Question 1

Currently attainable standards can be achieved under efficient operating conditions.

Accepted Answer

A) True 
 B)False

Question 2

Ideal standards demand maximum efficiency and can be achieved only if everything operates perfectly.

Accepted Answer

A) True 
 B)False

Question 3

Which formula is used to calculate the materials usage variance?

Accepted Answer

A)  (standard price × actual quantity)− (standard price × standard quantity) 
B)  (standard price × standard quality)− (standard price × actual quantity) 
C)  (actual price × actual quantity)− (standard price × actual quantity) 
D)  (actual price × standard quantity)− (actual quantity × standard price) 
A)  (standard price × actual quantity)− (standard price × standard quantity) 
B)  (standard price × standard quality)− (standard price × actual quantity) 
C)  (actual price × actual quantity)− (standard price × actual quantity) 
D)  (actual price × standard quantity)− (actual quantity × standard price)

Question 4

Meeds Company uses the following rule to determine whether labour efficiency variances should be investigated:
A labour efficiency variance will be investigated when the variance is greater than either $100 or 10% of the standard labour cost.
During March,the company used 525 direct labour hours at a rate of $16 per hour.Its standard rate is 500 direct labour hours at a rate of $15.50 per hour. A. Determine the company's labour efficiency variance and whether it is favourable or unfavourable.
B. Should the variance be investigated?

Accepted Answer

The answer of Meeds Company uses the following rule to...

Question 5

A favourable price variance occurs whenever the actual prices are greater than the standard prices.

Accepted Answer

A) True 
 B)False

Question 6

If the target cost is less than what is currently achievable,management must find ways to reduce costs in order to attain the target cost.Describe the three cost reduction methods that are typically used.

Accepted Answer

The three cost reduction methods are rev

Question 7

The standard quantity of materials allowed can be calculated by multiplying the unit quantity standard by the actual output.

Accepted Answer

A) True 
 B)False

Question 8

The actual quantity of input at the standard price less than the standard quantity of input at the actual price equals the usage variance.

Accepted Answer

A) True 
 B)False

Question 9

The unit standard quantity of inputs is vital to the computation of total amount of inputs allowed for the actual output and efficiency variances.

Accepted Answer

A) True 
 B)False

Question 10

The sum of the labour rate and labour efficiency variances will not add up to the total labour variance.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following are sources of quantity standards?

Accepted Answer

A)  historical experience 
B)  budget studies 
C)  input from interested personnel 
D)  benchmarks 
A)  historical experience 
B)  budget studies 
C)  input from interested personnel 
D)  benchmarks

Question 12

Which formula is used to calculate the labour efficiency variance?

Accepted Answer

A)  (standard hours × actual hours)− (actual hours × standard rate) 
B)  (actual rate × actual hours)− (standard rate × actual hours) 
C)  (actual hours × standard rate)− (standard hours × standard rate) 
D)  (standard hours × actual rate)− (actual hours × actual rate) 
A)  (standard hours × actual hours)− (actual hours × standard rate) 
B)  (actual rate × actual hours)− (standard rate × actual hours) 
C)  (actual hours × standard rate)− (standard hours × standard rate) 
D)  (standard hours × actual rate)− (actual hours × actual rate)

Question 13

Kaizen costing provides fixed standards which reflect continuous improvement efforts.

Accepted Answer

A) True 
 B)False

Question 14

Overland Company is considering manufacturing a new brand of car.Given the current product and process designs,the cost data are as follows: $$\begin{array} { l l } 
\text { Direct materials costs (per car) } & \$ 10,000 \
\text { Direct labour costs (per car) } & \$ 3,000 \
\text { Overhead costs (per car) } & \$ 4,000
\end{array}$$ The company expects the selling price to be $20,000 and has set a target profit of $5,000.
A supplier told Overland that it could purchase a couple of similar components under a different brand name at a lower price.This would result in cost savings of $2,000 per car.Furthermore,the company found that it could redesign its manufacturing process to cut down on both inspection labour and worker labour,which would result in cost savings of $1,000 per car. A. Calculate Overland's target cost.
B. Calculate the total costs per car after Overland redesigns its processes and schedules to buy cost-saving components.
C. Should Overland manufacture the car? Calculate the expected profit after the cost savings are taken into account.

Accepted Answer

The answer of Overland Company is considering manufacturing a new...

Question 15

If a process-costing system uses standard costing to assign product costs,there is no need to compute a unit cost for each equivalent unit cost category since a standard unit cost would exist for each category.

Accepted Answer

A) True 
 B)False

Question 16

Match the variance with its correct calculation.
-Actual costs

Accepted Answer

A) Actual quantity × actual price 
B) (Actual hours × actual rate)− (standard hours × standard rate) 
C) (Actual quantity × actual price)− (standard quantity × standard price) 
D) (Actual hours − standard hours)× standard rate 
E) (Actual price − standard price)× actual quantity
F)Standard quantity × standard price
G)(Actual rate − standard rate)× actual hours
H)(Actual quantity − standard quantity)× standard price 
A) Actual quantity × actual price 
B) (Actual hours × actual rate)− (standard hours × standard rate) 
C) (Actual quantity × actual price)− (standard quantity × standard price) 
D) (Actual hours − standard hours)× standard rate 
E) (Actual price − standard price)× actual quantity
F)Standard quantity × standard price
G)(Actual rate − standard rate)× actual hours
H)(Actual quantity − standard quantity)× standard price

Question 17

During March,6,000 direct labour hours were worked at a standard cost of $22 per hour.Suppose the direct labour rate variance for March was $16,500 favourable.What was the actual cost per direct labour hour?

