Question 1

Which statement best describes target costing?

Accepted Answer

A)  Target costs are internally driven. 
B)  The principal challenge of target costing is finding the cause of the costs. 
C)  It is a useful tool for establishing cost reduction goals for products in the design stage. 
D)  It is the difference between the sales price needed to capture a predetermined market share and the desired per-unit gross profit. 
A)  Target costs are internally driven. 
B)  The principal challenge of target costing is finding the cause of the costs. 
C)  It is a useful tool for establishing cost reduction goals for products in the design stage. 
D)  It is the difference between the sales price needed to capture a predetermined market share and the desired per-unit gross profit.

Question 2

Match each of the following calculations with their corresponding variance.
-Labour rate variance

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 3

Ideal standards allow for machine breakdowns, slack, or momentary lack of skill.

Accepted Answer

A) True 
 B)False

Question 4

Match each of the following calculations with their corresponding variance.
-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 5

Allan Company
Allan Company manufactures overalls. During the year, it manufactured 125,000 overalls, using 2.9 hours of direct labour per unit at a rate of $6.25 per hour. The materials and labour standards for manufacturing the overalls are as follows: $\begin{array}{lll}
\text {Direct materials ( $ 5 \mathrm{~m} $ of denim $ @ \$ 2 $ per metre) }&\$10\
\text {Direct labour (3 hours $ @ \$ 6 $ per  }&18\
\end{array}$
 The company required 600,000 m at $1.95 per metre to make the 125,000 overalls.There were no beginning or ending inventories.
-Refer to AirSoar Company. What was the total labour variance?

Accepted Answer

A)  $52,500 F 
B)  $55,000 F 
C)  $65,000 F 
D)  $67,500 F 
A)  $52,500 F 
B)  $55,000 F 
C)  $65,000 F 
D)  $67,500 F

Question 6

Historical experience may provide an initial guideline for setting standards, but it should be used with caution.

Accepted Answer

A) True 
 B)False

Question 7

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.
Required:
A. Determine the company's labour efficiency variance and whether it is favourable or unfavourable.
B. Should the variance be investigated?

Accepted Answer

@#IMG-DLM& B. Standard labour cost = 500

Question 8

Allan Company
Allan Company manufactures overalls. During the year, it manufactured 125,000 overalls, using 2.9 hours of direct labour per unit at a rate of $6.25 per hour. The materials and labour standards for manufacturing the overalls are as follows: $\begin{array}{lll}
\text {Direct materials ( $ 5 \mathrm{~m} $ of denim $ @ \$ 2 $ per metre) }&\$10\
\text {Direct labour (3 hours $ @ \$ 6 $ per  }&18\
\end{array}$
 The company required 600,000 m at $1.95 per metre to make the 125,000 overalls.There were no beginning or ending inventories.
-Refer to AirSoar Company. What was the actual cost per labour hour?

Accepted Answer

A)  $11.25 
B)  $11.50 
C)  $12.50 
D)  $12.75 
A)  $11.25 
B)  $11.50 
C)  $12.50 
D)  $12.75

Question 9

Bear Company
Bear Company uses a standard costing system. The following information pertains to direct labour costs for the month of March: $$\begin{array} { l l } 
\text { Standard direct labour rate per hour } & \$ 15.00 \
\text { Actual direct labour rate per hour } & \$ 13.50 \
\text { Labour rate variance } & \$ 18,000 \text { fav ourable } \
\text { Actual output } & 1,000 \text { units } \
\text { Standard hours allowed for actual production } & 10,000 \text { hours }
\end{array}$$
-Refer to Bear Company. What is the total labour budget variance?

Accepted Answer

A)  $12,000 U 
B)  $12,000 F 
C)  $18,000 U 
D)  $18,000 F 
A)  $12,000 U 
B)  $12,000 F 
C)  $18,000 U 
D)  $18,000 F

Question 10

What formula is used to determine the usage variance?

Accepted Answer

A)  (AQ - SQ) x SP 
B)  (SQ - AQ) x SP 
C)  (AQ - AQ) x SP 
D)  (SQ + AQ) x SP 
A)  (AQ - SQ) x SP 
B)  (SQ - AQ) x SP 
C)  (AQ - AQ) x SP 
D)  (SQ + AQ) x SP

Question 11

Which formula is used to compute standard hours allowed?

Accepted Answer

A)  unit labour standard × actual input 
B)  unit labour standard × actual output 
C)  unit labour standard × standard input 
D)  unit labour standard × standard output 
A)  unit labour standard × actual input 
B)  unit labour standard × actual output 
C)  unit labour standard × standard input 
D)  unit labour standard × standard output

Question 12

Kaizen costing provides fixed standards which reflect continuous improvement efforts.

Accepted Answer

A) True 
 B)False

Question 13

In kaizen costing, each period's kaizen standard is based on prior periods' improvements, thereby locking in these improvements.

Accepted Answer

A) True 
 B)False

Question 14

Which statement best describes variances?

Accepted Answer

A)  A favourable labour rate variance could result from lower wage workers quitting. 
B)  A favourable materials price variance could result from purchasing materials from another supplier at a lower price. 
C)  A favourable materials usage variance could result from increased waste caused by not efficiently utilizing raw materials. 
D)  An unfavourable labour efficiency variance could result from using higher quality materials that result in fewer inspections. 
A)  A favourable labour rate variance could result from lower wage workers quitting. 
B)  A favourable materials price variance could result from purchasing materials from another supplier at a lower price. 
C)  A favourable materials usage variance could result from increased waste caused by not efficiently utilizing raw materials. 
D)  An unfavourable labour efficiency variance could result from using higher quality materials that result in fewer inspections.

