Question 1

If standard costing is not economically feasible for a company,predetermined overhead rates should not be used.

Accepted Answer

A) True 
 B)False

Question 2

Underfoot Products uses standard costing.The following information about overhead was generated during May: $$\begin{array} { l l } 
\text { Standard variable overhead rate } & \$ 2 \text { per machine howr } \
\text { Standard fixed overhead rate } & \$ 1 \text { per machine hour } \
\text { Actual variable overhead costs } & \$ 390,000 \
\text { Actual Eixed dverhead costs } & \$ 175,000 \
\text { Budgeted fixed overhead costs } & \$ 190,000 \
\text { Standard machine hours per urit produced } & 10 \
\text { Good urits produced } & 18,000 \
\text { Actual machine hours } & 200,000
\end{array}$$ 
Compute the fixed overhead variance.

Accepted Answer

A)  $5,000 (F) 
B)  $5,000 (U) 
C)  $10,000 (U) 
D)  $10,000 (F) 
A)  $5,000 (F) 
B)  $5,000 (U) 
C)  $10,000 (U) 
D)  $10,000 (F)

Question 3

The direct materials price standard is determined by averaging costs of current purchases.

Accepted Answer

A) True 
 B)False

Question 4

A flexible budget is most useful

Accepted Answer

A)  for budgeting and planning purposes. 
B)  when actual output equals budgeted output. 
C)  as a cost control tool to help evaluate performance. 
D)  when a product's cost structure includes variable costs only. 
A)  for budgeting and planning purposes. 
B)  when actual output equals budgeted output. 
C)  as a cost control tool to help evaluate performance. 
D)  when a product's cost structure includes variable costs only.

Question 5

Ewing Corporation's controller has developed the cost and usage data listed below in preparation of standard unit cost information for the coming year. $\begin{array}{lr}
 \text { Direct materials quantity standard } & 3 \text { pounds per product } \
\text { Direct labor time standard } & 5 \text { hours per product } \
\text { Direct materials price standard } & \$ 10 \text { per pound } \
\text { Direct labor rate standard } & \$ 9 \text { per hour } \
\text { Standard variable overhead rate } & \$ 5 \text { per labor hour } \
\text { Standard fixed overhead rate } & \$ 10 \text { per labor hour }
\end{array}$ 
The standard unit cost for overhead is

Accepted Answer

A)  $15. 
B)  $25. 
C)  $50. 
D)  $75. 
A)  $15. 
B)  $25. 
C)  $50. 
D)  $75.

Question 6

Powerhorse,Inc.,manufactures steel hitches for horse trailers.The company's direct labor rates have been set by the terms of the current labor contract.Direct labor rate standards have been assigned for each job classification.In July 20xx,a young apprentice was being trained during regular working hours to become a machine operator on one of the turret lathes.A timekeeper determined that the apprentice had spent a total of 48 hours as a novice machine operator in July.Standard time for the same work output is 34 hours.The apprentice earned $6.80 per hour in July.The standard direct labor rate for machine operators working on turret lathes is $9.50 per hour.
a. From the data provided, determine the direct labor efficiency variance and the direct labor rate variance that resulted from the temporary substitution of the apprentice for the regular machine operator. (Note that, according to the labor contract, the apprentice is not entitled to the same rate as a regular machine operator during the training period.)
b. Did the company benefit financially from the situation? Why or why not? (Show calculations.)

Accepted Answer

a.Direct labor effic

Question 7

A direct labor rate variance would occur in which of the following situations?

Accepted Answer

A)  When a production employee takes an unplanned break 
B)  When a production employee spends more time producing one product than was expected 
C)  When a low-paid production employee performs a task higher than his or her assigned level 
D)  When a production employee incurs overtime hours at the same hourly rate as regular pay 
A)  When a production employee takes an unplanned break 
B)  When a production employee spends more time producing one product than was expected 
C)  When a low-paid production employee performs a task higher than his or her assigned level 
D)  When a production employee incurs overtime hours at the same hourly rate as regular pay

Question 8

If actual capacity used exceeds expected capacity,the fixed overhead volume variance is favorable.

Accepted Answer

A) True 
 B)False

Question 9

Standard costs are useful for all but which of the following?

Accepted Answer

A)  Determining actual costs 
B)  Preparing budgets and forecasts 
C)  Evaluating the performance of workers and management 
D)  Helping to develop appropriate selling prices 
A)  Determining actual costs 
B)  Preparing budgets and forecasts 
C)  Evaluating the performance of workers and management 
D)  Helping to develop appropriate selling prices

Question 10

The fixed overhead volume variance measures the use of existing facilities and capacity.

Accepted Answer

A) True 
 B)False

Question 11

The formula used to compute budgeted total cost at any level of activity is presented in the

Accepted Answer

A)  flexible budget. 
B)  performance report. 
C)  static budget. 
D)  cash flow forecast. 
A)  flexible budget. 
B)  performance report. 
C)  static budget. 
D)  cash flow forecast.

Question 12

A flexible budget is a summary of expected costs for a range of activity levels and is geared to changes in the level of productive output.

Accepted Answer

A) True 
 B)False

Question 13

The direct materials price variance is the difference between the actual price and the standard price,multiplied by the standard quantity.

