Question

8. What does a favourable direct materials price variance indicate?
a. The actual cost of materials purchased was greater than the standard cost of materials purchased.
b. The standard cost of materials purchased was less than the actual cost of materials purchased.
c. The standard cost of materials purchased was greater than the actual cost of materials purchased.
d. The actual quantity of materials used was less than the standard quantity of materials used for actual production.

9. In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are
a. allocated costs.
b. budgeted costs.
c. fixed costs.
d. variable costs.
e. estimated costs.

10. Actual overhead is $698,000, while budgeted overhead is $598,000. What is the fixed overhead static-budget variance if 250,000 units are produced and 225,000 are budgeted?
a. $80,000 favourable
b. $100,000 unfavourable
c. $100,000 favourable
d. $101,000 unfavourable
e. $102,000 favourable
 

Answer 1

8. Option C

Favourable direct material price variance means, Standard cost > Actual Cost Means, Standard cost should be less than the actual cost. Therefore, Option C is correct.

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9. Option C

In the flexible budget costs that remain the same is Fixed Costs. Option C Fixed Costs

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10. Option B 100,000 unfavourable (budgeted overhead - actual overhead) (598,000 - 698,000)

Clarification: If it was flexible overhead variance, the answer would have been different because it would consider the output as well. But in Static variance, it is not considered that output also has been increased with the increase in cost. Therefore, only increased cost is considered that is $100,000 more (unfavourable).