Question 15

Allan Company
Allan Company manufactures overalls. During the year, it manufactured 125,000 overalls, using 2.9 hours of direct labour per unit at a rate of $6.25 per hour. The materials and labour standards for manufacturing the overalls are as follows: $\begin{array}{lll}
\text {Direct materials ( $ 5 \mathrm{~m} $ of denim $ @ \$ 2 $ per metre) }&\$10\
\text {Direct labour (3 hours $ @ \$ 6 $ per  }&18\
\end{array}$
 The company required 600,000 m at $1.95 per metre to make the 125,000 overalls.There were no beginning or ending inventories.
-Refer to Allan Company. What is the materials price variance?

Accepted Answer

A)  $30,000 U 
B)  $30,000 F 
C)  $31,250 U 
D)  $31,250 F 
A)  $30,000 U 
B)  $30,000 F 
C)  $31,250 U 
D)  $31,250 F

Question 16

Niven Company
Niven Company has developed the following standards for one of its products: $\begin{array}{ll}
\text { Direct materials: } & 8 \mathrm{~kg} \times \$ 8.5 \text { per kilogram } \
\text { Direct labour: } & 3 \text { hours } \times \$ 1 \text { per hour }
\end{array}$ The following activity occurred during the month of April: $\begin{array}{ll}
\text { Materials purchased: } & 5,000 \mathrm{~kg} \text { costing } \$ 42,500 \
\text { Materials used: } & 3,600 \mathrm{~kg} \
\text { Units produced: } & 500 \text { units } \
\text { Direct labour: } & 1,150 \text { hours at } \$ 11.80 \text { per hour } \
\end{array}$ The company records materials price variances at the time of purchase.
-Refer to Niven Company. What is the variable standard cost per unit for materials?

Accepted Answer

A)  $8.50 
B)  $11.81 
C)  $68.00 
D)  $204.00 
A)  $8.50 
B)  $11.81 
C)  $68.00 
D)  $204.00

Question 17

Serenity Equestrian Corporation
Serenity Equestrian Corporation produces high-quality leather saddles. The company has a standard cost system and has set the following standards for materials and labour: $$\begin{array} { l l } 
\text { Leather } ( 20 \text { strips } ( Q , \$ 15 \text { per strip) } & \$ 300 \
\text { Direct labour } ( 15 \text { hours } ( a ) \$ 15 \text { per hour } ) & \$ 225 \
\text { Total prime cost } & \$ 525
\end{array}$$ During the year, the company produced 150 saddles. Actual leather purchased was 3,100 strips at $12 per strip. There were no beginning or ending inventories of leather.Actual direct labour was 2,500 hours at $16 per hour.
-Refer to Serenity Equestrian Corporation. What is the total budget variance for labour?

Accepted Answer

A)  $3,750 U 
B)  $3,750 F 
C)  $6,250 U 
D)  $6,250 F 
A)  $3,750 U 
B)  $3,750 F 
C)  $6,250 U 
D)  $6,250 F

Question 18

What is characteristic of the use of materials variance information?

Accepted Answer

A)  The production manager is generally responsible for acquiring quality materials. 
B)  The production manager is generally responsible for the materials usage variance. 
C)  The production manager is generally responsible for the materials price variance. 
D)  The purchasing department is generally concerned with minimizing scrap, waste, and rework. 
A)  The production manager is generally responsible for acquiring quality materials. 
B)  The production manager is generally responsible for the materials usage variance. 
C)  The production manager is generally responsible for the materials price variance. 
D)  The purchasing department is generally concerned with minimizing scrap, waste, and rework.

Question 19

Standard costs are developed for direct materials, direct labour, and variable overhead only.

Accepted Answer

A) True 
 B)False

Question 20

In kaizen costing, the cost reduction process is controlled by repetitive use of continuous improvements and maintenance.

Accepted Answer

A) True 
 B)False

Which statement best describes target costing?

Match each of the following calculations with their corresponding variance. -Labour rate variance

Ideal standards allow for machine breakdowns, slack, or momentary lack of skill.

Match each of the following calculations with their corresponding variance. -Actual costs

Historical experience may provide an initial guideline for setting standards, but it should be used with caution.

What formula is used to determine the usage variance?

Which formula is used to compute standard hours allowed?

Kaizen costing provides fixed standards which reflect continuous improvement efforts.

In kaizen costing, each period's kaizen standard is based on prior periods' improvements, thereby locking in these improvements.

Which statement best describes variances?

What is characteristic of the use of materials variance information?

Standard costs are developed for direct materials, direct labour, and variable overhead only.

In kaizen costing, the cost reduction process is controlled by repetitive use of continuous improvements and maintenance.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Cost-Volume-Profit 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

Which statement best describes target costing?

Match each of the following calculations with their corresponding variance. -Labour rate variance

Ideal standards allow for machine breakdowns, slack, or momentary lack of skill.

Match each of the following calculations with their corresponding variance. -Actual costs

Historical experience may provide an initial guideline for setting standards, but it should be used with caution.

What formula is used to determine the usage variance?

Which formula is used to compute standard hours allowed?

Kaizen costing provides fixed standards which reflect continuous improvement efforts.

In kaizen costing, each period's kaizen standard is based on prior periods' improvements, thereby locking in these improvements.

Which statement best describes variances?

What is characteristic of the use of materials variance information?

Standard costs are developed for direct materials, direct labour, and variable overhead only.

In kaizen costing, the cost reduction process is controlled by repetitive use of continuous improvements and maintenance.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Cost-Volume-Profit 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