Question 1

"A favorable direct materials price variance is always good for a company." Is this statement true? Justify your answer.

Accepted Answer

The statement is not true.Favorable dire

Question 2

If a company is operating at a capacity below its normal capacity in units,the fixed overhead volume variance will be favorable.

Accepted Answer

A) True 
 B)False

Question 3

James Corporation's controller has developed the cost and usage data listed below in preparation of standard unit cost information for the coming year.   Using the above information provided for James Corporation.
-The standard unit cost for direct materials is

Accepted Answer

A) $45. 
B) $10. 
C) $24. 
D) $33. 
A) $45. 
B) $10. 
C) $24. 
D) $33.

Question 4

Underfoot Products uses standard costing.The following information about overhead was generated during May:   
-Compute the variable overhead spending variance.

Accepted Answer

A) $10,000 (F) 
B) $10,000 (U) 
C) $40,000 (F) 
D) $40,000 (U) 
A) $10,000 (F) 
B) $10,000 (U) 
C) $40,000 (F) 
D) $40,000 (U)

Question 5

A standard costing system

Accepted Answer

A) is used by management for cost planning,but not for cost control purposes. 
B) is a system in which all costs affecting the three inventory accounts and the Cost of Goods Sold account are stated in terms of actual costs incurred. 
C) depends on actual costs rather than planned costs. 
D) is employed with an existing job order costing or process costing system and is not a full cost accounting system in itself. 
A) is used by management for cost planning,but not for cost control purposes. 
B) is a system in which all costs affecting the three inventory accounts and the Cost of Goods Sold account are stated in terms of actual costs incurred. 
C) depends on actual costs rather than planned costs. 
D) is employed with an existing job order costing or process costing system and is not a full cost accounting system in itself.

Question 6

Robert Inc.uses the standard costing method.The company's main product is a fine-quality headphones that normally takes 0.5 hour to produce.Normal annual capacity is 5,000 direct labor hours,and budgeted fixed overhead costs for the year were $8,750.During the year,the company produced and sold 5,800 units.Actual fixed overhead costs were $6,000. Using the information provided for Robert Inc.
-Compute the fixed overhead volume variance.

Accepted Answer

A) $2,750 (F) 
B) $925 (U) 
C) $5,800 (U) 
D) $3,675 (U) 
A) $2,750 (F) 
B) $925 (U) 
C) $5,800 (U) 
D) $3,675 (U)

Question 7

The effective evaluation of managers' performance depends on both human factors and company policies.Using variances from standard costs in a manager's performance report adds accuracy to the evaluation process.What actions should be taken to ensure effectiveness and fairness when setting up a performance evaluation process?

Accepted Answer

A company's management should establish

Question 8

The variable overhead spending variance is also called the variable overhead rate variance.

Accepted Answer

A) True 
 B)False

Question 9

Discuss standard costing.As part of your discussion,define a standard cost.In addition,compare and contrast standard costs and predetermined overhead costs.Include in your discussion at least three reasons why standard costs are introduced into a cost accounting system.How is a standard cost accounting system useful to management?

Accepted Answer

Standard costs are predetermined realist

Question 10

If standard costing is not economically feasible for a company,predetermined overhead rates should not be used.

Accepted Answer

A) True 
 B)False

Question 11

Cost centers have well-defined links between the cost of the resources and the resulting products.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Blue Bull Inc.uses direct labor hours to allocate variable and fixed overhead costs.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 all circumstances the base used for each calculation is 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 all circumstances the base used for each calculation is 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 14

During the current month,Thompson Company started 40,000 units of product and transferred 25,000 fully completed units to finished goods.The final work in process inventory was 50 percent complete as to labor operations.There was no initial work in process,and actual labor hours were 150,000 for the period.Each unit should have required 3 direct labor hours to be produced at standard.The total standard hours allowed for the period are

Accepted Answer

A) 75,000 hours. 
B) 97,500 hours. 
C) 120,000 hours. 
D) 150,000 hours. 
A) 75,000 hours. 
B) 97,500 hours. 
C) 120,000 hours. 
D) 150,000 hours.

Question 15

Although expensive to install and maintain,a standard cost accounting system can save a company considerable amounts of money by reducing resource waste.

Accepted Answer

A) True 
 B)False

Question 16

The use of realistic predetermined unit costs to facilitate product costing,cost control,cost flow,and inventory valuation is a description of the

Accepted Answer

A) flexible budget concept. 
B) budgetary control concept. 
C) capacity level concept. 
D) standard cost accounting concept. 
A) flexible budget concept. 
B) budgetary control concept. 
C) capacity level concept. 
D) standard cost accounting concept.

Question 17

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 18

A flexible budget is most useful

Accepted Answer

A) when company has only fixed costs. 
B) when actual output equals budgeted output. 
C) as a cost control tool to help evaluate performance. 
D) when a product's cost structure includes variable costs only. 
A) when company has only fixed costs. 
B) when actual output equals budgeted output. 
C) as a cost control tool to help evaluate performance. 
D) when a product's cost structure includes variable costs only.

Exam 22: Standard Costing and Variance Analysis

"A favorable direct materials price variance is always good for a company." Is this statement true? Justify your answer.

If a company is operating at a capacity below its normal capacity in units,the fixed overhead volume variance will be favorable.

James Corporation's controller has developed the cost and usage data listed below in preparation of standard unit cost information for the coming year. Using the above information provided for James Corporation. -The standard unit cost for direct materials is

Underfoot Products uses standard costing.The following information about overhead was generated during May: -Compute the variable overhead spending variance.

A standard costing system

The variable overhead spending variance is also called the variable overhead rate variance.

If standard costing is not economically feasible for a company,predetermined overhead rates should not be used.

Cost centers have well-defined links between the cost of the resources and the resulting products.

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

Blue Bull Inc.uses direct labor hours to allocate variable and fixed overhead costs.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?

Although expensive to install and maintain,a standard cost accounting system can save a company considerable amounts of money by reducing resource waste.

The use of realistic predetermined unit costs to facilitate product costing,cost control,cost flow,and inventory valuation is a description of the

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?

A flexible budget is most useful

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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