Deck 12: Standard Costs and Balanced Scorecard

Question 1

Which of the following is true?

A)Standard costs cannot be incorporated into the accounts in the general ledger.
B)An advantage of standard costs is that they simplify costing of inventories and reduce clerical costs.
C)Setting standard costs is relatively simple because it is done entirely by accountants.
D)Standard cost cards are the subsidiary ledger for the Work in Process account in a standard cost system.

Answer 1

B

Question 2

An unfavourable labour quantity variance indicates that the actual number of direct labour hours worked was greater than the number of direct labour hours that should have been worked for the output attained.

Answer 2

True

Question 3

Inventories cannot be valued at standard cost in financial statements.

Answer 3

False

Question 4

A standard cost is

A)a cost which is paid for a group of similar products.
B)the average cost in an industry.
C)a predetermined cost.
D)the historical cost of producing a product last year.

Question 5

Which of the following is true?

A)In developing a standard cost for direct materials, a price factor and a quantity factor must be considered.
B)A direct labour price standard is frequently called the direct labour efficiency standard.
C)The standard predetermined overhead rate must be based on direct labour hours as the standard activity index.
D)The direct materials price standard should be based on the production department's best estimate of the cost of raw material.

Question 6

A debit to the Overhead Volume Variance account indicates that the standard hours allowed for the output produced was greater than the standard hours at normal capacity.

Question 7

The difference between a budget and a standard is that

A)a budget expresses what costs were, while a standard expresses what costs should be.
B)a budget expresses management's plans, while a standard reflects what actually happened.
C)a budget expresses a total amount while a standard expresses a unit amount.
D)standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system.

Question 8

Standard cost + price variance + quantity variance = budgeted cost.

Question 9

If standard costs are incorporated into the accounting system,

A)it may simplify the costing of inventories and reduce clerical costs.
B)it can eliminate the need for the budgeting process.
C)the accounting system will produce information which is less relevant than the historical cost accounting system.
D)approval of the stockholders is required.

Question 10

When it comes to variances,

A)actual costs that vary from standard costs always indicate efficiencies.
B)ideal standards will generally result in favourable variances for the company.
C)a variance is the difference between total actual costs and total standard costs.
D)if actual costs are less than standard costs, the variance is unfavourable.

Question 11

The learning and growth perspective on the balanced scorecard includes measures monitoring product development, production, delivery, and after-sale service.

Question 12

Budget data are not journalized in cost accounting systems with the exception of

A)the application of manufacturing overhead.
B)direct labour budgets.
C)direct materials budgets.
D)cash budget data.

Question 13

It is possible that a company's financial statements may report inventories at

A)budgeted costs.
B)standard costs.
C)both budgeted and standard costs.
D)none of these.

Question 14

Which of the following statements is FALSE?

A)A standard cost is more accurate than a budgeted cost.
B)A standard is a unit amount.
C)In concept, standards and budgets are essentially the same.
D)The standard cost of a product is equivalent to the budgeted cost per unit of product.

Question 15

A standard is a unit amount, whereas a budget is a total amount.

Question 16

Standard cost is the industry average cost for a product or service.

Question 17

Normal standards

A)should not be rigorous but attainable.
B)do not incorporate normal contingencies of production into the standards.
C)once set should not be changed during the year.
D)represent efficient levels of performance that are attainable under expected operating conditions.

Question 18

There could be instances where the production department is responsible for a direct materials price variance.

Question 19

A materials quantity variance is calculated as the difference between the standard direct materials price and the actual direct materials price multiplied by the actual quantity of direct materials used.

Question 20

Standard costs may be used by

A)universities.
B)governmental agencies.
C)charitable organizations.
D)all of these.

Question 21

Which of the following is not considered an advantage of using standard costs?

A)Standard costs can reduce clerical costs.
B)Standard costs can be useful in setting prices for finished goods.
C)Standard costs can be used as a means of finding fault with performance.
D)Standard costs can make employees "cost-conscious."

Question 22

The two levels that standards may be set at are

A)normal and fully efficient.
B)normal and ideal.
C)ideal and less efficient.
D)fully efficient and fully effective.

Question 23

Allowance for spoilage is part of the direct

A)materials price standard.
B)materials quantity standard.
C)labour price standard.
D)labour quantity standard.

Question 24

Ideal standards

A)are rigorous but attainable.
B)are the standards generally used in a master budget.
C)reflect optimal performance under perfect operating conditions.
D)will always motivate employees to achieve the maximum output.

Question 25

The direct labour quantity standard is sometimes called the direct labour

A)volume standard.
B)effectiveness standard.
C)efficiency standard.
D)quality standard.

