Understanding Process Costing and Variance Analysis

Which of the following is the costing system used for mass-produced like or similar units of products?

Process-costing systems

Which of the following statements is true?

In a process-costing system, each unit uses approximately the same amount of resources.

Which of the following are not conversion costs?

The cost of tires on an automobile.

The purpose of the equivalent-unit computation is to ________.

Use a common metric to estimate the amount of work done on units in a period

Which of the following is true regarding estimates of completion of units in a process costing system?

Estimating the degree of completion with regards to direct materials is usually easier and more accurate than estimating the degree of completion with regards to conversion costs.

The weighted-average process-costing method calculates the equivalent units by ________.

The equivalent units completed during the current period plus the equivalent units in ending inventory

In the computation of the cost per equivalent unit, the weighted-average method of process costing considers all the costs ________.

Entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period

Which of the following steps are part of the first-in, first-out (FIFO) process-costing method?

Assignment of costs of the previous period's equivalent units in beginning work-in-process inventory to the first units completed and transferred out of the process

Which of the following is true of weighted-average process-costing?

It calculates the cost per equivalent unit of all work done to date, regardless of the accounting period in which it was done.

A major advantage of using the FIFO process-costing method is that:

FIFO provides managers with information about changes in the costs per unit from one period to the next.

Which of the following best describes transferred-in costs?

Costs incurred in a previous department or process that are carried forward as the product's cost as that product moves to another department or process in the production cycle.

Management by exception is a practice whereby managers focus more closely on ________.

Areas not operating as anticipated and less closely on areas that are operating as anticipated.

An unfavorable variance indicates that ________.

The actual units sold are less than the budgeted units.

The flexible budget contains ________.

Budgeted amounts for actual output.

The difference between the actual amounts and the flexible budget amounts for the actual output is the:

Flexible budget variance.

In a flexible budget ________.

Fixed costs are kept at the same level of static budget.

Which of the following is true of flexible budget?

It calculates total variable cost by multiplying actual units by budgeted variable cost per unit.

The sales-volume variance is sometimes due to ________.

Quality problems leading to customer dissatisfaction.

The flexible-budget variance for direct cost inputs can be further subdivided into a ________.

Price variance and an efficiency variance.

Which of the following can be a reason for a favorable price variance for direct materials?

A decrease in the price of materials due to an oversupply of materials.

A favorable efficiency variance for direct labor might indicate that ________.

Work is scheduled efficiently.

Which of the following could be a reason for a favorable material price variance?

The purchasing manager bargaining effectively with suppliers.

Efficiency is ________.

The relative amount of inputs used to achieve a given output level.

A company has a policy "investigate all variances exceeding $3,000 or 15% of the budgeted cost, whichever is lower." There is a variance of $2,000 in repair and maintenance costs of $12,000. What does the company do in the given situation?

It deserves more attention as it is more than 15% of total repair cost.

Effective planning of variable overhead costs means that managers must ________.

Focus on activities that add value for the customer and eliminate nonvalue-added activities.

Fixed overhead costs include ________.

Leasing of machinery used in a factory.

Effective planning of variable overhead costs includes ________.

Redesigning products or processes to use fewer resources.

While calculating the costs of products and services, a standard costing system ________.

Uses standard costs to determine the cost of products.

In flexible budgets, the costs that are not "flexed" because they remain the same within a relevant range of activity (such as sales or output) are called ________.

Fixed Costs

The variable overhead efficiency variance is computed ________ and interpreted ________ the direct-cost efficiency variance.

The same as; differently than.

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n) ________.

Unfavorable fixed overhead flexible-budget variance.

Which of the following is the correct mathematical expression to calculate the fixed overhead spending variance?

Actual costs incurred - Flexible-budget amount.

Which of the following is the correct mathematical expression to calculate the fixed overhead production-volume variance?

Budgeted fixed overhead - Fixed overhead allocated for actual output.

Which of the following statements is true of variable overhead costs?

Variable overhead costs have no production-volume variance.

Fixed overhead costs ________.

Have no efficiency variance.