Deck 23: Evaluating Variances From Standard Costs

Question 1

A budget performance report compares actual costs with the standard costs and reports differences for possible investigation.

Answer 1

True

Question 2

Standard costs serve as a device for measuring efficiency.

Answer 2

True

Question 3

Standards are performance goals used to evaluate and control operations.

Answer 3

True

Question 4

Accounting systems that use standards for product costs are called variable cost systems.

Question 5

Standards are set for only direct labor and direct materials.

Question 6

Ideal standards are developed under conditions that assume no idle time, no machine breakdowns, and no materials spoilage.

Question 7

Accounting systems that use standards for product costs are called budgeted cost systems.

Question 8

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

Question 9

While setting standards, managers should never allow for spoilage or machine breakdowns in their calculations.

Question 10

The difference between the standard cost of a product and its actual cost is called a cost variance.

Question 11

The principle of exceptions allows managers to focus on correcting variances between standard costs and actual costs.

Question 12

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

Question 13

Currently attainable standards do not allow for reasonable production difficulties.

Question 14

The fact that workers are unable to meet a properly determined direct labor standard is sufficient cause to change the standard.

Question 15

Accounting systems that use standards for product costs are called standard cost systems.

Question 16

The standard cost is how much a product should cost to manufacture.

Question 17

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

Question 18

Because accountants have financial expertise, they are the only ones that are able to set standard costs for the production area.

Question 19

If employees are given bonuses for exceeding normal standards, the standards may be very effective in motivating employees.

Question 20

Financial reporting systems that are guided by the principle of exceptions focus attention on variances from standard costs.

Question 21

The most effective means of presenting factory overhead cost variance data is through a flexible factory overhead budget.

Question 22

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

Question 23

Since the variable factory overhead controllable variance measures the efficiency of using variable overhead resources, if budgeted variable overhead exceeds actual results, the variance is favorable.

Question 24

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

Question 25

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual direct materials used are 800 units at $12, the direct materials quantity variance is $2,200 unfavorable.

Question 26

An unfavorable fixed factory overhead volume variance may be due to a failure of supervisors to maintain an even flow of work.

Question 27

The variance from standard for factory overhead cost resulting from operating at a level above or below 100% of normal capacity is termed volume variance.

Question 28

An unfavorable cost variance occurs when the standard cost exceeds the actual cost.

Question 29

Favorable fixed factory overhead volume variances are never harmful, since achieving them encourages managers to run the factory above normal capacity.

Question 30

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

Question 31

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

Question 32

The direct labor time variance measures the efficiency of the direct labor force.

Question 33

A favorable cost variance occurs when the actual cost is less than the standard cost.

Question 34

If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual direct labor incurred is 600 hours at $17, the direct labor rate variance is $1,200 favorable.

Question 35

If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual direct labor incurred is 600 hours at $17, the direct labor rate variance is $1,200 unfavorable.

Question 36

Standards are designed to evaluate price and quantity variances separately.

Question 37

The variance from standard for factory overhead resulting from incurring a total amount of factory overhead cost that is greater or less than the amount budgeted for the level of operations achieved is termed the variable factory overhead controllable variance.

Question 38

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

Question 39

If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual direct materials used are 1,600 units at $13, the direct materials quantity variance is $5,200 favorable.

Question 40

Standard direct materials costs are determined by multiplying the standard price by the standard quantity.

Question 41

The total manufacturing cost variance is

A)the difference between total actual costs and total standard costs for the units produced
B)the flexible budget variance plus the time variance
C)the difference between planned costs and standard costs for the units produced
D)none of these choices

Question 42

The volume variance measures the use of fixed factory overhead resources.

Question 43

Subtracting actual revenues from planned revenues provides the revenue price variance.

Question 44

Myers Corporation has the following data related to direct materials costs for November: actual cost for 5,000 pounds of material at $4.50 per pound and standard cost for 4,800 pounds of material at $5.10 per pound.​ The direct materials price variance is

A)$3,000 favorable
B)$3,000 unfavorable
C)$2,880 favorable
D)$2,880 unfavorable

Question 45

Standard costs are divided into which of the following components?

