Deck 9: Standard Costing and Variances

Question 1

To foster continuous improvement, standards should ________________ over time.

A) remain stable
B) increase in difficulty
C) decrease in difficulty
D) become ideal

Answer 1

B

Question 2

Fixed overhead does not have separate price and quantity variances

Answer 2

True

Question 3

The standard costs are summarized on a:

A) static cost card.
B) flexible budget card.
C) standard cost card.
D) standard static carD.
The standard cost card summarizes standard costs by showing what the company should spend to make a single unit of product based on expected production and sales for the coming perioD.

Answer 3

C

Question 4

The direct material quantity variance is the difference between the actual quantity and the standard quantity of materials multiplied by the actual price

Question 5

The flexible budget can be used as a benchmark for evaluating performance after the fact, as part of the control process

Question 6

The variable overhead rate variance is the difference between the actual variable overhead rate and the standard variable overhead rate multiplied by the actual value of the cost driver

Question 7

A quantity standard is the amount of input that should go into a single unit of the product or service

Question 8

Which of the following types of standards can be achieved only under perfect conditions?

A) Easily attainable standard
B) Ideal standard
C) Currently attainable standard
D) Tight but attainable standard

Question 9

A price standard is the price that should be paid per output unit for the input

Question 10

A standard cost card shows what the company spent to produce each unit of product

Question 11

A standard cost system records cost at their actual amounts

Question 12

The fixed overhead volume variance is the difference between actual production volume and actual sales volume

Question 13

An ideal standard is one that can be achieved only under perfect conditions

Question 14

When preparing a flexible budget, fixed costs should remain the same as on the master budget

Question 15

Which of the following statements is correct about the way managers set standards for employees?

A) The standards managers set for employee productivity should be based on ideal conditions to encourage employees to push themselves.
B) Eliminating breaks, downtime, and maintenance time from set standards is an excellent way to motivate employees.
C) High employee turnover results in higher standards over the long run because weak or underperforming employees are replaced with high performing employees.
D) When setting standards, managers should include a reasonable amount of downtime for preventable maintenance, employee breaks, and training.

Question 16

Standard cost systems depend on which two types of standards?

A) Quantity and price standards
B) Quantity and efficiency standards
C) Rate and price standards
D) Rate and spending standards

Question 17

Easily attainable standards are the best for motivating individuals to work hard

Question 18

A standard cost system initially records manufacturing costs at the standard rather than the actual amount

Question 19

The production manager is typically responsible for the direct labor rate variance

Question 20

A spending variance is calculated by comparing actual costs with the static budget

Question 21

Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's fixed overhead cost be if it used a flexible budget for the period based on actual sales?

A) $43,200
B) $46,440
C) $49,923
D) $166,410

Question 22

________ variances are calculated by comparing the master budget to the flexible budget, and ___________ variances are calculated by comparing actual costs to the flexible budget (not the master budget).

A) Volume, volume
B) Volume, spending
C) Spending, volume
D) Spending, spending

Question 23

The difference between the actual price and the standard price, multiplied by the actual quantity of materials purchased is the:

A) direct materials spending variance.
B) direct materials volume variance.
C) direct materials price variance.
D) direct materials quantity variance.

Question 24

After selling 4,300 units during the period, Dole Corp. prepared a flexible budget that included $22,962 for direct materials, $36,120 for direct labor, $19,350 for variable overhead, and $46,440 for fixed overhead. Dole originally planned its master budget based on sales of 4,000 units. What would total costs have been on the master budget?

A) $111,070
B) $119,400
C) $124,872
D) $116,160

Question 25

A budget depends upon:

A) only the level of output.
B) only the input standards.
C) both the level of output as well as the input standards.
D) neither the level of output nor the input standards.

Question 26

Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's variable overhead cost be if it used a flexible budget for the period based on actual sales?

A) $16,745
B) $18,000
C) $19,350
D) $46,440

Question 27

How do managers and companies set price and quantity standards?

