1.
Which term describes when the actual price is lower or higher than the sales price?
Correct Answer
C. Sales price variance
Explanation
Sales price variance is used in business to describe differences between the actual price at which products are sold and the expected sales price. For example, if you expect to sell a toy for $10 but actually sell it for $12, there's a favorable sales price variance of $2. This variance helps businesses understand how their pricing strategies are performing against their expectations, and whether they are selling their products for more or less than planned. It's a useful tool for adjusting future pricing and sales strategies.
2.
Into how many parts is sales margin variance classified?
Correct Answer
C. 3
Explanation
Sales margin variance is typically classified into three parts: sales volume variance, sales mix variance, and sales price variance. These components help businesses analyze the differences between their expected profit margins and the actual results. Sales volume variance looks at the impact of the number of units sold, sales mix variance examines the proportion of different products sold, and sales price variance considers the difference between actual and expected selling prices. Understanding these variances allows companies to adjust their strategies to improve profitability.
3.
Which department takes corrective actions after the analysis of variance?
Correct Answer
A. Management
Explanation
After the analysis of variance, it is typically the management department that takes corrective actions. This process involves evaluating the results to understand where performance did not meet expectations and deciding what changes need to be made to improve. Management uses the insights gained from variance analysis to address issues related to budgeting, planning, and operational efficiencies. This helps ensure that the company aligns its resources and strategies more effectively to achieve its financial and operational goals.
4.
Which method is not used for the analysis of overhead variance?
Correct Answer
A. Five variance method
Explanation
The analysis of overhead variance typically involves methods like the two-variance method, three-variance method, and four-variance method. These methods help in breaking down and understanding different aspects of overhead costs, such as how efficiently resources are being used (efficiency variance) and how spending compares to the budget (spending variance). The "Five variance method" is not a recognized or standard approach for analyzing overhead variances in accounting practices. Each method provides different levels of detail and analysis based on the specific needs of the business.
5.
Which of the following variances is also known as Gang composition variance?
Correct Answer
C. Labour mix variance
Explanation
Labour mix variance, also known as Gang composition variance, analyzes the impact of differences in the composition of a workgroup or team from the standard or planned composition. For instance, if a project was supposed to be completed by a team consisting of three experienced workers and two novices but instead was done by two experienced workers and three novices, the labour mix variance would help quantify how this shift affected labour costs or efficiency. This variance is crucial for understanding how the actual mix of skills and experience levels among employees compares to what was expected and how it impacts productivity and cost.
6.
When the actual output is more than the budgeted output, what is the impact on volume variance?
Correct Answer
C. Favorable
Explanation
When the actual output exceeds the budgeted output, the volume variance is considered favorable. This scenario indicates that production efficiency is higher than planned, leading to more products being manufactured than expected within the set budget constraints. A favorable volume variance often reflects good management and operational efficiency, suggesting that the company can produce more with the same or fewer resources. This type of variance is beneficial as it can lead to increased revenues without proportionately increasing costs, enhancing the company's profitability.
7.
What is another name for labor efficiency variance?
Correct Answer
D. All of the above
Explanation
Labor efficiency variance is also known by several other names, including labor usage variance, labor quantity variance, and labor time variance. These terms all refer to the same concept, which evaluates the efficiency of labor use against the standard or planned labor for a given level of production. This variance measures whether more or less time was needed to produce a set number of units compared to what was expected. If less time is used than planned, the variance is favorable, indicating higher efficiency. Conversely, more time than expected results in an unfavorable variance. All these terms highlight different aspects of how labor efficiency impacts production costs and productivity.
8.
Which of these conditions is responsible for idle time variance?
Correct Answer
A. Time lost due to unforseen conditions
Explanation
Idle time variance typically occurs when there is time lost due to unforeseen conditions. This might include machine breakdowns, delays in material supply, power failures, or unexpected maintenance issues. These disruptions cause workers to be idle because they cannot proceed with their tasks, leading to a variance from the planned productive hours. This type of variance is crucial for management to monitor as it affects labor efficiency and the overall cost of operations, highlighting areas where improvements in process and resource management may be necessary.
9.
What should be calculated if process loss is not given?
Correct Answer
A. Material yield variance
Explanation
If process loss information is not available, it is important to calculate the material yield variance. This variance measures the difference between the actual output of material and the expected output, considering the standard amount of input materials used. By assessing material yield variance, businesses can identify inefficiencies or deviations in the production process that cause more materials to be used than necessary, or lower-than-expected output from the given inputs. This analysis helps in optimizing material usage and reducing waste, thereby improving overall production efficiency and cost-effectiveness.
10.
What is another name for Material sub-usage variance?
Correct Answer
A. Revised quantity variance
Explanation
Material sub-usage variance, also known as material usage variance, occurs when the actual quantity of materials used in production differs from the standard or expected quantity set for that production. This variance helps businesses understand whether they are using more or less material than planned, which can affect costs. The options provided (Revised quantity variance, Material revised usage, A and B) do not accurately represent alternative names for material sub-usage variance. Therefore, the correct response is "None of the above."