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    Variance Assignment with MCQ

    Question 1

    1.  NAFTA reduced tariffs in which countries?

    Answer

    China, Mexico, and the United States
    Cuba, Canada, and Mexico
    Canada, China, and the United States
    Canada, Mexico, and the United States

    Question 2

    Which if the following statements is FALSE of Total Quality Management (TQM)?

    Answer

    TQM is focused on improving product and customer service quality.
    TQM is expensive to initiate.
    TQM requires top management support.
    TQM requires ISO 9000 certification.

    Question 3

    Which of the following statements is FALSE of Just-In-Time (JIT) manufacturing systems?

    Answer

    Demand pull means a closer relationship with the customer.
    The power of suppliers is reduced.
    Warehousing space and equipment needs are reduced.
    After process re-engineering, time to complete the product is reduced.

    Question 4

    What is the total time from when a product starts the production process until it is ready for sale called?

    Answer

    Throughput time
    Dedicated flow lines
    Six Sigma
    Total Quality Management

    Question 5

    Typical quality improvements over the last twenty years include all of the following EXCEPT:

    Answer

    product redesign.
    electronic defect detection.
    alteration of organizational architecture to increase local responsiveness to customer needs.
    disbandment of robotic manufacturing systems.

    Question 6

    When a factory becomes organized around dedicated JIT production lines producing a single type of product, it is sometimes called _________.

    Answer

    throughput time
    dedicated flow lines
    Six Sigma
    Total Quality Management

    Question 7

    _________ volume is the amount the plant would have generated if each unit of product manufactured used precisely the standard units of volume allowed.

    Answer

    Actual
    sales
    Numerator
    Denominator

    Question 8

    Carloff Cremes (CC) planned to sell 40,000 Queen size at $20 each and 20,000 King size at $15 each. Actual sales of the former were 45,000 and 25,000 of the latter, at $19 and $16 respectively.
    Which of the following is TRUE of CC’s sales (quantity) variance?

    Answer

    $183,333 F
    $155,000 F
    $163,333 F
    $175,000 F

    Question 9

    The _________ perspective of the balanced scorecard represents shareholder/owners of the organization.

    Answer

    financial
    customer
    internal business process
    innovation and learning

    Question 10

    During its first year, Green Garden (GG), which operates a Just-In-Time production system, recorded the following costs (all data in thousands): materials purchased $3,360; direct labor, $670; and overheads; $3,200. Two thousand units were completed. At the year-end, 300 units were still in process. These were 80% complete with respect to materials and 50% complete with respect to conversion costs. Which of the following is the CORRECT journal entry?

    Answer

    Dr. Wages payable $670 Cr. COGS $670
    Dr. Raw and in process inventory $990 Cr. COGS $990
    Dr. Raw and in process inventory $630 Cr. COGS $630
    Dr. COGS $7,590 Cr. Accounts payable/cash $7,590

    Question 11

    The Milling Department uses standard machine hours to allocate overhead to products. Budgeted volume for the year was 36,000 machine hours. A flexible budget is used to set the overhead rate. Fixed overhead is budgeted to be $720,000 and variable overhead is estimated to be $10 per machine hour.

    During the year, two products are milled. The following table summarizes operations.

     Product 1Product 2
    Units milled10,50012,000
    Standard machine per unit21
    Actual machine hours used23,00013,000

    Actual overhead during the year was $1.1 million.

    Calculate all the relevant overhead variances for the department, and write a memo that describes what each one means.

    Question 12

    Printers Inc. manufactures and sells a mid-volume color printer (MC) and a high-volume color printer (HC). Each MC requires 100 direct labor hours to manufacture, and each HC requires 150 direct labor hours. At the beginning of the year, 700 MCs are scheduled for production and 500 HCs are scheduled. At the end of the year, 720 MCs and 510 HCs were produced. Fourteen hundred too many hours were used in producing MCs and 3,000 hours fewer than standard were used to manufacture HCs. The flexible overhead budget is $2.9 million of fixed costs and $10 per direct labor hour.

    a. Calculate budgeted volume.
    b. Calculate standard volume.
    c. Calculate actual volume.
    d. Calculate the overhead rate.
    e. Calculate the overhead volume variance, and discuss the meaning.

    SAMPLE ANSWER:

    a. Budgeted Volume = Standard labor hours * Budgeted Units
    MC = 100700 = 70,000, HC = 150500 = 75000
    b. Standard Volume = Standard labor hours * Actual Units
    MC = 100720 = 72,000, HC = 150510 = 76500
    c. Actual Volume: MC = 70,000+1400 = 71400, HC = 75000-3000 = 72000
    d. Overhead Rate = Fixed Budgeted Overhead/Budgeted Activity + Variable Rate

    = 2,900,000/(70,000+75000) + 10 = $30

    Question 13

    Overhead is applied on the basis of direct labor hours. Three direct labor hours are required for each product unit. Planned production for the period was set at 8,000 units. Manufacturing overhead for the period is budgeted at $204,000, of which 30 percent is fixed. The 26,200 hours worked during the period resulted in production of 8,500 units. Manufacturing overhead cost incurred was $220,500. Calculate the Overhead spending variance, overhead efficiency variance, and the overhead volume variance. Discuss the over meaning of your results.

    Following are the formulas that should be used in solving the problem.

    Overhead Spending Variance

    (AOH) – (FOH + VOH x AV) =

    Overhead Efficiency Variance

    (FOH + (VOH x AV)) – (FOH + (VOH x SV)) =

    Overhead Volume Variance

    (FOH + (VOH x SV)) – (OHR x SV) =

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