Deck 9: Standard Costing: a Functional-Based Control Approach

Question 1

The most detailed method to compute overhead variances is the four-variance method.

Answer 1

True

Question 2

All variances accounts are closed out at the end of the year.

Answer 2

True

Question 3

Standard costs are the amount that should be spent to produce a product or service

Answer 3

True

Question 4

The direct materials price variance is the difference between actual and standard pricing.

Question 5

Price standards specify amounts and quantity standards specify prices.

Question 6

Both manufacturing and service firms may use standard costing systems.

Question 7

The unit quantity standards can be used to compute the total amount of inputs allowed for the actual output.

Question 8

A yield variance occurs when the actual output is the same as the standard output.

Question 9

Standard costing is used in process industries because it's more difficult to utilize.

Question 10

Developing standards for input prices and quantities allows for a more detailed understanding of flexible budget variances.

Question 11

In computing efficiency variances, managers compute the standard quantity of materials used and the standard hours allowed.

Question 12

The standard cost sheet shows costs needed to make many units of output.

Question 13

Unfavorable variances occur whenever actual prices or usage are less than standard prices or usage, and the opposite for a favorable variance.

Question 14

A mix variance is created whenever the actual mix of inputs is equal to the standard mix.

Question 15

The direct materials usage variance is the sum of the actual quantities and the standard quantities of units.

Question 16

The variable overhead efficiency variance measures the change in variable overhead consumption due to efficient or inefficient use of the activity driver used to assign overhead costs to products.

Question 17

The three-variance method requires dividing costs into fixed and variable amounts.

Question 18

In standard costing, overhead is applied to a product by debiting work in process and crediting variable and fixed overhead control accounts.

Question 19

the direct materials mix variance is the difference in the standard cost of actual inputs and the standard costs of inputs that should have been used.

Question 20

The total budget variances are categorized into price variances and usage variances.

Question 21

The following condition which demands maximum efficiency and can be achieved only if everything operates perfectly is called:

A) Ideal standards
B) Currently attainable standards
C) Budget standards
D) Personnel standards

Question 22

All of the following are true of currently attainable standards EXCEPT

A) Currently attainable standards are based on an efficiently operating work force.
B) Currently attainable standards are based on ideal conditions.
C) Currently attainable standards allow for downtime and rest periods.
D) Currently attainable standards are based on present production processes and technology.

Question 23

Which of the following is NOT true about Kaizen Standards?

A) Kaizen standards are the standards used for continuous improvement.
B) Kaizen standards are a currently attainable standard that reflects planned improvement.
C) Kaizen standards are constantly changing.
D) Kaizen standards are the standards used in traditional costing systems.

Question 24

The document that shows the amount and cost of direct materials, direct labor, and overhead to make a unit of output is called the standard __________ .

Question 25

Price standards are the responsibility of

A) accounting.
B) purchasing.
C) personnel.
D) all of these.

Question 26

The sum of the standard plus allowable deviation is called the upper __________ .

Question 27

The condition where everything operates perfectly and demands maximum efficiency is called __________ .

Question 28

__________ standards are the standards used for continuous improvement.

Question 29

Variances indicate

A) the cause of the variance.
B) who is responsible for the variance.
C) that actual performance is not going according to plan.
D) when the variance should be investigated.

Question 30

The standard cost sheet includes all of the following EXCEPT

A) the standard cost per unit.
B) the standard quantity allowed for actual production.
C) the standard price.
D) the standard quantity per unit.

Question 31

Quantity price standards

A) are standard price multiplied by standard quantity.
B) specify how much of the quantity of input should be used for the standard price.
C) specify how much should be paid for the quantity of input to be used.
D) specify how much of the quantity of input should be used for the actual price.

Question 32

All variances accounts are __________ at the end of the operating year.

Question 33

The standard cost sheet includes all of the following EXCEPT

A) the standard quantity per unit.
B) the standard material costs per unit.
C) the standard cost per unit.
D) the standard labor hours allowed for actual production.

Question 34

In setting price standards, the purchasing manager must consider

A) freight.
B) quality.
C) discounts.
D) all of these.

Question 35

The __________ variance show the difference between actual output and expected output for a given amount of input.

Question 36

The variances that focus on the difference between actual quantity and standard quantity are called the __________ variances.

Question 37

The unit standard cost is

A) the product of the standard price times the standard quantity for each unit.
B) the price standard for each unit.
C) the actual cost for a standard product.
D) the amount of actual cost to produce a unit in a standardized process.

Question 38

The factors where actual performance differs from planned are called: __________ .

Question 39

The costing that establishes price and quantity standards for inputs is called __________ costing.

Question 40

A production __________ would most likely be responsible for an unfavorable variable overhead efficiency variance.

Question 41

Which of the following equations measures a price variance?

