These are ACCA F2 (MA/FMA) Management Accounting MCQs for Part-E of the Syllabus “Standard costing”.

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INFORMATION ABOUT THESE MCQs Test

Course: ACCA – Associations of Chartered Certified Accountants
Fundamental Level: Knowledge, FIA – Foundation in Accounting
Subject: Management Accounting
Paper: F2 – MA/FMA
Chapter: Cost variances, and Sales variances and operating statements
Chapter Number: 14 of the Practice and Exam Kit
Syllabus Area: E – Standard costing
Questions Type: CBE MCQs
Exam Section Type: Section A

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Number of the Questions

There are 19 Questions in this F2 MCQ Test that cover Chapter 14a; Cost variances of ACCA F2 (MA/FMA) Management Accounting Module.

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F2 - Chapter 14 - Part A - MCQs

Course: ACCA - FIA
Subject: F2 (MA/FMA) Management Accounting
Chapter: 14 - Cost variances, and Sales variances and operating statements
Syllabus Area: E - Standard costing
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

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1 / 48

A cost centre had an overhead absorption rate of $4.25 per machine hour, based on a budgeted activity level of 12,400 machine hours.

In the period covered by the budget, actual machine hours worked were 2% more than the budgeted hours and the actual overhead expenditure incurred in the cost centre was $56,389.

What was the total over or under absorption of overheads in the cost centre for the period?

$1,054 over absorbed

$3,689 under absorbed

$3,689 over absorbed

$2,635 under absorbed

2 / 48

A company purchased 6,850 kgs of material at a total cost of $21,920. The material price variance was $1,370 favourable.

What was the standard price per kg?

$_____ (to two decimal places)

3 / 48

A company’s actual profit for a period was $27,000. The only variances for the period were:

	$
Sales price	5,000 adverse
Fixed overhead volume	3,000 favourable
Fixed overhead capacity	4,000 favourable
Fixed overhead efficiency	1,000 adverse

What was the budgeted profit for the period?

$26,000

$29,000

$25,000

$28,000

4 / 48

Extracts from a company's records from last period are as follows.

	Budget	Actual
Production	1,925 units	2,070 units
Variable production overhead cost	$11,550	$14,904
Labour hours worked	5,775	8,280

What are the variable production overhead variances for last period?

Expenditure $1,656 (F) , Efficiency $3,726 (A)

Expenditure $1,656 (F) , Efficiency $4,140 (A)

Expenditure $3,354 (A) , Efficiency $4,140 (A)

Expenditure $1,656 (F) , Efficiency $2,070 (A)

5 / 48

When comparing the profits reported under absorption costing and marginal costing during a period when the level of inventory increased, which of the following is true?

Marginal costing profits will be higher and closing inventory valuations higher than those under absorption costing.

Marginal costing profits will be higher and closing inventory valuations lower than those under absorption costing.

Absorption costing profits will be higher and closing inventory valuations higher than those under marginal costing.

Absorption costing profits will be higher and closing inventory valuations lower than those under marginal costing.

6 / 48

A company uses standard marginal costing to monitor performance. The budgeted profit and budgeted fixed overhead for a month were $25,000 and $12,000 respectively. In the month, the following variances occurred:

	$
Sales volume contribution	1,000 Adverse
Sales price	2,000 Favourable
Total variable costs	4,000 Adverse
Fixed production overhead expenditure	500 Adverse

What was the actual profit for the month?

$40,000

$9,500

$33,500

$21,500

7 / 48

A company has a budgeted material cost of $125,000 for the production of 25,000 units per month. Each unit is budgeted to use 2 kg of material. The standard cost of material is $2.50 per kg.

Actual materials in the month cost $136,000 for 27,000 units and 53,000 kg were purchased and used.

What was the adverse material price variance?

$_______

8 / 48

A company calculates the following under a standard absorption costing system.

The sales volume margin variance
The total fixed overhead variance
The total variable overhead variance

If a company changed to a standard marginal costing system, which variances could change in value?

(i) only

(i), (ii) and (iii)

(i) and (ii) only

(ii) only

9 / 48

Number of units produced	2,200	2,000
	Budget	Actual
	$	$
Direct materials	110,000	110,000
Direct labour	286,000	280,000
Variable overhead	132,000	120,000

The actual number of units produced was 2,000.

