Mocktest on Variance Analysis... ANSWERS are at the end...
*Mocktest on Variance Analysis*
Mcq questions on variance analysis:
Section A)
Question 1
A company has a favorable sales price variance. What can be inferred about the actual selling price compared to the budgeted selling price?
A) Actual selling price is lower than budgeted selling price
B) Actual selling price is higher than budgeted selling price
C) Actual selling price is equal to budgeted selling price
D) Cannot be determined
Answer:
Question 2
A company has an adverse material usage variance. What is likely to be the cause?
A) Workers are more efficient than expected
B) Material prices have increased
C) More material was used than budgeted
D) Material quality has improved
Answer:
Question 3
A company has a favorable labor efficiency variance. What does this indicate about the actual labor hours worked compared to the budgeted labor hours?
A) Actual labor hours are higher than budgeted labor hours
B) Actual labor hours are lower than budgeted labor hours
C) Actual labor hours are equal to budgeted labor hours
D) Cannot be determined
Answer:
Question 4
A company has a favorable sales volume variance. What can be inferred about the actual sales quantity compared to the budgeted sales quantity?
A) Actual sales quantity is lower than budgeted sales quantity
B) Actual sales quantity is higher than budgeted sales quantity
C) Actual sales quantity is equal to budgeted sales quantity
D) Cannot be determined
Answer:
Section B)
Material Efficiency Variance (MEV)
Q1. A favorable material price variance and an unfavorable material efficiency variance most likely indicate:
A. Poor quality materials purchased at a discount
B. Use of higher-quality materials than standard
C. Inefficient labor handling of materials
D. Errors in setting material standards
Answer:
Q2. Which situation will not affect material efficiency variance?
A. Machine breakdown causing spoilage
B. Purchase of inferior materials
C. Change in standard price per unit
D. Excessive scrap during production
Answer:
Q3. A favorable material efficiency variance may be misleading if it results from:
A. Improved production methods
B. Use of smaller components reducing quality
C. Reduced waste
D. Skilled labor usage
Answer:
Labour Efficiency Variance (LEV)
Q4. Which factor most likely causes an unfavorable labor efficiency variance while labor rate variance is favorable?
A. Use of inexperienced workers at lower wages
B. High employee motivation
C. Automation improvements
D. Proper scheduling
Answer:
Q5. An unfavorable labor efficiency variance caused by poor material quality should be primarily attributed to:
A. Human resource department
B. Production supervisor
C. Purchasing department
D. Cost accounting department
Answer:
Q6. Which action improves labor efficiency variance without changing wage rates?
A. Hiring more workers
B. Reducing hourly wages
C. Improving training and workflow
D. Increasing overtime
Answer:
Variable Overhead Spending Variance
Q7. A favorable variable overhead spending variance with an unfavorable efficiency variance indicates:
A. Overhead costs were underestimated
B. Overhead resources were used inefficiently
C. Lower variable overhead cost per hour
D. Fixed overhead was misclassified
Answer
Q8. Variable overhead spending variance is primarily influenced by:
A. Changes in activity level
B. Cost control over indirect resources
C. Budgeted production volume
D. Fixed cost behavior
Answer:
Q9. Which cost is included in variable overhead spending variance?
A. Factory rent
B. Indirect materials
C. Supervisor salaries
D. Depreciation
Answer:
Fixed Overhead Spending Variance
Q10. A favorable fixed overhead spending variance means:
A. Actual output exceeded budgeted output
B. Actual fixed overhead was less than budgeted
C. Capacity utilization increased
D. Variable costs declined
Answer:
Q11. Which item most likely causes an unfavorable fixed overhead spending variance?
A. Higher utility usage
B. Unexpected property tax increase
C. Increased production volume
D. Efficient labor utilization
Answer:
Q12. Fixed overhead spending variance is best used to evaluate:
A. Production efficiency
B. Capacity utilization
C. Cost control of fixed resources
D. Variable cost behavior
Answer:
Fixed Overhead Volume Variance
Q13. An unfavorable fixed overhead volume variance occurs when:
A. Actual fixed overhead exceeds budget
B. Actual production is less than planned capacity
C. Variable costs exceed standard
D. Standard fixed overhead rate is incorrect
Answer:
Q14. Fixed overhead volume variance primarily reflects:
A. Cost control
B. Pricing strategy
C. Capacity utilization
D. Budget accuracy
Answer:
Q15. Which manager is most responsible for fixed overhead volume variance?
