1) An advantage of decentralization is that it:

A) creates greater responsiveness to local needs

B) focuses manager's attention on the organization as a whole
C) does not result in a duplication of activities
D) reduces the cost of gathering information

2) Transfer prices should be judged by whether they promote:

A) goal congruence.
B) the balanced scorecard method.
C) a high level of subunit autonomy in decision making.
D) Both A and C are correct.

3) Which of the following transfer-pricing methods preserves sub-unit autonomy?

A) market-based transfer pricing
B) cost-based transfer pricing
C) negotiated transfer pricing
D) Both A and C are correct.

4) The master budget is:

A) a flexible budget
B) a static budget
C) developed at the end of the period
D) based on the actual level of output

5) Management by exception is the practice of concentrating on:

A) the master budget
B) areas not operating as anticipated
C) favorable variances
D) unfavorable variances

6) An unfavorable variance indicates that:

A) actual costs are less than budgeted costs
B) actual revenues exceed budgeted revenues
C) the actual amount decreased operating income relative to the budgeted amount
D) All of these answers are correct.

7) Regier Company had planned for operating income of $10 million in the master
budget but actually achieved operating income of only $7 million.
A) The static-budget variance for operating income is $3 million favorable.
B) The static-budget variance for operating income is $3 million unfavorable.
C) The flexible-budget variance for operating income is $3 million favorable.
D) The flexible-budget variance for operating income is $3 million unfavorable.

8) The flexible budget contains:

A) budgeted amounts for actual output
B) budgeted amounts for planned output
C) actual costs for actual output
D) actual costs for planned output
9) An unfavorable sales-volume variance could result from:
A) decreased demand for the product
B) competitors taking market share
C) customer dissatisfaction with the product
D) All of these answers are correct.

10) A flexible-budget variance is $600 favorable for unit-related costs. This indicates
that costs were:
A) $600 more than the master budget
B) $600 less than for the planned level of activity
C) $600 more than standard for the achieved level of activity
D) $600 less than standard for the achieved level of activity

11) Bebee Corporation currently produces cardboard boxes in an automated process.

Expected production per month is 40,000 units, direct-material costs are $0.60 per unit,
and manufacturing overhead costs are $18,000 per month. Manufacturing overhead is
all fixed costs. What is the flexible budget for 20,000 and 40,000 units, respectively?
A) $21,000; $33,000
B) $21,000; $42,000
C) $30,000; $42,000
D) None of these answers are correct.

12) Hemberger Corporation currently produces baseball caps in an automated process.

Expected production per month is 20,000 units, direct material costs are $3.00 per unit,
and manufacturing overhead costs are $46,000 per month. Manufacturing overhead is
entirely fixed costs. What is the flexible budget for 10,000 and 20,000 units,
respectively?
A) $53,000; $83,000
B) $53,000; $106,000
C) $76,000; $106,000
D) None of these answers are correct.

13) A favorable efficiency variance for direct materials might indicate:

A) that lower-quality materials were purchased
B) an overskilled workforce
C) poor design of products or processes
D) a lower-priced supplier was used

14) Typically, managers have the LEAST control over:

A) the direct material price variance
B) the direct material efficiency variance
C) machine maintenance
D) the scheduling of production

15) Christine Corporation manufactures baseball uniforms and uses budgeted machine-
hours to allocate variable manufacturing overhead. The following information pertains
to the company's manufacturing overhead data:
Budgeted output units 10,000 units
Budgeted machine-hours 15,000 hours
Budgeted variable manufacturing overhead costs $180,000
Actual output units produced 9,000 units
Actual machine-hours used 14,000 hours
Actual variable manufacturing overhead costs $171,000

What is the budgeted variable overhead cost rate per output unit?
A) $12.00
B) $12.21
C) $18.00
D) $19.00

16) A $5,000 unfavorable flexible-budget variance indicates that:

A) the flexible-budget amount exceeded actual variable manufacturing overhead by
$5,000
B) the actual variable manufacturing overhead exceeded the flexible-budget amount by
$5,000
C) the flexible-budget amount exceeded standard variable manufacturing overhead by
$5,000
D) the standard variable manufacturing overhead exceeded the flexible-budget amount
by $5,000

17) For variable manufacturing overhead, there is no:

A) spending variance
B) efficiency variance
C) flexible-budget variance
D) production-volume variance

Roberson Corporation manufactured 30,000 ice chests during September. The overhead
cost-allocation base is $11.25 per machine-hour. The following variable overhead data
pertain to September:

Actual Budgeted
Production 30,000 units 24,000 units
Machine-hours 15,000 hours 10,800 hours
Variable overhead cost per machine-hour: $11.00 $11.25

18) What is the actual variable overhead cost?

A) $121,500
B) $151,875
C) $165,000
D) $168,750

19) What is the flexible-budget amount?

A) $121,500
B) $151,875
C) $165,000
D) $168,750
20) What is the variable overhead spending variance?
A) $3,750 favorable
B) $16,875 unfavorable
C) $13,125 unfavorable
D) $30,375 unfavorable

21) What is the variable overhead efficiency variance?

A) $3,750 favorable
B) $16,875 unfavorable
C) $13,125 unfavorable
D) $30,375 unfavorable