Multiple Choice Questions

1. A standard cost is:

a. Not determinable in most manufacturing environments

b. Equivalent to the budget for a single unit of a product or service

c. Equivalent to the budget for total production of a batch of products

d. None of the above

2. What causes differences between flexible and static budgets?

a. Differences in budgeted and actual sales

b. Differences in budgeted and actual production

c. Both a and b

d. Neither a nor b

3. Last year, Taquita Corporation estimated harvesting (i.e., production) and sales of 7,000 banana treats. The company actually produced and sold 6,000 treats. Each treat has a standard stipulating 1.4 pounds of ingredients at a budgeted cost of $1.50 per pound and 3 hours of mixing time at a cost of $10.50 per hour. The treats sell for $30 each. Actual costs for the production of 6,000 treats were $12,900 for ingredients (8,600 pounds at $1.50 per pound) and $178,350 for labor (17,400 hours at $10.25 per hour). What is Taquita’s income/(loss) based on a flexible budget?

a. ($11,250)

b. $11,250

c. $21,600

d. ($21,600)

4. Refer to the information in question 3 above. What is Taquita’s flexible budget variance?

a. $10,350 U

b. $10,950 F

c. $10,350 F

d. $10,950 U

5. Last year, Bandana Corporation budgeted for production and sales of 11,000 bandanas. The company produced and sold 10,500 bandanas. Each bandana has a standard requiring 2 feet of material at a budgeted cost of $1.50 per foot and 30 minutes of sewing time at a cost of $0.30 per minute. The bandanas sell for $14.75. Actual costs for the production of 10,500 bandanas were $33,880 for materials (22,000 feet at $1.54 per foot) and $92,800 for labor (320,000 minutes at $0.29 per minute). What was Bandana’s sales volume variance?

a. $1,695

b. $1,345

c. $1,375

d. $1,595

6. Refer to the information in question 5 above. Bandana’s actual revenue from bandana sales was $154,875. What was Bandana’s sales price variance?

a. $1,950 F

b. $1,950 U

c. $0

d. It cannot be determined from the information provided.

7. Refer to the information in question 5 above. What was Bandana’s direct material price variance?

a. $1,500 F

b. $1,500 U

c. $880 F

d. $880 U