Question 1

As a general rule, an investigation of a variance should be undertaken only if the

Accepted Answer

A) variance is isolated 
B) anticipated benefits are greater than the expected costs. 
C) variance is negative. 
D) variance is positive.

Question 2

Which of the following people is most likely responsible for an unfavorable variable overhead efficiency variance?

Accepted Answer

A) production supervisor 
B) accountant 
C) personnel director 
D) supplier

Question 3

Both manufacturing and service firms may use standard costing systems.

Accepted Answer

A) True 
 B)False

Question 4

Diaz Company has developed the following standards for one of its products: $\begin{array}{ll}
\text { Direct materials } & 3.50 \text { pounds } \times \$ 4 \text { per pound } \
\text { Direct labor } & 1 \text { hour } \times \$ 12 \text { per hour } \
\text { Variable manufacturing overhead } & 1 \text { hour } \times \$ 6 \text { per hour }
\end{array}$

$\text { The following activity occurred during the month of April: }$

$\begin{array}{ll}
\text { Materials purchased } & 2,000 \text { pounds costing } \$ 22,500 \
\text { Materials used } & 1,600 \text { pounds } \
\text { Units produced } & 250 \text { units } \
\text { Direct labor } & 550 \text { hours at } \$ 12.50 \text { per hour } \
\text { Actual variable manufacturing overhead: } & \$ 2,500
\end{array}$ The company records materials price variances at the time of purchase.
The total variable standard cost is:

Accepted Answer

A) $31,875. 
B) $6,000. 
C) $8,000. 
D) $15,500.

Question 5

Formidable Company collected the following information: $\begin{array}{ll}\text { Standard costs per unit: }\
\text { Variable overhead } & 4 \text { machine hours } @ \$ 6 \text { per machine hour } \
\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }\\
\text { Actual output } & 20,000 \text { units } \
\text { Denominator (normal capacity) output } & 21,000 \text { units } \
\text { Actual machine hours } & 79,000 \text { machine hours } \
\text { Actual variable overhead cost } & \$ 540,000 \
\text { Actual fixed overhead cost } & \$ 810,000\
\end{array}$ Using the two variance method, what is the volume variance?

Accepted Answer

A) $6,000 (F) 
B) $40,000 (F) 
C) $40,000 (U) 
D) $6,000 (U)

Question 6

Which of the following is NOT true about Kaizen Standards?

Accepted Answer

A) Kaizen standards are the standards used for continuous improvement. 
B) Kaizen standards are a currently attainable standard that reflects planned improvement. 
C) Kaizen standards are constantly changing. 
D) Kaizen standards are the standards used in traditional costing systems.

Question 7

In computing efficiency variances, managers compute the standard quantity of materials used and the standard hours allowed.

Accepted Answer

A) True 
 B)False

Question 8

During September, 40,000 units were produced. The standard quantity of material allowed per unit was 5 pounds at a standard cost of $2.50 per pound. If there was a favorable usage variance of $25,000 for September, the actual quantity of materials used must have been

Accepted Answer

A) 210,000 pounds. 
B) 190,000 pounds. 
C) 105,000 pounds. 
D) 95,000 pounds.

Question 9

Firecracker Company has developed the following standards for one of its products. $\begin{array}{ll}
\text { Direct materials: } & 15 \text { pounds } \times \$ 16 \text { per pound } \
\text { Direct labor: } & 4 \text { hours } \times \$ 24 \text { per hour } \
\text { Variable manufacturing overhead: } & 4 \text { hours } \times \$ 14 \text { per hour }
\end{array}$
$\text { The following activity occurred during the month of October: }$

$\begin{array}{ll}
\text { Materials purchased: } & 10,000 \text { pounds costing } \$ 170,000 \
\text { Materials used: } & 7,200 \text { pounds } \
\text { Units produced: } & 500 \text { units } \
\text { Direct labor: } & 2,300 \text { hours at } \$ 23.60 / \text { hour } \
\text { Actual variable manufacturing overhead: } & \$ 30,000
\end{array}$ The company records materials price variances at the time of purchase. The direct materials price variance is

Accepted Answer

A) $50,000 favorable. 
B) $50,000 unfavorable. 
C) $10,000 favorable. 
D) $10,000 unfavorable.

Question 10

Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows one direct labor hour per unit. During the current year, Crawford produced 110,000 units of product, (within the relevant range of activity) incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.
What is Croissant's fixed overhead spending variance for the current year?

Accepted Answer

A) $60,000 (F) 
B) $24,000 (F) 
C) $30,000 (U) 
D) $36,000 (U)

Question 11

Standard costing

Accepted Answer

A) establishes price and quantity standards for inputs. 
B) provides journal entry support. 
C) is not used in unit costing. 
D) none of these.

Question 12

Fixed manufacturing overhead was budgeted at $105,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $4,000 unfavorable and the fixed overhead spending variance was $1,500 favorable, fixed manufacturing overhead applied must be

Accepted Answer

A) $109,000. 
B) $106,500. 
C) $106,500 
D) $101,000.

