Exam 10: Standard Costing and Analysis of Direct Costs

Which of the following is a predetermined estimated cost that can be used in the calculation of a variance?

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

Which of the following would not be considered if a company desires to establish a series of practical manufacturing standards?

Situation 1: Loren Company recently purchased materials from a new supplier at a very attractive price.The materials were found to be of poor quality, and the company's laborers struggled significantly as they shaped the materials into finished product. Situation 2: In a desperate move to make up for some of the time lost, the Loren Company manufacturing supervisor brought in more-senior employees from another part of the plant. Which of the following variances would have a high probability of arising from both of these situations?

When spending is lower than expected for direct materials, the amount by which spending is less than planned is called an unfavorable direct-material variance (U).

Waterstone Industries is setting standard costs for one of its products.The main material is fiber board sold by the square foot.The current cost of fiber board is $4.00 per square foot from Waterstone's preferred supplier.Delivery costs are $0.25 per board foot.Waterstone's wages per hour are $25.00.Payroll costs are $3.60 per hour and benefits are $5.00 per hour.How much is the direct labor cost standard per hour?

Bender Corporation has a favorable materials quantity variance.Which department would likely be asked to explain the cause of this variance?

Which of the following combinations of direct-material variances might prompt management to undertake a detailed variance investigation?

A standard cost:

Interactions among variances often occur, making it even more difficult to determine the responsibility for a particular variance.

The Purchasing Department would normally begin an investigation regarding an unfavorable materials quantity variance.

The following events occurred at Eureka Manufacturing (EM), an assembler of engine parts, during March: 1.Because of a stock shortage at its regular supplier, EM had to rely on a new vendor for two purchases of raw material parts.The vendor required EM to pay air-freight charges; however, upon arrival, the company found the goods to be above-average in quality. 2.The local municipality raised its property tax rates by 2%. 3.A flu outbreak on the assembly line forced management to use more experienced, senior personnel to complete production orders on a timely basis.These workers more than made up for lost time. 4.A shoddy maintenance program resulted in an abnormally high number of breakdowns on machine no.76 and slowed production. 5.The implementation of a new program had positive effects for the company with respect to material usage and worker productivity. Required: Create a table with the following headings: material price variance, material quantity variance, labor rate variance, and labor efficiency variance.Determine which of these variances would be affected by the individual events and whether the variance would be favorable or unfavorable.

Which of the following choices correctly notes a characteristic associated with perfection standards and one associated with practical standards?

Which of the following is a criticism of standard costing, as applied to today's manufacturing environment?

Which of the following are methods for setting standards?

Which of the following individuals is least likely to become involved in the setting of either direct material standards or direct labor standards?

An unfavorable labor rate variance is created when:

A drawback of standard costing is that standard costs often fluctuate erratically.

Which of the following correctly lists all the information needed to calculate a labor rate variance?

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 BOLD,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?