Question 1

A perfection standard:

Accepted Answer

A)  tends to motivate employees over a long period of time. 
B)  is attainable in an ideal operating environment. 
C)  would make allowances for normal amounts of scrap and waste. 
D)  is generally preferred by behavioral scientists. 
E)  will result in a number of favorable variances on a performance report. 
A)  tends to motivate employees over a long period of time. 
B)  is attainable in an ideal operating environment. 
C)  would make allowances for normal amounts of scrap and waste. 
D)  is generally preferred by behavioral scientists. 
E)  will result in a number of favorable variances on a performance report.

Question 2

Product costing is the process of accumulating the costs of a production process and assigning them to the completed products.

Accepted Answer

A) True 
 B)False

Question 3

The absolute size of a variance is more important than the relative size when trying to decide what variances to investigate.

Accepted Answer

A) True 
 B)False

Question 4

Managerial accountants use either task analysis or an analysis of historical data to set cost standards.

Accepted Answer

A) True 
 B)False

Question 5

A direct-labor efficiency variance cannot be caused by:

Accepted Answer

A)  inexperienced employees. 
B)  poor quality raw materials. 
C)  employee inefficiency. 
D)  an out-of-date labor time standard. 
E)  producing fewer finished units than originally planned. 
A)  inexperienced employees. 
B)  poor quality raw materials. 
C)  employee inefficiency. 
D)  an out-of-date labor time standard. 
E)  producing fewer finished units than originally planned.

Question 6

During June, Fraser Company's material purchases amounted to 6,000 pounds at a price of $7.35 per pound. Actual costs incurred in the production of 2,000 units were as follows:
   
The standards for one unit of Fraser Company's product are as follows:
  
Required: 
Compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.

Accepted Answer

The answer of During June, Fraser Company's material purchases amounted...

Question 7

James at the Mill Barn Woods produces handcrafted frames. A standard-size 11 x 14 inch frame requires 6 board feet of rustic barn wood in the finished product. In addition, 1 board foot of scrap lumber is normally left from the production of one frame. James pays a demolition company $1.50 per board foot, plus $1.00 in transportation charges per board foot.
Required: 
Compute the standard direct-material cost of a frame.

Accepted Answer

The answer of James at the Mill Barn Woods produces...

Question 8

The aggregate nature of the variances in standard costing is a drawback in the advanced manufacturing setting that makes it difficult for managers to determine their cause.

Accepted Answer

A) True 
 B)False

Question 9

Timber Enterprises purchased 67,000 pounds (cost = $616,400) of direct material to be used in the manufacture of the company's only product. According to the production specifications, each completed unit requires four pounds of direct material at a standard cost of $9 per pound. Direct materials consumed by the end of the period totaled 65,500 pounds in the manufacture of 16,050 finished units.
An examination of Timber's payroll records revealed that the company worked 42,000 labor hours (cost = $621,600) during the period, and specifications called for each completed unit requiring 2.6 hours of labor at a standard cost of $15 per hour.
Assume that the company computes variances at the earliest point in time.
Required: 
Calculate the direct-material price and quantity variances, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.

Accepted Answer

Direct Material Price Variance: 65,500 x

Question 10

A statistical control chart is best used for determining:

Accepted Answer

A)  direct-material price variances. 
B)  direct-labor variances. 
C)  whether a variance is favorable or unfavorable. 
D)  who should be held accountable for specific variances. 
E)  whether a particular variance should be investigated. 
A)  direct-material price variances. 
B)  direct-labor variances. 
C)  whether a variance is favorable or unfavorable. 
D)  who should be held accountable for specific variances. 
E)  whether a particular variance should be investigated.