Question 26

A managerial accountant 1.does not participate in the standard setting process.
2.provides knowledge of cost behaviours in the standard setting process
3.provides input of histarical costs to the standard setting process.

A)1
B)2
C)3
D)2 and 3

Question 27

A standard which represents an efficient level of performance that is attainable under expected operating conditions is called a(n)

A)ideal standard.
B)loose standard.
C)tight standard.
D)normal standard.

Question 28

Standard costs

A)may show past cost experience.
B)help establish expected future costs.
C)are the budgeted costs per unit in the present.
D)all of these.

Question 29

The total standard cost to produce one unit of product is shown

A)at the bottom of the income statement.
B)at the bottom of the balance sheet.
C)on the standard cost card.
D)in the Work in Process Inventory account.

Question 30

The direct materials quantity standard would not be expressed in

A)kilograms.
B)barrels.
C)dollars.
D)board metres.

Question 31

Most companies that use standards set them at

A)the normal level.
B)a conceivable level.
C)the ideal level.
D)last year's level.

Question 32

Which of the following statements about standard costs is FALSE?

A)Properly set standards should promote efficiency.
B)Standard costs facilitate management planning.
C)Standards should not be used in "management by exception."
D)Standard costs can simplify the costing of inventories.

Question 33

The direct materials quantity standard should

A)exclude unavoidable waste.
B)exclude quality considerations.
C)allow for normal spoilage.
D)always be expressed as an ideal standard.

Question 34

The cost of freight-in

A)is to be included in the standard cost of direct materials.
B)is considered a selling expense.
C)should have a separate standard apart from direct materials.
D)should not be included in a standard cost system.

Question 35

The final decision for setting standard costs should be is the responsibility of

A)the quality control engineer.
B)the managerial accountants.
C)the purchasing agent.
D)management.

Question 36

The labour time requirements for standards may be determined by the

A)sales manager.
B)product manager.
C)industrial engineers.
D)payroll department manager.

Question 37

A manufacturing company would include setup and downtime in their direct

A)materials price standard.
B)materials quantity standard.
C)labour price standard.
D)labour quantity standard.

Question 38

If a company is concerned with the potential negative effects of establishing standards, they should

A)set loose standards that are easy to fulfill.
B)offer wage incentives to those meeting standards.
C)not employ any standards.
D)set tight standards in order to motivate people.

Question 39

A good system of standard costing always

A)ensures that the right staff are to blame if there are negative variances.
B)ensures that the right staff are both rewarded and blamed when there are positive or negative variances.
C)avoids excessive detail in examining small variances.
D)considers the impact of morale on all those who utilize the reporting system.

Question 40

The most rigorous of all standards is the

A)normal standard.
B)realistic standard.
C)ideal standard.
D)conceivable standard.

Question 41

The investigation of a materials quantity variance usually begins in the

A)production department.
B)purchasing department.
C)sales department.
D)controller's department.

Question 42

Which of the following would generally not be a cause to adjust standard cost rates in a service industry?

A)wage rate increase for the cleaners
B)electricity charges from the municipality
C)salary increases for management
D)cleaning supplies increases from suppliers

Question 43

Use the following information for questions
A company developed the following per-unit standards for its product: 5 kilograms of direct materials at $3 per kilogram.Last month, 1,000 kilograms of direct materials were purchased for $2,900.Also last month, 700 kilograms of direct materials were used to produce 135 units.
What was the direct materials price variance for last month?

A)$12,100 favourable
B)$100 favourable
C)$12,100 unfavourable
D)$100 unfavourable

Question 44

The formula for the materials quantity variance is

A)(SQ × AP)- (SQ × SP).
B)(AQ × AP)- (AQ × SP).
C)(AQ × SP)- (SQ × SP).
D)(AQ × AP)- (SQ × SP).

Question 45

If the materials price variance is $600 F and the materials quantity and labour variances are each $450 U, what is the total materials variance?

A)$600 F
B)$450 U
C)$150 F
D)$1,050 U

Question 46

An unfavourable materials quantity variance would occur if

A)more materials are purchased than are used.
B)actual kilograms of materials used were less than the standard kilograms allowed.
C)actual labour hours used were greater than the standard labour hours allowed.
D)actual kilograms of materials used were greater than the standard kilograms allowed.

Question 47

Use the following information for questions
Bridgeware Company has a materials price standard of $2.50 per kilogram.Four thousand kilograms of materials were purchased at $2.40 a kilogram.The actual quantity of materials used was 3,500 kilograms, although the standard quantity allowed for the output was 3,400 kilograms.
Bridgeware Company's materials price variance is

A)$400 U.
B)$400 F.
C)$350 U.
D)$300 F.

