Question 1

Variance analysis includes all of the following except

Accepted Answer

A) taking corrective action. 
B) investigating all significant and insignificant variances. 
C) developing performance measures to track activities causing the variance. 
D) computing variances.

Question 2

Robert Inc.uses the standard costing method.The company's main product is a fine-quality headphones that normally takes 0.5 hour to produce.Normal annual capacity is 5,000 direct labor hours,and budgeted fixed overhead costs for the year were $8,750.During the year,the company produced and sold 5,800 units.Actual fixed overhead costs were $6,000. 
-Using the information provided for Robert Inc,compute the fixed overhead volume variance.

Accepted Answer

A) $2,750 (F) 
B) $925 (U) 
C) $5,800 (U) 
D) $3,675 (U)

Question 3

Golf Pro Inc.makes wood drivers for the professional golfer.Because of the clientele of users,only the finest materials can be used,and the quality of craftsmanship must be high.The following cost,quantity,and time standards have been set for 2014:
Direct materials: 2 board-feet of wood @ $20 per board-foot and 2 feet of leather strip @ $5 per foot
Direct labor: Cutting Department,0.6 hour per driver at $10 per hour;Shaping/Finishing Department,1.4 hours per driver at $15 per hour
Overhead: variable,$5 per direct labor hour;fixed,$8 per direct labor hour
The wood is added at the beginning of the cutting process and the leather strip at the beginning of the shaping/finishing process.
Compute the standard cost per driver.

Accepted Answer

The answer of Golf Pro Inc.makes wood drivers for the...

Question 4

A summary of expected costs for a range of activity levels that is geared to changes in the level of productive output is the definition of a

Accepted Answer

A) continuous budget. 
B) flexible budget. 
C) master budget. 
D) period budget.

Question 5

The variable overhead efficiency variance is the difference between actual total overhead costs incurred and the total overhead costs applied using the standard overhead rates.

Accepted Answer

A) True 
 B)False

Question 6

If a company's flexible budget formula is $11.25 per unit plus $72,100,what would be the total budget for evaluating operating performance if 28,650 units were sold and 38,500 units were produced?

Accepted Answer

A) $433,125 
B) $505,225 
C) $811,125 
D) $72,100

Question 7

The total fixed overhead variance is comprised of the

Accepted Answer

A) variable overhead efficiency and fixed variances. 
B) fixed overhead budget and volume variances. 
C) labor efficiency and rate variances. 
D) fixed overhead spending and efficiency variances.

Question 8

If standard costing is not economically feasible for a company,predetermined overhead rates should not be used.

Accepted Answer

A) True 
 B)False

Question 9

Cost centers have well-defined links between the cost of the resources and the resulting products.

Accepted Answer

A) True 
 B)False

Question 10

A performance report should contain cost or revenue items that the manager receiving the report can control.

Accepted Answer

A) True 
 B)False

Question 11

Flexible budgets are also called static budgets.

Accepted Answer

A) True 
 B)False

Question 12

Candy Stores Inc.gives you the following information: The standard material cost is $7 per pound for a 15 pound bag of chocolate.The following is the actual cost and usage data:
 
-Using the above information provided for Candy Stores,compute the direct materials price variance for Candy Stores.

Accepted Answer

A) $186,000 (F) 
B) $186,000 (U) 
C) $42,000 (F)

Question 13

Underfoot Products uses standard costing.The following information about overhead was generated during May:  
-Using the above information provided for Underfoot Products,compute the variable overhead variance.

Accepted Answer

A) $42,000 (F) 
B) $42,000 (U) 
C) $30,000 (U) 
D) $32,000 (F)

Question 14

When a manufacturing company employs standard costs,all costs affecting the three inventory accounts and the Cost of Goods Sold account are stated in terms of actual costs rather than in terms of standard costs incurred.

Accepted Answer

A) True 
 B)False

Question 15

If the actual amount of direct materials used equals the standard amount of direct materials that should have been used,the difference between the standard cost and actual cost of direct materials is called the

Accepted Answer

A) price variance. 
B) rate variance. 
C) quantity variance. 
D) efficiency variance.