A) Based on a manager's previous experience at another company.
B) Based on historical data, industry averages, and the results of process studies.
C) Based on the ideal budget created for the operating division.
D) Based on prior period variances.

Question 28

The formula AQ × (SP - AP) is the:

A) direct materials spending variance.
B) direct materials volume variance.
C) direct materials price variance.
D) direct materials quantity variance.

Question 29

Comparing the master budget with the flexible budget creates a:

A) quantity variance.
B) volume variance.
C) spending variance.
D) price variance.

Question 30

Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's direct materials cost be if it used a flexible budget for the period based on actual sales?

A) $19,870
B) $21,360
C) $22,962
D) $91,848

Question 31

A budget that is based on a single estimate of sales volume is called a:

A) static budget.
B) flexible budget.
C) variable budget.
D) sunk cost budget.

Question 32

A master budget is an example of a:

A) static budget.
B) flexible budget.
C) standard cost card.
D) volume variance.

Question 33

Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's total costs be if it used a flexible budget for the period based on actual sales?

A) $111,070
B) $119,400
C) $124,872
D) $128,355

Question 34

When completing a variance analysis, we describe variances as ____________ or _________.

A) good; bad
B) favorable; unfavorable
C) positive; negative
D) ideal; less-than-ideal

Question 35

A spending variance is made up of:

A) volume variance and quantity variance.
B) price variance and volume variance.
C) price variance and quantity variance.
D) price variance and rate variance.

Question 36

The formula SP × (SQ - AQ) is the:

A) direct materials spending variance.
B) direct materials volume variance.
C) direct materials price variance.
D) direct materials quantity variance.

Question 37

Delaware Corp. prepared a master budget that included $21,360 for direct materials, $33,600 for direct labor, $18,000 for variable overhead, and $46,440 for fixed overhead. Delaware Corp. planned to sell 4,000 units during the period, but actually sold 4,300 units. What would Delaware's direct labor cost be if it used a flexible budget for the period based on actual sales?

A) $14,448
B) $31,256
C) $33,600
D) $36,120

Question 38

Both the master budget and the flexible budget are based on:

A) variable costs.
B) actual costs.
C) standard costs.
D) ideal costs.

Question 39

The standard labor rate is:

A) the expected hourly cost of labor, excluding employee taxes and benefits.
B) the expected hourly cost of labor, including employee taxes and benefits.
C) the amount of time that workers should take to produce a single unit of product.
D) the amount of time that workers should take to produce a single unit of product times the expected hourly cost of labor.

Question 40

A quantity standard is:

A) the total dollar amount that a company expects to spend to achieve a given level of output.
B) a form that shows what the company should spend to make a single unit of product.
C) the price that should be paid for a specific quantity of input.
D) the amount of input that should be used in each unit of product or service.

Question 41

Whitman has a direct labor standard of 2 hours per unit of output. Each employee has a standard wage rate of $22.50 per hour. During July, Whitman paid $94,750 to employees for 4,445 hours worked. 2,350 units were produced during July. What is the direct labor efficiency variance?

A) $11,000.00 favorable
B) $5,737.50 favorable
C) $5,262.50 favorable
D) $5,262.50 unfavorable

Question 42

Cooper Company has a direct material standard of 2 gallons of input at a cost of $7.50 per gallon. During July, Cooper Company purchased and used 13,000 gallons, paying $93,200. The direct materials quantity variance was $1,500 unfavorable. How many units were produced?

A) 13,000 units
B) 6,600 units
C) 6,214 units
D) 6,400 units

Question 43

Scarlett Company has a direct material standard of 3 gallons of input at a cost of $5 per gallon. During July, Scarlett Company purchased and used 7,500 gallons. The direct material quantity variance was $750 unfavorable and the direct material price variance was $3,000 favorable. What price per gallon was paid for the purchases?

A) $5.00
B) $5.40
C) $4.60
D) $2.50

Question 44

Exeter has a material standard of 1 pound per unit of output. Each pound has a standard price of $26 per pound. During July, Exeter paid $66,100 for 2,475 pounds, which it used to produce 2,350 units. What is the direct materials quantity variance?

