Question 1

Dexter Surgical Tools has set the following perfection direct labour standard: 0.5 hours at $20 per hour,for each unit of Tool #11.The company plans to produce 1200 units of Tool #11 in July;however,the actual production was 1000 units and only 900 units were actually sold.The actual labour cost for July was $22 per hour.If Dexter Surgical Tools decides to use a practical standard instead of the perfection standard,the labour efficiency variance is likely to:

Accepted Answer

A)  remain unchanged 
B)  increase 
C)  decrease 
D)  not enough information

Question 2

A particular firm with zero material inventory purchased 30 000 kg of material and used 25 000 kg.For control purposes,it is recommended that firms calculate the material price variance at the time of purchase.The variance could alternatively be calculated at the time of usage of that material.Which of the following statements most correctly reflects a comparison of the two methods for this firm?

Accepted Answer

A)  Whether calculated on purchase or usage,both variances will be favourable. 
B)  Whether calculated on purchase or usage,both variances will be unfavourable. 
C)  The variance calculated on purchase will be larger than the variance calculated on usage,but in the same direction (favourable/unfavourable). 
D)  The variance calculated on purchase will be smaller than the variance calculated on usage,but in the same direction (favourable/unfavourable).

Question 3

I Wear Optometry determined the following variances had occurred during the month of September:
The company made 1600 pairs of eyeglasses during the month using 2000 direct labour hours.The standard wage rate per hour is $14.50.What is the number of standard hours allowed for one pair of eyeglasses?

Accepted Answer

A)  1 hour 
B)  1600 hours 
C)  1 hour 15 minutes 
D)  Insufficient data to determine

Question 4

Twister Pty Ltd has set direct labour standards of 3 hours per unit and $5 per hour.During the month 2900 hours at a total cost of $17 400 were used to produce 1000 units.Determine the direct labour price variance.

Accepted Answer

A)  $2400 (U) 
B)  $2400 (F) 
C)  $2900 (U) 
D)  $2900 (F)

Question 5

Which of the following statements is/are true?

Accepted Answer

A)  The standard direct labour hours per unit of output are used to calculate a labour rate variance. 
B)  The standard direct labour hours per unit of output are used to calculate a labour efficiency variance. 
C)  The standard direct labour hours per unit of output cannot be determined until the end of the period. 
D)  All of the given answers.

Question 6

Which department typically is responsible for an unfavourable materials price variance?

Accepted Answer

A)  Purchasing 
B)  Engineering 
C)  Production 
D)  Receiving

Question 7

Cultco Company Ltd has set the following direct material standards per unit of product: 2.5 kg @ $3.00 per kg;$7.50 per unit.During April,actual direct material purchased and used amounted to 8000 kg at a cost of $3.10 per kg.Actual production amounted to 3000 units.Determine Cultco's direct material quantity variance.

Accepted Answer

A)  $2300 (U) 
B)  $1500 (U) 
C)  $800 (U) 
D)  $500 (U)

Question 8

Which of the following statements is false concerning the two ways to set standards?

Accepted Answer

A)  Time and motion studies are part of the task analysis method. 
B)  The usefulness of the historical data analysis method is reduced by changes in production methods. 
C)  The task analysis method is future oriented rather than past oriented. 
D)  The task analysis method and the analysis of historical data method cannot be used together.

Question 9

Which of the following statements is/are false?

Accepted Answer

A)  All favourable variances represent the costs of producing efficiently. 
B)  Favourable variances (after closing to cost of goods sold)cause cost of goods sold to be lower. 
C)  Significant favourable variances do not need to be investigated by managers. 
D)  All favourable variances represent the costs of producing efficiently AND significant favourable variances do not need to be investigated by managers.

Question 10

Variance analysis is used to evaluate actual performance by analysing the differences between standard and actual costs.

Accepted Answer

A) True 
 B)False

Question 11

Given the following information,calculate the materials price variance:

Accepted Answer

A)  $2800 (F) 
B)  $2800 (U) 
C)  $6000 (U) 
D)  $6000 (F)

Question 12

Which of the following statements is false?

Accepted Answer

A)  Standard costs are used for product costing. 
B)  Standard costs provide a benchmark against which actual costs can be compared. 
C)  Standard costs are actual costs. 
D)  Standard costs are used for control.

Question 13

Which of the following statements is a definition of standard quantity of direct materials allowed for a period? Standard quantity of direct materials is:

Accepted Answer

A)  the number of units of material that should have been used for expected (budgeted)production 
B)  the number of units of material that were used for actual production 
C)  the number of units of material that should have been used for actual production 
D)  the number of units of material required for each unit of production

Question 14

A labour efficiency variance is shown by:

Accepted Answer

A)  (AR)(AR) 
B)  SR (AH - SH) 
C)  (AH - SH) 
D)  AH (AR - SR)

Question 15

The production supervisor generally does not influence the:

Accepted Answer

A)  direct material quantity variance 
B)  direct labour rate variance 
C)  direct labour efficiency variance 
D)  direct material price variance

Question 16

What is the most viable rule of thumb for choosing variances that should be investigated?

Accepted Answer

A)  Greater than $10 000 or greater than 10 per cent of standard cost 
B)  Greater than 50 per cent of standard 
C)  Never investigate favourable variances 
D)  Always investigate unfavourable variances

Question 17

Flexer Company Ltd has set the following standards for the production of one unit of product.Normal production each month is 500 units.During June,actual production amounted to 420 units.All direct material was purchased and used this month.Actual cost amounted to:
Determine the direct labour rate variance for June production.

Accepted Answer

A)  $280 (U) 
B)  $172 (U) 
C)  $200 (U) 
D)  $168 (U)

Question 18

Selected data about a firm's materials follows.What amount would be debited to work in process account for materials used?

Accepted Answer

A)  $660 
B)  $630 
C)  $600 
D)  None of the given answers

Question 19

A labour rate variance is shown by:

Accepted Answer

A)  AH (AR - SR) 
B)  (AH - SH) 
C)  (AH - SH)(AR - SR) 
D)  AR (AH - SH)

Question 20

A favourable labour rate variance leads to a:

Accepted Answer

A)  credit to the labour rate variance account 
B)  debit to the labour rate variance account 
C)  larger than standard debit to work in process 
D)  None of the given answers

Exam 10: Standard Costs for Control: Direct Material and Direct Labour