Fundementals Of Cost Accounting Seventh Edition-McGraw Hill- ACCT521 CH 17 QUESTIONS Week 8

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Differences in sales and production units do NOT impact the Blank______ variances. Multiple select question. sales activity correct variable production sales price correct marketing & administrative correct Correct Answer  sales activity  sales price  marketing & administrative When a company uses full absorption costing and production and sales volume are not the same, fixed production costs are allocated to ending Blank 1 Blank 1 ending , Correct Unavailable inventory Blank 2 Blank 2 inventory , Correct Unavailable and finished goods. (Enter only one word per blank.) Correct Answer  Blank 1: ending  Blank 2: inventory If a company purchases more material than is used in production in a period, the difference will affect the Blank______ variance. Multiple choice question. purchase price correct efficiency accounts payable Correct Answer

purchase price If a company purchases 100,000 pounds of material with an actual price of $0.20 per pound and a standard price of $0.10 per pound, the entry will include a Blank______ to material price variance for $10,000. Multiple choice question. credit Reason: Accounts Payable is higher than the recorded inventory. debit correct Correct Answer debit When recording the entry for the use of raw materials, the Blank______ inventory account is debited. Multiple choice question. finished goods work-in-process correct materials Correct Answer work-in-process When production is greater than sales, Blank______. Multiple choice question. only the fixed production cost variance is affected both the fixed production cost and variable production cost variances are affected only the variable production cost variance is affected correct neither the fixed production cost or variable production cost variances are affected Correct Answer only the variable production cost variance is affected

The sales activity variances that can be computed are the Blank______ variances. Multiple select question. industry volume correct selling price market share correct purchase cost Correct Answer  industry volume  market share When a company uses variable costing, the entire fixed Blank 1 Blank 1 fixed , Correct Unavailable production cost is expensed. (Enter only one word per blank.) Correct Answer  Blank 1: fixed When a company sells multiple products that are imperfect substitutes for each other, the result can be a(n) sales Blank 1 Blank 1 sales , Correct Unavailable mix Blank 2 Blank 2 mix , Correct Unavailable variance. (Enter only one word per blank.) Correct Answer  Blank 1: sales  Blank 2: mix

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When materials purchased is different than materials used, the purchase Blank 1 Blank 1 purchase , Correct Unavailable price Blank 2 Blank 2 price , Correct Unavailable variance is impacted. (Enter only one word per blank.) Correct Answer  Blank 1: purchase  Blank 2: price The components of the sales activity variance are the sales quantity Blank 1 Blank 1 quantity , Correct Unavailable variance and the sales mix Blank 2 Blank 2 mix , Correct Unavailable variance. (Enter only one word per blank.) Correct Answer  Blank 1: quantity  Blank 2: mix When recording the purchase of raw materials at standard cost, the entry includes a Blank______. Multiple select question. credit to Accounts Payable correct debit to Materials Inventory correct debit to Cost of Goods Sold Correct Answer  credit to Accounts Payable  debit to Materials Inventory

The variance that arises from a charge in the relative proportion of inputs (materials or labor mix) is called a(n) production mix Blank 1 Blank 1 mix , Correct Unavailable variance. (Enter only one word per blank.) Correct Answer  Blank 1: mix When recording the entry for the use of raw materials, the difference between work-in-process inventory and raw materials inventory is recorded as the materials Blank______ variance. Multiple choice question. efficiency correct price quantity Correct Answer efficiency Addams, Inc. produces water sealant that is made from two chemicals: A20 standard cost per unit of finished product 0.7 gallon @ $4.00 = $2.80 B15 standard cost per unit of finished product 0.3 gallon @ $9.00 = $2.70 Last month Addams produced 55,000 gallons of the water sealant using the following: A20 material purchased and used 40,000 gallons @ $4.25 B15 material purchased and used 20,000 gallons @ $10.00

