11) The PRIMARY reason for using cost variances is:

A) that they diagnose the cause of a problem and what should be done to correct it.

B) for superiors to communicate expectations to lower level employees.

C) to administer appropriate disciplinary action.

D) for financial control of operating activities.

12) A favorable cost variance of significant magnitude:

A) is the result of good planning.

B) may lead to improved production methods if it is investigated.

C) indicates that management does not need to be concerned about lax standards.

D) does not need to be investigated.

13) The variances that should be investigated by management include:

A) only unfavorable variances.

B) only favorable variances.

C) all variances, both favorable and unfavorable.

D) both favorable and unfavorable variances that are considered significant in amount for the company.

14) A flexible budget contains:

A) cost targets for actual output.

B) cost targets for planned output.

C) the difference between planned and actual output.

D) actual costs for actual output.

15) All of the following are true of flexible budgets EXCEPT that they:

A) use the same flexible (variable) cost per unit as the master budget.

B) result in higher total costs for greater levels of production.

C) allow comparison of actual results to targets based on the achieved level of production.

D) reflect the same level of production as the master budget.

16) The variance that LEAST affects cost control is the ________ variance.

A) flexible budget

B) direct material price

C) planning

D) direct labor efficiency

17) A flexible budget variance is $1,500 favorable for unit-related costs. This indicates that:

A) actual costs were $1,500 more than the master budget.

B) actual costs were $1,500 less than standard for the achieved level of activity.

C) the sum of the planning and efficiency variances totals $1,500.

D) actual costs were $1,500 less than for the planned level of activity.

18) A favorable price variance for direct materials indicates that:

A) a lower price than expected was paid for materials.

B) a higher price than expected was paid for materials.

C) less material was used during production than planned for actual output.

D) more material was used during production than planned for actual output.

19) A favorable efficiency variance for direct labor indicates that:

A) a lower wage rate than expected was paid for direct labor.

B) a higher wage rate than expected was paid for direct labor.

C) less direct labor hours were used during production than expected for actual output.

D) more direct labor hours were used during production than expected for actual output.

20) A favorable wage rate variance for direct labor might indicate that:

A) employees were paid less than planned.

B) fewer skilled employees are available in the market.

C) less skilled and qualified employees are being hired.

D) an efficient labor force.

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