Deck 10: Standard Costing and Variance Analysis

Question 1

Which of the following words do you associate with standard costing?
Please select all that apply.

A) Expected
B) Predictive
C) Actual
D) Planned

Answer 1

A,B,D

Question 2

Which of the following statements does not describe variance analysis?

A) Variance analysis is a comparison of actual outcomes with expectations.
B) Variances are used to explain the difference between actual and budgeted results.
C) Variances represent expectations of what costs and revenues will be.
D) Variance analysis helps control operations.

Answer 2

C

Question 3

Which one of the following is not a recognized standard under standard costing?

A) Ideal
B) Normal
C) Attainable
D) Actual

Answer 3

D

Question 4

A standard cost card includes just details of product costs.

Question 5

A standard cost is just a best estimate of the costs and revenues associated with a product or service.

Question 6

A standard cost card includes details of standard selling price, direct materials, direct labour, direct expenses and variable overheads.

Question 7

What is the correct formula for the direct material total variance?

A) (Actual usage of direct materials for actual production - expected usage of direct materials for actual production) x the standard cost for one unit of direct material.
B) Actual expenditure on direct materials for actual production - expected expenditure on direct materials for actual production.
C) What the direct materials for actual production should have cost - what the direct materials for actual production actually cost.
D) Expected expenditure on materials - (actual production units x standard materials cost per unit of production).

Question 8

What is the correct formula for the direct material price variance?

A) Actual expenditure on direct materials for actual production - expected expenditure on direct materials for actual production.
B) (Actual usage of direct materials for actual production - expected usage of direct materials for actual production) x the standard cost for one unit of direct material.
C) What the direct materials for actual production should have cost - what the direct materials for actual production actually cost.
D) What the direct materials for expected production should have cost - what the direct materials for actual production actually cost.

Question 9

What is the correct formula for the direct material usage variance?

A) (The direct materials that should have been used in actual production - the actual direct materials used in actual production) x the actual cost for one unit of direct material.
B) Actual expenditure on direct materials used in actual production - expected expenditure on direct materials used in actual production.
C) What the direct materials used in actual production should have cost - what the direct materials used in actual production actually cost.
D) (The direct materials that should have been used in actual production - the actual direct materials used in actual production) x the standard cost for one unit of direct material.

Question 10

Maria bakes and sells cakes for special occasions. Each cake requires 0.5 kilograms of flour. Flour costs £1.20 per kilogram. During May, Maria expected to bake 500 cakes. However, due to additional demand, she baked 600 cakes and her total flour cost for the month was £420 for 360 kilograms. What was Maria's direct material total variance for the month of May?

A) £12 Favourable
B) £60 Unfavourable
C) £72 Unfavourable
D) £72 Favourable

Question 11

ABC Limited uses a standard costing system for all its products. ABC Limited produces shirts. Each shirt uses a standard 3 metres of material at a standard cost of £5.50 per metre. Budgeted production is 5,000 shirts per annum. During the financial year ended 30 April 2019, ABC produced 5,500 shirts. The cost of each metre of material was £5.30 and 2.8 metres of material were used in each shirt produced. Based on the above information, what is the direct material total variance for the year ended 30 April 2019?

A) £3,080 Favourable
B) £5,830 Favourable
C) £6,050 Favourable
D) £9,130 Favourable

Question 12

MSC Limited uses a standard costing system for all its products. MSC Limited produces hoodies. Each hoodie uses a standard 5 metres of material at a standard cost of £3 per metre. Budgeted production is 2,000 hoodies per annum. During the financial year ended 30 April 2019, MSC produced 2,200 hoodies. The cost of each metre of material was £3.25 and 4.8 metres of material were used in each hoodie produced. Based on the above information, what is the direct material price variance for the year ended 30 April 2019?

A) £1,320 Favourable
B) £1,320 Unfavourable
C) £2,400 Unfavourable
D) £2,640 Unfavourable

Question 13

ZTC Limited uses a standard costing system for its products. ZTC Limited produces soft drinks. Each litre of soft drink uses 0.5 litres of fruit juice at a standard cost of £0.40 per litre. Budgeted production for June is 50,000 litres of soft drinks. Actual production for June was 55,000 litres. Total fruit juice used in June was 28,000 litres which cost £11,500. Based on the above information, what is the direct material price variance for June?

