Question 1

A purpose of standard costing is to

Accepted Answer

A)  control costs. 
B)  allocate costs more accurately. 
C)  replace subjective decision making. 
D)  compute the breakeven point. 
A)  control costs. 
B)  allocate costs more accurately. 
C)  replace subjective decision making. 
D)  compute the breakeven point.

Question 2

A production manager usually is responsible for direct materials used and direct labor hours used.

Accepted Answer

A) True 
 B)False

Question 3

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 efficiency and rate varia

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Using the standard costs of $5 per pound for a 10 pound bag of chocolate and the following actual cost and usage data,compute the direct materials variance.
 $\begin{array}{ll}
\text { Direct materials purchased and used } & 99,000 \text { pounds } \
\text { Price paid for direct materials } & \$ 4.00 \text { per pound } \
\text { Number of good units produced } & 9,000 \text { units }
\end{array}$

Accepted Answer

A)  $45,000 (F) 
B)  $45,000 (U) 
C)  $54,000 (F) 
D)  $99,000 (F) 
A)  $45,000 (F) 
B)  $45,000 (U) 
C)  $54,000 (F) 
D)  $99,000 (F)

Question 6

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}& \text {3 pounds per product }\
 \text {Direct labor time standard }& \text {5 hours per product }\
 \text {Direct materials price standard }& \text { $ \$ 10 $ per pound}\
 \text {Direct labor rate standard }& \text { $ \$ 9 $ per hour}\
 \text { Standard variable overhead rate}& \text { $ \$ 5 $ per labor hour}\
 \text { Standard fixed overhead rate}& \text {$ \$ 10 $ per labor hour }\
\end{array}$
 The standard unit cost for direct materials is

Accepted Answer

A)  $30. 
B)  $10. 
C)  $50. 
D)  $27. 
A)  $30. 
B)  $10. 
C)  $50. 
D)  $27.

Question 7

A favorable fixed overhead volume variance for a manufacturing company could indicate

Accepted Answer

A)  the creation of excess inventory. 
B)  the actual overhead exceeded the budgeted overhead. 
C)  sales exceeded production. 
D)  variable overhead costs were less than fixed overhead costs. 
A)  the creation of excess inventory. 
B)  the actual overhead exceeded the budgeted overhead. 
C)  sales exceeded production. 
D)  variable overhead costs were less than fixed overhead costs.

Question 8

Using the following information,compute the standard unit cost of a 20 pound bag of dog food: $\begin{array} { l  }
 \text { Direct materials quantity standard}& \text { 20 pounds per unit}\
 \text { Direct materials price standard}& \text {$ \$ 0.02 $ per pound }\
 \text {Direct labor time standard }& \text {0.1 hour per unit }\
 \text { Direct labor rate standard}& \text {$ \$ 11.60 $ per hour }\
 \text {Variable overhead rate standard }& \text {$ \$ 11.60 $ per hour }\
 \text {Fixed overhead rate standard }& \text {$ \$ 2.50 $ per machine hou: }\
 \text { Fixed overhead rate standard}& \text {$ \$ 1.50 $ per machine hou: }\
 \text {Machine hour standard }& \text { 0.25 hours per unit}\
\end{array}$

Accepted Answer

A)  $2.56 
B)  $2.22 
C)  $2.16 
D)  $2.81 
A)  $2.56 
B)  $2.22 
C)  $2.16 
D)  $2.81

Question 9

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 10

The final step in variance analysis is determining the cause of the variance.

Accepted Answer

A) True 
 B)False

Question 11

Point Company uses the standard costing method.The company's main product is a fine-quality audio speaker that normally takes 0.25 hour to produce.Normal annual capacity is 3,000 direct labor hours,and budgeted fixed overhead costs for the year were $6,750.During the year,the company produced and sold 8,000 units.Actual fixed overhead costs were $4,800.Compute the fixed overhead variance.

Accepted Answer

A)  $300 (F) 
B)  $300 (U) 
C)  $1,950 (U) 
D)  $2,250 (U) 
A)  $300 (F) 
B)  $300 (U) 
C)  $1,950 (U) 
D)  $2,250 (U)

Question 12

Managers are constantly comparing the costs of what was expected to happen with the costs of what did happen.By examining the differences,or variances,managers can learn much valuable information.Identify and discuss the steps involved in variance analysis.

