ACCT 6302 Exam 3 Review

• Accounting
• Year 4

ACCT 6302 Exam 3 Review

Welcome to Exam 3 Review for ACCT 6302

Let's do amazing on this exam!!

- Prof Lizzy

A total variable cost variance (such as for direct materials) can be broken down into separate variances that evaluate:

1. Sales-volume versus sales-mix effects
2. Volume (output) and productivity
3. Units and cost
4. Price (rate) and efficiency (quantity)

A total variable cost variance (such as for direct materials) can be broken down into separate variances that evaluate:

Two key factors of total variable cost variance for DM is price (rate) variance, which evaluates the difference between the actual price paid for materials and the expected (budgeted) price. It answers the question, “Did we pay more or less per unit of material than planned?”

 AND Efficiency (quantity) Variance, which assesses the difference between the actual quantity of materials used and the expected (budgeted) quantity. It answers the question, “Did we use more or less material than planned to produce the same output?

The master budget variance for a period reveals whether a company has achieved:

1. The master budgeted operating income for the period.
2. Control of basic business processes.
3. The sales level budgeted for the period.
4. Control of total expenses for the period.

The master budget variance for a period reveals whether a company has achieved:

The master budgeted operating income for the period. correct because the master budget variance for a period specifically reveals whether a company has achieved the master budgeted operating income for that period. The master budget is a comprehensive financial plan that includes all of the company’s budgets, such as sales, production, and expenses, culminating in the budgeted operating income.

By comparing the actual operating income to the master budgeted operating income, companies can determine if they met their financial goals for the period. This variance analysis helps in identifying areas where performance deviated from the plan, allowing for better financial control and strategic adjustments

The four categories of cost associated with a cost of quality (COQ) reporting system are:

1. External failure, internal failure, prevention, and carrying.
2. Warranty, product liability, training, and appraisal.
3. External failure, internal failure, prevention, and appraisal.
4. Warranty, product liability, prevention, and appraisal.

The four categories of cost associated with a cost of quality (COQ) reporting system are:

Cost of quality (COQ): A comprehensive reporting framework for classification of quality-related costs. COQ into the following four categories: prevention costs, appraisal costs, internal failure costs, and external failure costs. 

A favorable price variance for direct materials indicates that:

1. There will most likely be an unfavorable materials efficiency (quantity) variance.
2. Lower-quality materials were purchased.
3. Less material was used in production this period than was allowed.
4. A lower price than expected was paid for the materials.

A favorable price variance for direct materials indicates that:

Favorable Price Variance for Direct Materials: Suggests that the actual cost of the materials was less than what was originally budgeted or expected. This is considered favorable because it means the company has spent less money on purchasing the materials than planned, which can lead to

increased profitability. 

Which of the following is NOT a characteristic of lean manufacturing?

1. Continuous-improvement perspective
2. Increase in product quality
3. Increase in inventory holdings
4. Increase in product flow (that is, throughput)

Which of the following is not a characteristic of lean manufacturing?

Lean Manufacturing: The goal of lean manufacturing is to increase product flow and product quality, reduce inventory, reduce waste and inefficiency, improve decision making, and increase profitability. In short, the ultimate goal of lean is the ability to do “more” with “less”—less human effort, less raw material, less developmental time, less space, and less energy.

Which of the following is different in a flexible budget compared to the master budget for a period?

1. Selling price per unit
2. Sales volume
3. Variable cost per unit
4. Budgeted fixed cost

Which of the following is different in a flexible budget compared to the master budget for a period?

Sales volume: correct because sales volume variance is different in flexible budget compared to master budget for a period.

For cost of quality (COQ) reporting purposes, contribution margin of canceled sales orders due to quality deficiency would be classified as:

1. Internal failure costs
2. Appraisal costs
3. External failure costs
4. Prevention costs

For cost of quality (COQ) reporting purposes, contribution margin of canceled sales orders due to quality deficiency would be classified as:

External failure costs:  correct because the contribution margin of canceled sales orders due to quality deficiencies is classified as external failure costs in cost of quality (COQ) reporting. External failure costs are incurred when defects are found after the product has been delivered to the customer. 

These costs include:

Sales returns and allowances

Warranty claims

Product recalls

Customer complaints

Contribution margin of canceled or lost sales orders

In deciding whether to further investigate a variance, an organization needs to weigh the costs of investigation against the:

1. Anticipated benefits from the investigation
2. Difficulty of the investigation
3. Size of the variance
4. Nature of the variance

In deciding whether to further investigate a variance, an organization needs to weigh the costs of investigation against the:

Anticipated benefits from the investigation: correct because when deciding whether to further investigate a variance, an organization needs to weigh the costs of investigation against the anticipated benefits from the investigation. This cost-benefit analysis helps determine if the potential insights and corrective actions derived from the investigation justify the resources spent on it

Firms struggling for survival in intensely competitive industries may choose to use which type of standard?

1. Real standards
2. Future standards
3. Ideal standards
4. Practical standards

Firms struggling for survival in intensely competitive industries may choose to use which type of standard?

Ideal standard: A standard that reflects perfect implementation and maximum efficiency in every aspect of the operation. NOTE*: Firms struggling for survival in intensely competitive industries

may choose to use ideal (or continuous improvement) standards to motivate employees to put forth their best efforts. Ideal standards are not effective, however, if frequent failures in meeting the standards dis courage employees or lead them to ignore the standards

What does the direct labor rate variance reflect?

1. The difference in labor variance rates for multiple companies in the same industry
2. The effect on operating income of using a number of direct labor hours during the period that differs from the standard hours allowed during the period
3. The effect on operating income when the budgeted hourly wage rate during the period deviates from the standard hourly wage rate:
4. The effect on operating income when the actual hourly wage rate during the period deviates from the standard hourly wage rate

What does the direct labor rate variance reflect?

The effect on operating income when the actual hourly wage rate during the period deviates from the standard hourly wage rate: Correct because The direct labor rate variance reflects the difference between the actual hourly rate paid to workers and the standard hourly rate that was budgeted. This variance indicates how such deviations impact the operating income

What is the fixed overhead spending variance?

1. The difference between budgeted and actual fixed factory overhead costs for a period
2. The difference between budgeted (lump-sum) fixed overhead cost for the period and the standard fixed overhead cost applied to production
3. The output (activity) level used to establish the predetermined fixed overhead application rate
4. The difference between actual fixed overhead costs for the period and the standard fixed overhead costs applied to production based on a standard fixed overhead application rate

hat is the fixed overhead spending variance? 

The difference between budgeted and actual fixed factory overhead costs for a period: Correct because the fixed overhead spending variance is specifically concerned with the

comparison between what was budgeted for fixed overhead costs and what the actual fixed overhead costs ended up being.  

In a standard cost system, when production (i.e., actual output) is greater than the denominator volume level, there will be:

1. An unfavorable total spending variance
2. A favorable production-volume variance (FOH production-volume variance)
3. A favorable sales-volume variance
4. A favorable labor efficiency variance

In a standard cost system, when production (i.e., actual output) is greater than the denominator volume level, there will be: 

A favorable production-volume variance (FOH production-volume variance) : Correct because producing more than the denominator volume level means that the fixed costs

are allocated over more units, reducing the cost per unit and resulting in a favorable variance. 

The End

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