Exam 24: Standard Costs and Balanced Scorecard

A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700. The direct materials price variance for last month was

Which of the following is true?

If production exceeds normal capacity, the overhead volume variance will be favorable.

There could be instances where the production department is responsible for a direct materials price variance.

A debit to the Overhead Volume Variance account indicates that the standard hours allowed for the output produced was greater than the standard hours at normal capacity.

A standard cost system may be used with a job order cost system but not with a process cost system.

An unfavorable labor quantity variance may be caused by

The investigation of materials price variance usually begins in the

Ideal standards will generally result in favorable variances for the company.

Atkins, Inc. produces a product requiring 8 pounds of material at $1.50 per pound. Atkins produced 10,000 units of this product during 2016 resulting in a $30,000 unfavorable materials quantity variance. How many pounds of direct material did Atkins use during 2016?

Parnell Company prepared its income statement for internal use. How would amounts for cost of goods sold and variances appear?

A materials quantity variance is calculated as the difference between the standard direct materials price and the actual direct materials price multiplied by the actual quantity of direct materials used.

Allowance for spoilage is part of the direct

Match the items in the two columns below by entering the appropriate code letter in the space provided. A. Variances F. Materials price variance B. Standard costs G. Labor quantity variance C. Standard cost accounting system H. Overhead controllable variance D. Normal standards I. Overhead volume variance E. Ideal standards J. Standard hours allowed ____ 1. The difference between actual overhead incurred and overhead budgeted for the standard hours allowed. ____ 2. The hours that should have been worked for the units produced. ____ 3. The difference between the actual quantity times the actual price and the actual quantity times the standard price. ____ 4. The difference between total actual costs and total standard costs. ____ 5. The difference between actual hours times the standard rate and standard hours times the standard rate. ____ 6. Predetermined unit costs that are measures of performance. ____ 7. The difference between normal capacity hours and standard hours allowed times the fixed overhead rate. ____ 8. Standards based on an efficient level of performance that are attainable under expected operating conditions. ____ 9. Standards based on the optimum level of performance under perfect operating conditions. ____ 10. A double-entry system of accounting in which standard costs are used in making entries and variances are recognized in the accounts.

If actual costs are less than standard costs, the variance is favorable.

A company uses 20,000 pounds of materials for which it paid $6.00 a pound. The materials price variance was $15,000 unfavorable. What is the standard price per pound?

An unfavorable labor quantity variance indicates that the actual number of direct labor hours worked was greater than the number of direct labor hours that should have been worked for the output attained.

Setting standard costs is relatively simple because it is done entirely by accountants.

Unfavorable materials price and quantity variances are generally the responsibility of the