Question 1

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 2

During the current month,Ringo Company started 50,000 units of product and transferred 40,000 fully completed units to finished goods.The final work in process inventory was 41 percent complete as to labor operations.There was no initial work in process,and actual labor hours were 180,000 for the period.Each unit should have required 4 direct labor hours to be produced at standard.The total standard hours allowed for the period are

Accepted Answer

A)  180,400. 
B)  176,400. 
C)  171,400. 
D)  186,400. 
A)  180,400. 
B)  176,400. 
C)  171,400. 
D)  186,400.

Question 3

The direct materials price variance is best measured and reported to appropriate management personnel at the time

Accepted Answer

A)  purchased quantities exceed standard order size. 
B)  quarterly financial statements are prepared. 
C)  shipments are received and recorded as purchases. 
D)  direct materials are issued to production areas. 
A)  purchased quantities exceed standard order size. 
B)  quarterly financial statements are prepared. 
C)  shipments are received and recorded as purchases. 
D)  direct materials are issued to production areas.

Question 4

Underfoot Products uses standard costing.The following information about overhead was generated during May: $$\begin{array} { l l } 
\text { Standard variable overhead rate } & \$ 2 \text { per machine hour } \
\text { Standard fixed overhead rate } & \$ \text { per machine hour } \
\text { Actual variable overhead costs } & \$ 390,000 \
\text { Actual fixed overhead costs } & \$ 175,000 \
\text { Budgeted fixed overhead costs } & \$ 190,000 \
\text { Standard machine hours per unit produced } & 10 \
\text { Good units produced } & 18,000 \
\text { Actual machine hours } & 200,000
\end{array}$$ 
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 5

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 6

In a standard costing system,standard costs eventually flow into the

Accepted Answer

A)  Cost of Goods Sold account. 
B)  Standard Cost account. 
C)  Selling and Administrative Expenses account. 
D)  Sales account. 
A)  Cost of Goods Sold account. 
B)  Standard Cost account. 
C)  Selling and Administrative Expenses account. 
D)  Sales account.

Question 7

Sweet Dreams manufactures candy.Its records revealed the following data: 
$\begin{array}{ll}
\text { Number of units produced } & 4,000 \
\text { Standard direct labor hours per unit } & 2 \
\text { Standard variable overhead rate } & \$ 2.50 \text { per hour } \
\text { Standard fixed overhead rate } & \$ 5.00 \text { per hour } \
\text { Budgeted fixed overhead costs } & \$ 40,800 \
\text { Actual variable overhead costs } & \$ 16,800 \
\text { Actual fixed overhead costs } & \$ 40,400 \
\text { Actual labor hours } & 8,000 \text { direct labor hours} \
\text { Total actual overhead } & \$ 57.200
\end{array}$ The total fixed overhead variance is

Accepted Answer

A)  $800 (F). 
B)  $800 (U). 
C)  $400 (U). 
D)  $400 (F). 
A)  $800 (F). 
B)  $800 (U). 
C)  $400 (U). 
D)  $400 (F).

Question 8

Which of the following statements is not true?

Accepted Answer

A)  Performance reports should be tailored to the responsibilities of the manager or department for which they are prepared. 
B)  Performance reports normally report standard costs and variances. 
C)  Performance reports should contain space for explanation of variances. 
D)  Performance reports do not present the causes of variances. 
A)  Performance reports should be tailored to the responsibilities of the manager or department for which they are prepared. 
B)  Performance reports normally report standard costs and variances. 
C)  Performance reports should contain space for explanation of variances. 
D)  Performance reports do not present the causes of variances.

Question 9

Camping for Fun,Inc.,produces a variety of camping products on a year-round basis.The best-selling item is a compact portable camping stove made from sheets of rust-free aluminum.Production of this stove requires two main operations: cutting/assembly and coating.The basic direct materials used are aluminum sheeting,a polyurethane base coating,and a gas jet assembly.Quantity,time,and cost standards for the camping stove are as follows:
Direct materials consist of sheet aluminum (two 2-by-3-meter sheets per stove at $1.15 per sheet),1.2 liters of coating materials per stove at $0.80 per liter,and a gas jet assembly purchased at $11.30.Direct labor in the Cutting/Assembly Department is expected to produce 50 stoves per hour at $9.50 per hour.Direct labor in the Coating Department can handle 32 stoves per hour at $8 per hour.Normal capacity is 126,000 stoves per year.
The firm actually produced 120,000 units during the year,and the production records contain the following information:
For direct materials,the firm used 241,200 sheets of aluminum at $1.10 per sheet,148,500 liters of coating at $0.77 per liter,and 120,100 gas jet assemblies costing a total of $1,369,140.Direct labor in the Cutting/Assembly Department amounted to 2,800 hours at $9.25 per hour; in the Coating Department,it amounted to 3,560 hours at $7.50 per hour.
Using the information provided,determine the following (remember to indicate whether the variance is favorable or unfavorable):
a. Standard hours allowed for the Cutting/Assembly and Coating Departments for the year (by department)
b. Direct materials price variances (by material)
c. Direct materials quantity variances (by material)
d. Direct labor rate variances (by department)
e. Direct labor efficiency variances (by department)

Accepted Answer

a.Standard hours allowed for the year:

Question 10

Suppose the standard for a given cost during a period was $80,000.The actual cost for the period was $72,000.Under what circumstances would you consider the variance from budget to be a positive performance indication?

