Question 1

A standard cost is a budget for the production of one unit of product or service.

Accepted Answer

A) True 
 B)False  True

Question 2

Coiller Company uses a standard cost system for its only product. The bickering between purchasing and production that occurs every month after the material variances are developed has the production vice president, Mr. Adath, at his wits end. He has checked the job descriptions of the individuals involved and notes that the purchasing department is responsible for the price at which materials and supplies are purchased and the manufacturing department is responsible for the quantity of material used. This seems very clear cut to him so he has gone to the cost accountant for some additional help.
Required: As the cost accountant, explain to Mr. Adath why, or why not, this division of duties solves the conflict between price and quantity variances.

Accepted Answer

The stated responsibilities reduce the conflict but do not eliminate it. Purchasing is adversely affected when manufacturing puts through rush orders that cannot be obtained at the normal price-this is the responsibility of manufacturing. If purchasing acquires materials of a lower quality than normal, perhaps at a lower price, manufacturing might have higher quantity variances due to excess waste-this is the responsibility of the purchasing department.
Even in the best of situations, a part of the quantity variance could be assigned to purchasing-thereby creating a joint variance
So, how can Mr. Adath resolve the problem? Try to investigate the cause of the variance carefully in order to charge it to the correct party and where it is a joint variance, explain the situation to both parties. The conflicts have arisen because, as the parties involved have surmised, the variances have been charged incorrectly.

Question 3

Use the following to answer questions:
The following standard cost information is available for Leah Co.'s only product: Direct material 9 feet at $5.00 per foot. Actual information for July: 2,000 units were produced; 20,000 feet of direct material were purchased at a cost of $92,000 and 19,000 feet of material were used.
-What is the material purchase price variance for July?

Accepted Answer

A)   $7,600 favorable
B)   $7,600 unfavorable
C)   $8,000 unfavorable
D)   $8,000 favorable D

Question 4

Use the following to answer questions:
Stanton Co. uses the following standards in the production of its only product:
Direct material 18 pounds at $25 per pound
Direct labor: 6 hours at $18 per hour.
During March company records showed the following:
 
-The direct labor rate variance is

Accepted Answer

A)   $1,800 unfavorable
B)   $1,800 favorable
C)   $14,100 unfavorable
D)   $14,100 favorable

Question 5

Use the following to answer questions:
Cabot Inc. uses a standard costing system for its only product. The standards are as follows:
  
Actual data for September are:
 
-Which of the following is the journal entry to record the use of direct material?

Accepted Answer

A)   Item A
B)   Item B
C)   Item C
D)   Item D

Question 6

Use the following to answer questions:
 Zhons Corporation uses two materials and two types of labor in the production of one of its products. The following standard cost information is available
 
-What is the material mix variance?

Accepted Answer

A)   $54,000 unfavorable
B)   $30,000 favorable
C)   $30,000 unfavorable
D)   $24,000 unfavorable

Question 7

Which of the following are possible reasons for altering the material mix?

Accepted Answer

A)   A shortage of one of the materials arises
B)   An attempt to improve yield
C)   An attempt to reduce the material price variance
D)   Both A and B

Question 8

Use the following to answer questions:
 Zhons Corporation uses two materials and two types of labor in the production of one of its products. The following standard cost information is available
 
-What is the labor yield variance

Accepted Answer

A)   $ 5,000 favorable
B)   $20,000 unfavorable
C)   $15,000 favorable
D)   $15,000 unfavorable

Question 9

Which of the following does not affect a material purchase price variance?

Accepted Answer

A)   Increases in the demand for the firm's output
B)   Need to purchase component parts with precise engineering specifications
C)   Rush order requests from the production department
D)   World-wide shortages of critical input materials

Question 10

Perfection standards can be defined as standards that are "tight but attainable."

Accepted Answer

A) True 
 B)False

Question 11

Which of the following variances might be affected by the purchase of off-standard materials?
I favorable material purchase price variance
II unfavorable material quantity variance
III unfavorable labor rate variance
IV unfavorable labor efficiency variance

Accepted Answer

A)   I
B)   I, II
C)   I, II, IV
D)   I, II, III, IV

Question 12

Because a key objective of cost management systems is the elimination of non-value-added costs, standards need to be revised frequently in order to remain valid for cost control purposes.