What was the total direct labour variance?

$20,000 Adverse

Nil

$6,000 Favourable

$22,000 Favourable

10 / 48

A company expected to produce 200 units of its product, the Bone, in 20X3. In fact 260 units were produced. The standard labour cost per unit was $70 (10 hours at a rate of $7 per hour). The actual labour cost was $18,600 and the labour force worked 2,200 hours although they were paid for 2,300 hours.

What is the direct labour efficiency variance for the company in 20X3?

$2,100 (F)

$2,800 (F)

$400 (A)

$2,800 (A)

11 / 48

Which of the following situations is most likely to result in a favourable selling price variance?

The sales director decided to change from the planned policy of market skimming pricing to one of market penetration pricing.

Fewer customers than expected took advantage of the early payment discounts offered.

Demand for the product was higher than expected and prices could be raised without adverse effects on sales volumes.

Competitors charged lower prices than expected, therefore selling prices had to be reduced in order to compete effectively.

12 / 48

A company uses variance analysis to control costs and revenues.

Information concerning sales is as follows:

Budgeted selling price	$15 per unit
Budgeted sales units	10,000 units
Budgeted profit per unit	$5 per unit

Actual sales revenue	$151,500
Actual units sold	9,800 units

What is the sales volume profit variance?

$1,000 Favourable

$500 Favourable

$3,000 Adverse

$1,000 Adverse

13 / 48

What is the direct labour rate variance for the company in 20X3?

$2,500 (A)

$400 (A)

$3,200 (A)

$2,500 (F)

14 / 48

A company has budgeted to make and sell 4,200 units of product X during the period.

The standard fixed overhead cost per unit is $4.

During the period covered by the budget, the actual results were as follows.

Production and sales	5,000 units
Fixed overhead incurred	$17,500

What are the fixed overhead variances for the period?

Fixed overhead Expenditure variance: $700 (A) ; Fixed overhead Volume variance: $3,200 (A)

Fixed overhead Expenditure variance: $700 (F) ; Fixed overhead Volume variance: $3,200 (A)

Fixed overhead Expenditure variance: $700 (F) ; Fixed overhead Volume variance: $3,200 (F)

Fixed overhead Expenditure variance: $700 (A) ; Fixed overhead Volume variance: $3,200 (F)

15 / 48

Last month a company budgeted to sell 8,000 units at a price of $12.50 per unit. Actual sales last month were 9,000 units giving a total sales revenue of $117,000.

What was the sales price variance for last month?

$4,500 Adverse

$4,000 Favourable

$4,500 Favourable

$4,000 Adverse

16 / 48

A company manufactures a single product. An extract from a variance control report together with relevant standard cost data is shown below.

Standard selling price per unit	$70
Standard direct material cost (5 kg x $2 per kg)	$10 per unit
Budgeted total material cost of sales	$2,300 per month
Budgeted profit margin	$6,900 per month
Actual results for February
Sales revenue	$15,200
Total direct material cost	$2,400
Direct material price variance	$800 adverse
Direct material usage variance	$400 favourable

There was no change in inventory levels during the month.

What was the actual usage of direct material during February?

______ kg

17 / 48

Which of the following would help to explain a favourable direct labour efficiency variance?

Employees were of a lower skill level than specified in the standard
Better quality material was easier to process
Suggestions for improved working methods were implemented during the period

(i) and (ii) only

(ii) and (iii) only

(i) and (iii) only

(i), (ii) and (iii)

18 / 48

A company has a budgeted material cost of $125,000 for the production of 25,000 units per month. Each unit is budgeted to use 2 kg of material. The standard cost of material is $2.50 per kg.

Actual materials in the month cost $136,000 for 27,000 units and 53,000 kg were purchased and used.

What was the favourable material usage variance?

19 / 48

A company manufactures a single product. An extract from a variance control report together with relevant standard cost data is shown below.

Standard selling price per unit	$70
Standard direct material cost (5 kg x $2 per kg)	$10 per unit
Budgeted total material cost of sales	$2,300 per month
Budgeted profit margin	$6,900 per month
Actual results for February
Sales revenue	$15,200
Total direct material cost	$2,400
Direct material price variance	$800 adverse
Direct material usage variance	$400 favourable

There was no change in inventory levels during the month.

