Wiley-Sec-C-2021-Mcq-Cma-Cpa-Practice-Test

School: University of Notre Dame - Course: ACCT MANAGERIAL - Subject: Accounting

Question 1 1.C.1.g flex.bpa.tb.051_0120 LOS: 1.C.1.g Lesson Reference: Flexible Budgets and Performance Analysis Difficulty: medium Bloom Code: 4 Olive Industries produced 30,000 units this month and used 36,000 machine hours. The company's static budget for manufacturing overhead costs based on 37,500 machine hours is as follows: Variable Indirect materials $441,000 Indirect labor630,000 Factory supplies63,000 Fixed Depreciation$189,000 Taxes31,500 Supervision157,500 During the month, Olive's actual costs were $11.80 per machine hour for indirect materials. What is the amount of difference for indirect materials shown on the company's manufacturing overhead flexible budget report? $1,500 unfavorable $16,200 favorable $1,500 favorable Rationale  $1,440 unfavorable Flexible budgets are prepared after a period is over to show budgeted amounts for the actual level of activity achieved. Since indirect materials is a variable cost, the amount in a flexible budget will be different from the amount in a static budget to the extent that the actual activity level differs from the activity level used to prepare the static budget. Olive's budgeted amount of indirect materials is $11.76 per machine hour ($441,000 ÷ 37,500). If 36,000 machine hours are used, the indirect materials in the flexible budget will be $423,360 ($11.76 × 36,000). The actual amount of indirect materials is $424,800 ($11.80 × 36,000). Since actual spending is $1,440 more than the flexible budget amount, the $1,440 variance is unfavorable. Rationale  $1,500 unfavorable This answer is incorrect. Olive's static budget indirect materials is $441,000 and indirect materials spending for 37,500 machine hours is $442,500 ($11.80 × 37,500). However, this does not measure the difference between actual spending and flexible budget spending. Rationale  $16,200 favorable This answer is incorrect. Olive's static budget indirect materials is $441,000 and its actual indirect materials spending is $424,800 ($11.80 × 36,000). The static budget variance is $16,200 favorable, but it does not measure the difference between actual spending and flexible budget spending. Rationale  $1,500 favorable This answer is incorrect. Olive's static budget indirect materials is $441,000 and indirect materials spending for 37,500 machine hours is $442,500 ($11.80 × 37,500). However, this does not measure the difference between actual spending and flexible budget spending. $1,440 unfavorable Correct https://t.me/joinchat/AAAAAEmdkQm8l_10mjxMXQ

Question 2 1.C.1.c tb.flex.bpa.005_1808 LOS: 1.C.1.c Lesson Reference: Flexible Budgets and Performance Analysis Difficulty: medium Bloom Code: 4 Under which of the following circumstances would a financially favorable variance not be truly favorable? A company saved money by replacing an old machine that was inefficient. A company saved money by firing several employees who had a habit of calling in sick at least once per week. Rationale  A company saved money by purchasing cheap cloth dye that produces environmentally hazardous byproducts. Correct. Variances are classified depending on how they impact actual net income relative to net income in the static budget. Any variance that would increase actual net income relative to budgeted net income is a favorable variance. Two reasons for favorable variances are paying less than the standard cost per unit of an input or using less than the standard amount of the input per unit of output. While favorable variances result in actual costs being lower than standard costs, they are not always "good" for the organization. One example of a favorable variance not being "good" for the organization is when lower-quality cloth dye than called for is purchased. The lower-quality dye will likely cost less than the standard (resulting in a favorable price variance), but the hazardous byproducts produced will likely be expensive to address and may result in lower selling prices. In this case, the favorable variance is not "good" for the organization.