Deck 12: Standard Costs and Balanced Scorecard

Question 1

Normal standards incorporate normal contingencies of production into the standards.

Answer 1

True

Question 2

In developing a standard cost for direct materials, a price factor and a quantity factor must be considered.

Answer 2

True

Question 3

A variance is the difference between actual costs and standard costs.

Answer 3

True

Question 4

Normal standards should be rigorous but attainable.

Question 5

An advantage of standard costs is that they simplify costing of inventories and reduce clerical costs.

Question 6

Once set, normal standards should NOT be changed during the year.

Question 7

Ideal standards will generally result in favourable variances for the company.

Question 8

A direct labour price standard is frequently called the direct labour efficiency standard.

Question 9

If actual costs are less than standard costs, the variance is favourable.

Question 10

Standard costs may be incorporated into the accounts in the general ledger.

Question 11

Inventories CANNOT be valued at standard cost in financial statements.

Question 12

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

Question 13

Actual costs that vary from standard costs always indicate inefficiencies.

Question 14

Setting standard costs is relatively simple because it is done entirely by accountants.

Question 15

Standard cost is the industry average cost for a particular item.

Question 16

The starting point for determining the causes of an unfavourable materials price variance is the purchasing department.

Question 17

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

Question 18

Standard cost cards are the subsidiary ledger for the Work in Process account in a standard cost system.

Question 19

The standard predetermined overhead rate must be based on direct labour hours as the standard activity index.

Question 20

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 21

Standard costs may be used by

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

Question 22

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 23

A credit to a Materials Quantity Variance account indicates that the actual quantity of direct materials used was greater than the standard quantity of direct materials allowed.

Question 24

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.

Question 25

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

Question 26

The customer perspective on the balance scorecard includes financial measures of performance.

Question 27

A standard cost system may be used with a job order cost system but not a process cost system.

Question 28

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 29

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 30

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 31

Variance analysis facilitates the principle of "management by exception."

Question 32

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 33

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

Question 34

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 35

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 36

If production exceeds normal capacity, the overhead volume variance will be favourable.

Question 37

A two-variance analysis of overhead consists of a spending variance and a volume variance.

Question 38

The total overhead budget variance relates primarily to fixed overhead costs.

Question 39

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 40

The fixed overhead volume variance relates only to fixed overhead costs.

Question 41

The most rigorous of all standards is the

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

Question 42

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 43

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 44

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 45

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 46

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 47

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 48

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 49

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 50

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 51

The direct materials quantity standard would NOT be expressed in

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

Question 52

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 53

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 54

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 55

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 56

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 57

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 58

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 59

The direct labour quantity standard is sometimes called the direct labour

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

Question 60

The final decision as to what standard cost should be is the responsibility of

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

Question 61

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 62

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 63

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 64

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 65

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 66

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 67

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 68

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 69

Blue Fin Co.produces a product requiring 10 kilograms of material at $1.50 per kilogram.Blue Fin produced 10,000 products during 2016 resulting in a $30,000 unfavourable materials quantity variance.How much direct material did Blue Fin use during 2016?

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

Question 70

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 71

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 72

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 73

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 74

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 75

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 76

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 77

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 78

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

Question 79

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 80

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