Calculate A20s yield variance. Multiple choice question. $8,000 favorable Reason: ($4.00 × .7 x 60,000) – ($4.00 × .7 × 55,000) = $14,000 unfavorable $14,000 unfavorable Reason: ($4.00 × .7 x 60,000) – ($4.00 × .7 × 55,000) = $14,000 unfavorable $14,000 favorable Reason: ($4.00 × .7 x 60,000) – ($4.00 × .7 × 55,000) = $14,000 unfavorable $8,000 unfavorable incorrect Reason: ($4.00 × .7 x 60,000) – ($4.00 × .7 × 55,000) = $14,000 unfavorable Correct Answer $14,000 unfavorable The two reasons for a sales activity variance are changes related to industry Blank 1 Blank 1 industry , Correct Unavailable volume or differences in market share. (Enter only one word per blank.) Correct Answer  Blank 1: industry Typical types of outputs used by service organizations for profit variance analysis include Blank______. Multiple select question. patient days correct sales units staff hours correct

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Correct Answer  patient days  staff hours A variance that comes from the relative proportion of different products sold is called a sales Blank______ variance. Multiple choice question. mix correct quantity activity price Correct Answer mix Given the following information, calculate the purchasing department's price variance. Standard number of transactions per day 20 Standard labor cost per day $20 0 Actual number of days for processing transactions 120 Actual number of transactions processed 1,96 0 Actual labor cost per day $18 0 Multiple choice question. $2,000 favorable Reason: ($180 × 120) – ($200 × 120) = $21,600 – $24,000 = $2,400 favorable

$2,400 unfavorable Reason: ($180 × 120) – ($200 × 120) = $21,600 – $24,000 = $2,400 favorable $2,000 unfavorable Reason: ($180 × 120) – ($200 × 120) = $21,600 – $24,000 = $2,400 favorable $2,400 favorable correct Reason: ($180 × 120) – ($200 × 120) = $21,600 – $24,000 = $2,400 favorable Correct Answer $2,400 favorable The variance that occurs in multi-product companies from the change in volume of sales, independent of change in sales mix is called the sales Blank 1 Blank 1 sales , Correct Unavailable quantity Blank 2 Blank 2 quantity , Correct Unavailable variance. (Enter only one word per blank.) Correct Answer  Blank 1: sales  Blank 2: quantity A company budgets 1,000 hours for a service job using a partner for 200 hours and staff for the remaining hours at $400 and $100 respectively. Due to scheduling issues, the partners work 400 hours on the job while staff works 600 hours. The production mix variance is Blank______. Multiple choice question. $80,000 Reason: [(400 × 400) + (600 × 100)] – [(200 × 400) + (800 × 100)] = 220,000 – 160,000 = $60,000 $60,000 correct

Reason: [(400 × 400) + (600 × 100)] – [(200 × 400) + (800 × 100)] = 220,000 – 160,000 = $60,000 $70,000 Reason: [(400 × 400) + (600 × 100)] – [(200 × 400) + (800 × 100)] = 220,000 – 160,000 = $60,000 Correct Answer $60,000 The difference between expected output from a given level of inputs and the actual output obtained from those inputs is called the production yield Blank 1 Blank 1 yield , Correct Unavailable variance. (Enter only one word per blank.) Correct Answer  Blank 1: yield When a CPA firm replaces a tax partner's time on a job with a staff person, this is an example of substitute Blank 1 Blank 1 substitute , Correct Unavailable of inputs. (Enter only one word per blank.) Correct Answer  Blank 1: substitutability, substitution, or substitute  Addams, Inc. produces water sealant that is made from two chemicals:  A20 standard cost per unit of finished product 0.7 gallon @ $4.00 = $2.80 B15 standard cost per unit of finished product 0.3 gallon @ $9.00 = $2.70   Last month Addams produced 55,000 gallons of the water sealant using the following:

