Question 1

In standard costing,

Accepted Answer

A)  the standards are developed only for overhead costs. 
B)  the standards are developed primarily from past costs. 
C)  comparisons with actual costs usually are not performed. 
D)  debit and credit entries to inventory accounts are made at standard costs. 
A)  the standards are developed only for overhead costs. 
B)  the standards are developed primarily from past costs. 
C)  comparisons with actual costs usually are not performed. 
D)  debit and credit entries to inventory accounts are made at standard costs.

Question 2

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 3

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

Accepted Answer

A) True 
 B)False

Question 4

If actual capacity used exceeds expected capacity, the fixed overhead volume variance is favorable.

Accepted Answer

A) True 
 B)False

Question 5

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 vari

Question 6

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 7

A performance report should contain cost or revenue items that the manager receiving the report can control.

Accepted Answer

A) True 
 B)False

Question 8

Once standard costs for direct materials, direct labor, and variable and fixed overhead have been developed, a total standard unit cost can be determined at any time.

Accepted Answer

A) True 
 B)False

Question 9

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 10

The Lennon Company uses a standard costing system and a flexible budget. At a normal level of activity of 15,000 units and 45,000 standard direct labor hours, the standard direct labor cost would be $270,000. During June, 44,950 hours were worked to produce 14,000 units at an actual direct labor cost of $352,000. The direct labor efficiency variance in June was

Accepted Answer

A)  $25,700 (U). 
B)  $17,700 (U). 
C)  $17,700 (F). 
D)  $20,700 (U). 
A)  $25,700 (U). 
B)  $17,700 (U). 
C)  $17,700 (F). 
D)  $20,700 (U).

Question 11

"The difference between actual hours worked and standard hours allowed for the good units produced, multiplied by the standard labor rate" is a description of the

Accepted Answer

A)  direct labor rate variance. 
B)  direct labor efficiency variance. 
C)  total direct labor cost variance. 
D)  direct labor quantity variance. 
A)  direct labor rate variance. 
B)  direct labor efficiency variance. 
C)  total direct labor cost variance. 
D)  direct labor quantity variance.

Question 12

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.

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 13

The overhead variance is equal to the difference between

Accepted Answer

A)  fixed overhead costs and flexible overhead costs. 
B)  estimated overhead rate and applied overhead rate. 
C)  actual overhead costs and variable overhead costs. 
D)  actual overhead costs and standard overhead costs. 
A)  fixed overhead costs and flexible overhead costs. 
B)  estimated overhead rate and applied overhead rate. 
C)  actual overhead costs and variable overhead costs. 
D)  actual overhead costs and standard overhead costs.

Question 14

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 15

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 16

The direct materials price standard is determined by averaging costs of current purchases.

Accepted Answer

A) True 
 B)False

Question 17

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 18

A flexible budget is a summary of expected costs for a range of activity levels and is geared to changes in the level of productive output.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

One drawback of using standard costing is that it is

Accepted Answer

A)  expensive to use. 
B)  difficult to implement. 
C)  often inaccurate. 
D)  not applicable to most manufacturing systems. 
A)  expensive to use. 
B)  difficult to implement. 
C)  often inaccurate. 
D)  not applicable to most manufacturing systems.

Exam 26: Standard Costing and Variance Analysis

In standard costing,

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

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

If actual capacity used exceeds expected capacity, the fixed overhead volume variance is favorable.

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.

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

A performance report should contain cost or revenue items that the manager receiving the report can control.

Once standard costs for direct materials, direct labor, and variable and fixed overhead have been developed, a total standard unit cost can be determined at any time.

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

"The difference between actual hours worked and standard hours allowed for the good units produced, multiplied by the standard labor rate" is a description of the

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.

The overhead variance is equal to the difference between

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.

Which of the following statements is not true?

The direct materials price standard is determined by averaging costs of current purchases.

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

A flexible budget is a summary of expected costs for a range of activity levels and is geared to changes in the level of productive output.

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

One drawback of using standard costing is that it is

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Short Run Decision Analysis

Capital Investment Analysis

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