What was the selling price variance for February?

$1,200 (A)

$1,200 (F)

$120 (F)

$900 (A)

20 / 48

A company uses a standard absorption costing system. Last month budgeted production was 8,000 units and the standard fixed production overhead cost was $15 per unit. Actual production last month was 8,500 units and the actual fixed production overhead cost was $17 per unit.

What was the total adverse fixed production overhead variance for last month?

$_______

21 / 48

Which of the following statements are true?

A favourable fixed overhead volume capacity variance occurs when actual hours of work are greater than budgeted hours of work
A labour force that produces 5,000 standard hours of work in 5,500 actual hours will give a favourable fixed overhead volume efficiency variance

(i) is false and (ii) is true

Both are true

(i) is true and (ii) is false

Both are false

22 / 48

A company manufactures a single product L, for which the standard material cost is as follows.

	$ per unit
Material 14 kg x $3	42

During July, 800 units of L were manufactured, 12,000 kg of material were purchased for $33,600, of which 11,500 kg were issued to production.

SM Co values all inventory at standard cost.

What are the material price and usage variances for July?

Price $2,300 (F) , Usage $900 (A)

Price $2,400 (F) , Usage $840 (A)

Price $2,400 (F) , Usage $900 (A)

Price $2,300 (F) , Usage $300 (A)

23 / 48

The following variances occurred last period.

Sales volume contribution	$20,000 favourable
Sales price	$5,000 adverse
Total variable cost	$18,000 favourable
Fixed cost expenditure	$12,000 adverse

If the flexed budget contribution was $200,000, what was the actual contribution?

$221,000

$218,000

$213,000

$233,000

24 / 48

Number of units produced	2,200	2,000
	Budget	Actual
	$	$
Direct materials	110,000	110,000
Direct labour	286,000	280,000
Variable overhead	132,000	120,000

The actual number of units produced was 2,000.

What was the total direct materials variance?

$10,000 Adverse

$11,000 Adverse

Nil

$10,000 Favourable

25 / 48

A company manufactures a single product. An extract from a variance control report together with relevant standard cost data is shown below.

Standard selling price per unit	$70
Standard direct material cost (5 kg x $2 per kg)	$10 per unit
Budgeted total material cost of sales	$2,300 per month
Budgeted profit margin	$6,900 per month
Actual results for February
Sales revenue	$15,200
Total direct material cost	$2,400
Direct material price variance	$800 adverse
Direct material usage variance	$400 favourable

There was no change in inventory levels during the month.

What was the actual production in February?

______ units

26 / 48

A company manufactures a single product. An extract from a variance control report together with relevant standard cost data is shown below.

Standard selling price per unit	$70
Standard direct material cost (5 kg x $2 per kg)	$10 per unit
Budgeted total material cost of sales	$2,300 per month
Budgeted profit margin	$6,900 per month
Actual results for February
Sales revenue	$15,200
Total direct material cost	$2,400
Direct material price variance	$800 adverse
Direct material usage variance	$400 favourable

There was no change in inventory levels during the month.

What was the sales volume profit variance for February?

$900 (A)

$2,100 (A)

$900 (F)

$1,200 (F)

27 / 48

PH Co produces a single product and currently uses absorption costing for its internal management accounting reports. The fixed production overhead absorption rate is $34 per unit. Opening inventories for the year were 100 units and closing inventories were 180 units. The company's management accountant is considering a switch to marginal costing as the inventory valuation basis.

If marginal costing were used, the marginal costing profit for the year, compared with the profit calculated by absorption costing, would be which of the following?

$3,400 higher

$3,400 lower

$2,720 lower

$2,720 higher

28 / 48

AD Co manufactures and sells a single product, E, and uses a standard absorption costing system.
Standard cost and selling price details for product E are as follows.

	$ per unit
Variable cost	8
Fixed cost	2
	10
Standard profit	5
Standard selling price	15

The sales volume variance reported for last period was $9,000 adverse.

AD Co is considering using standard marginal costing as the basis for variance reporting in future.

What would be the correct sales volume variance to be shown in a marginal costing operating statement for last period?