A) AQ ´ (AP - SP)
B) SP ´ (AQ - SQ)
C) SQ ´ (AP - SP)
D) (AQ - SQ) ´ (AP - SP)

Question 42

Malkovich Company uses a standard costing system. The following information pertains to direct materials for the month of July: Malkovich Company reports its material price variances at the time of purchase.
What is the standard quantity of direct materials per unit for Malkovich Company?

A) 3.50 lbs.
B) 3.00 lbs.
C) 3.10 lbs.
D) 3.25 lbs.

Question 43

During January, 7,175 direct labor hours were worked at a standard cost of $20 per hour. If the direct labor rate variance for January was $17,500 favorable, the actual cost per direct labor hour must be

A) $20.50.
B) $25.50.
C) $23.00.
D) $17.56.

Question 44

Montana Company uses a standard costing system. The following information pertains to direct labor costs for the month of February: How many actual labor hours were worked during February for Montana Company?

A) 10,000
B) 12,000
C) 1,200
D) 2,000

Question 45

Firecracker Company has developed the following standards for one of its products. The company records materials price variances at the time of purchase.
The direct materials price variance is

A) $50,000 favorable.
B) $50,000 unfavorable.
C) $10,000 favorable.
D) $10,000 unfavorable.

Question 46

During November, 10,000 units were produced. The standard quantity of material allowed per unit was 10 pounds at a standard cost of $3 per pound. If there was an unfavorable usage variance of $18,750 for November, the actual quantity of materials used must be

A) 23,438 pounds.
B) 93,750 pounds.
C) 31,875 pounds.
D) 106,250 pounds.

Question 47

Figure 9-1 Bender Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows:
Refer to Figure 9-1. What is the material usage variance for Bender Corporation?

A) $90 (F)
B) $90 (U)
C) $36 (F)
D) $36 (U)

Question 48

During September, 12,000 pounds of materials were purchased at a cost of $8 per pound. If there was an unfavorable direct materials price variance of $6,000 for June, the standard cost per pound must be

A) $8.50.
B) $8.00.
C) $7.00.
D) $7.50.

Question 49

Standard costing

A) establishes price and quantity standards for inputs.
B) provides journal entry support.
C) is not used in unit costing.
D) none of these.

Question 50

Rowing Company has developed the following standards for one of its products: The company records materials price variances at the time of purchase.
The variable standard cost per unit is

A) $81.00
B) $91.00
C) $98.50
D) $42.50

Question 51

Malkovich Company uses a standard costing system. The following information pertains to direct materials for the month of July: Malkovich Company reports its material price variances at the time of purchase.
What is the journal entry to record material purchases?

A) Materials 55,800 Materials Price Variance 4,650
Accounts Payable 51,150
B) Accounts Payable 55,800 Materials 55,800
C) Materials 55,800 Accounts Payable 55,800
D) Materials 51,150 Materials Price Variance 4,650
Accounts Payable 55,800

Question 52

Malkovich Company uses a standard costing system. The following information pertains to direct materials for the month of July: Malkovich Company reports its material price variances at the time of purchase.
What is the material usage variance for Malkovich Company?

A) $2,850 (F)
B) $1,950 (F)
C) $900 (F)
D) $900 (U)

Question 53

Which of the following equations measures the direct labor rate variance?

A) (SR ´ AH) - (SR ´ SH)
B) (AR ´ SH) - (SR ´ AH)
C) (AR ´ AH) - (SR ´ AH)
D) none of these

Question 54

If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the number of hours allowed, the labor rate variance and labor efficiency variance will be

A) Favorable Favorable
B) Favorable Unfavorable
C) Unfavorable Favorable
D) Unfavorable Unfavorable

Question 55

Montana Company uses a standard costing system. The following information pertains to direct labor costs for the month of February: What is the total labor budget variance for Montana Company?

A) $18,000 (F)
B) $12,000 (U)
C) $18,000 (U)
D) $12,000 (F)

Question 56

Figure 9-1 Bender Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows:
Refer to Figure 9-1. What is the material price variance for Bender Corporation?

A) $30 (U)
B) $90 (F)
C) $36 (U)
D) $36 (F)

Question 57

The usage variances focus on the difference between

A) actual quantity used and standard quantity allowed for actual production.
B) actual costs of inputs and standard costs of inputs.
C) actual quantity used and standard quantity allowed for budgeted production.
D) both a and b.

Question 58

During September, 40,000 units were produced. The standard quantity of material allowed per unit was 5 pounds at a standard cost of $2.50 per pound. If there was a favorable usage variance of $25,000 for September, the actual quantity of materials used must have been

A) 210,000 pounds.
B) 190,000 pounds.
C) 105,000 pounds.
D) 95,000 pounds.

Question 59

Price/rate variances focus on the differences between

A) actual and standard inputs multiplied by actual prices.
B) actual and standard unit prices of an input multiplied by the actual quantity of inputs.
C) actual and standard inputs multiplied by standard prices.
D) actual and standard unit prices of an input multiplied by the budgeted quantity of inputs.

Question 60

Which of the following equations measures the total budget variance?