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 A20 material purchased and used 40,000 gallons @ $4.25 B15 material purchased and used 20,000 gallons @ $10.00   Calculate A20s purchase price variance.  Multiple choice question.  $9,625 favorable  Reason:  ($4.25 × 40,000) – ($4.00 × 40,000) = $10,000 U  $9,625 unfavorable  Reason:  ($4.25 × 40,000) – ($4.00 × 40,000) = $10,000 U  $10,000 unfavorable  correct  Reason:  ($4.25 × 40,000) – ($4.00 × 40,000) = $10,000 U  $10,000 favorable  Reason:  ($4.25 × 40,000) – ($4.00 × 40,000) = $10,000 U  Correct Answer  $10,000 unfavorable Professional staff hours, number of guests or patient-days are all examples of outpiut Blank 1 Blank 1 outpiut , Incorrect Unavailable measures used by service organizations. (Enter only one word per blank.) Correct Answer  Blank 1: output  Given the following information, calculate the purchasing department's efficiency variance.   Standard number of transaction per day 20

Standard labor cost per day $20 0 Actual number of days for processing transactions 120 Actual number of transactions processed 1,96 0 Actual labor cost per day $18 0    Multiple choice question.  $2,400 favorable  Reason:  ($200/day × 120 days) – ($200/day × 1,960/20) = $4,400 unfavorable  $2,400 unfavorable  Reason:  ($200/day × 120 days) – ($200/day × 1,960/20) = $4,400 unfavorable  $4,400 favorable  Reason:  ($200/day × 120 days) – ($200/day × 1,960/20) = $4,400 unfavorable  $4,400 unfavorable  correct  Reason:  ($200/day × 120 days) – ($200/day × 1,960/20) = $4,400 unfavorable  Correct Answer  $4,400 unfavorable Variances that should get the most attention from management are Blank______. Multiple select question. high-impact correct uncontrollable highly controllable

correct low-impact Correct Answer  high-impact  highly controllable A company budgets 1,000 hours for a service job using a partner for 200 hours and staff for the remaining hours at $400 and $100 respectively. Due to scheduling issues, the partners works 400 hours on the job while staff work 600 hours. This will result in a Blank______ variance. Multiple choice question. production mix correct labor quantity labor price Correct Answer production mix Because managements' time is a scare resource, priorities must be set to determine which variances should be investigated using cost Blank 1 Blank 1 cost , Correct Unavailable- benefit Blank 2 Blank 2 benefit , Correct Unavailable analysis. (Enter only one word per blank.) Correct Answer  Blank 1: cost  Blank 2: benefit Factors that are important to consider when working with mix variances are Blank______. Multiple select question. substitutability of inputs correct

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controllability of variance different input costs correct Correct Answer  substitutability of inputs  different input costs Immediate corrective actions can generally be taken for Blank______ variances which occur frequently and are easily corrected as soon as they are discovered. Multiple select question. usage correct labor price efficiency correct mix Correct Answer  usage  efficiency Addams, Inc. produces water sealant that is made from two chemicals: A20 standard cost per unit of finished product 0.7 gallon @ $4.00 = $2.80 B15 standard cost per unit of finished product 0.3 gallon @ $9.00 = $2.70 Last month Addams produced 55,000 gallons of the water sealant using the following: A20 material purchased and used 40,000 gallons @ $4.25

B15 material purchased and used 20,000 gallons @ $10.00 Calculate A20s mix variance. Multiple choice question. $8,000 unfavorable incorrect Reason: ($4.00 × 40,000) – ($4.00 × .7 × 60,000) = $8,000 favorable $6,000 unfavorable Reason: ($4.00 × 40,000) – ($4.00 × .7 × 60,000) = $8,000 favorable $8,000 favorable Reason: ($4.00 × 40,000) – ($4.00 × .7 × 60,000) = $8,000 favorable $6,000 favorable Reason: ($4.00 × 40,000) – ($4.00 × .7 × 60,000) = $8,000 favorable Correct Answer $8,000 favorable Typical types of outputs used by service organizations for profit variance analysis include Blank______. Multiple select question. sales units patient days correct staff hours correct Correct Answer  patient days  staff hours