$6,428 (A)

$6,428 (F)

$12,600 (A)

$12,600 (F)

29 / 48

The following data relates to one of a company's products.

	$ per unit	$ per unit
Selling price		27.00
Variable costs	12.00
Fixed costs	9.00
		21.00
Profit		6.00

Budgeted sales for control period 7 were 2,400 units, but actual sales were 2,550 units. The revenue earned from these sales was $67,320.

Profit reconciliation statements are drawn up using marginal costing principles.

What sales variances would be included in such a statement for period 7?

Price $1,530 , Volume (A) $900 (F)

Price $1,530 , Volume (F) $2,250 (F)

Price $1,530 , Volume (A) $2,250 (F)

Price $1,530 , Volume (A) $2,250 (A)

30 / 48

A company currently uses a standard absorption costing system. The fixed overhead variances extracted from the operating statement for November are:

	$
Fixed production overhead expenditure variance	5,800 adverse
Fixed production overhead capacity variance	4,200 favourable
Fixed production overhead efficiency variance	1,400 adverse

PQ Co is considering using standard marginal costing as the basis for variance reporting in future.

What variance for fixed production overhead would be shown in a marginal costing operating statement for November?

Volume variance: $2,800 favourable

Expenditure variance: $5,800 adverse

No variance would be shown for fixed production overhead

Total variance: $3,000 adverse

31 / 48

A company uses a standard absorption costing system. Actual profit last period was $25,000, which was $5,000 less than budgeted profit. The standard profit on actual sales for the period was

$15,000. Only three variances occurred in the period: a sales volume profit variance, a sales price variance and a direct material price variance.

Which of the following is a valid combination of the three variances?

	Sales volume profit variance	Sales price variance	Direct material price variance

(A)	$15,000 A	$2,000 F	$8,000 F
(B)	$5,000 A	$2,000 A	$2,000 F
(C)	$15,000 A	$2,000 A	$8,000 A
(D)	$5,000 A	$2,000 F	$5,000 A

Option D

Option B

Option A

Option C

32 / 48

The graph below shows the standard fixed overhead cost per unit, the total budgeted fixed overhead cost and the actual fixed overhead cost for the month of December. The actual number of units produced in June was 2,500 units.

What is the total fixed overhead variance?

$2,500 Adverse

$3,750 Favourable

$6,250 Favourable

$5,000 Adverse

33 / 48

A company uses standard marginal costing. Its budgeted contribution for the last month was
$20,000. The actual contribution for the month was $15,000, and the following variances have been calculated:

Sales volume contribution variance	$5,000 adverse
Sales price variance	$9,000 favourable
Fixed overhead expenditure variance	$3,000 favourable

What was the total variable cost variance?

$12,000 favourable

$9,000 favourable

$9,000 adverse

$12,000 adverse

34 / 48

The standard direct material cost per unit for a product is calculated as follows:

10.5 litres at $2.50 per litre

Last month the actual price paid for 12,000 litres of material used was 4% above standard and the direct material usage variance was $1,815 favourable. No stocks of material are held.

What was the actual production last month (in units)?

1,119

1,074

1,258

1,212

35 / 48

A company manufactures a single product, and relevant data for December is as follows.

	Budget/standard	Actual
Production units	1,800	1,900
Labour hours	9,000	9,400
Fixed production overhead	$36,000	$39,480

What are the fixed production overhead capacity and efficiency variances for December?

Capacity $1,600 (F) , Efficiency $400 (F)

Capacity $1,600 (A) , Efficiency $400 (F)

Capacity $1,600 (F) , Efficiency $400 (A)

Capacity $1,600 (A) , Efficiency $400 (A)

36 / 48

The standard direct material cost per unit for a product is calculated as follows:

10.5 litres at $2.50 per litre

Last month the actual price paid for 12,000 litres of material used was 4% above standard and the direct material usage variance was $1,815 favourable. No stocks of material are held.

What was the adverse direct material price variance for last month?

$1,000

$1,200

$1,212

$1,260

37 / 48

A company uses standard marginal costing. Last month the standard contribution on actual sales was $10,000 and the following variances arose:

	$
Total variable costs variance	2,000 Adverse
Sales price variance	500 Favourable
Sales volume contribution variance	1,000 Adverse

What was the actual contribution for last month?