Question 48

A company uses 40,000 kilograms of materials for which they paid $9.00 a kilogram.The materials price variance was $80,000 favourable.What is the standard price per kilogram?

A)$2.00
B)$7.00
C)$10.00
D)$11.00

Question 49

A total materials variance is analyzed in terms of

A)price and quantity variances.
B)buy and sell variances.
C)quantity and quality variances.
D)tight and loose variances.

Question 50

A company uses 3,150 kilograms of materials and exceeds the standard by 150 kilograms.The quantity variance is $900 unfavourable.What is the standard price?

A)$2.00
B)$3.50
C)$4.00
D)$6.00

Question 51

A company purchases 130,000 kilograms of materials.The materials price variance is $26,000 favourable.What is the difference between the standard and actual price paid for the materials?

A)$5.00
B)$0.20
C)$5.50
D)$0.25

Question 52

EKPN Co.produces wooden boxes.The company's standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour.The standard labour rate is $15 per hour.In August, EKPN Co.Purchased 12,000 boards for a total cost of $123,000.It used 11,500 boards to manufacture 1,900 boxes.Total labour hours were 1,000 hours, and total labour costs were $16,250.What was the materials price variance for August?

A)$3,000 F
B)$3,000 U
C)$ 8,000 F
D)$8,000 U

Question 53

The total materials variance is equal to the

A)materials price variance.
B)difference between the materials price variance and materials quantity variance.
C)product of the materials price variance and the materials quantity variance.
D)sum of the materials price variance and the materials quantity variance.

Question 54

Use the following information for questions
Bridgeware Company has a materials price standard of $2.50 per kilogram.Four thousand kilograms of materials were purchased at $2.40 a kilogram.The actual quantity of materials used was 3,500 kilograms, although the standard quantity allowed for the output was 3,400 kilograms.
Bridgeware Company's total materials variance is

A)$150 F.
B)$1,500 U.
C)$1,250 U.
D)$100 F.

Question 55

The investigation of a materials price variance usually begins in the

A)first production department.
B)purchasing department.
C)controller's office.
D)accounts payable department.

Question 56

Use the following information for questions
A company developed the following per-unit standards for its product: 5 kilograms of direct materials at $3 per kilogram.Last month, 1,000 kilograms of direct materials were purchased for $2,900.Also last month, 700 kilograms of direct materials were used to produce 135 units.
What was the direct materials quantity variance for last month?

A)$75 unfavourable
B)$75 favourable
C)$900 unfavourable
D)$900 favourable

Question 57

The formula for the materials price variance is

A)(AQ × SP)- (SQ × SP).
B)(AQ × AP)- (AQ × SP).
C)(AQ × AP)- (SQ × SP).
D)(AQ × SP)- (SQ × AP).

Question 58

EKPN Co.produces wooden boxes.The company's standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour.The standard labour rate is $15 per hour.In August, EKPN Co.Purchased 12,000 boards for a total cost of $123,000.It used 11,500 boards to manufacture 1,900 boxes.Total labour hours were 1,000 hours, and total labour costs were $16,250.What was the material quantity variance for August?

A)$5,000 U
B)$5,000 F
C)$1,000 U
D)$1,000 F

Question 59

If actual direct material costs are greater than standard direct materials costs, it means that

A)actual costs were calculated incorrectly.
B)the actual unit price of direct materials was greater than the standard unit price of direct materials.
C)the actual unit price of raw materials or the actual quantities of raw materials used was greater than the standard unit price or standard quantities of raw materials expected.
D)the purchasing agent or the production foreman is inefficient.

Question 60

Use the following information for questions
Bridgeware Company has a materials price standard of $2.50 per kilogram.Four thousand kilograms of materials were purchased at $2.40 a kilogram.The actual quantity of materials used was 3,500 kilograms, although the standard quantity allowed for the output was 3,400 kilograms.
Bridgeware Company's materials quantity variance is

A)$250 U.
B)$250 F.
C)$340 F.
D)$340 U.

Question 61

An overhead fixed volume variance is calculated as the difference between normal capacity hours and standard hours allowed

A)times the total predetermined overhead rate.
B)times the predetermined variable overhead rate.
C)times the predetermined fixed overhead rate.
D)divided by actual number of hours worked.

Question 62

If the standard hours allowed are less than the standard hours at normal capacity,

A)the overhead volume variance will be unfavourable.
B)variable overhead costs will be under-applied.
C)the overhead controllable variance will be favourable.
D)variable overhead costs will be over-applied.

