CIA Managerial Accounting 2

Question 1

A company purchased 5,000 lbs of material at $4.20 per lb; the standard price is $4.00 per lb. What is the materials price variance (computed at purchase)?

Accepted Answer

$1,000 unfavorable

Answer

Price variance = 5,000 x ($4.20 - $4.00) = $1,000, unfavorable because actual price exceeded standard.

Question 2

Standard hours allowed for actual output were 2,000, actual hours worked were 2,100, and the standard labor rate is $15 per hour. What is the labor efficiency variance?

Accepted Answer

$1,500 unfavorable

Answer

Efficiency variance = (2,100 - 2,000) x $15 = $1,500 unfavorable since more hours were used than allowed.

Question 3

The fixed overhead volume variance is best described as the difference between:

Accepted Answer

Budgeted fixed overhead and fixed overhead applied to production

Answer

The volume variance arises when actual output differs from the denominator activity used to set the fixed overhead rate.

Question 4

A flexible budget is most useful for performance evaluation because it:

Accepted Answer

Adjusts budgeted costs to the actual level of activity achieved

Answer

Comparing actual costs to a budget at the same activity level isolates spending and efficiency differences.

Question 5

The sales volume variance measures the difference between:

Accepted Answer

The flexible budget and the static (master) budget

Answer

Sales volume variance captures the profit effect of selling a different quantity than originally planned.

CIA - Certified Internal Accountant Practice Test

CIA - Certified Internal Accountant Practice Test

CIA Managerial Accounting 2