# Standard Costs and Variance Analysis MCQs

## Accounting MCQ11- Simson Company’s master budget shows straight-line depreciation on factory equipment

• A. \$19,475
• B. \$20,425
• C. \$20,500
• D. \$21,500
• Answer (D) is correct. Since depreciation is a fixed cost, that cost will be the same each month regardless of production. Therefore,

## Accounting MCQ12- Barnes Corporation expected to sell 150,000 board games during the month of November

• A. \$225,000
• B. \$270,000
• C. \$420,000
• D. \$510,000
• Answer (C) is correct. Revenue of \$2,400,000 reflects a uni The contribution margin is \$975,000, or \$6.50 per game (\$975,000 , 150,000 games). Increasing sales will result in an increased contribution margin of \$195,000 (30,000 games , \$6.50). Since fixed costs are, by their nature, unchanging across the relevant range, net income will increase to \$420,000 (\$225,000 originally reported + \$195,000).

## Accounting MCQ13- A static budget

• A. Drops the current month or quarter and adds a future month or a future quarter as the current month or quarter is completed.
• B. Presents a statement of expectations for a period but does not present a firm commitment.
• C. Presents the plan for only one level of activity and does not adjust to changes in the level of activity.
• D. Presents the plan for a range of activity so that the plan can be adjusted for changes in activity.
• Answer (C) is correct. A static budget plans for only one level of activity and does not provide for changed levels of activity.

## Accounting MCQ14- performance report for a cost center using flexible budgeting techniques

• A. Budgeted amount in the original budget prepared before the beginning of the year.
• B. Actual amount for the same period in the preceding year.
• C. Budget adjusted to the actual level of activity for the period being reported.
• D. Budget adjusted to the planned level of activity for the period being reported.
• Answer (C) is correct. If a report is to be used for performance evaluation, the planned cost column should be based on the actual level of activity for the period. The ability to adjust amounts for varying activity levels is the primary advantage of flexible budgeting.

## Accounting MCQ17- Selo Imports uses flexible budgeting for the control of costs

• A. \$350 favorable
• B. \$350 unfavorable
• C. \$1,000 unfavorable
• D. \$1,000 favorable
• Answer (C) is correct. The budget (spending) variance for fixed O/H equals actual minus budgeted fixed O/H. The \$324,000 cost of supervisory salaries is fixed and is incurred at \$27,000 per month. Thus, the variance is the difference between actual costs of \$28,000 and the bud of \$27,000, or \$1,000 unfavorable.

## Accounting MCQ18- Red Rock Company uses flexible budgeting for cost control

• A. \$13,000
• B. \$13,975
• C. \$13,500
• D. \$11,700
• Answer (C) is correct. The cost of indirect materials for 144,000 units was expected to be \$180,000. Consequently, the budgeted unit cost of indirect materials is \$1.25 (\$180,000 � 144,000). Multiplying the \$1.25 unit cost times the 10,800 units actually produced results in an expected total indirect materials cost of \$13,500.