A)variance standard and quantity standard
B)materials standard and labor standard
C)standard quality and standard quantity
D)standard price and standard quantity

Question 46

Which of the following conditions normally would not indicate that standard costs should be revised?

A)The Engineering Department has revised product specifications in responding to customer suggestions.
B)The company has signed a new union contract that increases the factory wages on average by $3.50 an hour.
C)Actual costs differed from standard costs for the preceding week.
D)The average price of raw materials increased from $4.68 per pound to $4.82 per pound.

Question 47

Jaxson Corporation has the following data related to direct labor costs for September: actual costs for 10,200 hours at $15.75 per hour and standard costs for 10,800 hours at $15.50 per hour.​ The direct labor time variance is

A)$9,300 favorable
B)$9,300 unfavorable
C)$9,450 favorable
D)$9,450 unfavorable

Question 48

A report that summarizes actual costs, standard costs, and the differences for the units produced is called a

A)zero-based budget report
B)budget performance report
C)master budget
D)budget

Question 49

Standards can be used in nonmanufacturing settings where the tasks are nonrepetitive in nature.

Question 50

The principle of exceptions allows managers to focus on correcting variances between

A)standard costs and actual costs
B)variable costs and actual costs
C)competitor's costs and actual costs
D)competitor's costs and standard costs

Question 51

A favorable cost variance occurs when

A)actual costs are more than standard costs
B)standard costs are more than actual costs
C)standard costs are less than actual costs
D)actual costs are the same as standard costs

Question 52

Standard costs are a useful management tool that can be used solely as a statistical device apart from the ledger or they can be incorporated in the accounts.

Question 53

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

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 overshadowed by a favorable variance, managers may overlook potential corrections.
D)Variances bring attention to discrepancies in the budget and require managers to revise budgets closer to actual results.

Question 54

Variances from standard costs are usually not included in reports to stockholders.

Question 55

Standard costs are used in companies for a variety of reasons. Which of the following is not one of the benefits for using standard costs?

A)They are used to indicate where changes in technology and machinery need to be made.
B)They are used to estimate the cost of inventory.
C)They are used to plan direct materials, direct labor, and variable factory overhead.
D)They are used to control costs.

Question 56

The standard price and quantity of direct materials are separated because

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

Question 57

Although favorable fixed factory overhead volume variances are usually good news, if inventory levels are too high, additional production could be harmful.

Question 58

Standards that represent levels of operation that can be attained with reasonable effort are called _____ standards.

A)theoretical
B)ideal
C)variable
D)normal

Question 59

The total manufacturing cost variance consists of

A)direct materials price variance, direct labor cost variance, and fixed factory overhead volume variance
B)direct materials cost variance, direct labor rate variance, and factory overhead cost variance
C)direct materials cost variance, direct labor cost variance, and variable factory overhead controllable variance
D)direct materials cost variance, direct labor cost variance, and factory overhead cost variance

Question 60

At the end of the fiscal year, the variances from standard are usually transferred to the finished goods account.

Question 61

If the wage rate paid per hour differs from the standard wage rate per hour for direct labor, the variance is a _____ variance.

A)variable
B)rate
C)quantity
D)volume

Question 62

The following data are given for Stringer Company: Overhead is applied on standard labor hours.
The direct materials quantity variance is

A)$22,800 favorable
B)$22,800 unfavorable
C)$52,000 favorable
D)$52,000 unfavorable

Question 63

The following data are given for Stringer Company: Overhead is applied on standard labor hours.
The direct materials price variance is

A)$22,800 unfavorable
B)$22,800 favorable
C)$52,000 unfavorable
D)$52,000 favorable

Question 64

The following data relate to direct labor costs for the current period: Standard costs
36,000 hours at $22.00
Actual costs
35,000 hours at $23.00
The direct labor time variance is

A)$36,000 unfavorable
B)$35,000 unfavorable
C)$23,000 favorable
D)$22,000 favorable

Question 65

The following data relate to direct labor costs for August: actual costs for 5,500 hours at $24.00 per hour and standard costs for 5,000 hours at $23.70 per hour.​ The direct labor rate variance is

A)$1,650 favorable
B)$1,650 unfavorable
C)$1,500 favorable
D)$1,500 unfavorable

Question 66

The following data relate to direct labor costs for the current period: Standard costs
6,000 hours at $12.00
Actual costs
7,500 hours at $11.40
The direct labor rate variance is

A)$18,000 unfavorable
B)$4,500 favorable
C)$17,100 unfavorable
D)$3,600 favorable

Question 67

If the price paid per unit differs from the standard price per unit for direct materials, the variance is a _____ variance.

A)variable
B)controllable
C)price
D)volume

Question 68

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

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

Question 69

Lucy Corporation purchased and used 129,000 board feet of lumber in production at a total cost of $1,548,000. Original production had been budgeted for 22,000 units with a standard materials quantity of 5.7 board feet per unit and a standard price of $12 per board foot. Actual production was 23,500 units.​
The direct materials price variance is

A)$0
B)$59,400 unfavorable
C)$59,400 favorable
D)$6,000 unfavorable

Question 70

If the actual quantity of direct materials used in producing a commodity differs from the standard quantity, the variance is a _____ variance.

A)controllable
B)price
C)quantity
D)rate

Question 71

Lucy Corporation purchased and used 129,000 board feet of lumber in production at a total cost of $1,548,000. Original production had been budgeted for 22,000 units with a standard materials quantity of 5.7 board feet per unit and a standard price of $12 per board foot. Actual production was 23,500 units.​
The direct materials quantity variance is

A)$63,000 favorable
B)$63,000 unfavorable
C)$59,400 favorable
D)$59,400 unfavorable

Question 72

Myers Corporation has the following data related to direct materials costs for November: actual costs for 5,000 pounds of material at $4.50 and standard costs for 4,800 pounds of material at $5.10 per pound.​ The direct materials quantity variance is

A)$1,020 favorable
B)$1,020 unfavorable
C)$900 favorable
D)$900 unfavorable

Question 73

The following data relate to direct labor costs for February:
Actual costs
7,700 hours at $14.00
Standard costs
7,000 hours at $16.00
The direct labor time variance is

A)$7,700 favorable
B)$7,700 unfavorable
C)$11,200 unfavorable
D)$11,200 favorable

Question 74

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

A)$875 favorable
B)$850 unfavorable
C)$850 favorable
D)$875 unfavorable

Question 75

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

A)$1,180 favorable
B)$1,140 unfavorable
C)$1,180 unfavorable
D)$1,140 favorable

Question 76

The following data relate to direct labor costs for the current period: Standard costs
7,500 hours at $11.70
Actual costs
6,000 hours at $12.00
The direct labor time variance is

A)$18,000 favorable
B)$18,000 unfavorable
C)$17,550 unfavorable
D)$17,550 favorable

Question 77

The standard costs and actual costs for direct materials for the manufacture of 3,000 actual units of product are as follows: The direct materials price variance is

A)$2,750 unfavorable
B)$2,750 favorable
C)$1,500 favorable
D)$1,500 unfavorable

Question 78

If the actual direct labor hours spent producing a commodity differ from the standard hours, the variance is a _____ variance.

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

Question 79

The following data relate to direct labor costs for the current period: Standard costs
9,000 hours at $5.50
Actual costs
8,500 hours at $5.75
The direct labor rate variance is

A)$2,250 unfavorable
B)$2,125 unfavorable
C)$2,250 favorable
D)$2,125 favorable

Question 80

The following data relate to direct labor costs for February:
Actual costs
7,700 hours at $14.00
Standard costs
7,000 hours at $16.00
The direct labor rate variance is

A)$14,000 favorable
B)$14,000 unfavorable
C)$15,400 favorable
D)$15,400 unfavorable