Cost Accounting and Management Accounting Flashcards

Which type of budget is adjusted to reflect the actual level of activity achieved during a period?

Answer: Flexible budget

A flexible budget is adjusted to reflect different levels of activity, making it useful for performance evaluation at the actual output level achieved.

The standard cost for direct materials is $5.00 per unit and the actual cost was $5.50 per unit. This results in a:

Answer: Unfavorable price variance

Since the actual cost ($5.50) exceeds the standard cost ($5.00) per unit, there is an unfavorable direct materials price variance.

A favorable direct labor efficiency variance indicates that:

Answer: Actual hours worked were less than standard hours allowed

A favorable direct labor efficiency variance means actual hours worked were less than the standard hours allowed for actual production, indicating efficient use of labor.

Which component of the master budget is typically prepared first?

Answer: Sales budget

The sales budget is prepared first because all other operating budgets (production, purchases, labor, overhead) depend on projected sales volume.

The overhead spending variance measures the difference between:

Answer: Actual overhead and flexible budget overhead

The overhead spending variance is the difference between actual overhead incurred and the flexible budget allowance for overhead at the actual activity level.

A company's direct labor standard is 2 hours per unit at $15/hour. Actual production was 12,000 units; actual hours were 25,000 at $14/hour. What is the direct labor rate variance?

Answer: $25,000 favorable

Labor rate variance = (Standard rate - Actual rate) × Actual hours = ($15 - $14) × 25,000 = $25,000 favorable.

Zero-based budgeting (ZBB) requires managers to:

Answer: Justify all budget expenditures from scratch each period

Zero-based budgeting requires managers to justify every budget item from zero each period, eliminating the assumption that prior budgets are automatically justified.