A. Cost accountant
B. Purchasing manager
C. Production planning manager
D. Payroll supervisor
Answer:
Q16. Flexible budget variance compares:
A. Actual costs to master budget
B. Actual output to planned output
C. Actual costs to budgeted costs at actual activity
D. Budgeted costs at planned activity to standard costs
Answer:
Q17. Which variance isolates the effect of cost control regardless of output volume?
A. Fixed overhead volume variance
B. Flexible budget variance
C. Sales volume variance
D. Production volume variance
Answer:
Q18. If actual production exceeds budgeted production, the flexible budget will show:
A. Lower variable costs
B. Higher fixed costs
C. Higher variable costs proportional to activity
D. No change in total cost
Answer:
Integrated Logical Questions (High-Level CMA)
Q19. An unfavorable material efficiency variance and an unfavorable labor efficiency variance occurring together most likely indicate:
A. Poor production scheduling
B. Increased wage rates
C. Higher fixed overhead
D. Budgeting error
Answer:
Q20. Which combination best indicates poor capacity utilization but good cost control?
A. Favorable spending variance & unfavorable volume variance
B. Unfavorable spending variance & favorable volume variance
C. Both unfavorable
D. Both favorable
Answer:
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ANSWERS:
Mcq questions on variance analysis:
Section A)
Question 1
A company has a favorable sales price variance. What can be inferred about the actual selling price compared to the budgeted selling price?
A) Actual selling price is lower than budgeted selling price
B) Actual selling price is higher than budgeted selling price
C) Actual selling price is equal to budgeted selling price
D) Cannot be determined
Answer: B) Actual selling price is higher than budgeted selling price
Question 2
A company has an adverse material usage variance. What is likely to be the cause?
A) Workers are more efficient than expected
B) Material prices have increased
C) More material was used than budgeted
D) Material quality has improved
Answer: C) More material was used than budgeted
Question 3
A company has a favorable labor efficiency variance. What does this indicate about the actual labor hours worked compared to the budgeted labor hours?
A) Actual labor hours are higher than budgeted labor hours
B) Actual labor hours are lower than budgeted labor hours
C) Actual labor hours are equal to budgeted labor hours
D) Cannot be determined
Answer: B) Actual labor hours are lower than budgeted labor hours
Question 4
A company has a favorable sales volume variance. What can be inferred about the actual sales quantity compared to the budgeted sales quantity?
A) Actual sales quantity is lower than budgeted sales quantity
B) Actual sales quantity is higher than budgeted sales quantity
C) Actual sales quantity is equal to budgeted sales quantity
D) Cannot be determined
Answer: B) Actual sales quantity is higher than budgeted sales quantity
Section B)
Below are logical, exam-oriented MCQs with answers on standard costing & variance analysis, framed at US CMA (Part 1) difficulty level.
Questions emphasize interpretation, reasoning, and cause–effect, not mere formula application.
Material Efficiency Variance (MEV)
Q1. A favorable material price variance and an unfavorable material efficiency variance most likely indicate:
A. Poor quality materials purchased at a discount
B. Use of higher-quality materials than standard
C. Inefficient labor handling of materials
D. Errors in setting material standards
Answer: A
Logic: Cheap materials may cause excess usage → unfavorable efficiency.
Q2. Which situation will not affect material efficiency variance?
A. Machine breakdown causing spoilage
B. Purchase of inferior materials
C. Change in standard price per unit
D. Excessive scrap during production
Answer: C
Logic: Efficiency variance depends on quantity, not price.
Q3. A favorable material efficiency variance may be misleading if it results from:
A. Improved production methods
B. Use of smaller components reducing quality
C. Reduced waste
D. Skilled labor usage
Answer: B
Logic: Lower usage that harms quality is unfavorable in substance.
