1. When the rate paid is higher than the standard rate and the hours used are higher than the standard hours allowed we will see:

a. Labor rate, labor efficiency and spending variance will all be unfavorable

b. Labor and efficiency rates will be unfavorable, but we can't calculate the spending variance

c. The spending variance will be unfavorable, but we can't calculate the labor rate or efficiency variances.

2. The combination of the variable overhead rate variance and the variable overhead efficiency variance is called:

a. Variable overhead spending variance

b. Variable overhead spending variance-unfavorable.

c. Variable overhead spending variance-favorable

3. Mike's Bikes budgeted $20,500 for labor in 2017. Actual labor ended up being $25,800. Mike went back to look at prior years and noted that his direct labor was always within 5% of budget. Is this variance significant? How should Mike handle this?

a. This is a significant variance and Mike needs to adjust his labor down immediately to lower his labor cost back in line with budget.

b. This is a significant variance and Mike should analyze sales, machinery breakdowns or issues or employee turnover to see if there is a reason for the high labor variance.

c. This is not a significant variance, and Mike needs to adjust his budget since labor costs are higher than budgeted.

4. You just received your new labor budget from company management. The hours they have budgeted for your part of the manufacturing process are not attainable if you are going to work safely and efficiently. How would you approach this situation?

a. Immediately start training your employees to speed up to meet this goal.

b. Have several of your best employees go through your portion of the manufacturing process and calculate the time needed to efficiently and safely do the job. Take this information to management to discuss the budget, and see if they are open to participative budgeting to insure a quality product.

c. Don't say anything. Just do the work at the current speed and see what happens when they review budget to actual.

5. If the actual quantity used is higher than the standard quantity allowed, this will crea a:

a. Either a favorable or unfavorable quantity variance.

b. An unfavorable quantity variance.

c. A favorable quantity variance.

6. Our production department has been showing a high amount of raw material waste this last period. Our material yield variance is unfavorable, and you, as the accounting manager are trying to figure out what may be causing the problem. There could be:

a. After talking with the production manager, he assured you it is simply a bad batch of materials and it won't happen again. Just watch and make sure it doesn't happen again.

b. Training issues or new workers who are just learning their jobs. Analyze the waste, and see if it is an ongoing or short-term issue. You may need to discuss with the purchasing department or production to see if there are material related issues.

c. Our employees are well trained, so it must just be a temporary situation. Don't worry about it, just keep it on the radar for next period.

7. Greg noticed his waste going up dramatically in his department when the purchasing department made a large purchase of one of his supplies at a deeply discounted cost. Why might this happen?

a. Greg's staff is not properly using the product, and needs to be reprimanded for the waste.

b. The lower priced product may be a lower quality, causing more waste on the production line. Greg should talk to his staff to learn more.

c. Purchasing needs to immediately send back the product as inferior.

8. The spending variance is the most important number to look at when we examine manufacturing overhead because.

a. This is the culmination of both the rate and efficiency variances, so it gives the total picture of changes to either component.

b. If the rate is higher than budgeted, our spending variance will be unfavorable.

c. If efficiency is favorable, we will have a favorable spending variance.