Question 1

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 2

During April, Risco Company produced 13,00012,000 chainsaw blades. The standard quantity of material allowed per unit was 21.5 kg of steel per blade at a standard cost of $98 per kilogram.
-Refer to the Figure.Suppose the actual cost was $87 per kilogram and Risco purchased 27,500 kg of steel.All materials purchased were used.What was Risco's materials usage variance?

Accepted Answer

A) $10,500 U 
B) $10,500 F 
C) $13,500 U 
D) $13,500 F 
A) $10,500 U 
B) $10,500 F 
C) $13,500 U 
D) $13,500 F

Question 3

Which of the following statements is characteristic of target costing?

Accepted Answer

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

Question 4

The Fantastic Tool Company (Mexico Division) produced 100,000 saw blades during the year. Each saw blade required two hours of labour at a rate of $5.50 per hour. However, the company's standard labour rate is $5.00. Its labour efficiency variance was a favourable $55,000.
-Refer to the Figure.What is Fantastic's labour rate variance?

Accepted Answer

A) $95,000 U 
B) $96,875 U 
C) $100,000 U 
D) $105,500 U 
A) $95,000 U 
B) $96,875 U 
C) $100,000 U 
D) $105,500 U

Question 5

During April, Risco Company produced 13,00012,000 chainsaw blades. The standard quantity of material allowed per unit was 21.5 kg of steel per blade at a standard cost of $98 per kilogram.
-Refer to the Figure.Risco determined that it had a favourable materials usage variance of $2,0001,000 for April.What was the actual quantity of materials Risco used?

Accepted Answer

A) 11,875 kg 
B) 12,125 kg 
C) 25,778 kg 
D) 27,778 kg 
A) 11,875 kg 
B) 12,125 kg 
C) 25,778 kg 
D) 27,778 kg

Question 6

Match the variance with its correct calculation.
-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 7

Determine if the variance is favourable or unfavourable.

-Actual price of inputs is greater than the standard price.

Accepted Answer

A) Favourable variance 
B) Unfavourable variance 
A) Favourable variance 
B) Unfavourable variance

Question 8

The total budget variance is the difference between the actual cost of the input and its actual cost.

Accepted Answer

A) True 
 B)False

Question 9

Allan Company manufactures overalls. During the year, it manufactured 125,000 overalls, using 2.9 hours of direct labour at a rate of $6.25 per hour. The materials and labour standards for manufacturing the overalls are as follows:
Allan required 600,000 m at $1.95 per metre to make the 125,000 overalls.
 $\begin{array}{lll}
\text {Direct materials ( $ 5 \mathrm{~m} $ of denim $ (012 $ per metre) }&\$10\
\text { Direct labour (3 hours $ @ \$ 6 $ per hour)}&18\\end{array}$

-Refer to the Figure.What is the entry to record the issuance and usage of materials?

Accepted Answer

A) Work in Process 1,170,000Materials Usage Variance 48,750Materials 1,218,750 
B) Work in Process 1,200,000Materials Usage Variance 50,000Materials 1,250,000 
C) Work in Process 1,218,750Materials Usage Variance 48,750Materials 1,170,000 
D) Work in Process 1,250,000Materials Usage Variance 50,000Materials 1,200,000 
A) Work in Process 1,170,000Materials Usage Variance 48,750Materials 1,218,750 
B) Work in Process 1,200,000Materials Usage Variance 50,000Materials 1,250,000 
C) Work in Process 1,218,750Materials Usage Variance 48,750Materials 1,170,000 
D) Work in Process 1,250,000Materials Usage Variance 50,000Materials 1,200,000

Question 10

Baker Company adopted a standard cost system several years ago.The standard costs for the prime costs of its single product follow:
The following operating data were taken from the records for December:
 $\begin{array}{ll}
\text { Material: } 10 \mathrm{~kg} @ \$ 4.50 \text { per kilogram } & \$ 45.00 \
\text { Labour: } 6 \text { hours } @ \$ 8.50 \text { per hour } & \$ 51.00
\end{array}$

Compute the following:
 A. Labour rate variance
B. Labour efficiency variance
C. Actual kilograms of material used in the production process
D. Actual cost paid per kilogram of material

Accepted Answer

The answer of Baker Company adopted a standard cost system...

Question 11

Perfect Builders constructs houses. The standard labour rate is $20 per hour, and the standard number of hours is 12,000 hours per home. During the year, it constructed 10 homes using 14,000 labour hours per home and a rate of $22 per hour.
-Refer to the Figure.What was the labour efficiency variance?

Accepted Answer

A) $400,000 U 
B) $400,000 F 
C) $440,000 U 
D) $440,000 F 
A) $400,000 U 
B) $400,000 F 
C) $440,000 U 
D) $440,000 F

Question 12

During March, a small roofing company purchased 700 bundles of a certain type of shingle at a price of $35 per bundle, $8 more than the standard price. The company's standard quantity of this type of shingles is 725 bundles.
-Refer to the Figure.What is the journal entry to record the purchase of materials?