A) $1,750 unfavorable
B) $1,300 favorable
C) $3,250 unfavorable
D) $4,550 unfavorable

Question 45

The price variance for direct labor is called the:

A) direct labor rate variance.
B) direct labor price variance.
C) indirect labor variance.
D) direct labor quantity variance.

Question 46

Oxford Co. has a material standard of 2.1 pounds per unit of output. Each pound has a standard price of $10 per pound. During February, Oxford Co. paid $57,220 for 4,840 pounds, which were used to produce 2,400 units. What is the direct materials price variance?

A) $6,820 unfavorable
B) $8,820 unfavorable
C) $8,820 favorable
D) $6,820 favorable

Question 47

The difference between the actual quantity and the standard quantity, multiplied by the standard price is the:

A) direct materials spending variance.
B) direct materials volume variance.
C) direct materials price variance.
D) direct materials quantity variance.

Question 48

Madrid Co. has a direct labor standard of 4 hours per unit of output. Each employee has a standard wage rate of $11 per hour. During February, Madrid Co. paid $99,500 to employees for 9,150 hours worked. 2,400 units were produced during February. What is the flexible budget amount for direct labor?

A) $26,400
B) $99,500
C) $100,650
D) $105,600

Question 49

Madrid Co. has a direct labor standard of 4 hours per unit of output. Each employee has a standard wage rate of $11 per hour. During February, Madrid Co. paid $99,500 to employees for 9,150 hours worked. 2,400 units were produced during February. What is the direct labor rate variance?

A) $1,150 favorable
B) $4,950 favorable
C) $6,100 favorable
D) $302 favorable

Question 50

The difference between the actual labor rate and the standard labor rate, multiplied by the actual labor hours is the:

A) direct labor spending variance.
B) direct labor volume variance.
C) direct labor rate variance.
D) direct labor efficiency variance.

Question 51

Who would typically be responsible for the direct material quantity variance?

A) The production manager
B) The purchasing manager
C) The human resources manager
D) The chief financial officer

Question 52

The formula AH × (SR - AR) is the:

A) direct labor spending variance.
B) direct labor volume variance.
C) direct labor rate variance.
D) direct labor efficiency variance.

Question 53

Exeter has a material standard of 1 pound per unit of output. Each pound has a standard price of $26 per pound. During July, Exeter paid $66,100 for 2,475 pounds, which it used to produce 2,350 units. What is the direct materials price variance?

A) $1,750 unfavorable
B) $1,300 favorable
C) $6,300 unfavorable
D) $5,000 unfavorable

Question 54

Scarlett Company has a direct material standard of 3 gallons of input at a cost of $5 per gallon. During July, Scarlett Company purchased and used 7,500 gallons. The direct materials quantity variance was $750 unfavorable and the direct materials price variance was $3,000 favorable. How many units were produced?

A) 2,450 units
B) 2,500 units
C) 7,350 units
D) 7,500 units

Question 55

The formula SR × (SH - AH) is the:

A) direct labor spending variance.
B) direct labor volume variance.
C) direct labor rate variance.
D) direct labor efficiency variance.

Question 56

Oxford Co. has a material standard of 2.1 pounds per unit of output. Each pound has a standard price of $10 per pound. During February, Oxford Co. paid $57,220 for 4,840 pounds, which were used to produce 2,400 units. What is the direct materials quantity variance?

A) $2,000 unfavorable
B) $2,000 favorable
C) $6,820 favorable
D) $6,820 unfavorable

Question 57

Whitman has a direct labor standard of 2 hours per unit of output. Each employee has a standard wage rate of $22.50 per hour. During July, Whitman paid $94,750 to employees for 4,445 hours worked. 2,350 units were produced during July. What is the direct labor rate variance?

A) $11,000.00 favorable
B) $5,737.50 favorable
C) $5,262.50 favorable
D) $10,525.00 unfavorable

Question 58

Which of the following statements is true about variances?