Question 11

Venazio Products uses a standard costing system to assist in the evaluation of operations. The company has had considerable employee difficulties in recent months, so much so that management has hired a new production supervisor (Ralph Moreno). Moreno has been on the job for six months and has seemingly brought order to an otherwise chaotic situation.
The vice-president of manufacturing recently commented that "Moreno has really done the trick. Ralph's team-building/morale-boosting exercises have truly brought things under control." The vice-president's comments were based on both a plant tour, where he observed a contented work force, and review of a performance report that showed a total labor variance of $14,000F. This variance is truly outstanding, given that it is less than 2% of the company's budgeted labor cost. Additional data follow.
· Total completed production amounted to 20,000 units.

· A review of the firm's standard cost records found that each completed unit requires 2.75 hours of labor at $14 per hour. Venazio's production actually required 42,000 labor hours at a total cost of $756,000.
Required: 
A. As judged by the information contained in the performance report, should the vice-president be concerned about the company's labor variances? Why?
B. Calculate Venazio's direct-labor variances.
C. On the basis of your answers to requirement "B," should Venazio be concerned about its labor situation? Why?
D. Briefly analyze and explain the direct-labor variances.

Accepted Answer

A. No. The variance is favorable and sma

Question 12

When the quantity of materials purchased is not equal to the quantity of material used, most companies base the calculation of the material quantity variance on the:

Accepted Answer

A)  quantity of direct materials purchased. 
B)  quantity of direct materials spoiled. 
C)  quantity of direct materials that should have been used in achieving actual production. 
D)  quantity of direct materials actually used. 
E)  None of the answers is correct. 
A)  quantity of direct materials purchased. 
B)  quantity of direct materials spoiled. 
C)  quantity of direct materials that should have been used in achieving actual production. 
D)  quantity of direct materials actually used. 
E)  None of the answers is correct.

Question 13

Which of the following are methods for setting standards?

Accepted Answer

A)  Analysis of historical data and goal congruence. 
B)  Task analysis and matrix application forms. 
C)  Task analysis and the analysis of historical data. 
D)  Matrix application forms and analysis of historical data. 
E)  Goal congruence and task analysis. 
A)  Analysis of historical data and goal congruence. 
B)  Task analysis and matrix application forms. 
C)  Task analysis and the analysis of historical data. 
D)  Matrix application forms and analysis of historical data. 
E)  Goal congruence and task analysis.

Question 14

Lamar Corporation's purchasing manager obtained a special price on an aluminum alloy from a new supplier, resulting in a direct-material price variance of $9,500F. The alloy produced more waste than normal, as evidenced by a direct-material quantity variance of $2,000U, and was also difficult to use. This slowed worker efficiency, generating a $2,500U labor efficiency variance.
To help remedy the situation, the production manager used senior line employees, which gave rise to a $900U labor rate variance. If overall product quality did not suffer, what variance amount is best used in judging the appropriateness of the purchasing manager's decision to acquire substandard material?

Accepted Answer

A)  $4,100F. 
B)  $5,000F. 
C)  $7,000F. 
D)  $7,500F. 
E)  $9,500F. 
A)  $4,100F. 
B)  $5,000F. 
C)  $7,000F. 
D)  $7,500F. 
E)  $9,500F.

Question 15

Which of the following choices correctly indicates the use of the standard price per unit of direct material when calculating the materials price variance and the material quantity variance?
Price Variance Quantity Variance

Accepted Answer

A)  Used Always used 
B)  Used Occasionally used 
C)  Used Not used 
D)  Not used Always used 
E)  Not used Not used 
A)  Used Always used 
B)  Used Occasionally used 
C)  Used Not used 
D)  Not used Always used 
E)  Not used Not used

Question 16

Quinton Company has set the following standards for one unit of product:
Direct material
Quantity: 6.2 pounds per unit
Price per pound: $11 per pound
Direct labor
Quantity: 6 hours per unit
Rate per hour: $23 per hour
Actual costs incurred in the production of 2,800 units were as follows:
Direct material: $194,350 ($11.50 per pound)
Direct labor: $393,750 ($22.50 per hour)
All materials purchased were consumed during the period.
Required: 
Calculate the direct-material price and quantity variances, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.

Accepted Answer

The answer of Quinton Company has set the following standards...