Accepted Answer

A) Materials 19,575Materials Price Variance 5,800Accounts Payable 25,375 
B) Materials 24,500Materials Price Variance 5,600Accounts Payable 18,900 
C) Materials 18,900Materials Price Variance 5,600Accounts Payable 24,500 
D) Materials 25,375Materials Price Variance 5,800Accounts Payable 19,575 
A) Materials 19,575Materials Price Variance 5,800Accounts Payable 25,375 
B) Materials 24,500Materials Price Variance 5,600Accounts Payable 18,900 
C) Materials 18,900Materials Price Variance 5,600Accounts Payable 24,500 
D) Materials 25,375Materials Price Variance 5,800Accounts Payable 19,575

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

How do standard cost systems enhance operational control?

Accepted Answer

A) through efficiency variances, which indicate the need for corrective action 
B) through price variances, which indicate the need for better spending control 
C) through standard costs, which indicate the desired cost of a unit of input 
D) through actual costs, which indicate the price received for units sold 
A) through efficiency variances, which indicate the need for corrective action 
B) through price variances, which indicate the need for better spending control 
C) through standard costs, which indicate the desired cost of a unit of input 
D) through actual costs, which indicate the price received for units sold

Question 15

Green Lawn Corporation wants to produce a new lawnmower. The financial data is as follows:
Other information:
 $\begin{array}{lr}
\text { Target price: } & \$ 450 \
\text { Target profit: } & \$ 75 \
\text { Estimated cost given current product and process designs: } & \$ 400
\end{array}$ 1.
Through reverse engineering, Green Lawn found a design improvement that would save $10 per unit.
2.
It also found that it could purchase a similar component of a different brand at a lower price, which would save $20 per unit.
-Refer to the Figure.What is Green Lawn's target cost?

Accepted Answer

A) $225 
B) $275 
C) $300 
D) $375 
A) $225 
B) $275 
C) $300 
D) $375

Question 16

During March,Raining Unlimited produced 5,500 umbrellas from nylon that costs $0.45 per metre,which is $0.05 per metre cheaper than the standard cost.It also used 3,000 direct labour hours at a rate of $6.50 per hour.Its direct materials standard is 1 m per umbrella.Its direct labour standard is 0.5 hour per umbrella.
Its materials usage variance was a favourable $500,and its labour rate variance was a favourable $900.
 A. Calculate the actual quantity of materials.
B. Calculate the standard labour rate.
C. Determine the materials price variance and whether it is favourable or unfavourable.
D. Determine the labour efficiency variance and whether it is favourable or unfavourable.
E. Record the entries for the materials purchase, the issuance and usage of materials, and the labour variances.
F. Provide the closing entries.

Accepted Answer

The answer of During March,Raining Unlimited produced 5,500 umbrellas from...

Question 17

Allan Company manufactures overalls. During the year, it manufactured 125,000 overalls, using 2.9 hours of direct labour at a rate of $6.25 per hour. The materials and labour standards for manufacturing the overalls are as follows:
Allan required 600,000 m at $1.95 per metre to make the 125,000 overalls.
 $\begin{array}{lll}
\text {Direct materials ( $ 5 \mathrm{~m} $ of denim $ (012 $ per metre) }&\$10\
\text { Direct labour (3 hours $ @ \$ 6 $ per hour)}&18\\end{array}$

-Refer to the Figure.What is Allan's materials usage variance?

Accepted Answer

A) $48,750 U 
B) $48,750 F 
C) $50,000 U 
D) $50,000 F 
A) $48,750 U 
B) $48,750 F 
C) $50,000 U 
D) $50,000 F

Question 18

During the month of December, Cakers Express purchased 20,000 kg of flour at $2 per kilogram.
-Refer to the Figure.At the end of December,Cakers Express found that it had a favourable materials price variance of $1,000.What is the flour's standard cost per kilogram?

Accepted Answer

A) $0.95 
B) $1.00 
C) $1.05 
D) $1.95 
A) $0.95 
B) $1.00 
C) $1.05 
D) $1.95

Question 19

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

A.LEV
= (AH − SH)SR
= (525 − 500)$15.50

Question 20

AirSoar Company produces model airplanes. During August, the company produced 1,000 planes. The actual labour hours were 10 hours per plane. The company's standard labour hours are 15 hours per plane. The standard labour rate is $12 per hour. At the end of August, AirSoar found that it had a favourable labour rate variance of $7,500.
-Refer to the Figure.What was AirSoar's 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

Which of the following are sources of quantity standards?

Which of the following statements is characteristic of target costing?

Match the variance with its correct calculation. -Materials usage variance

Determine if the variance is favourable or unfavourable. -Actual price of inputs is greater than the standard price.

The total budget variance is the difference between the actual cost of the input and its actual cost.

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

How do standard cost systems enhance operational control?

During the month of December, Cakers Express purchased 20,000 kg of flour at $2 per kilogram. -Refer to the Figure.At the end of December,Cakers Express found that it had a favourable materials price variance of $1,000.What is the flour's standard cost per kilogram?

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

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Exam 10: Standard Costing: a Managerial Control Tool

Which of the following are sources of quantity standards?

Which of the following statements is characteristic of target costing?

Match the variance with its correct calculation. -Materials usage variance

Determine if the variance is favourable or unfavourable. -Actual price of inputs is greater than the standard price.

The total budget variance is the difference between the actual cost of the input and its actual cost.

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

How do standard cost systems enhance operational control?

During the month of December, Cakers Express purchased 20,000 kg of flour at $2 per kilogram. -Refer to the Figure.At the end of December,Cakers Express found that it had a favourable materials price variance of $1,000.What is the flour's standard cost per kilogram?

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