Accepted Answer

A) True 
 B)False

Question 13

Az Company currently uses a traditional standard costing system. During the past two years the company has been modernizing its plant and has tried to keep the old standard costing system in place by changing some of the features to reflect the more automated situation. It has now come to a point, however, where the old system just isn't providing useful information for product costing, pricing, decision making, etc.
The CEO Ms. Yamaguchi has set up a team to look into the situation and initially come up with reasons why the old system isn't working anymore.
Required: What are the problems with traditional standard costing under the current manufacturing environment?

Accepted Answer

The answer of Az Company currently uses a traditional standard...

Question 14

Discuss the issues underlying the calculation of a mix and yield variance for direct materials.

Accepted Answer

The answer of Discuss the issues underlying the calculation of...

Question 15

Use the following to answer questions:
 Zhons Corporation uses two materials and two types of labor in the production of one of its products. The following standard cost information is available
 
-What is the labor efficiency variance?

Accepted Answer

A)   $ 5,000 favorable
B)   $20,000 unfavorable
C)   $15,000 favorable
D)   $15,000 unfavorable

Question 16

Yield 96,600 units Required:
(1) Calculate the material quantity, mix and yield variances.
(2) Based on the actual mix numbers and standard prices, above, what does it seem as if the company was trying to do and did it succeed?
Yield 9,000 units
During July, the following actual production information was available:
  Koach CO. produces a product that uses three different materials. The standards are

Accepted Answer

The answer of Yield 96,600 units Required:
(1) Calculate the material...

Question 17

Standard Costing is not appropriate in service-industry firms

Accepted Answer

A) True 
 B)False

Question 18

Firms using standard costing systems do not use standards for product costing.

Accepted Answer

A) True 
 B)False

Question 19

The following statements relate to standard costing systems:
I Computation of standard costs and cost variances enables managers to employ management by exception.
II Variances provide a means of performance evaluation and rewards for employees
III Short product life cycles mean that standards are relevant for only a short time
IV Use of standard costs in product costing results in more stable product costs than if actual product costs were used
Which of these statements are considered advantages of standard costing?

Accepted Answer

A)   I, II
B)   I, III
C)   I, II, IV
D)   I, III, IV

Question 20

Generally a variance should be investigated if:

Accepted Answer

A)   Benefits of investigation are greater than zero
B)   The variance is unfavorable
C)   The benefits of investigation exceed the cost of investigation
D)   The variance is favorable

Exam 16: Standard Costing, Variance Analysis, and Kaizen Costing

A standard cost is a budget for the production of one unit of product or service.

Use the following to answer questions: Stanton Co. uses the following standards in the production of its only product: Direct material 18 pounds at $25 per pound Direct labor: 6 hours at $18 per hour. During March company records showed the following: -The direct labor rate variance is

Use the following to answer questions: Cabot Inc. uses a standard costing system for its only product. The standards are as follows: Actual data for September are: -Which of the following is the journal entry to record the use of direct material?

Use the following to answer questions: Zhons Corporation uses two materials and two types of labor in the production of one of its products. The following standard cost information is available -What is the material mix variance?

Which of the following are possible reasons for altering the material mix?

Use the following to answer questions: Zhons Corporation uses two materials and two types of labor in the production of one of its products. The following standard cost information is available -What is the labor yield variance

Which of the following does not affect a material purchase price variance?

Perfection standards can be defined as standards that are "tight but attainable."

Which of the following variances might be affected by the purchase of off-standard materials? I favorable material purchase price variance II unfavorable material quantity variance III unfavorable labor rate variance IV unfavorable labor efficiency variance

Because a key objective of cost management systems is the elimination of non-value-added costs, standards need to be revised frequently in order to remain valid for cost control purposes.

Discuss the issues underlying the calculation of a mix and yield variance for direct materials.

Use the following to answer questions: Zhons Corporation uses two materials and two types of labor in the production of one of its products. The following standard cost information is available -What is the labor efficiency variance?

Standard Costing is not appropriate in service-industry firms

Firms using standard costing systems do not use standards for product costing.

Generally a variance should be investigated if: