Question 1

Which of the following journal entries correctly represents the recording of an unfavourable material price variance?

Accepted Answer

A)  Direct material debit, materials price variance and accounts payable credit. 
B)  Direct material and materials price variance debit, accounts payable credit. 
C)  Direct material debit, work in process and accounts payable credit. 
D)  Direct materials debit, accounts payable credit. 
A)  Direct material debit, materials price variance and accounts payable credit. 
B)  Direct material and materials price variance debit, accounts payable credit. 
C)  Direct material debit, work in process and accounts payable credit. 
D)  Direct materials debit, accounts payable credit.

Question 2

When using a standard costing system for recoding purposes, most companies will close the variance accounts by debiting finished goods.

Accepted Answer

A) True 
 B)False

Question 3

The following data relates to QA firm.
Cost standards:  
Actual results:
7800 units were produced.  
Calculate the direct labour rate variance.

Accepted Answer

A)  $8010 (F) 
B)  $8000 (U) 
C)  $8020 (F) 
D)  $7800 (F) 
A)  $8010 (F) 
B)  $8000 (U) 
C)  $8020 (F) 
D)  $7800 (F)

Question 4

A company using a standard costing system uses an actual quantity of 520 direct labour hours at an actual cost of $5.90 per hour. The direct labour hours quantity allowed was 500 hours at a standard cost of $6.00 per hour. What is the cost of direct labour that would appear in work in process inventory?

Accepted Answer

A)  $3068 
B)  $3120 
C)  $2950 
D)  $3000 
A)  $3068 
B)  $3120 
C)  $2950 
D)  $3000

Question 5

In setting standards, it is common to carry out time and motion studies to determine how long it should take workers to perform a particular process.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not a desired outcome from allowing managers to participate in the setting of standards?

Accepted Answer

A)  Greater confidence in the accuracy of the standard 
B)  Increased commitment to standards 
C)  Easily attained standards 
D)  None of the given answers 
A)  Greater confidence in the accuracy of the standard 
B)  Increased commitment to standards 
C)  Easily attained standards 
D)  None of the given answers

Question 7

A cost variance is

Accepted Answer

A)  the difference between the cost of a product and its selling price. 
B)  a measure of risk. 
C)  the difference between the actual cost and the standard cost. 
D)  the difference between actual costs in two successive time periods. 
A)  the difference between the cost of a product and its selling price. 
B)  a measure of risk. 
C)  the difference between the actual cost and the standard cost. 
D)  the difference between actual costs in two successive time periods.

Question 8

Five kilograms at a cost of $7 per kilogram and 2 hours @ $32 per hour are examples of standard costs for the production of a product.

Accepted Answer

A) True 
 B)False

Question 9

A standard that assumes a production process is as efficient as practical under normal operating conditions is

Accepted Answer

A)  a perfection standard. 
B)  an attainable standard. 
C)  an average standard. 
D)  an operating standard. 
A)  a perfection standard. 
B)  an attainable standard. 
C)  an average standard. 
D)  an operating standard.

Question 10

Cultco Company Ltd has set the following direct material standards per unit of product: 2.5 kg @ $3.00 per kg; $7.50 per unit. During April, actual direct material purchased and used amounted to 8000 kg at a cost of $3.10 per kg. Actual production amounted to 3000 units. Determine Cultco's direct material quantity variance.

Accepted Answer

A)  $2300 (U) 
B)  $1500 (U) 
C)  $800 (U) 
D)  $500 (U) 
A)  $2300 (U) 
B)  $1500 (U) 
C)  $800 (U) 
D)  $500 (U)

Question 11

The following data relates to QA firm.
Cost standards:  
Actual results:
7800 units were produced.  
Calculate the direct material price variance, based on the quantity of materials purchased.

Accepted Answer

A)  $2310 (U) 
B)  $2500 (U) 
C)  $2500 (F) 
D)  $2000 (U) 
A)  $2310 (U) 
B)  $2500 (U) 
C)  $2500 (F) 
D)  $2000 (U)

Question 12

Companies sometimes develop standards based on historical data. Which of the following statements about this approach is correct?

Accepted Answer

A)  This is an appropriate approach for mature production process. 
B)  This is an appropriate approach for processes that are labour intensive. 
C)  This is an inappropriate approach because it is a relatively more expensive approach to standard setting. 
D)  This approach is only acceptable for manufacturing companies. 
A)  This is an appropriate approach for mature production process. 
B)  This is an appropriate approach for processes that are labour intensive. 
C)  This is an inappropriate approach because it is a relatively more expensive approach to standard setting. 
D)  This approach is only acceptable for manufacturing companies.

Question 13

If Company XYZ purchased 30 000 kg of brass metal at an actual price of $7.10 per kg (standard price is $7.00 per kg), the entry to the direct material price variance should be

Accepted Answer

A)  $3000 debit. 
B)  $3000 credit. 
C)  $1500 debit. 
D)  $1500 credit. 
A)  $3000 debit. 
B)  $3000 credit. 
C)  $1500 debit. 
D)  $1500 credit.

Question 14

When considering the significance of cost variances, managers should not consider

Accepted Answer

A)  relative size of the variances. 
B)  recurring variances. 
C)  the trends of the variances. 
D)  favourable or unfavourable status of the variances. 
A)  relative size of the variances. 
B)  recurring variances. 
C)  the trends of the variances. 
D)  favourable or unfavourable status of the variances.

Question 15

In which of the following circumstances would it be acceptable to record the material price variance at the time of usage of the materials?

