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Cost Accounting, 14e (Horngren/Datar/Rajan)
Chapter 7 Flexible Budgets, Direct-Cost Variances, and Management Control
Objective 7.1
1) The master budget is:
A) a flexible budget
B) a static budget
C) developed at the end of the period
D) based on the actual level of output
Answer: B
Diff: 1
Terms: static budget
Objective: 1
AACSB: Reflective thinking
2) A flexible budget:
A) is another name for management by exception
B) is developed at the end of the period
C) is based on the budgeted level of output
D) provides favorable operating results
Answer: B
Diff: 1
Terms: flexible budget
Objective: 1
AACSB: Reflective thinking
3) Management by exception is the practice of concentrating on:
A) the master budget
B) areas not operating as anticipated
C) favorable variances
D) unfavorable variances
Answer: B
Diff: 1
Terms: management by exception
Objective: 1
AACSB: Reflective thinking
4) A variance is:
A) the gap between an actual result and a benchmark amount
B) the required number of inputs for one standard output
C) the difference between an actual result and a budgeted amount
D) the difference between a budgeted amount and a standard amount
Answer: C
Diff: 1
Terms: variance
Objective: 1
AACSB: Reflective thinking
1
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5) An unfavorable variance indicates that:
A) actual costs are less than budgeted costs
B) actual revenues exceed budgeted revenues
C) the actual amount decreased operating income relative to the budgeted amount
D) All of these answers are correct.
Answer: C
Diff: 2
Terms: unfavorable variance
Objective: 1
AACSB: Reflective thinking
6) A favorable variance indicates that:
A) budgeted costs are less than actual costs
B) actual revenues exceed budgeted revenues
C) the actual amount decreased operating income relative to the budgeted amount
D) All of these answers are correct.
Answer: B
Diff: 2
Terms: favorable variance
Objective: 1
AACSB: Reflective thinking
Answer the following questions using the information below:
Bowden Corporation used the following data to evaluate their current operating system. The company
sells items for $20 each and used a budgeted selling price of $20 per unit.
Actual Budgeted
Units sold 46,000 units 45,000 units
Variable costs $225,400 $216,000
Fixed costs $47,500 $50,000
7) What is the static-budget variance of revenues?
A) $20,000 favorable
B) $20,000 unfavorable
C) $2,000 favorable
D) $2,000 unfavorable
Answer: A
Explanation: A) (46,000 units × $20) - (45,000 units × $20) = $20,000 F
Diff: 2
Terms: static-budget variance
Objective: 1
AACSB: Analytical skills
2
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8) What is the static-budget variance of variable costs?
A) $1,200 favorable
B) $9,400 unfavorable
C) $20,000 favorable
D) $1,200 unfavorable
Answer: B
Explanation: B) $225,400- $216,000 = $9,400 U
Diff: 2
Terms: static-budget variance
Objective: 1
AACSB: Analytical skills
9) What is the static-budget variance of operating income?
A) $10,600 favorable
B) $10,600 unfavorable
C) $13,100 favorable
D) $13,100 unfavorable
Answer: C
Explanation:
C) Actual Static Static-budget
Results Budget Variance
Units sold 46,000 45,000
Revenues $920,000 $900,000 $20,000 F
Variable costs 225,400 216,000 9,400 U
Contribution margin $694,600 $684,000 10,600 F
Fixed costs 47,500 50,000 (2,500) F
Operating income $647,100 $634,000 $13,100 F
Diff: 2
Terms: static-budget variance
Objective: 1
AACSB: Analytical skills
3
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CH (7) costCost Test bank Cost Test bank Cost Test bank
Cost Test bank
Cost Test bank Cost Test bank Cost Test bank Cost Test bank (University of Modern
Sciences)
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Downloaded by GEOFREY GEOFFREY ()
, lOMoARcPSD|11763056
Cost Accounting, 14e (Horngren/Datar/Rajan)
Chapter 7 Flexible Budgets, Direct-Cost Variances, and Management Control
Objective 7.1
1) The master budget is:
A) a flexible budget
B) a static budget
C) developed at the end of the period
D) based on the actual level of output
Answer: B
Diff: 1
Terms: static budget
Objective: 1
AACSB: Reflective thinking
2) A flexible budget:
A) is another name for management by exception
B) is developed at the end of the period
C) is based on the budgeted level of output
D) provides favorable operating results
Answer: B
Diff: 1
Terms: flexible budget
Objective: 1
AACSB: Reflective thinking
3) Management by exception is the practice of concentrating on:
A) the master budget
B) areas not operating as anticipated
C) favorable variances
D) unfavorable variances
Answer: B
Diff: 1
Terms: management by exception
Objective: 1
AACSB: Reflective thinking
4) A variance is:
A) the gap between an actual result and a benchmark amount
B) the required number of inputs for one standard output
C) the difference between an actual result and a budgeted amount
D) the difference between a budgeted amount and a standard amount
Answer: C
Diff: 1
Terms: variance
Objective: 1
AACSB: Reflective thinking
1
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5) An unfavorable variance indicates that:
A) actual costs are less than budgeted costs
B) actual revenues exceed budgeted revenues
C) the actual amount decreased operating income relative to the budgeted amount
D) All of these answers are correct.
Answer: C
Diff: 2
Terms: unfavorable variance
Objective: 1
AACSB: Reflective thinking
6) A favorable variance indicates that:
A) budgeted costs are less than actual costs
B) actual revenues exceed budgeted revenues
C) the actual amount decreased operating income relative to the budgeted amount
D) All of these answers are correct.
Answer: B
Diff: 2
Terms: favorable variance
Objective: 1
AACSB: Reflective thinking
Answer the following questions using the information below:
Bowden Corporation used the following data to evaluate their current operating system. The company
sells items for $20 each and used a budgeted selling price of $20 per unit.
Actual Budgeted
Units sold 46,000 units 45,000 units
Variable costs $225,400 $216,000
Fixed costs $47,500 $50,000
7) What is the static-budget variance of revenues?
A) $20,000 favorable
B) $20,000 unfavorable
C) $2,000 favorable
D) $2,000 unfavorable
Answer: A
Explanation: A) (46,000 units × $20) - (45,000 units × $20) = $20,000 F
Diff: 2
Terms: static-budget variance
Objective: 1
AACSB: Analytical skills
2
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8) What is the static-budget variance of variable costs?
A) $1,200 favorable
B) $9,400 unfavorable
C) $20,000 favorable
D) $1,200 unfavorable
Answer: B
Explanation: B) $225,400- $216,000 = $9,400 U
Diff: 2
Terms: static-budget variance
Objective: 1
AACSB: Analytical skills
9) What is the static-budget variance of operating income?
A) $10,600 favorable
B) $10,600 unfavorable
C) $13,100 favorable
D) $13,100 unfavorable
Answer: C
Explanation:
C) Actual Static Static-budget
Results Budget Variance
Units sold 46,000 45,000
Revenues $920,000 $900,000 $20,000 F
Variable costs 225,400 216,000 9,400 U
Contribution margin $694,600 $684,000 10,600 F
Fixed costs 47,500 50,000 (2,500) F
Operating income $647,100 $634,000 $13,100 F
Diff: 2
Terms: static-budget variance
Objective: 1
AACSB: Analytical skills
3
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