Question 1

Normally standard costs should be revised when labor rates change to incorporate new union contracts.

Accepted Answer

A) True 
 B)False

Question 2

Ruby Company produces a chair that requires 5 yds. of material per unit. The standard price of one yard of material is $7.50. During the month, 8,500 chairs were manufactured, using 43,600 yards at a cost of $7.55 per yard. Determine the (a) price variance, (b) quantity variance, and (c) cost variance.

Accepted Answer

(a) Price variance = ($7.50 -

Question 3

In most businesses, cost standards are established principally by accountants.

Accepted Answer

A) True 
 B)False

Question 4

Standard costs should always be revised when they differ from actual costs.

Accepted Answer

A) True 
 B)False

Question 5

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 unfavorable.

Accepted Answer

A) True 
 B)False

Question 6

It is correct to rely exclusively on past cost data when establishing standards.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a reason standard costs are separated in two components?

Accepted Answer

A)  the price and quantity variances need to be identified separately to correct the actual major differences. 
B)  identifying variances determines which manager must find a solution to major discrepancies. 
C)  if a negative variance is over-shadowed by a favorable variance, managers may overlook potential corrections. 
D)  variances brings attention to discrepancies in the budget and requires managers to revise budgets closer to actual. 
A)  the price and quantity variances need to be identified separately to correct the actual major differences. 
B)  identifying variances determines which manager must find a solution to major discrepancies. 
C)  if a negative variance is over-shadowed by a favorable variance, managers may overlook potential corrections. 
D)  variances brings attention to discrepancies in the budget and requires managers to revise budgets closer to actual.

Question 8

The formula to compute direct materials price variance is to calculate the difference between

Accepted Answer

A)  actual costs - (actual quantity * standard price) 
B)  actual cost + standard costs 
C)  actual cost - standard costs 
D)  (actual quantity * standard price) -standard costs 
A)  actual costs - (actual quantity * standard price) 
B)  actual cost + standard costs 
C)  actual cost - standard costs 
D)  (actual quantity * standard price) -standard costs

Question 9

The standard costs and actual costs for direct labor for the manufacture of 2,500 actual units of product are as follows:   The amount of the direct labor rate variance is:

Accepted Answer

A)  $2,960 unfavorable 
B)  $4,500 favorable 
C)  $2,960 favorable 
D)  $4,500 unfavorable 
A)  $2,960 unfavorable 
B)  $4,500 favorable 
C)  $2,960 favorable 
D)  $4,500 unfavorable

Question 10

Ruby Company produces a chair that requires 5 yds. of material per unit. The standard price of one yard of material is $7.50. During the month, 8,400 chairs were manufactured, using 43,700 yards at a cost of $7.30 per yard. Determine the (a) price variance, (b) quantity variance, and (c) cost variance.

Accepted Answer

(a) Price variance = ($7.50 -

Question 11

Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in a:

Accepted Answer

A)  quantity variance 
B)  controllable variance 
C)  volume variance 
D)  rate variance 
A)  quantity variance 
B)  controllable variance 
C)  volume variance 
D)  rate variance

Question 12

If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 500 hours at $17, the time variance was $1,700 unfavorable.

Accepted Answer

A) True 
 B)False

Question 13

The following data is given for the Taylor Company:
   Overhead is applied on standard labor hours.
Compute the direct material price and quantity variances for Taylor Company.

Accepted Answer

Direct material price: $23,000

Question 14

If the actual direct labor hours spent producing a commodity differs from the standard hours, the variance is termed a:

Accepted Answer

A)  time variance 
B)  price variance 
C)  quantity variance 
D)  rate variance 
A)  time variance 
B)  price variance 
C)  quantity variance 
D)  rate variance

Question 15

Hsu Company produces a part with a standard of 5 yds. of material per unit. The standard price of one yard of material is $8.50. During the month, 8,800 parts were manufactured, using 45,700 yards of material at a cost of $8.30.
Required:
Determine the (a) price variance, (b) quantity variance, and (c) cost variance.

Accepted Answer

(a) Price variance = ($8.50 - $8.30) x 4

Question 16

Favorable volume variances may be harmful when:

Accepted Answer

A)  machine repairs cause work stoppages 
B)  supervisors fail to maintain an even flow of work 
C)  production in excess of normal capacity cannot be sold 
D)  all of the above 
A)  machine repairs cause work stoppages 
B)  supervisors fail to maintain an even flow of work 
C)  production in excess of normal capacity cannot be sold 
D)  all of the above

Question 17

The following data is given for the Zoyza Company:   Overhead is applied on standard labor hours.
The factory overhead controllable variance is:

Accepted Answer

A)  $73,250F 
B)  $73,250U 
C)  $59,400F 
D)  $59,400U 
A)  $73,250F 
B)  $73,250U 
C)  $59,400F 
D)  $59,400U

Question 18

A variable cost system is an accounting system where standards are set for each manufacturing cost element.

Accepted Answer

A) True 
 B)False

Question 19

The standard price and quantity of direct materials are separated because:

Accepted Answer

A)  GAAP reporting requires this separation 
B)  direct materials prices are controlled by the purchasing department, and quantity used is controlled by the production department 
C)  standard quantities are more difficult to estimate than standard prices 
D)  standard prices change more frequently than standard quantities 
A)  GAAP reporting requires this separation 
B)  direct materials prices are controlled by the purchasing department, and quantity used is controlled by the production department 
C)  standard quantities are more difficult to estimate than standard prices 
D)  standard prices change more frequently than standard quantities

Question 20

Define ideal and currently attainable standards. Which type of standard should be used and why?

Accepted Answer

Ideal standards are standards that are o

Exam 23: Performance Evaluation Using Variances From Standard Costs

Normally standard costs should be revised when labor rates change to incorporate new union contracts.

In most businesses, cost standards are established principally by accountants.

Standard costs should always be revised when they differ from actual costs.

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 unfavorable.

It is correct to rely exclusively on past cost data when establishing standards.

Which of the following is not a reason standard costs are separated in two components?

The formula to compute direct materials price variance is to calculate the difference between

The standard costs and actual costs for direct labor for the manufacture of 2,500 actual units of product are as follows: The amount of the direct labor rate variance is:

Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in a:

If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 500 hours at $17, the time variance was $1,700 unfavorable.

The following data is given for the Taylor Company: Overhead is applied on standard labor hours. Compute the direct material price and quantity variances for Taylor Company.

If the actual direct labor hours spent producing a commodity differs from the standard hours, the variance is termed a:

Favorable volume variances may be harmful when:

The following data is given for the Zoyza Company: Overhead is applied on standard labor hours. The factory overhead controllable variance is:

A variable cost system is an accounting system where standards are set for each manufacturing cost element.

The standard price and quantity of direct materials are separated because:

Define ideal and currently attainable standards. Which type of standard should be used and why?

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Budgeting

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

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