Accepted Answer

A) True 
 B)False

Question 14

The Lennon Company uses a standard costing system and a flexible budget.At a normal level of activity of 15,000 units and 45,000 standard direct labor hours,the standard direct labor cost would be $270,000.During June,44,050 hours were worked to produce 14,000 units at an actual direct labor cost of $352,000.The direct labor efficiency variance in June was

Accepted Answer

A)  $20,300 (U). 
B)  $12,300 (U). 
C)  $12,300 (F). 
D)  $15,300 (U). 
A)  $20,300 (U). 
B)  $12,300 (U). 
C)  $12,300 (F). 
D)  $15,300 (U).

Question 15

The direct materials standards for the main product of Duchess Company are 8 grams of direct materials per product at a cost of $3 per gram.During April,974 grams of direct materials were used to produce 120 products at a direct materials cost of $2,900.The direct materials quantity variance for April was

Accepted Answer

A)  $72 (U). 
B)  $92 (U). 
C)  $42 (U). 
D)  $112 (F). 
A)  $72 (U). 
B)  $92 (U). 
C)  $42 (U). 
D)  $112 (F).

Question 16

The overhead variance is equal to the difference between

Accepted Answer

A)  fixed overhead costs and flexible overhead costs. 
B)  estimated overhead rate and applied overhead rate. 
C)  actual overhead costs and variable overhead costs. 
D)  actual overhead costs and standard overhead costs. 
A)  fixed overhead costs and flexible overhead costs. 
B)  estimated overhead rate and applied overhead rate. 
C)  actual overhead costs and variable overhead costs. 
D)  actual overhead costs and standard overhead costs.

Question 17

Sweet Dreams manufactures candy.Its records revealed the following data: $$\begin{array} { l l } 
\text { Number of urits produced } & 4,000 \
\text { Standard direct labor hours per unit } & 2 \
\text { Standard variable overhead rate } & \$ 2.50 \text { per hour } \
\text { Standard fixed overhead rate } & \$ 5.00 \text { per hour } \
\text { Budgeted fixed overhead costs } & \$ 40,800 \
\text { Actual variable overhead costs } & \$ 16,800 \
\text { Actual fixed overhead costs } & \$ 40,400 \
\text { Actual labor hours } & 8,000 \text { direct labor hours } \
\text { Total actual overhead } & \$ 57,200
\end{array}$$ 
The total variable overhead variance is

Accepted Answer

A)  $3,200 (U). 
B)  $3,200 (F). 
C)  $3,600 (F). 
D)  $0. 
A)  $3,200 (U). 
B)  $3,200 (F). 
C)  $3,600 (F). 
D)  $0.

Question 18

In standard costing,

Accepted Answer

A)  the standards are developed only for overhead costs. 
B)  the standards are developed primarily from past costs. 
C)  comparisons with actual costs usually are not performed. 
D)  debit and credit entries to inventory accounts are made at standard costs. 
A)  the standards are developed only for overhead costs. 
B)  the standards are developed primarily from past costs. 
C)  comparisons with actual costs usually are not performed. 
D)  debit and credit entries to inventory accounts are made at standard costs.

Question 19

The direct labor rate variance is the difference between actual hours worked and standard hours allowed for good units produced,multiplied by the standard labor rate.

Accepted Answer

A) True 
 B)False

Question 20

The primary difference between a fixed (static)budget and a flexible budget is that a fixed budget

Accepted Answer

A)  cannot be changed after the period begins, whereas a flexible budget can be changed after the period begins. 
B)  is concerned only with future acquisitions of fixed assets, whereas a flexible budget is concerned with expenses that vary with sales. 
C)  is a plan for a single level of production, whereas a flexible budget is several plans (one for each of several production levels). 
D)  includes only fixed costs, whereas a flexible budget includes only variable costs. 
A)  cannot be changed after the period begins, whereas a flexible budget can be changed after the period begins. 
B)  is concerned only with future acquisitions of fixed assets, whereas a flexible budget is concerned with expenses that vary with sales. 
C)  is a plan for a single level of production, whereas a flexible budget is several plans (one for each of several production levels). 
D)  includes only fixed costs, whereas a flexible budget includes only variable costs.

Exam 23: Standard Costing and Variance Analysis

If standard costing is not economically feasible for a company,predetermined overhead rates should not be used.

The direct materials price standard is determined by averaging costs of current purchases.

A flexible budget is most useful

A direct labor rate variance would occur in which of the following situations?

If actual capacity used exceeds expected capacity,the fixed overhead volume variance is favorable.

Standard costs are useful for all but which of the following?

The fixed overhead volume variance measures the use of existing facilities and capacity.

The formula used to compute budgeted total cost at any level of activity is presented in the

A flexible budget is a summary of expected costs for a range of activity levels and is geared to changes in the level of productive output.

The direct materials price variance is the difference between the actual price and the standard price,multiplied by the standard quantity.

The overhead variance is equal to the difference between

In standard costing,

The direct labor rate variance is the difference between actual hours worked and standard hours allowed for good units produced,multiplied by the standard labor rate.

The primary difference between a fixed (static)budget and a flexible budget is that a fixed budget

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Contributed Capital

Investments

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

The Changing Business Environment - a Managers Perspective

Cost Concepts and Cost Allocation

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions,incltarget Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

Filters