A) £200 Unfavourable
B) £300 Unfavourable
C) £500 Unfavourable
D) £1,500 Unfavourable

Question 14

Zany Cushion Covers Limited uses a standard costing system. Each cushion cover uses a standard 2 metres of material at a standard cost of £1.50 per metre. Budgeted production is 2,000 cushion covers per month. During November, Zany Cushion Covers Limited produced 2,200 cushion covers, using 4,950 metres of material at a cost of £6,930. Based on the above information, what is the direct material price variance for November?

A) £300 Unfavourable
B) £330 Unfavourable
C) £495 Favourable
D) £825 Unfavourable

Question 15

BFM Limited uses a standard costing system for all its products. BFM Limited produces Product

A) £1,800 Unfavourable
B) £4,000 Favourable
C) £4,500 Favourable
D) £6,300 Unfavourable

Question 16

BTG Limited uses a standard costing system for all its products. BTG Limited produces Product

A) £10,625 Unfavourable
B) £13,750 Favourable
C) £14,375 Favourable
D) £25,000 Unfavourable

Question 17

Podcaster University Press uses a standard costing system for all its book production. The standard paper usage for the Accounting Standards Book is 600 sheets at a cost of £1.20 for 500 sheets. Budgeted production of the Accounting Standards book is 5,000 copies per annum. During the financial year ended 31 December 2018, Podcaster University Press printed 5,500 copies of the Accounting Standards book, using a total of 3,600,000 sheets of paper at a cost of £1.25 per 500 sheets. Based on the above information, what is the direct material usage variance for the Accounting Standards book in the year ended 31 December 2018?

A) £360 Unfavourable
B) £720 Unfavourable
C) £750 Unfavourable
D) £1,080 Unfavourable

Question 18

(The labour hours that should have been used for actual production - the labour hours that were actually used for actual production) x standard rate per hour. Which variance is calculated using this formula?

A) Direct Labour Efficiency Variance
B) Direct Labour Total Variance
C) Direct Labour Rate Variance
D) Variable Overhead Efficiency Variance

Question 19

What is the correct formula for the direct labour rate variance?

A) Actual expenditure on direct labour for actual production - expected expenditure on direct labour for actual production.
B) (Expected direct labour hours for actual production - actual direct labour hours for actual production) x the standard cost for one hour of direct labour.
C) What the actual direct labour hours for actual production should have cost - what the actual direct labour hours for actual production actually cost.
D) What the direct labour for expected production should have cost - what the direct labour for actual production actually cost.

Question 20

What is the correct formula for the direct labour total variance?

A) (Expected hours of direct labour for actual production - actual hours of direct labour for actual production) x the standard cost for one hour of direct labour.
B) Expected expenditure on direct labour - (actual production units x standard labour hour cost per unit of production).
C) (Actual direct labour hours for actual production x standard cost) - what the actual direct labour hours for actual production actually cost.
D) Actual expenditure on direct labour for actual production - expected expenditure on direct labour for actual production.

Question 21

Maria runs a bakery, baking and selling cakes for special occasions. Each cake requires 2 hours of direct labour for baking and decorating. Direct labour is paid at the rate of £8 per hour. During May, Maria expected to bake 400 cakes. However, due to additional demand, she baked 500 cakes and her total labour cost for the month was £7,938 for 980 hours of direct labour. What was Maria's direct labour total variance for the month of May?

A) £62 Favourable
B) £98 Unfavourable
C) £160 Favourable
D) £1,600 Unfavourable

Question 22

ABC Limited uses a standard costing system for all its products. ABC Limited produces shirts. Each shirt uses a standard 8 hours of direct labour at a standard rate of pay of £10 per direct labour hour. Budgeted production is 5,000 shirts per annum. During the financial year ended 30 April 2019, ABC produced 5,500 shirts. The cost of each direct labour hour was £9.60 and a total of 45,000 direct labour hours were paid. Based on the above information, what is the direct labour total variance for the year ended 30 April 2019?

A) £8,000 Favourable
B) £10,000 Unfavourable
C) £18,000 Favourable
D) £32,000 Unfavourable

Question 23

QRS Limited uses a standard costing system for all its products. QRS Limited produces Product

A) £Nil
B) £1,650 unfavourable
C) £9,350 Favourable
D) £11,000 Unfavourable

Question 24

XDT Limited uses a standard costing system for all its services. XDT Limited services photocopiers. The standard direct labour time to service one photocopier is 2½ hours and the standard cost of labour is £18 per direct labour hour. The company budgets 750 photocopier services per month with budgeted monthly labour hours of 1,875. In September, XDT Limited serviced 800 photocopiers and paid their service engineers for a total of 1,950 labour hours. Direct labour cost for the month was £36,075. What is the direct labour efficiency variance for September?