Labour Efficiency Variance (LEV)
Q4. Which factor most likely causes an unfavorable labor efficiency variance while labor rate variance is favorable?
A. Use of inexperienced workers at lower wages
B. High employee motivation
C. Automation improvements
D. Proper scheduling
Answer: A
Logic: Lower wage workers may take longer → poor efficiency.
Q5. An unfavorable labor efficiency variance caused by poor material quality should be primarily attributed to:
A. Human resource department
B. Production supervisor
C. Purchasing department
D. Cost accounting department
Answer: C
Logic: Poor materials increase labor time → purchasing fault.
Q6. Which action improves labor efficiency variance without changing wage rates?
A. Hiring more workers
B. Reducing hourly wages
C. Improving training and workflow
D. Increasing overtime
Answer: C
Variable Overhead Spending Variance
Q7. A favorable variable overhead spending variance with an unfavorable efficiency variance indicates:
A. Overhead costs were underestimated
B. Overhead resources were used inefficiently
C. Lower variable overhead cost per hour
D. Fixed overhead was misclassified
Answer: C
Logic: Rate per hour lower, but hours used inefficiently.
Q8. Variable overhead spending variance is primarily influenced by:
A. Changes in activity level
B. Cost control over indirect resources
C. Budgeted production volume
D. Fixed cost behavior
Answer: B
Q9. Which cost is included in variable overhead spending variance?
A. Factory rent
B. Indirect materials
C. Supervisor salaries
D. Depreciation
Answer: B
Fixed Overhead Spending Variance
Q10. A favorable fixed overhead spending variance means:
A. Actual output exceeded budgeted output
B. Actual fixed overhead was less than budgeted
C. Capacity utilization increased
D. Variable costs declined
Answer: B
Q11. Which item most likely causes an unfavorable fixed overhead spending variance?
A. Higher utility usage
B. Unexpected property tax increase
C. Increased production volume
D. Efficient labor utilization
Answer: B
Q12. Fixed overhead spending variance is best used to evaluate:
A. Production efficiency
B. Capacity utilization
C. Cost control of fixed resources
D. Variable cost behavior
Answer: C
Fixed Overhead Volume Variance
Q13. An unfavorable fixed overhead volume variance occurs when:
A. Actual fixed overhead exceeds budget
B. Actual production is less than planned capacity
C. Variable costs exceed standard
D. Standard fixed overhead rate is incorrect
Answer: B
Q14. Fixed overhead volume variance primarily reflects:
A. Cost control
B. Pricing strategy
C. Capacity utilization
D. Budget accuracy
Answer: C
Q15. Which manager is most responsible for fixed overhead volume variance?
A. Cost accountant
B. Purchasing manager
C. Production planning manager
D. Payroll supervisor
Answer: C
Flexible Budget Variance
Q16. Flexible budget variance compares:
A. Actual costs to master budget
B. Actual output to planned output
C. Actual costs to budgeted costs at actual activity
D. Budgeted costs at planned activity to standard costs
Answer: C
Q17. Which variance isolates the effect of cost control regardless of output volume?
A. Fixed overhead volume variance
B. Flexible budget variance
C. Sales volume variance
D. Production volume variance
Answer: B
Q18. If actual production exceeds budgeted production, the flexible budget will show:
A. Lower variable costs
B. Higher fixed costs
C. Higher variable costs proportional to activity
D. No change in total cost
Answer: C
Integrated Logical Questions (High-Level CMA)
Q19. An unfavorable material efficiency variance and an unfavorable labor efficiency variance occurring together most likely indicate:
A. Poor production scheduling
B. Increased wage rates
C. Higher fixed overhead
D. Budgeting error
Answer: A
Q20. Which combination best indicates poor capacity utilization but good cost control?
A. Favorable spending variance & unfavorable volume variance
B. Unfavorable spending variance & favorable volume variance
C. Both unfavorable
D. Both favorable
Answer: A
📌 CMA Exam Tip
• Spending variance = Cost control
• Efficiency variance = Operational effectiveness
• Volume variance = Capacity utilization
• Flexible budget variance = Pure performance evaluation
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