BEC Cost Accounting and Management Accounting 2 — Questions and Answers
Question 1: Which type of budget is adjusted to reflect the actual level of activity achieved during a period?
- Static budget
- Master budget
- Cash budget
- Flexible budget (Correct answer)
Correct 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.
Question 2: The standard cost for direct materials is $5.00 per unit and the actual cost was $5.50 per unit. This results in a:
- Favorable price variance
- Unfavorable price variance (Correct answer)
- Favorable quantity variance
- Unfavorable efficiency variance
Correct 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.
Question 3: A favorable direct labor efficiency variance indicates that:
- Actual hours worked exceeded standard hours allowed
- Actual wage rate was lower than the standard wage rate
- Actual hours worked were less than standard hours allowed (Correct answer)
- Actual units produced exceeded budgeted units
Correct 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.
Question 4: Which component of the master budget is typically prepared first?
- Production budget
- Cash budget
- Sales budget (Correct answer)
- Purchases budget
Correct answer: Sales budget
The sales budget is prepared first because all other operating budgets (production, purchases, labor, overhead) depend on projected sales volume.
Question 5: The overhead spending variance measures the difference between:
- Actual overhead and flexible budget overhead (Correct answer)
- Flexible budget overhead and applied overhead
- Actual overhead and static budget overhead
- Applied overhead and budgeted overhead at standard hours
Correct 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.
Question 6: 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?
- $25,000 favorable (Correct answer)
- $25,000 unfavorable
- $30,000 favorable
- $30,000 unfavorable
Correct answer: $25,000 favorable
Labor rate variance = (Standard rate - Actual rate) × Actual hours = ($15 - $14) × 25,000 = $25,000 favorable.
Question 7: Zero-based budgeting (ZBB) requires managers to:
- Adjust the prior year's budget by an inflation factor
- Justify all budget expenditures from scratch each period (Correct answer)
- Base budgets on a fixed percentage of forecasted sales
- Carry forward unused budget amounts to the following period
Correct 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.
BEC Cost Accounting and Management Accounting 2
Which type of budget is adjusted to reflect the actual level of activity achieved during a period?