Accepted Answer

1.The first step is to compute the varia

Question 13

The purchasing agent is responsible for developing the direct materials quantity standard.

Accepted Answer

A) True 
 B)False

Question 14

The static budget can be adjusted automatically for changes in the level of output.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following provides an explanation of why the variable overhead rate is separated from the fixed overhead rate in standard costing?

Accepted Answer

A)  There is no justifiable reason; their separation is merely to simplify entries. 
B)  Both calculations divide by the same direct labor hours, but the numerator is different for each calculation. 
C)  The variable overhead rate is calculated using actual direct labor hours, whereas the fixed overhead rate is calculated using normal capacity direct labor hours. 
D)  Different application bases are generally appropriate. 
A)  There is no justifiable reason; their separation is merely to simplify entries. 
B)  Both calculations divide by the same direct labor hours, but the numerator is different for each calculation. 
C)  The variable overhead rate is calculated using actual direct labor hours, whereas the fixed overhead rate is calculated using normal capacity direct labor hours. 
D)  Different application bases are generally appropriate.

Question 16

The direct labor efficiency variance is the difference between the standard hours allowed and the actual hours multiplied by the actual labor rate.

Accepted Answer

A) True 
 B)False

Question 17

The standard overhead cost is the sum of the estimates of variable and fixed overhead costs in the next accounting period.

Accepted Answer

A) True 
 B)False

Question 18

Service organizations do not develop standards for

Accepted Answer

A)  any service costs. 
B)  overhead. 
C)  direct materials. 
D)  labor. 
A)  any service costs. 
B)  overhead. 
C)  direct materials. 
D)  labor.

Question 19

The total variable overhead variance is comprised of the

Accepted Answer

A)  variable overhead efficiency and fixed variances. 
B)  fixed overhead budget and volume variances. 
C)  variable overhead spending and efficiency variances. 
D)  labor efficiency and rate variances. 
A)  variable overhead efficiency and fixed variances. 
B)  fixed overhead budget and volume variances. 
C)  variable overhead spending and efficiency variances. 
D)  labor efficiency and rate variances.

Question 20

Golf Pro,Inc.,makes wood drivers for the professional golfer.Because of the clientele of users,only the finest materials can be used,and the quality of craftsmanship must be high.The following cost,quantity,and time standards have been set for 20xx:
Direct materials: 2 board-feet of wood @ $20 per board-foot and 2 feet of leather strip @ $5 per foot
Direct labor: Cutting Department,0.6 hour per driver at $10 per hour; Shaping/Finishing Department,1.4 hours per driver at $15 per hour
Overhead: variable,$5 per direct labor hour; fixed,$8 per direct labor hour
The wood is added at the beginning of the cutting process and the leather strip at the beginning of the shaping/finishing process.
Compute the standard cost per driver.

Accepted Answer

The answer of Golf Pro,Inc.,makes wood drivers for the professional...

Exam 23: Standard Costing and Variance Analysis

A purpose of standard costing is to

A production manager usually is responsible for direct materials used and direct labor hours used.

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

Using the standard costs of $5 per pound for a 10 pound bag of chocolate and the following actual cost and usage data,compute the direct materials variance. Direct materials purchased and used 99,000 pounds Price paid for direct materials \ 4.00 per pound Number of good units produced 9,000 units

A favorable fixed overhead volume variance for a manufacturing company could indicate

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 final step in variance analysis is determining the cause of the variance.

Managers are constantly comparing the costs of what was expected to happen with the costs of what did happen.By examining the differences,or variances,managers can learn much valuable information.Identify and discuss the steps involved in variance analysis.

The purchasing agent is responsible for developing the direct materials quantity standard.

The static budget can be adjusted automatically for changes in the level of output.

Which of the following provides an explanation of why the variable overhead rate is separated from the fixed overhead rate in standard costing?

The direct labor efficiency variance is the difference between the standard hours allowed and the actual hours multiplied by the actual labor rate.

The standard overhead cost is the sum of the estimates of variable and fixed overhead costs in the next accounting period.

Service organizations do not develop standards for

The total variable overhead variance is comprised of the

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

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