True or false: Investigating variances that are not controllable in the short- run normally have high benefits to a company. True false question. True Reason: Investigating variances that are uncontrollable in the short-run have low benefits. Falsecorrect Correct Answer False Variances dealing with the cost of energy are difficult for a company to take action to improve the variance in the short-run due to the variance being Blank______. Multiple choice question. high-impact, easy to control high-impact, difficult to control correct low-impact, difficult to control low-impact, easy to control Correct Answer high-impact, difficult to control Using a planned variance Blank______. Multiple select question. is common when temporary changes occur incorrect does not affect the performance evaluation activity correct sends managers the wrong signal about product costs incorrect Reason: It sends the right signal. Correct Answer  is common when temporary changes occur  does not affect the performance evaluation activity

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An approach that requires emphasis of the deviation from an accepted base point, such as, a standard, a budget, an industry average, or a prior period experience is called management Blank 1 Blank 1 management , Correct Unavailable by exception Blank 2 Blank 2 exception , Correct Unavailable. (Enter only one word per blank.) Correct Answer  Blank 1: management  Blank 2: exception Which of the following are true of monitoring process outcomes? Multiple select question. Process outcomes fluctuations caused by something systematic in the process are considered "noise" and cannot be corrected. A process control chart is a graphical approach based on monitoring the variation in a process. correct Process outcomes can have normal operating fluctuations caused by random, uncontrollable events. incorrect The purpose of a process control chart is to ignore the normal fluctuations due to noise and investigate when the fluctuation is signaling a systematic problem. incorrect Correct Answer  A process control chart is a graphical approach based on monitoring the variation in a process.  Process outcomes can have normal operating fluctuations caused by random, uncontrollable events.  The purpose of a process control chart is to ignore the normal fluctuations due to noise and investigate when the fluctuation is signaling a systematic problem.

Immediate corrective actions can generally be taken for efficiency Blank 1 Blank 1 efficiency , Correct Unavailable or usage variances that occur frequently and are easily corrected as soon as they are discovered. (Enter only one word per blank.) Correct Answer  Blank 1: efficiency When using process control charts, Blank______. Multiple select question. when a process outcome rises above or falls below one of the control limits, it is an indication to managers NOT to investigate the causes of the variance managers may choose NOT to investigate a variance with a fluctuation of less than three standard deviations from the mean correct only unfavorable variances will be investigated incorrect one must keep in mind that the reliability of the statistical estimates for accounting variances are lower incorrect Correct Answer  managers may choose NOT to investigate a variance with a fluctuation of less than three standard deviations from the mean  one must keep in mind that the reliability of the statistical estimates for accounting variances are lower The accounting staff must carefully check variance reports before sending them to operating managers since many variances occur because of errors in Blank______. Multiple select question. planned operating issues timing problems correct bookkeeping adjustments

correct recording incorrect Correct Answer  timing problems  bookkeeping adjustments  recording A variance that is expected to occur if certain conditions affect operations is called a(n) a Blank 1 Blank 1 a , Incorrect Unavailable variance. (Enter only one word per blank.) Correct Answer  Blank 1: planned A graph or other visualization that plots or reflects process outcomes over time is a(n) Blank______. Multiple choice question. standard variance chart planned variance chart impact chart process control chart correct Correct Answer process control chart Which of the following are true of process control charts? Multiple select question. They have lower and upper limits that are typically set at ±1 standard deviation. Reason: The lower and upper limits are typically set at ±3 standard deviation.

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They have lower and upper limits set based on the estimated variance of a process. correct They plot process outcomes over time on a chart that is centered around the mean outcome. correct Any variance that falls within the control limits of the process control chart must be investigated. Reason: Variances outside the control limits are typically investigated. Correct Answer  They have lower and upper limits set based on the estimated variance of a process.  They plot process outcomes over time on a chart that is centered around the mean outcome.

Fundementals Of Cost Accounting Seventh Edition-McGraw Hill- ACCT521 CH 17 QUESTIONS Week 8

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