Question 16

During the current month,Thompson Company started 40,000 units of product and transferred 25,000 fully completed units to finished goods.The final work in process inventory was 50 percent complete as to labor operations.There was no initial work in process,and actual labor hours were 150,000 for the period.Each unit should have required 3 direct labor hours to be produced at standard.The total standard hours allowed for the period are

Accepted Answer

A) 75,000 hours. 
B) 97,500 hours. 
C) 120,000 hours. 
D) 150,000 hours.

Question 17

Standard costs are based solely on actual costs incurred in past.

Accepted Answer

A) True 
 B)False

Question 18

Ronald Company has a standard costing system and keeps all its costs up to date. The company specializes in producing herbal medicines. The standard variable costs for producing 1 liter herbal oil are as follows:

The company's normal capacity is 15,000 direct labor hours. Its budgeted fixed overhead costs for the year were $27,000. During the year, it produced and sold 22,000 liters and it purchased 51,250 units of direct materials; the purchase cost was $1.50 per unit. The average labor rate was $4.90 per hour, and 15,500 direct labor hours were worked. The company's actual variable overhead costs for the year were $50,100, and its fixed costs were $25,500.
Using the data given, compute the following using formulas or diagram form:
1. Direct materials cost variances:
     a. Direct materials price variance
     b. Direct materials quantity variance
     c. Total direct materials cost variance

2. Direct labor cost variances:
     a. Direct labor rate variance
     b. Direct labor efficiency variance
     c. Total direct labor cost variance

3. Variable overhead variances:
     a. Variable overhead spending variance
     b. Variable overhead efficiency variance
     c. Total variable overhead variance

4. Fixed overhead variances:
     a. Fixed overhead budget variance
     b. Fixed overhead volume variance
     c. Total fixed overhead variance

Accepted Answer

The answer of Ronald Company has a standard costing system...

Question 19

The direct materials price variance is best measured and reported to appropriate management personnel at the time

Accepted Answer

A) purchased quantities exceed standard order size. 
B) quarterly financial statements are prepared. 
C) shipments are received and recorded as purchases. 
D) direct materials are issued to production areas.

Question 20

Which of the following provides an explanation of why the variable overhead rate is separated from the fixed overhead rate in standard costing?

Accepted Answer

A) There is no justifiable reason;their separation is merely to simplify entries. 
B) Both calculations divide by the same direct labor hours,but the numerator is different for each calculation. 
C) The variable overhead rate is calculated using actual direct labor hours,whereas the fixed overhead rate is calculated using normal capacity direct labor hours. 
D) The behavior of costs,used for computing variable overhead rate and fixed overhead rate,differs.

Exam 24: Standard Costing and Variance Analysis

Variance analysis includes all of the following except

A summary of expected costs for a range of activity levels that is geared to changes in the level of productive output is the definition of a

The variable overhead efficiency variance is the difference between actual total overhead costs incurred and the total overhead costs applied using the standard overhead rates.

If a company's flexible budget formula is $11.25 per unit plus $72,100,what would be the total budget for evaluating operating performance if 28,650 units were sold and 38,500 units were produced?

The total fixed overhead variance is comprised of the

If standard costing is not economically feasible for a company,predetermined overhead rates should not be used.

Cost centers have well-defined links between the cost of the resources and the resulting products.

A performance report should contain cost or revenue items that the manager receiving the report can control.

Flexible budgets are also called static budgets.

Candy Stores Inc.gives you the following information: The standard material cost is $7 per pound for a 15 pound bag of chocolate.The following is the actual cost and usage data: -Using the above information provided for Candy Stores,compute the direct materials price variance for Candy Stores.

Underfoot Products uses standard costing.The following information about overhead was generated during May: -Using the above information provided for Underfoot Products,compute the variable overhead variance.

When a manufacturing company employs standard costs,all costs affecting the three inventory accounts and the Cost of Goods Sold account are stated in terms of actual costs rather than in terms of standard costs incurred.

If the actual amount of direct materials used equals the standard amount of direct materials that should have been used,the difference between the standard cost and actual cost of direct materials is called the

Standard costs are based solely on actual costs incurred in past.

The direct materials price variance is best measured and reported to appropriate management personnel at the time

Which of the following provides an explanation of why the variable overhead rate is separated from the fixed overhead rate in standard costing?