46) Give at least three good reasons why a favorable price variance for direct materials might be reported.

47) Give at least three good reasons why an unfavorable efficiency variance for direct manufacturing labor might be reported.

Objective 7.6

1) A purchasing manager's performance is best evaluated using the:

A) direct materials price variance

B) direct materials flexible-budget variance

C) direct manufacturing labor flexible-budget variance

D) affect the manager's action has on total costs for the entire company

2) One of the primary reasons for using cost variances is:

A) they diagnose the cause of a problem and what should be done to correct it

B) for superiors to communicate expectations to lower-level employees

C) to administer appropriate disciplinary action

D) for financial control of operating activities and understanding why variances arise

3) A favorable cost variance of significant magnitude:

A) is the result of good planning

B) if investigated, may lead to improved production methods

C) indicates management does not need to be concerned about lax standards

D) does not need to be investigated

4) The variances that should be investigated by management include:

A) only unfavorable variances

B) only favorable variances

C) all variances, both favorable and unfavorable

D) both favorable and unfavorable variances considered significant in amount for the company

5) 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

6) If manufacturing machines are breaking down more than expected, this will contribute to a(n):

A) favorable direct manufacturing labor price variance

B) unfavorable direct manufacturing labor price variance

C) favorable direct manufacturing labor efficiency variance

D) unfavorable direct manufacturing labor efficiency variance

7) A single variance:

A) signals the cause of a problem

B) should be evaluated in isolation from other variances

C) may be the result of many different problems

D) should be used for performance evaluation

8) Variance analysis should be used:

A) to understand why variances arise

B) as the sole source of information for performance evaluation

C) to punish employees that do not meet standards

D) to encourage employees to focus on meeting standards