Question 13

The document that shows the amount and cost of direct materials, direct labor, and overhead to make a unit of output is called the standard __________ .

Accepted Answer

The answer of The document that shows the amount and...

Question 14

Harrangue Company's standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured.
What is the total variable overhead variance for March for Harrangue?

Accepted Answer

A) $2,200 (U) 
B) $600 (U) 
C) $1,000 (U) 
D) $1,200 (U)

Question 15

The following information is provided about three materials utilized in the production of a product: $\begin{array} { l r r r } \text { Material } & \text { Standard Mix } & \text { Standard Unit Price } & \text { Standard Cost } \ \mathrm { X } & 1,250 \text { units } & \$ 3.00 \text { per unit } & \$ 3,750 \ \mathrm { Y } & 750 \text { units } & 5.00 \text { per unit } & \$ 3,750 \ \mathrm { Z } & 500 \text { units } & 4.00 \text { per unit } & \$ 2,000 \\ \text {Yield  }& 2,250 \text { units }\
\end{array}$

During May, the following actual production in formati on was provided:
$\begin{array} { l r } \underline {\text { Material }} & \underline { \text { Actual Mix } } \ \mathrm { X } & 10,000 \text { units } \ Y & 5,000 \text { units } \ Z & 2,500 \text { units } \end{array}$ Yield 15,000 units
What is the Material yield variance.

Accepted Answer

A) $3,167(F) 
B) $3,167(U) 
C) $6,333(F) 
D) $6,333(U)

Question 16

Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows 1 direct labor hour per unit. During the current year, Croissant produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.
What is the standard activity level on which Croissant based its fixed overhead rate?

Accepted Answer

A) 100,000 direct labor hours 
B) 105,000 direct labor hours 
C) 110,000 direct labor hours 
D) 50,000 direct labor hours

Question 17

Mozambique Industries uses two different types of labor to manufacture its product. The types of labor, Cutting and Setup, have the following standards: $$\begin{array}{l}
\begin{array} { l r r r } 
\text { Labor Type } & \text { Standard Mix } & \text { Standard Unit Price } & \text { Standard Cost } \
\text { Cutting } & 200 \text { hours } & \$ 12.00 \text { per unit } & \$ 2,400 \
\text { Setup } & 800 \text { hours } & 8.00 \text { per unit } & \$ 6,400
\end{array}\
\text { Yiel d 4,000 units }
\end{array}$$ During September, the following actual production in formation was provided:
$\begin{array}{lr}
\text { Labor Type } & \text { Actual Mix } \
\text { Cutting } & 7,000 \text { hours } \
\text { Setup } & 3,000 \text { hours }
\end{array}$
Yiel d 42,000 units 
Required:
Calculate the labor mix and yield variances.

Accepted Answer

The answer of Mozambique Industries uses two different types of...

Question 18

Price standards specify amounts and quantity standards specify prices.

Accepted Answer

A) True 
 B)False

Question 19

Production of a product utilizes materials D, E, and F. The following are their standards: $\begin{array} { l r r r } \text { Material } & \text { Standard Mix } & \text { Standard Unit Price } & \text { Standard Cost } \ \text { D } & 6,000 \text { units } & \$ 1.00 \text { per unit } & \$ 6,000 \ E & 4,000 \text { units } & 2.00 \text { per unit } & \$ 8,000 \ F & 2,000 \text { units } & 1.50 \text { per unit } & \$ 3,000 \end{array}$
Yield 8,000 units
During August, the following actual production in formation was provided:
$\begin{array} { l r } \text { Material } & \text { Actual Mix } \ D & 37,000 \text { units } \ E & 17,000 \text { units } \ F & 7,000 \text { units } \end{array}$ 
Yield 50,000 units
Required:
Calculate the materials mix, yield, and usage variances.

Accepted Answer

The answer of Production of a product utilizes materials D,...

Question 20

In setting price standards, the purchasing manager must consider

Accepted Answer

A) freight. 
B) quality. 
C) discounts. 
D) all of these.

Exam 9: Standard Costing: a Functional-Based Control Approach

As a general rule, an investigation of a variance should be undertaken only if the

Which of the following people is most likely responsible for an unfavorable variable overhead efficiency variance?

Both manufacturing and service firms may use standard costing systems.

Which of the following is NOT true about Kaizen Standards?

In computing efficiency variances, managers compute the standard quantity of materials used and the standard hours allowed.

During September, 40,000 units were produced. The standard quantity of material allowed per unit was 5 pounds at a standard cost of $2.50 per pound. If there was a favorable usage variance of $25,000 for September, the actual quantity of materials used must have been

Standard costing

Fixed manufacturing overhead was budgeted at $105,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $4,000 unfavorable and the fixed overhead spending variance was $1,500 favorable, fixed manufacturing overhead applied must be

The document that shows the amount and cost of direct materials, direct labor, and overhead to make a unit of output is called the standard __________ .

Price standards specify amounts and quantity standards specify prices.

In setting price standards, the purchasing manager must consider