VARIENCE

ANALYSIS
MCQS
Examine the following data:

The material price variance would

be:
£3.50 (Adverse)

£4.00 (Adverse)

£3.50 (Favourable)

£4.00 (Favourable)

What term can be defined as a means of assessing the difference

between a predetermined amount and the actual amount?
Activity based costing

Variance analysis

Master budgeting

Investment appraisal

Positive

Adverse

Negative

Favourable
The correct formula for the labour efficiency variance is:
Standard hours less actual hours multiplied by standard wage

Standard wage rate less actual wage rate multiplied by actual hours

Standard wage rate less actual wage rate multiplied by standard hours

None of the above

Which of the following would not explain a favourable wage rate

variance?
Reduction in power of trade unions

New technology

Introduction of minimum wage legislation

Higher unemployment in industrial sector

Examine the following relating to Job X3:

The total labour variance for Job X3 is:

£13.49 (Favourable)

£6.13 (Adverse)

£7.36 (Favourable)

£6.13 (Favourable)
Examine the following data:

Which of the following variances is not correct?

Price variance is £0.44 (Favourable)

Usage variance is £1.45 (Favourable)

Total variance is £1.01 (Favourable)

Price variance is £0.44 (Adverse)

The formula for the materials price variance is:

Standard hours less actual hours multiplied by actual quantity

Standard price less actual price multiplied by actual quantity

Standard price less actual price multiplied by standard quantity

Standard materials quantity less actual quantity multiplied by standard price

A favourable labour variance combined with an adverse wage rate

variance could be caused by:
Higher unemployment in local economy

Cheaper raw materials imported due to exchange rate depreciation

Introduction of performance related pay

Cost cutting exercises implement by management

Examine the following data:

The materials usage variance will be:
£0.44 (Favourable)

£0.75 (Adverse)

£1.19 (Adverse)

£1.19 (Favourable)

A benefit of having a standard costing system would not include:

Faster reporting

Better system for checking efficiencies

Allows creative input into budgeting decisions

Eventual reduction of administrative work

Concentrating on things that are deviating from planned results only is

known as:
Standard costing

Management by objectives

Crisis management

Management by exception

When analysing sale variances, which of the following would not be an

important factor?
Recovery rate variances
 Volume variances

Selling price variances

Mix variances

Examine the following relating to Job 124:

The labour efficiency variance for Job 124 would be:

£9.08 (Favourable)

£3.53 (Adverse)

£11.93 (Adverse)

£8.40 (Favourable)

An estimate of what costs should be is known as:

Ideal cost

Standard cost

Actual cost

Forecast cost

Exchange rate depreciation if materials are imported

More wastage of materials incurred

Inferior quality materials being used

Higher wage costs

Workers being paid a rate in excess of their wage rate for working
additional hours are paid:
Price rate

Overtime

Commission

Fees

A favourable total sales variance could have been the result of:
A price cut leading to a proportionality higher increase in sales volume

A fall in sales volume and a price reduction

Lower output leading to favourable total cost variances

A price cut leading to a proportionality lower increase in sales volume

What standard is based upon the assumption that everything operates

at the maximum level of efficiency?
Ideal standard

Efficient standard

Attainable standard

Realistic standard

An adverse labour efficiency variance may have been caused by:

Machinery downtime

Higher wage rates

Improved training
 Improved working practices

Which of the following would not account for an adverse materials

variance?
Scarcity in supply of materials.

Poorly trained production staff.

Rising exchange rates for imported materials.

General inflation.

Examine the following data:

Material B1
Standard price per Kg £40
Standard usage per unit 3.5 Kg
Actual price per Kg £42
Actual usage per unit 3.8 Kg
The material price variance would be:
£7.60 (favourable).

£12.00 (adverse).

£7.60 (adverse).

£7.00 (adverse).

A favourable labour efficiency variance is likely to have been caused

by:
trade union conflicts.

higher wages producing motivational benefits.

lower skilled labour being used.

inferior materials being used.

Examine the following relating to Job C3:

Job C3:
Standard hours worked 12.0
Actual hours worked 11.5
Standard wage rate £5.60
Actual wage rate £6.00
The total labour variance for Job C3 is:
£2.80 (favourable).

£7.40 (favourable).

£4.60 (adverse).

£1.80 (adverse).

Examine the following relating to Job NE1:

Job NE1:
Standard hours worked 112
Actual hours worked 130
Standard wage rate £5.40
Actual wage rate £4.95
The wage rate variance for Job NE1 is:
£97.20 (adverse).

£58.50 (favourable).

£97.20 (favourable).

£58.50 (adverse).

Examine the following data:

Material 5RT
Standard price per kg £12.50
Standard usage per unit 21 kg
Actual price per kg £13.75
Actual usage per unit 19 kg
The materials price variance will be:
 £25.00 (favourable).

£25.00 (adverse).

£23.75 (adverse).

£23.75 (favourable).

Which of the following could have caused an adverse total labour

variance?
Lower wage rates leading to an insignificant change in productivity.

Lower wage rates leading to a significant change in productivity.

Higher wage rates leader to an insignificant change in productivity.

Higher wage rates leading to a significant change in productivity.

Which of the following is normally associated with an adverse sales

variance?
Higher selling prices.

A slight downward change in demand following a major price increase.

Higher sales volume.

A slight upwards change in demand following a major price reduction.

Answers.
1.A

2.D

3B

4A

5B

6B
7A

8D

9A

10B

11B

12C

13B

14A

15A

16D

17C

18B

19A

20B

21A

22D

23B

24A

25C

26A

27A

28D