A) Positive variances (i.e., those with a positive sign) are always favorable.
B) Positive variances (i.e., those with a positive sign) are always unfavorable.
C) Negative variances (i.e., those with a negative sign) are always favorable.
D) There is not necessarily any correlation between the sign of the result (positive or negative) and whether the variance is positive or negative.

Question 59

Whitman has a direct labor standard of 2 hours per unit of output. Each employee has a standard wage rate of $22.50 per hour. During July, Whitman paid $94,750 to employees for 4,445 hours worked. 2,350 units were produced during July. What is the flexible budget amount for direct labor?

A) $105,750
B) $189,500
C) $200,025
D) $211,500

Question 60

The difference between the actual labor hours and the standard labor hours, multiplied by the standard labor rate is the:

A) direct labor spending variance.
B) direct labor volume variance.
C) direct labor rate variance.
D) direct labor efficiency variance.

Question 61

Venus Company applies overhead based on direct labor hours. The variable overhead standard is 10 hours at $3.50 per hour. During October, Venus Company spent $157,600 for variable overhead. 47,440 labor hours were used to produce 4,800 units. What is the over- or underapplied variable overhead?

A) $10,400 overapplied
B) $8,440 overapplied
C) $8,440 underapplied
D) $1,960 overapplied

Question 62

Bonnie Company has a direct labor standard of 15 hours per unit of output. Each employee has a standard wage rate of $14 per hour. The standard variable overhead rate is $10 per hour. During March, employees worked 13,100 hours. The direct labor rate variance was $9,170 favorable, the variable overhead rate variance was $13,100 unfavorable, and the direct labor efficiency variance was $15,400 unfavorable. What is the actual variable overhead?

A) $117,900
B) $131,000
C) $144,100
D) $183,400

Question 63

Raven applies overhead based on direct labor hours. The variable overhead standard is 2 hours at $11 per hour. During July, Raven spent $116,700 for variable overhead. 8,890 labor hours were used to produce 4,700 units. What is the variable overhead rate variance?

A) $13,300 unfavorable
B) $6,650 unfavorable
C) $18,910 unfavorable
D) $13,300 favorable

Question 64

The difference between the actual fixed manufacturing overhead cost and the budgeted fixed manufacturing overhead cost is the:

A) fixed overhead spending variance.
B) fixed overhead volume variance.
C) fixed overhead rate variance.
D) fixed overhead efficiency variance.

Question 65

Venus Company applies overhead based on direct labor hours. The variable overhead standard is 10 hours at $3.50 per hour. During October, Venus Company spent $157,600 for variable overhead. 47,440 labor hours were used to produce 4,800 units. What is the variable overhead rate variance?

A) $8,440 favorable
B) $1,960 favorable
C) $10,400 favorable
D) $1,960 unfavorable

Question 66

The difference between the actual cost driver amount and the standard cost driver amount, multiplied by the standard variable overhead rate is the:

A) variable overhead rate variance.
B) variable overhead efficiency variance.
C) variable overhead volume variance.
D) over- or underapplied variance.

Question 67

Bonnie Company has a direct labor standard of 15 hours per unit of output. Each employee has a standard wage rate of $14 per hour. The standard variable overhead rate is $10 per hour. During March, employees worked 13,100 hours. The direct labor rate variance was $9,170 favorable, the variable overhead rate variance was $13,100 unfavorable, and the direct labor efficiency variance was $15,400 unfavorable. What is the variable overhead efficiency variance?

A) $13,100 unfavorable
B) $11,000 unfavorable
C) $24,100 unfavorable
D) $11,000 favorable

Question 68

Swan Company has a direct labor standard of 15 hours per unit of output. Each employee has a standard wage rate of $14 per hour. During March, employees worked 13,100 hours. The direct labor rate variance was $9,170 favorable, the direct labor efficiency variance was $15,400 unfavorable. What was the actual payroll?

A) $183,400
B) $168,000
C) $174,230
D) $192,570

Question 69

In a standard cost system, overhead is applied per unit by multiplying the ___________ overhead rate times the ____________ quantity of the cost driver.