Accepted Answer

A)  $17.50 
B)  $20.00 
C)  $22.50 
D)  $25.00 
A)  $17.50 
B)  $20.00 
C)  $22.50 
D)  $25.00

Question 18

Black and Digger's manufactures hedgers.During the year,it manufactured 5,000 hedgers,using 4.2 hours of direct labour per hedger at a rate of $8 per hour.The materials and labour standards for manufacturing the hedgers are as follows: $\begin{array}{lr}
\text { Direct materials (10 units } @ \$ 2 \text { per unit) } & \$ 20 \
\text { Direct labour ( } 4 \text { hours } @ \$ 7.50 \text { per hour) } & 30
\end{array}$ Black and Digger's actually used 53,000 units of direct materials at a price of $2.25 per unit.
Required: A. Determine the materials price variance and whether it is favourable or unfavourable.
B. Determine the materials usage variance and whether it is favourable or unfavourable.
C. Determine the labour rate variance and whether it is favourable or unfavourable.
D. Determine the labour efficiency variance and whether it is favourable or unfavourable.

Accepted Answer

The answer of Black and Digger's manufactures hedgers.During the year,it...

Question 19

During November,10,000 units were produced.The standard quantity of material allowed per unit was 10 kg at a standard cost of $3 per kilogram.Suppose the company had an unfavourable usage variance of $18,750 for November.What would have been the actual quantity of materials used?

Accepted Answer

A)  23,438 kg 
B)  31,875 kg 
C)  93,750 kg 
D)  106,250 kg 
A)  23,438 kg 
B)  31,875 kg 
C)  93,750 kg 
D)  106,250 kg

Question 20

The quantity of each input that should be used to produce one unit of output is documented on the standard cost sheet.

Accepted Answer

A) True 
 B)False

Currently attainable standards can be achieved under efficient operating conditions.

Ideal standards demand maximum efficiency and can be achieved only if everything operates perfectly.

Which formula is used to calculate the materials usage variance?

A favourable price variance occurs whenever the actual prices are greater than the standard prices.

If the target cost is less than what is currently achievable,management must find ways to reduce costs in order to attain the target cost.Describe the three cost reduction methods that are typically used.

The standard quantity of materials allowed can be calculated by multiplying the unit quantity standard by the actual output.

The actual quantity of input at the standard price less than the standard quantity of input at the actual price equals the usage variance.

The unit standard quantity of inputs is vital to the computation of total amount of inputs allowed for the actual output and efficiency variances.

The sum of the labour rate and labour efficiency variances will not add up to the total labour variance.

Which of the following are sources of quantity standards?

Which formula is used to calculate the labour efficiency variance?

Kaizen costing provides fixed standards which reflect continuous improvement efforts.

If a process-costing system uses standard costing to assign product costs,there is no need to compute a unit cost for each equivalent unit cost category since a standard unit cost would exist for each category.

Match the variance with its correct calculation. -Actual costs

During March,6,000 direct labour hours were worked at a standard cost of $22 per hour.Suppose the direct labour rate variance for March was $16,500 favourable.What was the actual cost per direct labour hour?

During November,10,000 units were produced.The standard quantity of material allowed per unit was 10 kg at a standard cost of $3 per kilogram.Suppose the company had an unfavourable usage variance of $18,750 for November.What would have been the actual quantity of materials used?

The quantity of each input that should be used to produce one unit of output is documented on the standard cost sheet.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Costvolumeprofit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing,and Inventory Management

Budgeting, production, cash, and Master Budget

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Filters

Exam 10: Standard Costing: a Managerial Control Tool

Currently attainable standards can be achieved under efficient operating conditions.

Ideal standards demand maximum efficiency and can be achieved only if everything operates perfectly.

Which formula is used to calculate the materials usage variance?

A favourable price variance occurs whenever the actual prices are greater than the standard prices.

If the target cost is less than what is currently achievable,management must find ways to reduce costs in order to attain the target cost.Describe the three cost reduction methods that are typically used.

The standard quantity of materials allowed can be calculated by multiplying the unit quantity standard by the actual output.

The actual quantity of input at the standard price less than the standard quantity of input at the actual price equals the usage variance.

The unit standard quantity of inputs is vital to the computation of total amount of inputs allowed for the actual output and efficiency variances.

The sum of the labour rate and labour efficiency variances will not add up to the total labour variance.

Which of the following are sources of quantity standards?

Which formula is used to calculate the labour efficiency variance?

Kaizen costing provides fixed standards which reflect continuous improvement efforts.

If a process-costing system uses standard costing to assign product costs,there is no need to compute a unit cost for each equivalent unit cost category since a standard unit cost would exist for each category.

Match the variance with its correct calculation. -Actual costs

During March,6,000 direct labour hours were worked at a standard cost of $22 per hour.Suppose the direct labour rate variance for March was $16,500 favourable.What was the actual cost per direct labour hour?

During November,10,000 units were produced.The standard quantity of material allowed per unit was 10 kg at a standard cost of $3 per kilogram.Suppose the company had an unfavourable usage variance of $18,750 for November.What would have been the actual quantity of materials used?

The quantity of each input that should be used to produce one unit of output is documented on the standard cost sheet.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Costvolumeprofit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing,and Inventory Management

Budgeting, production, cash, and Master Budget

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Filters