A) AQ ´ (AP - SP)
B) SP ´ (AQ - SQ)
C) SQ ´ (AP - SP)
D) (AQ ´ AP) - (SQ ´ SP)

Question 61

If variable manufacturing overhead is applied based on direct labor hours and there is an unfavorable direct labor efficiency variance

A) the direct materials usage variance will be unfavorable.
B) the direct labor rate variance will be favorable.
C) the variable manufacturing overhead efficiency variance will be unfavorable.
D) the variable manufacturing overhead spending variance will be unfavorable.

Question 62

As a general rule, an investigation of a variance should be undertaken only if the

A) variance is isolated
B) anticipated benefits are greater than the expected costs.
C) variance is negative.
D) variance is positive.

Question 63

Which is NOT an acceptable method of disposing of variances?

A) closing them to cost of goods sold
B) closing them to raw materials, work-in-process, and finished goods
C) closing them to work-in-process, finished goods, and cost of goods sold
D) all are acceptable methods

Question 64

During October, 10,000 direct labor hours were worked at a standard cost of $10 per hour. If the direct labor rate variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be

A) $10.40.
B) $10.00.
C) $9.60.
D) $9.20.

Question 65

A five-percent wage increase for all factory employees would affect which of the following variances?

A) direct materials price variance
B) direct labor rate variance
C) direct labor efficiency variance
D) variable manufacturing overhead efficiency variance

Question 66

Harrangue Company's standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured. What is the total variable overhead variance for March for Harrangue?

A) $2,200 (U)
B) $600 (U)
C) $1,000 (U)
D) $1,200 (U)

Question 67

The standard overhead cost assigned to each unit of product manufactured is called the

A) total manufacturing cost.
B) predetermined overhead cost.
C) applied overhead cost.
D) estimated overhead cost.

Question 68

An unfavorable variable overhead spending variance may be caused by

A) the use of excessive quantities of variable overhead items.
B) the payment of lower prices for variable overhead items used.
C) the use of excessive quantities of the variable overhead allocation base.
D) both a and b.

Question 69

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. The company records materials price variances at the time of purchase.
The direct labor rate variance is

A) $12,000 favorable.
B) $8,000 favorable.
C) $12,000 unfavorable.
D) $8,000 unfavorable.

Question 70

Colina Production Company uses a standard costing system. The following information pertains to 2014. Direct labor hours is the driver used to assign overhead costs to products. The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000 units is as follows:
What is the variable overhead efficiency variance for Colina Production Company?

A) $562.50 (F)
B) $3,000.00 (U)
C) $1,687.50 (F)
D) $562.50 (U)

Question 71

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. The company records materials price variances at the time of purchase.
The variable manufacturing overhead efficiency variance is

A) $1,000 favorable.
B) $2,000 favorable.
C) $1,000 unfavorable.
D) $3,000 unfavorable.

Question 72

Refer to Figure 9-2. What is the journal entry to record labor variances?

A) Work in Process 6,072 Payroll 6,072
B) Payroll 6,072 Work in Process 6,072
C) Work in Process 6,000 Labor Rate Variance 552
Labor Efficiency Variance 480
Payroll 6,072
D) Work in Process 6,000 Labor Efficiency Variance 552
Labor Rate Variance 480
Payroll 6,072

Question 73

Colina Production Company uses a standard costing system. The following information pertains to 2014. Direct labor hours is the driver used to assign overhead costs to products. The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000 units is as follows:
What is the fixed overhead volume variance for Colina Production Company?

A) $3,600 (F)
B) $1,350 (F)
C) $4,125 (U)
D) $1,350 (U)

Question 74

Which of the following factors would cause an unfavorable material quantity variance?

A) using poorly maintained machinery
B) using higher quality materials
C) using more highly skilled workers
D) receiving discounts for purchasing larger than normal quantities

Question 75

The standard plus the allowable deviation is called the:

A) standard quantity
B) standard price
C) upper control limit
D) total budget variance

Question 76

A materials price variance would NOT be caused by

A) ordering the wrong quality of materials.
B) ordering from the wrong supplier.
C) not taking a quantity discount.
D) requiring laborers to work overtime.

Question 77

Harrangue Company's standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured. What is the variable overhead efficiency variance for March for Harrangue?

A) $2,200 (U)
B) $2,200 (F)
C) $1,200 (U)
D) $600 (U)

Question 78

Which of the following factors would cause an unfavorable labor rate variance?

A) using higher quality materials
B) using low-efficiency workers
C) using more unskilled workers
D) using more highly skilled workers

Question 79

Using more highly skilled direct laborers might affect which of the following variances?

A) direct materials usage variance
B) direct labor efficiency variance
C) variable manufacturing overhead efficiency variance
D) all of these

Question 80

Figure 9-2 Bodacious Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows:
Refer to 9-2. What is the labor efficiency variance for Bodacious Corporation?

A) $480 (U)
B) $480 (F)
C) $552 (U)
D) $552 (F)