Question 1

Why should historical experience be used with caution in a standard setting?

Accepted Answer

A)  Historical experience can perpetuate inefficiencies. 
B)  Historical experience provides very rigorous guidelines. 
C)  Standards based on historical experience are better than standards based on engineering studies. 
D)  Operating personnel may not be able to achieve operating standards based on historical experience. 
A)  Historical experience can perpetuate inefficiencies. 
B)  Historical experience provides very rigorous guidelines. 
C)  Standards based on historical experience are better than standards based on engineering studies. 
D)  Operating personnel may not be able to achieve operating standards based on historical experience.

Question 2

Match each of the following calculations with their corresponding variance.
-Total direct labour 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

Which formula is used to compute the standard quantity of materials allowed?

Accepted Answer

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

Question 4

To compute the standard direct labour hours allowed, multiply the unit labour standard by the standard output.

Accepted Answer

A) True 
 B)False

Question 5

For better control, the materials price variance is computed using the standard quantity of materials used.

Accepted Answer

A) True 
 B)False

Question 6

Fender Corporation
Fender Corporation produced 100 units of Product XX. The total standard and actual costs for materials and direct labour for the 100 units of Product XX are as follows: $\begin{array}{ll}
 &&\underline{\text { Standard}} &\underline{\text {  Actual }}\ 
 \underline{\text { Materials}}\
\text { Standard: } & 200 \mathrm{~kg} \text { at } \$ 3.00 \text { per kilogram }&\$600 \
\text { Actual: } & 220 \mathrm{~kg} \text { at } \$ 2.85 \text { per kilogram }&&\$627\
\
 \underline{\text { Direct labour}}\
\text { Standard: } & 400 \text { hours at } \$ 15.00 \text { per hour } & 6,000 \
\text { Actual: } & 368 \text { hours at } \$ 16.50 \text { per hour } &&6,072 
\end{array}$ 
-Refer to Perfect Builders. What was the labour rate variance?

Accepted Answer

A)  $240,000 U 
B)  $240,000 F 
C)  $280,000 U 
D)  $280,000 F 
A)  $240,000 U 
B)  $240,000 F 
C)  $280,000 U 
D)  $280,000 F

Question 7

Match each of the following calculations with their corresponding variance.
-Materials usage 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 8

Which formula is used to calculate the labour rate variance?

Accepted Answer

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

Question 9

Match each of the following calculations with their corresponding variance.
-Materials price 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 10

Bi-land Company
Bi-land Company's standard cost is $150,000. The allowable deviation is ±10%. The actual costs for six months are as follows: $$\begin{array} { l l } 
\text { January } & \$ 130,000 \
\text { February } & \$ 120,000 \
\text { March } & \$ 145,000 \
\text { April } & \$ 160,000 \
\text { May } & \$ 170,000 \
\text { June } & \$ 180,000
\end{array}$$
-Refer to Bi-land Company. What are the upper and lower control limits, respectively?

Accepted Answer

A)  $165,000 and $105,000 
B)  $165,000 and $135,000 
C)  $175,000 and $150,000 
D)  $205,000 and $95,000 
A)  $165,000 and $105,000 
B)  $165,000 and $135,000 
C)  $175,000 and $150,000 
D)  $205,000 and $95,000

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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. Assuming that the variances are NOT significant, what are the entries to close the variances of labour and materials?

Accepted Answer

A)  Materials Price Variance 30,000
Materials Usage Variance 50,000
Labour Efficiency Variance 75,000
Cost of Goods Sold 155,000
Cost of Goods Sold 90,625
Labour Rate Variance 90,625 
B)  Materials Price Variance 31,250
Materials Usage Variance 48,750
Labour Efficiency Variance 78,125
Cost of Goods Sold 158,125
Cost of Goods Sold 93,750
Labour Rate Variance 93,750 
C)  Cost of Goods Sold 155,000
Materials Price Variance 30,000
Materials Usage Variance 50,000
Labour Efficiency Variance 75,000
Labour Rate Variance 90,625
Cost of Goods Sold 90,625 
D)  Cost of Goods Sold 158,125
Materials Price Variance 31,250
Materials Usage Variance 48,750
Labour Efficiency Variance 78,125
Labour Rate Variance 93,750
Cost of Goods Sold 93,750 
A)  Materials Price Variance 30,000
Materials Usage Variance 50,000
Labour Efficiency Variance 75,000
Cost of Goods Sold 155,000
Cost of Goods Sold 90,625
Labour Rate Variance 90,625 
B)  Materials Price Variance 31,250
Materials Usage Variance 48,750
Labour Efficiency Variance 78,125
Cost of Goods Sold 158,125
Cost of Goods Sold 93,750
Labour Rate Variance 93,750 
C)  Cost of Goods Sold 155,000
Materials Price Variance 30,000
Materials Usage Variance 50,000
Labour Efficiency Variance 75,000
Labour Rate Variance 90,625
Cost of Goods Sold 90,625 
D)  Cost of Goods Sold 158,125
Materials Price Variance 31,250
Materials Usage Variance 48,750
Labour Efficiency Variance 78,125
Labour Rate Variance 93,750
Cost of Goods Sold 93,750

Question 13

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 entry to record the purchase of materials?