A) £75 Unfavourable
B) £900 Favourable
C) £975 Unfavourable
D) £1,350 Unfavourable

Question 25

Potters Limited uses a standard costing system for all its products. Potters Limited produces hand painted teapots. The standard direct labour time to paint one teapot is 1½ hours and the standard cost of labour is £20 per direct labour hour. Budgeted production is 1,500 teapots per month with budgeted monthly labour hours of 2,250. In October, Potters Limited produced 1,480 teapots and incurred total labour costs for painting the teapots of £43,659, paying £19.80 per hour for labour. What is the direct labour efficiency variance for October?

A) £300 Favourable
B) £441 Favourable
C) £600 Favourable
D) £741 Favourable

Question 26

QRS Limited uses a standard costing system for all its products. QRS Limited produces Product

A) £3,600 Favourable
B) £4,200 Favourable
C) £9,800 Unfavourable
D) £14,000 Unfavourable

Question 27

ZDT Limited uses a standard costing system for all its products. ZDT Limited produces box files. The standard direct labour time to produce one box file is 5 minutes and the standard cost of labour is £10 per direct labour hour. Budgeted production is 21,000 box files per month with budgeted labour hours of 1,750 per month. In October, ZDT Limited produced 24,000 box files and total labour hours paid were 1,950. Direct labour cost for the month was £20,280. What is the direct labour rate variance for October?

A) £280 Unfavourable
B) £500 Favourable
C) £780 Unfavourable
D) £2,000 Unfavourable

Question 28

The Pottery Limited uses a standard costing system for all its products. The Pottery Limited produces decorative vases. The standard direct labour time to paint one decorative vase is 2 hours and the standard cost of labour is £16 per direct labour hour. Budgeted production is 1,000 decorative vases per month with budgeted labour hours of 2,000 per month. In April, The Pottery Limited produced 1,050 decorative vases and incurred total labour costs for painting the vases of £33,075, paying £17.50 per hour for labour. What is the direct labour rate variance for April?

A) £525 Favourable
B) £2,835 Unfavourable
C) £3,150 Unfavourable
D) £3,360 Favourable

Question 29

Which one of the following presents the correct formula for the sales volume variance calculation?

A) (Actual sales in units - budgeted sales in units) x (actual selling price per unit - actual variable costs per unit).
B) (Actual sales in units - budgeted sales in units) x (actual selling price per unit - standard variable costs per unit).
C) (Actual sales in units - budgeted sales in units) x (standard selling price per unit - actual variable costs per unit).
D) (Actual sales in units - budgeted sales in units) x (standard selling price per unit - standard variable costs per unit).

Question 30

Which one of the following presents the correct formula for the sales price variance calculation?

A) (Actual sales in units - budgeted sales in units) x (standard selling price per unit - standard variable costs per unit).
B) (Actual unit selling price - standard unit selling price) x budgeted sales in units.
C) (Actual unit selling price - standard unit selling price) x actual units sold.
D) (Actual unit selling price - standard unit selling price) x (actual units sold - budgeted sales units).

Question 31

TST Limited uses a standard costing system for all its products. Product F has a standard selling price of £30 and budgeted total sales for the year ended 31 May 2019 of 10,000 units. The actual selling price for Product F throughout the year to 31 May 2019 was £35 and the actual units sold were 10,500. The actual variable costs of Product F amounted to £22 per unit in the year to 31 May 2019 while the standard variable cost of Product F is £20. Based on the above information, what is the sales volume variance for Product F for the year ended 31 May 2019?

A) £5,000 Favourable
B) £6,500 Favourable
C) £52,500 Favourable
D) £84,000 Favourable

Question 32

Which one of the following scenarios would not result in a favourable sales volume variance?

A) A higher level of actual sales units compared to budget and a lower actual selling price than budget.
B) A higher level of actual sales units compared to budget and a lower actual contribution per sale than budget.
C) A lower level of actual sales units compared to budget and a higher actual contribution per sale than budget.
D) A higher level of actual sales units compared to budget and a higher actual selling price per unit than budget.