Question 17

Variances are computed by taking the difference between which of the following?

Accepted Answer

A)  Product cost and period cost. 
B)  Actual cost and differential cost. 
C)  Price factors and rate factors. 
D)  Actual cost and standard cost. 
E)  Product cost and standard cost. 
A)  Product cost and period cost. 
B)  Actual cost and differential cost. 
C)  Price factors and rate factors. 
D)  Actual cost and standard cost. 
E)  Product cost and standard cost.

Question 18

A favorable labor efficiency variance is created when:

Accepted Answer

A)  actual labor hours worked exceed standard hours allowed. 
B)  actual hours worked are less than standard hours allowed. 
C)  actual wages paid are less than amounts that should have been paid. 
D)  actual units produced exceed budgeted production levels. 
E)  actual units produced exceed standard hours allowed. 
A)  actual labor hours worked exceed standard hours allowed. 
B)  actual hours worked are less than standard hours allowed. 
C)  actual wages paid are less than amounts that should have been paid. 
D)  actual units produced exceed budgeted production levels. 
E)  actual units produced exceed standard hours allowed.

Question 19

The individual generally responsible for the direct-material price variance is the:

Accepted Answer

A)  sales manager. 
B)  production supervisor. 
C)  purchasing manager. 
D)  finance manager. 
E)  head of the human resources department. 
A)  sales manager. 
B)  production supervisor. 
C)  purchasing manager. 
D)  finance manager. 
E)  head of the human resources department.

Question 20

Action Enterprises recently used 14,000 labor hours to produce 7,500 completed units. According to manufacturing specifications, each unit is anticipated to take two hours to complete. The company's actual payroll cost amounted to $158,200. If the standard labor cost per hour is $11, Action's labor rate variance is:

Accepted Answer

A)  $4,200U. 
B)  $4,000F. 
C)  $4,300U. 
D)  $4,300F. 
E)  None of the answers is correct. 
A)  $4,200U. 
B)  $4,000F. 
C)  $4,300U. 
D)  $4,300F. 
E)  None of the answers is correct.

A perfection standard:

Product costing is the process of accumulating the costs of a production process and assigning them to the completed products.

The absolute size of a variance is more important than the relative size when trying to decide what variances to investigate.

Managerial accountants use either task analysis or an analysis of historical data to set cost standards.

A direct-labor efficiency variance cannot be caused by:

The aggregate nature of the variances in standard costing is a drawback in the advanced manufacturing setting that makes it difficult for managers to determine their cause.

A statistical control chart is best used for determining:

When the quantity of materials purchased is not equal to the quantity of material used, most companies base the calculation of the material quantity variance on the:

Which of the following are methods for setting standards?

Which of the following choices correctly indicates the use of the standard price per unit of direct material when calculating the materials price variance and the material quantity variance? Price Variance Quantity Variance

Variances are computed by taking the difference between which of the following?

A favorable labor efficiency variance is created when:

The individual generally responsible for the direct-material price variance is the:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters

Exam 10: Standard Costing and Analysis of Direct Costs

A perfection standard:

Product costing is the process of accumulating the costs of a production process and assigning them to the completed products.

The absolute size of a variance is more important than the relative size when trying to decide what variances to investigate.

Managerial accountants use either task analysis or an analysis of historical data to set cost standards.

A direct-labor efficiency variance cannot be caused by:

The aggregate nature of the variances in standard costing is a drawback in the advanced manufacturing setting that makes it difficult for managers to determine their cause.

A statistical control chart is best used for determining:

When the quantity of materials purchased is not equal to the quantity of material used, most companies base the calculation of the material quantity variance on the:

Which of the following are methods for setting standards?

Which of the following choices correctly indicates the use of the standard price per unit of direct material when calculating the materials price variance and the material quantity variance? Price Variance Quantity Variance

Variances are computed by taking the difference between which of the following?

A favorable labor efficiency variance is created when:

The individual generally responsible for the direct-material price variance is the:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters