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Name_______________________________________
Acctg 202

Choose the best answer. 

1. A static budget: 
A) is based totally on prior year's costs. 
B) is based on one anticipated activity level. 
C) is based on a range of activity. 
D) is preferred over a flexible budget in the evaluation of performance. 
E) presents a clear measure of performance when planned activity differs from actual activity. 

2. A flexible budget: 
A) parallels a static budget with respect to format and advantages of use. 
B) is preferred over a static budget in the evaluation of performance. 
C) gives management flexibility in terms of meeting budget goals. 
D) can be used to compare actual and budgeted costs at various levels of activity. 
E) is characterized by choices "b" and "d" above. 

3. A flexible budget is appropriate for a:
Sales Direct Variable   Commission Material Overhead
 Budget        Budget                     Budget
A) Yes          No                            Yes 
B) Yes         Yes                             Yes 
C) No         Yes                             No 
D) No         No                              No 
E) No         Yes                             Yes 

4. Which of the following is not an overhead variance? 
A) Variable-overhead spending variance. 
B) Variable-overhead volume variance. 
C) Variable-overhead efficiency variance. 
D) Fixed-overhead budget variance. 
E) Fixed-overhead volume variance. 

5. Assume that machine hours is the cost driver for overhead. The difference between the actual variable overhead incurred and the applied variable overhead is the: 
A) volume variance. 
B) net overhead variance. 
C) efficiency variance. 
D) sum of the spending and efficiency variances. 
E) spending variance. 

6. A fixed-overhead volume variance would normally arise when: 
A) planned activity coincides with actual levels of production. 
B) budgeted fixed overhead is overapplied to production. 
C) there is a fixed-overhead budget variance. 
D) actual fixed overhead exceeds budgeted fixed overhead. 
E) there is a variable-overhead efficiency variance. 

7. The budget variance arises from a comparison of: 
A) budgeted fixed overhead expenditures with budgeted fixed overhead costs. 
B) actual fixed overhead costs with budgeted fixed overhead costs. 
C) actual variable overhead expenditures with budgeted variable overhead costs. 
D) variable overhead costs with budgeted fixed overhead costs. 
E) static-budget amounts with flexible-budget amounts. 

8. Which variance is commonly associated with measuring the cost of under- or over-utilization of plant capacity? 
A) The variable-overhead spending variance. 
B) The variable-overhead efficiency variance. 
C) The fixed-overhead budget variance. 
D) The fixed-overhead volume variance. 
E) The total fixed-overhead variance. 

9. The difference between the budgeted fixed manufacturing overhead and the fixed overhead applied to production is the: 
A) sum of the spending and efficiency variances. 
B) controllable variance. 
C) efficiency variance. 
D) spending variance. 
E) volume variance. 

10. Lantern Corporation recently prepared a manufacturing cost budget for an output of 50,000 units, as follows:

Direct materials

$100,000

Direct labor

$50,000

Variable Overhead

$75,000

Fixed overhead

$100,000

Actual units produced amounted to 60,000. Actual costs incurred were: direct materials, $110,000; direct labor, $60,000; variable overhead, $100,000; and fixed overhead, $97,000. If Lantern evaluated performance by the use of a flexible budget, a performance report would reveal a total variance of: 

A) $27,000 unfavorable. 
B) $42,000 unfavorable. 
C) $3,000 favorable. 
D) $23,000 favorable. 
E) none of the above amounts. 

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