Question 33

Potters Limited uses a standard costing system for all its products. Mugs have a standard selling price of £10 and budgeted total sales for December are 4,000 mugs. The actual selling price for mugs throughout December was £10.50 and the actual number of mugs sold was 3,800. The actual variable costs of producing mugs during December were £5.00 per while the standard variable cost of each mug is £4.75. Based on the above information, what is the sales volume variance for mugs in December?

A) £1,000 Unfavourable
B) £1,050 Unfavourable
C) £1,100 Unfavourable
D) £1,150 Unfavourable

Question 34

JMJ Limited operates a standard costing system for all its products. The standard selling price of product A is £50 and the budgeted sales for the year ended 31 March 2019 are 5,000 units. During the year ended 31 March 2019, 6,000 Product As were sold and the average selling price during the year was £52. What is the sales price variance for the year ended 31 March 2019?

A) £2,000 Unfavourable
B) £2,000 Favourable
C) £12,000 Unfavourable
D) £12,000 Favourable

Question 35

ADB Limited uses a standard costing system for all its products. ADB produces and sells dinner plates. Each dinner plate has a standard selling price of £15 and budgeted total sales for June of 4,000 plates. The actual selling price for dinner plates throughout June was £14.50 and the actual number of dinner plates sold was 3,900. The actual variable costs are £7 per dinner plate while the standard variable cost of each plate is £6.75. Based on the above information, what is the sales price variance for dinner plates for June?

A) £975 Favourable
B) £1,000 Favourable
C) £1,950 Unfavourable
D) £2,000 Unfavourable

Question 36

BCD Limited uses a standard costing system for all its products. BCD produces and sells footballs which it sells to local league football teams. Each football has a standard variable cost of £10. The standard selling price of each football is £35 and budgeted total sales for October were 800 footballs. The actual selling price for footballs throughout October was £37.50 and the actual number of footballs sold in the month was 850. The actual variable costs in October were £11.50 per football. Based on the above information, what is the sales price variance for footballs for October?

A) £1,250 Favourable
B) £1,275 Favourable
C) £2,000 Unfavourable
D) £2,125 Unfavourable

Question 37

The fixed overhead variance is calculated by deducting the budgeted fixed overhead expenditure from the actual fixed overhead expenditure.

Question 38

BCD allocates £6 of fixed overhead to each product it produces. Fixed overhead is allocated to products on the basis that monthly production at the company will be 2,500 units of product. Actual production for August was 2,000 units. Actual fixed overhead costs in August totalled up to £14,800. What is the fixed overhead variance for August?

A) £200 Favourable
B) £2,800 Unfavourable
C) £3,000 Unfavourable
D) £3,000 Favourable

Question 39

What is the correct formula for the variable overhead expenditure variance?

A) The total cost of variable overheads for actual production compared to the standard cost of variable overheads for actual production.
B) (Expected direct labour or machine hours for actual production - actual direct labour or machine hours for actual production) x the standard cost for one hour of variable overhead.
C) What the actual direct labour or machine hours for actual production should have cost - what the actual direct labour or machine hours for actual production actually cost.
D) What the direct labour or machine hours for expected production should have cost - what the direct labour or machine hours for actual production actually cost.

Question 40

Which one of the following is the correct formula used in calculating the variable overhead total variance?

A) What the actual direct labour or machine hours for actual production should have cost - what the actual direct labour or machine hours for actual production actually cost.
B) The total cost of variable overheads for actual production - the standard cost of variable overheads for actual production.
C) (Expected direct labour or machine hours for actual production - actual direct labour or machine hours for actual production) x the standard cost for one hour of variable overhead.
D) Standard expenditure on variable overhead incurred in actual production - (actual production units x standard variable overhead cost per unit of production).

Question 41

What is the correct formula for the variable overhead efficiency variance?

A) (The labour or machine hours that should have been used in actual production - the actual labour or machine hours used in actual production) x the actual cost for one hour of variable overhead.
B) Actual expenditure on variable overheads used in actual production - expected expenditure on variable overheads used in actual production.
C) What the variable overheads incurred in actual production should have cost - what the variable overheads incurred in actual production actually cost.
D) (Expected direct labour or machine hours for actual production - actual direct labour or machine hours for actual production) x the standard cost for one hour of variable overhead.