Question 63

A favourable variance

A)is an indication that the company is not operating in an optimal manner.
B)implies a positive result if quality control standards are met.
C)implies a positive result if standards are flexible.
D)means that standards are too loosely specified.

Question 64

Labour efficiency is measured by the

A)materials quantity variance.
B)total labour variance.
C)labour quantity variance.
D)labour rate variance.

Question 65

If actual costs are greater than standard costs, there is a(n)

A)normal variance.
B)unfavourable variance.
C)favourable variance.
D)error in the accounting system.

Question 66

Variances from standards are

A)expressed in total dollars.
B)expressed on a per-unit basis.
C)expressed on a percentage basis.
D)all of these.

Question 67

The overhead volume variance relates only to

A)variable overhead costs.
B)fixed overhead costs.
C)both variable and fixed overhead costs.
D)all manufacturing costs.

Question 68

The matrix approach to variance analysis

A)will yield slightly different variances than the formula approach.
B)is more accurate than the formula approach.
C)does not separate the price and quantity variance calculations.
D)provides a convenient structure for determining each variance.

Question 69

An unfavourable labour quantity variance may be caused by

A)paying workers higher wages than expected.
B)paying workers a bonus at year end.
C)worker fatigue or carelessness.
D)higher pay rates mandated by union contracts.

Question 70

If the labour quantity variance is unfavourable and the cause is inefficient use of direct labour, the responsibility rests with the

A)sales department.
B)production department.
C)budget office.
D)controller's department.

Question 71

The per-unit standards for direct labour are 3 direct labour hours at $15 per hour.If in producing 700 units, the actual direct labour cost was $31,175 for 2,150 direct labour hours worked, the total direct labour variance is

A)$50 unfavourable.
B)$325 favourable.
C)$50 favourable.
D)$325 unfavourable.

Question 72

The standard number of hours that should have been worked for the output attained is 8,000 direct labour hours and the actual number of direct labour hours worked was 8,400.If the direct labour price variance was $8,400 unfavourable, and the standard rate of pay was $18 per direct labour hour, what was the actual rate of pay for direct labour?

A)$17.00 per direct labour hour
B)$15.00 per direct labour hour
C)$19.00 per direct labour hour
D)$18.00 per direct labour hour

Question 73

Which of the following statements about overhead variances is FALSE?

A)The difference between the budgeted fixed overhead and the fixed overhead applied is the volume variance.
B)Standard hours allowed are used in calculating the volume variance.
C)The spending variance pertains solely to fixed costs.
D)The total overhead variance pertains to both variable and fixed costs.

Question 74

The total overhead budget variance is equal to the

A)sum of the total materials variance and the total labour variance.
B)difference between the total materials variance and the total labour variance.
C)difference between the actual overhead costs and the overhead costs applied to the work done.
D)total variance minus the spending variance and the volume variance.

Question 75

Under a standard costing system, manufacturing overhead costs are applied to work in process on the basis of

A)actual hours worked.
B)standard hours allowed.
C)ratio of actual variable to fixed costs.
D)actual overhead costs incurred.

Question 76

Which of the following is false?

A)The total overhead budget variance relates primarily to fixed overhead costs.
B)The fixed overhead volume variance relates only to fixed overhead costs.
C)If production exceeds normal capacity, the overhead volume variance will be favourable.
D)A two-variance analysis of overhead consists of a spending variance and a volume variance.

Question 77

Blue Fin Co.produces a product requiring 10 kilograms of material at $1.50 per kilogram.Blue Fin produced 10,000 products during 2020 resulting in a $30,000 unfavourable materials quantity variance.How much direct material did Blue Fin use during 2020?

A)120,000 kilograms
B)100,000 kilograms
C)200,000 kilograms
D)145,000 kilograms

Question 78

Which of the following statements is FALSE?

A)The overhead volume variance indicates whether plant facilities were used efficiently during the period.
B)The costs that cause the overhead volume variance are usually controllable costs.
C)The overhead volume variance relates solely to fixed costs.
D)The overhead volume variance is favourable if standard hours allowed for output are greater than the standard hours at normal capacity.

Question 79

The standard rate of pay is $15 per direct labour hour.If the actual direct labour payroll was $58,800 for 4,000 direct labour hours worked, the direct labour price (rate)variance is

A)$1,200 unfavourable.
B)$1,200 favourable.
C)$1,500 unfavourable.
D)$1,500 favourable.

Question 80

The total variance is $10,000 favourable.The total materials variance is $4,000 favourable.The total labour variance is twice the total overhead variance, both which are favourable.What is the total overhead variance?

A)$1,000
B)$2,000
C)$3,000
D)$4,000