Question 1

Comparing "what did happen" with "what should have happened" aids in the performance evaluation of a company.

Accepted Answer

A) True 
 B)False

Question 2

The fixed overhead volume variance measures the use of existing facilities and capacity.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following provides an explanation of why the variable overhead rate is separated from the fixed overhead rate in standard costing?

Accepted Answer

A)  There is no justifiable reason; their separation is merely to simplify entries. 
B)  Both calculations divide by the same direct labor hours, but the numerator is different for each calculation. 
C)  The variable overhead rate is calculated using actual direct labor hours, whereas the fixed overhead rate is calculated using normal capacity direct labor hours. 
D)  Different application bases are generally appropriate. 
A)  There is no justifiable reason; their separation is merely to simplify entries. 
B)  Both calculations divide by the same direct labor hours, but the numerator is different for each calculation. 
C)  The variable overhead rate is calculated using actual direct labor hours, whereas the fixed overhead rate is calculated using normal capacity direct labor hours. 
D)  Different application bases are generally appropriate.

Question 4

Service organizations do not develop standards for

Accepted Answer

A)  any service costs. 
B)  overhead. 
C)  direct materials. 
D)  labor. 
A)  any service costs. 
B)  overhead. 
C)  direct materials. 
D)  labor.

Question 5

If the actual amount of direct materials used equals the standard amount of direct materials that should have been used, the difference between the standard cost and actual cost of direct materials is called the

Accepted Answer

A)  price variance. 
B)  rate variance. 
C)  quantity variance. 
D)  efficiency variance. 
A)  price variance. 
B)  rate variance. 
C)  quantity variance. 
D)  efficiency variance.

Question 6

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 7

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 8

Variable overhead variances:
a. Variable overhead spending variance:
 $\begin{array}{|l|l|}
\hline \text { Budgeted variable overhead for actual hours } & \
\hline \text { (\$5.00/hr' } 10,900 \mathrm{hr}) & \$ 54,500 \
\hline \text { Less actual variable overhead costs } & 55.100 \
\hline \text { Variable overhead spending variance } & \$ 600(\mathrm{U}) \
\hline
\end{array}$

Accepted Answer

b. Variable overhead efficiency variance

Question 9

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 variance. $\begin{array}{lr}
\text { Direct materials purchased and used}&\text {99,000 pounds }\
\text {Price paid for direct materials }&\text { $ \$ 4.00 $ per pound}\
\text {Number of good units prochuced }&\text {9,000 units }\
\end{array}$

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 10

The total overhead variance is the difference between standard variable overhead costs and standard fixed overhead costs.

Accepted Answer

A) True 
 B)False

Question 11

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 standard cost accounting system. How is a standard cost accounting system useful to management?

Accepted Answer

Standard costs are predetermined realist

Question 12

Using the labor time standard of 0.5 labor hour per unit and a labor cost standard of $10 per labor hour for a 10 pound bag of chocolate and the following actual cost and usage data, compute the direct labor variance. $\begin{array}{lr}
\text {Direct labor hours used }&\text {4,950 hours }\
\text { Total cost of direct labor}&\text {\$ 53,460 }\
\text {Number of good units prochuced }&\text { 9,000 units}\
\end{array}$

Accepted Answer

A)  $3,960 (F) 
B)  $8,460 (U) 
C)  $3,960 (U) 
D)  $8,460 (F) 
A)  $3,960 (F) 
B)  $8,460 (U) 
C)  $3,960 (U) 
D)  $8,460 (F)

Question 13

Prepare a flexible budget for 8,000, 9,000, and 10,000 units of output, given the following data:
 $\begin{array}{ll}
\text { Variable costs }&\text { Budgeted fixed overhead }&\$90,000\
\text { Direct materials } \quad \$ 5 \
\text { Direct labor } \quad \quad \quad 4 \
\text { Onrethear } \quad\quad \quad\quad 8
\end{array}$

Accepted Answer

None

Question 14

Keerin, Inc., produces a complete line of women's athletic apparel. Sweatsuits are very popular in the northern states. During August, the company's records revealed the following information about the production of sweatsuits:
 $\begin{array}{lll}
 \text {   Standerds: } &  \text { Direct materials } & \text {  5 yards@ $ \$ 2.50 $ per yard} \
& \text {  Direct labor} & \text { 1 hour@\$9.50 per hour } &\
& \text {  Overhead:} & \text {  } &\
& \text { Variable } & \text { $ \$ 5.50 $ per direct labor hour } &\
& \text {Fixed.  } & \text {  $ \$ 7 $ per direct labor hour} &\
\end{array}$
 Compute the standard unit cost for a sweatsuit.

Accepted Answer

None

Question 15

Point Company uses the standard costing method. The company's main product is a fine-quality audio speaker that normally takes 0.25 hour to produce. Normal annual capacity is 3,000 direct labor hours, and budgeted fixed overhead costs for the year were $6,750. During the year, the company produced and sold 8,000 units. Actual fixed overhead costs were $4,800.
- Compute the fixed overhead variance.