Question 42

Maria's bakery bakes and sells cakes for special occasions. Each cake requires 2 hours of direct labour time for baking and decorating. Variable overhead is incurred at the rate of £2.50 per labour hour. During the month of May, Maria's bakery produced 500 cakes compared to a budgeted output figure of 460 cakes. Maria's employees worked for 980 hours during May. The total variable overhead cost for May was £2,620. What was Maria's variable overhead total variance for the month of May?

A) £50 Favourable
B) £120 Unfavourable
C) £170 Unfavourable
D) £320 Unfavourable

Question 43

ABC Limited uses a standard costing system for all its products. ABC Limited produces shirts. Each shirt uses a standard 8 hours of direct labour. Variable overhead is incurred at the rate of £0.75 per labour hour. Budgeted production is 5,000 shirts per annum. During the financial year ended 30 April 2019, ABC produced 5,500 shirts. A total of 45,000 direct labour hours were worked and the total variable overhead expenditure was £31,500. Based on the above information, what is the variable overhead total variance for the year ended 30 April 2019?

A) £750 Unfavourable
B) £1,500 Unfavourable
C) £1,500 Favourable
D) £2,250 Favourable

Question 44

XTA Limited uses a standard costing system for all its products. Product E's standard specifies 4 machine hours of production time and absorbs variable overheads at the standard rate of £2 per machine hour. Budgeted production of Product E is 10,000 units per annum. For the financial year ended 31 January 2019, it was calculated that the machine hours actually used for each Product E were 3.9 hours while the actual cost of variable overhead was £2.10 per machine hour. Actual production was 9,800 units of Product

A) £1,862 Unfavourable
B) £1,960 Favourable
C) £2,000 Favourable
D) £3,822 Unfavourable

Question 45

XDT Limited uses a standard costing system for all its services. XDT Limited services photocopiers. The standard direct labour time to service one photocopier is 2½ hours. Variable overhead is incurred at the rate of £5.00 per labour hour. The company budgets 750 photocopier services per month with budgeted monthly labour hours of 1,875. In September, XDT Limited serviced 800 photocopiers and paid their service engineers for a total of 1,950 labour hours. Actual variable overhead expenditure for the month was £9,550. What is the variable overhead efficiency variance for September?

A) £200 Favourable
B) £250 Favourable
C) £375 Unfavourable
D) £450 Favourable

Question 46

Potters Limited uses a standard costing system for all its products. Potters Limited produces hand painted teapots. The standard direct labour time to paint one teapot is 1½ hours. Variable overhead is allocated to each teapot on the basis of £6 per labour hour. Budgeted production is 1,500 teapots per month with budgeted monthly labour hours of 2,250. In October, Potters Limited produced 1,480 teapots and incurred total variable overhead expenditure of £13,000. 2,205 labour hours were paid in October. What is the variable overhead efficiency variance for October?

A) £90 Favourable
B) £180 Favourable
C) £230 Favourable
D) £320 Favourable

Question 47

QRS Limited uses a standard costing system for all its products. QRS Limited produces Product

A) £600 Unfavourable
B) £2,000 Unfavourable
C) £2,600 Unfavourable
D) £8,400 Unfavourable

Question 48

ZDT Limited uses a standard costing system for all its products. ZDT Limited produces picture frames. The standard direct labour time to produce one picture frame is 20 minutes. Variable overhead is allocated to picture frames at the rate of £6 per direct labour hour. Budgeted production is 15,000 picture frames per month. In October, ZDT Limited produced 15,300 picture frames, incurring variable overhead costs of £32,000 and total labour hours paid were 4,800. What is the variable overhead expenditure variance for October?

A) £600 Favourable
B) £1,400 Unfavourable
C) £1,800 Favourable
D) £3,200 Unfavourable

Question 49

The Pottery Limited uses a standard costing system for all its products. The Pottery Limited produces decorative vases. The standard direct labour time to paint one decorative vase is 2 hours and the standard cost of labour is £16 per direct labour hour. Variable overheads are allocated to each vase at the rate of £4 per labour hour. Budgeted production is 1,000 decorative vases per month with budgeted labour hours of 2,000 per month. In April, The Pottery Limited produced 1,050 decorative vases and incurred total variable overheads of £8,300. The direct labour hours paid for April were 2,025. What is the variable overhead expenditure variance for April?

A) £100 Favourable
B) £200 Unfavourable
C) £300 Favourable
D) £1,200 Favourable