Sample Exam MCQ

Amalgamated Manipulation Manufacturing’s (AMM) standards anticipate that there will be 3 pounds of raw material used for every unit of finished goods produced. AMM began the month of May with 5,000 pounds of raw material, purchased 15,000 pounds for $19,500 and ended the month with 4,000 pounds on hand. The company produced 5,000 units of finished goods. The company estimates standard costs at $1.50 per pound. The materials price and efficiency variances for the month of May were:

(*PV: price variance; EV: efficiency variance)

A) PV - $3000 U; EV - $1500 F

B) PV - $3000 F; EV - $0

C) PV - $3000 F; EV - $1500 U

D) PV - $3200 F; EV - $1500 U

PV - $3000 F; EV - $1500 U

Fordham Corporation produces a single product. The standard costs for one unit of its Concourse product are as follows:

• Direct materials (6 pounds at $0.50 per pound) - $3

• Direct labor (2 hours at $10 per hour) - $20

• Variable manufacturing overhead (2 hours at $5 per hour) - $10

  • Total: $33

During November Year 2, 4000 units of Concourse were produced. The costs associated with November operations were as follows:

• Material purchased (36,000 pounds at $0.60 per pound) - $21,600

• Material used in production (28,000 pounds)

• Direct labor (8200 hours at $9.75 per hour) - $79,950

• Variable manufacturing overhead incurred - $41,820

What is the variable overhead efficiency variance for Concourse for November Year 2?

$1000 unfavorable

Morton Graphics successfully bid on a job printing standard notebook covers during the year using last year’s price of $0.27 per cover. This amount was calculated from prior year costs, noting that no changes in any costs had occurred from the past year to the current year. At the end of the year, the company manager was shocked to discover that the company had suffered a loss. “How could this be?” she exclaimed. “We had no increases in cost and our price was the same as last year. Last year we had a healthy income.” What could explain the company’s loss in income this current year?

Their costs were mostly fixed costs and the amount produced this year was less than last year.

For external financial reporting purposes, product costs

are regarded as assets before the products are sold

The purpose of a flexible budget is to

compare actual and budgeted results at virtually any level of production

What type of direct material variances for price and usage will arise if the actual number of pounds of materials used exceeds standard pounds allowed but actual cost was less than standard cost?

usage - unfavorable; price - favorable