Accepted Answer

A)  Where a fixed contract price is in place for the purchase of materials for a period. 
B)  Where the purchasing manager is held accountable for all material price variances. 
C)  Where the purchasing manager has little control over the price paid. 
D)  Both where a fixed contract price is in place for the purchase of materials for a period AND where the purchasing manager has little control over the price paid. 
A)  Where a fixed contract price is in place for the purchase of materials for a period. 
B)  Where the purchasing manager is held accountable for all material price variances. 
C)  Where the purchasing manager has little control over the price paid. 
D)  Both where a fixed contract price is in place for the purchase of materials for a period AND where the purchasing manager has little control over the price paid.

Question 16

A company using a standard costing system uses an actual quantity of 1100 kg of material at an actual cost of $1.20 per kg. The standard quantity allowed was 1000 kg at a standard cost of $1.00 per kg. After the goods are completed and transferred from work in process inventory, what is the cost of direct material that would appear in finished goods inventory?

Accepted Answer

A)  $1000 
B)  $1100 
C)  $1200 
D)  $1320 
A)  $1000 
B)  $1100 
C)  $1200 
D)  $1320

Question 17

In a standard costing system all inventories are recorded at

Accepted Answer

A)  actual cost. 
B)  standard cost. 
C)  budgeted cost. 
D)  purchase cost. 
A)  actual cost. 
B)  standard cost. 
C)  budgeted cost. 
D)  purchase cost.

Question 18

Cultco Company Ltd has set the following direct material standards per unit of product: 2.5 kg @ $3.00 per kg; $7.50 per unit. During April, actual direct material purchased and used amounted to 8000 kg at a cost of $3.10 per kg. Actual production amounted to 3000 units. Determine Cultco's direct material price variance.

Accepted Answer

A)  $1500 (U) 
B)  $800 (U) 
C)  $750 (U) 
D)  $500 (U) 
A)  $1500 (U) 
B)  $800 (U) 
C)  $750 (U) 
D)  $500 (U)

Question 19

A firm's purchasing manager bought poor quality material at a large saving. Because of the lower quality of material, more scrap was produced and because of the extra labour hours required an additional employee had to be hired to assist in the cutting operation. Assuming only the facts given, what variance(s) would result?

Accepted Answer

A)  Favourable material price 
B)  Favourable material price; unfavourable material quantity; unfavourable labour efficiency 
C)  Favourable material price; unfavourable material quantity; unfavourable labour efficiency; unfavourable labour rate 
D)  Favourable material price; unfavourable labour efficiency 
A)  Favourable material price 
B)  Favourable material price; unfavourable material quantity; unfavourable labour efficiency 
C)  Favourable material price; unfavourable material quantity; unfavourable labour efficiency; unfavourable labour rate 
D)  Favourable material price; unfavourable labour efficiency

Question 20

Which department typically is responsible for an unfavourable materials price variance?

Accepted Answer

A)  Purchasing 
B)  Engineering 
C)  Production 
D)  Receiving 
A)  Purchasing 
B)  Engineering 
C)  Production 
D)  Receiving

Which of the following journal entries correctly represents the recording of an unfavourable material price variance?

When using a standard costing system for recoding purposes, most companies will close the variance accounts by debiting finished goods.

The following data relates to QA firm. Cost standards: Actual results: 7800 units were produced. Calculate the direct labour rate variance.

In setting standards, it is common to carry out time and motion studies to determine how long it should take workers to perform a particular process.

Which of the following is not a desired outcome from allowing managers to participate in the setting of standards?

A cost variance is

Five kilograms at a cost of $7 per kilogram and 2 hours @ $32 per hour are examples of standard costs for the production of a product.

A standard that assumes a production process is as efficient as practical under normal operating conditions is

The following data relates to QA firm. Cost standards: Actual results: 7800 units were produced. Calculate the direct material price variance, based on the quantity of materials purchased.

Companies sometimes develop standards based on historical data. Which of the following statements about this approach is correct?

If Company XYZ purchased 30 000 kg of brass metal at an actual price of $7.10 per kg (standard price is $7.00 per kg), the entry to the direct material price variance should be

When considering the significance of cost variances, managers should not consider

In which of the following circumstances would it be acceptable to record the material price variance at the time of usage of the materials?

In a standard costing system all inventories are recorded at

Which department typically is responsible for an unfavourable materials price variance?

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters

Exam 10: Standard Costs for Control: Direct Material and Direct Labour

Which of the following journal entries correctly represents the recording of an unfavourable material price variance?

When using a standard costing system for recoding purposes, most companies will close the variance accounts by debiting finished goods.

The following data relates to QA firm. Cost standards: Actual results: 7800 units were produced. Calculate the direct labour rate variance.

In setting standards, it is common to carry out time and motion studies to determine how long it should take workers to perform a particular process.

Which of the following is not a desired outcome from allowing managers to participate in the setting of standards?

A cost variance is

Five kilograms at a cost of $7 per kilogram and 2 hours @ $32 per hour are examples of standard costs for the production of a product.

A standard that assumes a production process is as efficient as practical under normal operating conditions is

The following data relates to QA firm. Cost standards: Actual results: 7800 units were produced. Calculate the direct material price variance, based on the quantity of materials purchased.

Companies sometimes develop standards based on historical data. Which of the following statements about this approach is correct?

If Company XYZ purchased 30 000 kg of brass metal at an actual price of $7.10 per kg (standard price is $7.00 per kg), the entry to the direct material price variance should be

When considering the significance of cost variances, managers should not consider

In which of the following circumstances would it be acceptable to record the material price variance at the time of usage of the materials?

In a standard costing system all inventories are recorded at

Which department typically is responsible for an unfavourable materials price variance?

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters