Knowledge Quiz

Question 1

Select all the true statements about variance analysis.

		Variance analysis only examines actual costs over a specific period of time.
		Variance analysis examines cost differences between standards and actuals.
		Cost elements can be isolated to identify specific drivers of variance.
		Variance analysis is only applicable to the manufacturing sector.

0.25 points

Question 2

A variance with a negative number (e.g., -2) is always called an unfavorable variance.

True

False

0.25 points

Question 3

Calculate the direct materials variance and determine if it is favorable or unfavorable.

		Quantity	Price
Standard		20	$1.50
Actual		22	$1.25
	1.50, favorable
	1.50, unfavorable
	2.50, favorable
	2.50, unfavorable

0.25 points

Question 4

Calculate the price variance for direct materials used to make a product.

	Quantity	Price
Standard	20	$1.50
Actual	22	$1.25
	Spent $5.50 more as compared to the standard.
	Spent $5.50 less as compared to the standard.
	Spent $3.50 more as compared to the standard.
	Spent $3.50 less as compared to the standard.

Question 5

Calculate the quantity variance of the direct materials used to make a product.

	Quantity	Price
Standard	20	$1.50
Actual	22	$1.25
	Variance is $3, favorable
	Variance is $3, unfavorable
	Variance is $2.5, favorable
	Variance is $2.5, unfavorable

0.25 points

Question 6

Calculate the variance in direct labor costs and determine if this is favorable or unfavorable.

	Product Hours	Rate of Pay
Standard		$80
Actual	10	$70
	$20 variance, favorable
	$20 variance, unfavorable
	$60 variance, favorable
	$60 variance, unfavorable

0.25 points

Question 7

Calculate the variance for rate of pay in regards to the production of a product. Was this favorable or unfavorable?

	Hours	Rate of Pay
Standard		$80
Actual	10	$70
	$100 variance, favorable
	$100 variance, unfavorable
	$80 variance, favorable
	$80 variance, unfavorable

Question 8

Calculate the variance for hours worked in regards to the production of a product. Was this favorable or unfavorable?

	Hours	Rate of Pay
Standard		$80
Actual	10	$70
	$140 variance, favorable
	$140 variance, unfavorable
	$160 variance, favorable
	$160 variance, unfavorable

0.25 points

Question 9

Use the break-even formula to calculate the number of widgets that must be sold to "break-even."

Widgets sell for $1,000 each. The cost to produce is $200 per Widget, the commission is $100 per Widget, and total fixed operating costs are $100,000 regardless of activity level (units manufactured).

Sales = Total Variable Costs + Total Fixed Costs

		100
		125
		143
		111

0.25 points

Question 10

Select all the true statements about the break-even point.

		It analyzes how demand impacts sales.
		It is defined as the point at which all sales exactly equal all the costs incurred to develop, produce, and deliver a product.
		It is a risk-assessment tool.
		It helps companies determine if they can operate profitably at different levels of sales.

Question 11

If a manager knows how much profit or target income is desired, CVP can be used to estimate sales revenue needed.

True

False

0.25 points

Question 12

Calculate the contribution to margin and net income.

Suppose widgets were selling for $1,000 each. The cost to produce them is $200, the commission for each sold is $100, and the company incurs $100,000 of fixed costs regardless of the level of activity.

	Total	Per Unit	Ratio
Sales (500 x $1,000)	$500,000	$1,000	100%
Variable costs (500 x $300)	$150,000	$300	30%
Contribution margin	$Blank 1	$700	70%
Fixed costs	$100,000
Net income	$Blank 2

0.25 points

Question 13

Select all that apply. The contribution margin:

		Is expressed as: variable expenses — revenues.
		Is expressed as: revenues — variable expenses.
		Reveals how much a company's revenues will contribute to the company's fixed expenses and net income.
		Reveals how much a company's variable expenses will contribute to the company's revenues and net income.

Question 14

Compute net income for 100 units of production.

		Total	Per Unit	Ratio
Sales			$1,000	100%
Variable costs			$300	30%
Contribution margin			$700	70%
Fixed costs		$100,000
Net income
	$50,000 net income
	- $50,000 net income
	$30,000 net income
	- $30,000 net income

0.25 points

Question 15

The break-even point can be calculated for the following (select all that apply):

		A service
		Overhead
		A product
		A company

0.25 points

Question 16

The manager is interested in hitting a specific profit target. Suppose the widget company was targeting a $200,000 profit this year. How many widgets would they need to sell? (Hint: Treat Profit Target like an extra fixed expense!)

Widgets sell for $1,000 each. The cost to produce each is $200, the commission for each sold is $100, and the company incurs $100,000 of fixed costs regardless of the level of activity.

		143
		429
		375
		100