Accepted Answer

A)  Materials 1,170,000
Materials Price Variance 30,000
Accounts Payable 1,200,000 
B)  Materials 1,200,000
Materials Price Variance 30,000
Accounts Payable 1,170,000 
C)  Materials 1,218,750
Materials Price Variance 31,250
Accounts Payable 1,250,000 
D)  Materials 1,250,000
Materials Price Variance 31,250
Accounts Payable 1,218,750 
A)  Materials 1,170,000
Materials Price Variance 30,000
Accounts Payable 1,200,000 
B)  Materials 1,200,000
Materials Price Variance 30,000
Accounts Payable 1,170,000 
C)  Materials 1,218,750
Materials Price Variance 31,250
Accounts Payable 1,250,000 
D)  Materials 1,250,000
Materials Price Variance 31,250
Accounts Payable 1,218,750

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

What is NOT characteristic of control limits?

Accepted Answer

A)  Control limits are set objectively using standard formulas. 
B)  The upper control limit is the standard plus the allowable deviation. 
C)  The lower control limit is the standard minus the allowable deviation. 
D)  Control limits are the top and bottom measures of the allowable range. 
A)  Control limits are set objectively using standard formulas. 
B)  The upper control limit is the standard plus the allowable deviation. 
C)  The lower control limit is the standard minus the allowable deviation. 
D)  Control limits are the top and bottom measures of the allowable range.

Question 16

How are costs assigned in a standard cost system?

Accepted Answer

A)  actual direct materials, actual direct labour, and actual manufacturing overhead 
B)  actual direct materials, actual direct labour, and budgeted manufacturing overhead 
C)  standard direct materials, standard direct labour, and standard manufacturing overhead 
D)  budgeted direct materials, standard direct labour, and standard manufacturing overhead 
A)  actual direct materials, actual direct labour, and actual manufacturing overhead 
B)  actual direct materials, actual direct labour, and budgeted manufacturing overhead 
C)  standard direct materials, standard direct labour, and standard manufacturing overhead 
D)  budgeted direct materials, standard direct labour, and standard manufacturing overhead

Question 17

The materials price variance is computed using the actual quantity of materials used, and the materials usage variance is computed using the actual quantity of materials purchased.

Accepted Answer

A) True 
 B)False

Question 18

Refer to RJB Builders. What was the materials price variance?

Accepted Answer

A)  $49,900 U 
B)  $49,900 F 
C)  $50,000 U 
D)  $50,000 F 
A)  $49,900 U 
B)  $49,900 F 
C)  $50,000 U 
D)  $50,000 F

Question 19

High Fly Company
High Fly Company manufactures model airplanes. During the month, it manufactured 10,000 airplanes. Each airplane used an average of 6.5 direct labour hours and an average of 1.5 sheets of aluminum. The company normally manufactures 7,500 airplanes each month. Materials and labour standards for making the airplanes are as follows: $$\begin{array} { l l } 
\text { Direct materials (1 sheet of aluminum } ( @ ) 10.00 \text { per sheet) } & \$ 10.00 \
\text { Direct materials (other accessories } @ \$ 8.75 ) & \$ 8.75 \
\text { Direct labour } ( 6 \text { hours } @ \$7.00 \text { per hour) } & \$ 42.00
\end{array}$$
-Refer to High Fly Company. How many standard hours are allowed for a volume of 10,000 airplanes?

Accepted Answer

A)  60,000 hours 
B)  65,000 hours 
C)  70,000 hours 
D)  420,000 hours 
A)  60,000 hours 
B)  65,000 hours 
C)  70,000 hours 
D)  420,000 hours

Question 20

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all.
-Standards of perfection that require absolute efficiency.

Accepted Answer

A) Quantity standards 
B) Ideal standards 
C) Price standards 
D) Standard cost sheet 
E) Upper control limit
F)Currently attainable standards
G)Kaizen standards 
A) Quantity standards 
B) Ideal standards 
C) Price standards 
D) Standard cost sheet 
E) Upper control limit
F)Currently attainable standards
G)Kaizen standards

Why should historical experience be used with caution in a standard setting?

Match each of the following calculations with their corresponding variance. -Total direct labour variance

Which formula is used to compute the standard quantity of materials allowed?

To compute the standard direct labour hours allowed, multiply the unit labour standard by the standard output.

For better control, the materials price variance is computed using the standard quantity of materials used.

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

Which formula is used to calculate the labour rate variance?

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

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

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

What is NOT characteristic of control limits?

How are costs assigned in a standard cost system?

The materials price variance is computed using the actual quantity of materials used, and the materials usage variance is computed using the actual quantity of materials purchased.

Refer to RJB Builders. What was the materials price variance?

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Standards of perfection that require absolute efficiency.

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

Why should historical experience be used with caution in a standard setting?

Match each of the following calculations with their corresponding variance. -Total direct labour variance

Which formula is used to compute the standard quantity of materials allowed?

To compute the standard direct labour hours allowed, multiply the unit labour standard by the standard output.

For better control, the materials price variance is computed using the standard quantity of materials used.

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

Which formula is used to calculate the labour rate variance?

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

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

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

What is NOT characteristic of control limits?

How are costs assigned in a standard cost system?

The materials price variance is computed using the actual quantity of materials used, and the materials usage variance is computed using the actual quantity of materials purchased.

Refer to RJB Builders. What was the materials price variance?

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Standards of perfection that require absolute efficiency.

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