Multiple Choice Questions

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

a. $1,500 F

b. $1,500 U

c. $880 F

d. $880 U

2. Refer to the information in question 5 above. What was Bandana’s direct labor rate variance?

a. $1,500 F

b. $1,500 U

c. $3,200 F

d. $3,200 U

3. Refer to the information in question 5 above. What was Bandana’s direct labor efficiency variance?

a. $1,500 F

b. $1,500 U

c. $3,200 F

d. $3,200 U

4. Hedrick Corporation incurred actual variable overhead expenses of $33,750 last year for production of 6,000 units. Variable overhead is applied at a rate of $3.00 per direct labor hour, and 2 direct labor hours are budgeted for each unit. The company used 11,990 direct labor hours for production. What was Hedrick’s variable overhead spending variance?

a. $2,250 F

b. $2,220 F

c. $2,250 U

d. $2,220 U

5. Refer to the information in question 11 above. What was Hedrick’s variable overhead efficiency variance?

a. $250 F

b. $250 U

c. $30 U

d. $30 F

6. Fixed overhead variances consist of:

a. A spending variance and an efficiency variance

b. A spending variance and a standard variance

c. A spending variance and a volume variance

d. An efficiency variance and a standard variance

7. Which of the following statements about activity-based costing (ABC) and variance analysis is true?

a. Advantages of variance analysis for overhead costs are enhanced in companies using ABC.

b. Because ABC systems break down overhead into multiple cost pools associated with activities (with a cost driver for each), companies that use ABC can analyze price and usage variances for each activity making up the total overhead variance.

c. Just as the use of ABC systems enhances the quality of information available for decision making, analyzing variances by activity has a similar effect.

d. All of the above are true.

8. The proper application of “management by exception”:

a. Requires managers to investigate all variances

b. Suggests that managers should generally investigate only those variances that are material in amount and outside a normal acceptable range

c. Prohibits the use of materiality thresholds to trigger investigations of variances

d. Is effective only for direct material and labor variances