;B.;Prediction error.;C.;Implementation error.;D.;Modeling error.;E.;Measurement error.;49. A;deviation from standard that occurs because of an incorrect number resulting;from improper or inaccurate accounting systems or procedures is an example of;a(n);A.;Random error.;B.;Prediction error.;C.;Implementation error.;D.;Modeling error.;E.;Accounting error.;50. A;deviation from standard that occurs during operations as a result of operator;errors is an example of a(n);A.;Random error.;B.;Prediction error.;C.;Implementation error.;D.;Modeling error.;E.;Accounting error.


Paper#44927 | Written in 18-Jul-2015

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