1. Blockwelder Snow Removal's cost formula for its vehicle operating cost is $1,240 per month plus $348 per

snow-day. For the month of December, the company planned for activity of 12 snow-days, but the actual

level of activity was 14 snow-days. The actual vehicle operating cost for the month was $6,330. The

vehicle operating cost in the planning budget for December would be:

$___________________ [10points]

2. Dike Hotel bases its budgets on guest-days. The hotel's static budget for June appears below: [10 points] The total overhead cost at an activity level of 8,400 guest-days per month should be:

$ _________________

3. Ozark Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and

performance reports. The cost formula for plane operating costs is $41,380 per month plus $2,282 per flight

plus $14 per passenger. The company expected its activity in August to be 77 flights and 264 passengers,

but the actual activity was 78 flights and 261 passengers. The actual cost for plane operating costs in

August was $216,740. The plane operating costs in the flexible budget for August would be:

$_____________________ [10 points]

4. Mid-Atlantic Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets

and performance reports. The cost formula for plane operating costs is $40,720 per month plus $2,646 per

flight plus $11 per passenger. The company expected its activity in September to be 62 flights and 288

passengers, but the actual activity was 64 flights and 289 passengers. The actual cost for plane operating

costs in September was $214,430. The activity variance for plane operating costs in September would be

(Hint compare planning budget to flexible budget be sure to indicate either favorable or unfavorable variance)

$__________________ [10 points]

5. Dunklin Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of

activity was 1,620 patient-visits and the actual level of activity was 1,540 patient-visits. The cost formula

for administrative expenses is $3.20 per patient-visit plus $14,300 per month. The actual administrative

expense was $21,050. In the clinic's flexible budget performance report for last month, the spending

variance for administrative expenses was:

(Hint compare flexible budget to actual results be sure to indicate either favorable or unfavorable variance) $__________________ [10 points]

6. Misemer Corporation is developing standards for its products. One product requires an input that is

purchased for $57.00 per kilogram from the supplier. By paying cash, the company gets a discount

of 8% off this purchase price. Shipping costs from the supplier's warehouse amount to $3.60 per kilogram.

Receiving costs are $0.26 per kilogram. The standard price per kilogram of this input should be: $__________________ [10 points]

Multiple Choice True False

1. An unfavorable materials quantity variance indicates that:

A. actual usage of material exceeds the standard material allowed for output. B. standard material allowed for output exceeds the actual usage of material. C. actual material price exceeds standard price. D. standard material price exceeds actual price.

2. A favorable labor rate variance indicates that

A. actual hours exceed standard hours.

B. standard hours exceed actual hours. C. the actual rate exceeds the standard rate. D. the standard rate exceeds the actual rate.

3.	A flexible budget can be used to determine what costs should have been: A. at a static level of activity B. before the actual level of activity is known C. at the planned level of activity D. at a given level of activity 4. In standard costing, ________________ standards should be used to forecast cash flows and to plan inventory, as well as to signal abnormal deviations in costs. A. Ideal B. Impossible C. Participating D. Practical
	5. For direct Materials, if the Actual Quantity of inputs at Actual Price equals $25,700 and the Actual Quantity of Inputs at the Standard Price equals $27,000 then the material price variance will be. A. $25,700 F B. $25,700 U C. $ 1,300 U D. $ 1,300 F 6. If activity is higher than expected, total variable costs should be higher than expected. If activity is lower than expected, total variable costs should be lower than expected. TRUE FALSE 7. A problem with directly comparing a static planning budget to actual costs is that this comparison fails to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled. TRUE FALSE 8. A flexible budget is an estimate of what revenues and costs should have been, given the level of activity that had been planned for the period. TRUE FALSE 9. A static planning budget is suitable for planning and for evaluating how well costs are controlled. TRUE FALSE 10. If the actual level of activity is 4% less than planned, then the costs in the static budget should be reduced by 4% before comparing them to actual costs. TRUE FALSE
11.	When a flexible budget is used in performance evaluation, actual costs are compared to what the costs should have been for the actual level of activity during the period rather than to the static planning budget. TRUE FALSE
12.	Flexible budgets cannot be used when there is more than one cost driver (i.e., measure of activity). TRUE FALSE

13.	In general, the purchasing agent is responsible for the materials price variance. TRUE FALSE
14.	A materials price variance is favorable if the actual price exceeds the standard price. TRUE FALSE
15.	Generally speaking, it is the responsibility of the production department to see that material usage is kept in line with standards. TRUE FALSE

16.	Standard costs should generally be based on the actual costs of prior periods. TRUE FALSE
17.	The standard quantity per unit for direct materials should not include an allowance for waste. TRUE FALSE 18. The standard direct labor rate should not include fringe benefits. TRUE FALSE 19. Purchase of poor quality materials will generally result in a favorable materials price variance and an unfavorable labor rate variance. TRUE FALSE 20. From a standpoint of cost control, the most effective time to recognize materials price variances is when the materials are placed into production. TRUE FALSE 21. The production manager is usually held responsible for the labor efficiency variance. TRUE FALSE 22. Management by exception means that a manager's attention is directed toward those parts of the organization where things are not proceeding according to plans. TRUE FALSE 23. All cost variances should be considered exceptions that require the attention of management. TRUE FALSE