Accepted Answer

A)  $300 (F) 
B)  $300 (U) 
C)  $1,950 (U) 
D)  $2,250 (U) 
A)  $300 (F) 
B)  $300 (U) 
C)  $1,950 (U) 
D)  $2,250 (U)

Question 16

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 17

Fantastic Lips, Inc., specializes in manufacturing lipstick. Racy Red, one of more than 75 shades produced by the company, is made from castor oil, beeswax, aloe vera, and a base compound. For the next 12 months, the company's purchasing agent believes that the cost of ingredients will be as follows:
 $\begin{array}{|l|l|l|}
\hline \text { Ingredient } & \text { Standard Cost } & \
\hline \text { Castor oil } & \$ 6.95 & \text { per gallon } \
\hline \text { Beeswax } & \$ 5.40 & \text { per pound } \
\hline \text { Aloe vera } & \$ 19.60 & \text { per gallon } \
\hline \text { Basse compound } & \$ 25.00 & \text { per gallon } \
\hline
\end{array}$
 The direct labor time standard is 4 hours per case at a standard direct labor rate of $11.00 per hour. The standard overhead rates are $15.00 per direct labor hour for the standard variable overhead rate and $13.00 per direct labor hour for the standard fixed overhead rate.
a. Using these production standards, compute the standard unit cost of direct materials per case of Racy Red if it takes 0.2 gallon of castor oil, 0.5 pound of beeswax, 0.3 gallon of aloe vera, and 1 gallon of base compound to produce one case.
b. Using the standard unit cost of direct materials per case determined in (a) and the production standards given for direct labor and overhead, compute the standard unit cost of one case of Racy Red lipstick.

Accepted Answer

None

Question 18

The total fixed overhead variance is comprised of the

Accepted Answer

A)  variable overhead efficiency and fixed variances. 
B)  fixed overhead budget and volume variances. 
C)  labor efficiency and rate variances. 
D)  variable overhead spending and efficiency variances. 
A)  variable overhead efficiency and fixed variances. 
B)  fixed overhead budget and volume variances. 
C)  labor efficiency and rate variances. 
D)  variable overhead spending and efficiency variances.

Question 19

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.

Question 20

The flexible budget formula is an equation that determines unexpected costs at any level of output.

Accepted Answer

A) True 
 B)False

Comparing "what did happen" with "what should have happened" aids in the performance evaluation of a company.

The fixed overhead volume variance measures the use of existing facilities and capacity.

Which of the following provides an explanation of why the variable overhead rate is separated from the fixed overhead rate in standard costing?

Service organizations do not develop standards for

If the actual amount of direct materials used equals the standard amount of direct materials that should have been used, the difference between the standard cost and actual cost of direct materials is called the

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.

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

Variable overhead variances: a. Variable overhead spending variance: Budgeted variable overhead for actual hours ( \5 .00/hr' 10,900) \ 54,500 Less actual variable overhead costs 55.100 Variable overhead spending variance \ 600()

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 variance. Direct materials purchased and used 99,000 pounds Price paid for direct materials \ 4.00 per pound Number of good units prochuced 9,000 units

The total overhead variance is the difference between standard variable overhead costs and standard fixed overhead costs.

Prepare a flexible budget for 8,000, 9,000, and 10,000 units of output, given the following data: Variable costs Budgeted fixed overhead \9 0,000 Direct materials \ 5 Direct labor 4 Onrethear 8

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

The total fixed overhead variance is comprised of the

One drawback of using standard costing is that it is

The flexible budget formula is an equation that determines unexpected costs at any level of output.

The Changing Business Environment - a Managers Perspective

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, Incl Target Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

Filters

Exam 8: Standard Costing and Variance Analysis

Comparing "what did happen" with "what should have happened" aids in the performance evaluation of a company.

The fixed overhead volume variance measures the use of existing facilities and capacity.

Which of the following provides an explanation of why the variable overhead rate is separated from the fixed overhead rate in standard costing?

Service organizations do not develop standards for

If the actual amount of direct materials used equals the standard amount of direct materials that should have been used, the difference between the standard cost and actual cost of direct materials is called the

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.

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

Variable overhead variances: a. Variable overhead spending variance: Budgeted variable overhead for actual hours ( \5 .00/hr' 10,900) \ 54,500 Less actual variable overhead costs 55.100 Variable overhead spending variance \ 600()

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 variance. Direct materials purchased and used 99,000 pounds Price paid for direct materials \ 4.00 per pound Number of good units prochuced 9,000 units

The total overhead variance is the difference between standard variable overhead costs and standard fixed overhead costs.

Prepare a flexible budget for 8,000, 9,000, and 10,000 units of output, given the following data: Variable costs Budgeted fixed overhead \9 0,000 Direct materials \ 5 Direct labor 4 Onrethear 8

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

The total fixed overhead variance is comprised of the

One drawback of using standard costing is that it is

The flexible budget formula is an equation that determines unexpected costs at any level of output.

The Changing Business Environment - a Managers Perspective

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, Incl Target Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

Filters