Accepted Answer

A)  The cost is fixed, and actual production was 90 percent of the standard level of budgeted production. 
B)  The cost is variable, and the standard cost noted above is the cost at a production level lower than the actual production level. 
C)  The cost is variable, and actual production was 90 percent of the standard level of production. 
D)  The cost is variable, and actual production was 75 percent of the standard level of production. 
A)  The cost is fixed, and actual production was 90 percent of the standard level of budgeted production. 
B)  The cost is variable, and the standard cost noted above is the cost at a production level lower than the actual production level. 
C)  The cost is variable, and actual production was 90 percent of the standard level of production. 
D)  The cost is variable, and actual production was 75 percent of the standard level of production.

Question 11

It is not necessary to provide an area on the performance report for a manager's reasons for variances.

Accepted Answer

A) True 
 B)False

Question 12

Standard costs are realistically predetermined costs of direct materials,direct labor,and overhead that usually are expressed as a cost per unit.

Accepted Answer

A) True 
 B)False

Question 13

Standard costs are based solely on expected future costs and conditions.

Accepted Answer

A) True 
 B)False

Question 14

Using the labor time standard of 0.5 labor hour per unit and a labor cost standard of $10 per labor hour for a 10 pound bag of chocolate and the following actual cost and usage data,compute the direct labor variance. 
$\begin{array}{ll}
\text { Direct labor hours used } & 4,950 \text { hours } \
\text { Total cost of direct labor } & \$ 53,460 \
\text { Number of good units produced } & 9,000 \text { units }
\end{array}$

Accepted Answer

A)  $3,960 (F) 
B)  $8,460 (U) 
C)  $3,960 (U) 
D)  $8,460 (F) 
A)  $3,960 (F) 
B)  $8,460 (U) 
C)  $3,960 (U) 
D)  $8,460 (F)

Question 15

Under which of the following circumstances would the base used to calculate the variable overhead rate be the same as that used for the fixed overhead rate?

Accepted Answer

A)  When actual labor hours are the same as budgeted labor hours 
B)  When standard indirect labor hours agree with standard direct labor hours 
C)  In most circumstances; the base used for each calculation is normally the same. 
D)  When the number of labor hours expected to be incurred for the period is the same as normal capacity direct labor hours 
A)  When actual labor hours are the same as budgeted labor hours 
B)  When standard indirect labor hours agree with standard direct labor hours 
C)  In most circumstances; the base used for each calculation is normally the same. 
D)  When the number of labor hours expected to be incurred for the period is the same as normal capacity direct labor hours

Question 16

Standard unit costs generally do not include which of the following?

Accepted Answer

A)  Direct materials costs 
B)  Indirect materials costs 
C)  President's salary 
D)  Depreciation on machinery 
A)  Direct materials costs 
B)  Indirect materials costs 
C)  President's salary 
D)  Depreciation on machinery

Question 17

Even if a variance is insignificant,corrective action should be taken.

Accepted Answer

A) True 
 B)False

Question 18

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 price 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 19

Service organizations use direct materials,direct labor,and overhead standard costs.

Accepted Answer

A) True 
 B)False

Question 20

Keerin,Inc.,produces a complete line of women's athletic apparel.Sweatsuits are very popular in the northern states.During August,the company's records revealed the following information about the production of sweatsuits:
 $\begin{array}{lll}
\text { Standards: } & \text { Direct materials } & 5 \text { yards } @ \$ 2.50 \text { per yard } \
& \text { Direct labor } & 1 \text { hour } @ \$ 9.50 \text { per hour }\
&\text {Overhead:}\
&\text {Variable }&\text {$ \$ 5.50 $ per direct labor hour}\
&\text {Fixed }&\text {$\$ 7 $ per direct labor hour}
\end{array}$

Compute the standard unit cost for a sweatsuit.

Accepted Answer

The answer of Keerin,Inc.,produces a complete line of women's athletic...

Exam 23: Standard Costing and Variance Analysis

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

The direct materials price variance is best measured and reported to appropriate management personnel at the time

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

In a standard costing system,standard costs eventually flow into the

Which of the following statements is not true?

Suppose the standard for a given cost during a period was $80,000.The actual cost for the period was $72,000.Under what circumstances would you consider the variance from budget to be a positive performance indication?

It is not necessary to provide an area on the performance report for a manager's reasons for variances.

Standard costs are realistically predetermined costs of direct materials,direct labor,and overhead that usually are expressed as a cost per unit.

Standard costs are based solely on expected future costs and conditions.

Under which of the following circumstances would the base used to calculate the variable overhead rate be the same as that used for the fixed overhead rate?

Standard unit costs generally do not include which of the following?

Even if a variance is insignificant,corrective action should be taken.

Service organizations use direct materials,direct labor,and overhead standard costs.

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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