A) actual, actual
B) actual, standard
C) standard, standard
D) standard, actual

Question 70

Swan Company has a direct labor standard of 15 hours per unit of output. Each employee has a standard wage rate of $14 per hour. During March, employees worked 13,100 hours. The direct labor rate variance was $9,170 favorable, the direct labor efficiency variance was $15,400 unfavorable. How many units were produced?

A) 873 units
B) 655 units
C) 1,100 units
D) 800 units

Question 71

Jupiter Co. applies overhead based on direct labor hours. The variable overhead standard is 4 hours at $12 per hour. During February, Jupiter Co. spent $113,400 for variable overhead. 9,150 labor hours were used to produce 2,400 units. What is the variable overhead efficiency variance?

A) $3,600 unfavorable
B) $3,600 favorable
C) $5,400 favorable
D) $1,800 favorable

Question 72

The difference between the actual variable overhead rate and the standard variable overhead rate, multiplied by the actual amount of the cost driver, is the:

A) variable overhead rate variance.
B) variable overhead efficiency variance.
C) variable overhead volume variance.
D) over- or underapplied variance.

Question 73

Raven applies overhead based on direct labor hours. The variable overhead standard is 2 hours at $11 per hour. During July, Raven spent $116,700 for variable overhead. 8,890 labor hours were used to produce 4,700 units. What is the variable overhead efficiency variance?

A) $5,610 favorable
B) $46,090 favorable
C) $18,910 favorable
D) $18,910 unfavorable

Question 74

Jupiter Co. applies overhead based on direct labor hours. The variable overhead standard is 4 hours at $12 per hour. During February, Jupiter Co. spent $113,400 for variable overhead. 9,150 labor hours were used to produce 2,400 units. How much is variable overhead on the flexible budget?

A) $28,800
B) $109,800
C) $113,400
D) $115,200

Question 75

The overall difference between the actual and applied manufacturing overhead is the:

A) over- or underapplied overhead.
B) overhead rate variance.
C) overhead efficiency variance.
D) overhead volume variance.

Question 76

Venus Company applies overhead based on direct labor hours. The variable overhead standard is 10 hours at $3.50 per hour. During October, Venus Company spent $157,600 for variable overhead. 47,440 labor hours were used to produce 4,800 units. What is the variable overhead efficiency variance?

A) $8,440 favorable
B) $1,960 favorable
C) $10,400 favorable
D) $1,960 unfavorable

Question 77

Jupiter Co. applies overhead based on direct labor hours. The variable overhead standard is 4 hours at $12 per hour. During February, Jupiter Co. spent $113,400 for variable overhead. 9,150 labor hours were used to produce 2,400 units. What is the variable overhead rate variance?

A) $3,600 unfavorable
B) $3,600 favorable
C) $5,400 favorable
D) $1,800 favorable

Question 78

Madrid Co. has a direct labor standard of 4 hours per unit of output. Each employee has a standard wage rate of $11 per hour. During February, Madrid Co. paid $99,500 to employees for 9,150 hours worked. 2,400 units were produced during February. What is the direct labor efficiency variance?

A) $1,150 favorable
B) $4,950 favorable
C) $6,100 favorable
D) $302 favorable

Question 79

Jupiter Co. applies overhead based on direct labor hours. The variable overhead standard is 4 hours at $12 per hour. During February, Jupiter Co. spent $113,400 for variable overhead. 9,150 labor hours were used to produce 2,400 units. What is the over- or underapplied variable overhead?

A) $3,600 underapplied
B) $3,600 overapplied
C) $5,400 overapplied
D) $1,800 overapplied

Question 80

Raven applies overhead based on direct labor hours. The variable overhead standard is 2 hours at $11 per hour. During July, Raven spent $116,700 for variable overhead. 8,890 labor hours were used to produce 4,700 units. How much is variable overhead on the flexible budget?

A) $56,400
B) $97,790
C) $103,400
D) $116,700