38 / 48

A company uses a standard absorption costing system. The following details have been extracted from its budget for April.

Fixed production overhead cost	$48,000
Production (units)	4,800

In April the fixed production overhead cost was under absorbed by $8,000 and the fixed production overhead expenditure variance was $2,000 adverse.

What was the actual number of units produced?

_____ units

39 / 48

A manufacturing company operates a standard absorption costing system. Last month 25,000 production hours were budgeted and the budgeted fixed production overhead cost was $125,000. Last month the actual hours worked were 24,000 and the standard hours for actual production were 27,000.

What was the fixed production overhead capacity variance for last month?

$10,000 Favourable

$5,000 Adverse

$10,000 Adverse

$5,000 Favourable

40 / 48

Which of the following statements is correct?

An adverse direct material cost variance will always be a combination of an adverse material price variance and an adverse material usage variance

An adverse direct material cost variance can be a combination of a favourable material price variance and an adverse material usage variance

An adverse direct material cost variance can be a combination of a favourable material price variance and a favourable material usage variance

An adverse direct material cost variance will always be a combination of an adverse material price variance and a favourable material usage variance

41 / 48

Which of the following statements are true?

The fixed overhead volume capacity variance represents part of the over/under absorption of overheads
A company works fewer hours than budgeted. This will result in an adverse fixed overhead volume capacity variance

Both are false

(i) is false and (ii) is true

(i) is true and (ii) is false

Both are true

42 / 48

Number of units produced	2,200	2,000
	Budget	Actual
	$	$
Direct materials	110,000	110,000
Direct labour	286,000	280,000
Variable overhead	132,000	120,000

The actual number of units produced was 2,000.

What was the total direct variable overheads variance?

Nil

$11,000 Adverse

$12,000 Favourable

$12,000 Adverse

43 / 48

A company uses a standard absorption costing system. The following figures are available for the last accounting period in which actual profit was $108,000.

	$
Sales volume profit variance	6,000 adverse
Sales price variance	5,000 favourable
Total variable cost variance	7,000 adverse
Fixed cost expenditure variance	3,000 favourable
Fixed cost volume variance	2,000 adverse

What was the standard profit for actual sales in the last accounting period?

$107,000

$109,000

$101,000

$115,000

44 / 48

A company uses a standard absorption costing system. Last month the actual profit was $500,000. The only variances recorded for the month were as follows:

	$'000
Sales volume profit variance	10 adverse
Fixed production overhead capacity variance	30 favourable
Fixed production overhead efficiency variance	40 adverse
Fixed production overhead volume variance	10 adverse
Fixed production overhead expenditure variance	50 favourable
Direct labour efficiency variance	15 adverse

What was the budgeted profit for last month?

$515,000

$485,000

45 / 48

The following information relates to labour costs for the past month:

Budget	Labour rate	$10 per hour
	Production time	15,000 hours
	Time per unit	3 hours
	Production units	5,000 units

Actual	Wages paid	$176,000
	Production	5,500 units
	Total hours worked	14,000 hours

There was no idle time.

What were the labour rate and efficiency variances?

Rate variance $36,000 (A) , Efficiency variance $2,500 (F)

Rate variance $26,000 (A) , Efficiency variance $10,000 (F)

Rate variance $36,000 (A) , Efficiency variance $25,000 (F)

Rate variance $26,000 (A) , Efficiency variance $25,000 (F)

46 / 48

The costs below relate to the month of June.

	Fixed budget	Flexed budget	Actual
	2,200 units	2,000 units	2,000 units
Total direct materials	$165,000	$150,000	$140,000

What was the total direct material variance?

$25,000 Adverse

$10,000 Adverse

$10,000 Favourable

$25,000 Favourable

47 / 48

The budgeted contribution for HMF Co for June was $290,000. The following variances occurred during the month.

	$
Fixed overhead expenditure variance	6,475	Favourable
Total direct labour variance	11,323	Favourable
Total variable overhead variance	21,665	Adverse
Selling price variance	21,875	Favourable
Fixed overhead volume variance	12,500	Adverse
Sales volume variance	36,250	Adverse
Total direct materials variance	6,335	Adverse