The differences between actual and budgeted figures are known as type your answer... 2 Which of the following is true about unfavorable variances? Managers generally investigate only unfavorable variances as part of "management by exception." Unfavorable variances will always be negative numbers when subtracting actual figures minus budgeted figures. O Unfavorable variances should always be interpreted as “bad news" for the company. Unfavorable variances are variances that cause operating income to be lower than budgeted.

The differences between actual and budgeted figures are known as type your answer... 2 Which of the following is true about unfavorable variances? Managers generally investigate only unfavorable variances as part of "management by exception." Unfavorable variances will always be negative numbers when subtracting actual figures minus budgeted figures. O Unfavorable variances should always be interpreted as “bad news" for the company. Unfavorable variances are variances that cause operating income to be lower than budgeted.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter9: Profit Planning And Flexible Budgets

Section: Chapter Questions

Problem 20MCQ: A firm comparing the actual variable costs of producing 10,000 units with the total variable costs...

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What is the cause of an unfavorable volume variance? Does the volume variance convey any meaningful information to managers?
This variance is the difference involving spending more or using more than the standard amount. A. favorable variance B. unfavorable variance C. no variance D. variance
This variance is the difference involving spending less, or using less than the standard amount. A. favorable variance B. unfavorable variance C. no variance D. variance
In comparing actual sales revenue to flexible budget sales revenue, would it be possible to have a favorable variance and still not have met revenue expectations?
The budget variance for variable production costs is broken down into quantity and price variances. Explain why the quantity variance is more useful for control purposes than the price variance.
Investigating variances from standard is a. always done. b. done if the variance is inside an acceptable range. c. not done if the variance is expected to recur. d. done if the variance is outside the control limits. e. None of these.
A firm comparing the actual variable costs of producing 10,000 units with the total variable costs of a static budget based on 9,000 units would probably see a. no variances. b. small favorable variances. c. large unfavorable variances. d. large favorable variances. e. small unfavorable variances.
Refer to the information for Cinturon Corporation on the previous page. Required: 1. Break down the total variance for materials into a price variance and a usage variance using the columnar and formula approaches. 2. CONCEPTUAL CONNECTION Suppose the Boise plant manager investigates the materials variances and is told by the purchasing manager that a cheaper source of leather strips had been discovered and that this is the reason for the favorable materials price variance. Quite pleased, the purchasing manager suggests that the materials price standard be updated to reflect this new, less expensive source of leather strips. Should the plant manager update the materials price standard as suggested? Why or why not?
What makes a variance favorable? Give an example of a favorable variance involving materials. What makes a variance unfavorable? Give an example of an unfavorable variance involving labor.
When is the material price variance unfavorable? A. when the actual quantity used is greater than the standard quantity B. when the actual quantity used is less than the standard quantity C. when the actual price paid is greater than the standard price D. when the actual price is less than the standard price
Refer to the information for Cinturon Corporation on the previous page. Required: 1. Break down the total variance for labor into a rate variance and an efficiency variance using the columnar and formula approaches. 2. CONCEPTUAL CONNECTION As part of the investigation of the unfavorable variances, the plant manager interviews the production manager. The production manager complains strongly about the quality of the leather strips. He indicates that the strips are of lower quality than usual and that workers have to be more careful to avoid a belt with cracks and more time is required. Also, even with extra care, many belts have to be discarded and new ones produced to replace the rejects. This replacement work has also produced some overtime demands. What corrective action should the plant manager take?
Marten Company has a cost-benefit policy to investigate any variance that is greater than 1,000 or 10% of budget, whichever is larger. Actual results for the previous month indicate the following: The company should investigate: a. neither the materials variance nor the labor variance. b. the materials variance only. c. the labor variance only. d. both the materials variance and the labor variance.