Deck 7: Standard Costing and Variance Analysis

Question 1

The total variance can provide useful information about the source of cost differences.

Answer 1

False

Question 2

The total variance does not provide useful information about the source of cost differences.

Answer 2

True

Question 3

A standard cost card is prepared after manufacturing standards have been developed for direct materials, direct labor, and factory overhead.

Answer 3

True

Question 4

The formula for usage variance is (AQ - SQ) * SP.

Question 5

The formula for price/rate variance is (AP - SP) ´ AQ.

Question 6

The formula for usage variance is (AQ - SQ) * AP.

Question 7

Specifications for materials are compiled on a purchase requisition.

Question 8

An operations flow document shows all processes necessary to manufacture one unit of a product.

Question 9

The difference between the standard hours worked for a specific level of production and the actual hours worked is the labor efficiency variance.

Question 10

The price variance reflects the difference between the quantity of inputs used and the standard quantity allowed for the output of a period.

Question 11

The price variance reflects the difference between the price paid for inputs and the standard price for those inputs.

Question 12

The difference between the actual wages paid to employees and the standard wages for all hours worked is the labor rate variance.

Question 13

Specifications for materials are compiled on a bill of materials.

Question 14

The point of purchase model calculates the materials price variance using the quantity of materials used in production.

Question 15

The point of purchase model calculates the materials price variance using the quantity of materials purchased.

Question 16

The difference between the actual wages paid to employees and the standard wages for all hours worked is the labor efficiency variance.

Question 17

A standard cost card is prepared before developing manufacturing standards for direct materials, direct labor, and factory overhead.

Question 18

The formula for price/rate variance is (AP - SP) ´ SQ.

Question 19

The usage variance reflects the difference between the quantity of inputs used and the standard quantity allowed for the output of a period.

Question 20

The usage variance reflects the difference between the price paid for inputs and the standard price for those inputs.

Question 21

Unfavorable variances are represented by credit balances in the overhead account.

Question 22

The difference between actual variable overhead and budgeted variable overhead based upon actual hours is referred to as the variable overhead spending variance.

Question 23

A budget variance is a controllable variance.

Question 24

The difference between the standard hours worked for a specific level of production and the actual hours worked is the labor rate variance.

Question 25

The difference between actual and budgeted fixed factory overhead is referred to as a fixed overhead spending variance.

Question 26

The difference between actual and budgeted fixed factory overhead is referred to as a fixed overhead volume variance.

Question 27

Favorable variances are represented by credit balances in the overhead account.

Question 28

The difference between budgeted and applied fixed factory overhead is referred to as a fixed overhead volume variance.

Question 29

Favorable variances are represented by debit balances in the overhead account.

Question 30

The difference between budgeted variable overhead for actual hours and standard overhead is the variable overhead efficiency variance.

Question 31

The difference between budgeted variable overhead for actual hours and standard overhead is the variable overhead spending variance.

Question 32

A one-variance approach calculates only a total overhead variance.

Question 33

A fixed overhead volume variance is a noncontrollable variance.

Question 34

Unfavorable variances are represented by debit balances in the overhead account.

Question 35

Favorable variances are always desirable for production.

Question 36

The difference between actual variable overhead and budgeted variable overhead based upon actual hours is referred to as the variable overhead efficiency variance.

Question 37

A fixed overhead volume variance is a controllable variance.

Question 38

A flexible budget is an effective tool for budgeting factory overhead.

Question 39

An overhead efficiency variance is related entirely to variable overhead.

Question 40

Managers have no ability to control the budget variance.

Question 41

Ideal standards generally yield unfavorable variances.

Question 42

Expected standards generally yield favorable variances.

Question 43

In a totally automated organization, using theoretical capacity will generally provide the highest fixed overhead application rate.

Question 44

Total quality management (TQM) and just-in-time (JIT) production systems are based on the premise of ideal production standards.

Question 45

Expected standards are a valuable tool for motivation and control.

Question 46

A conversion variance combines labor and overhead variances.

Question 47

As production becomes more automated, direct labor may be viewed more as a conversion cost than as a prime cost.

Question 48

When multiple labor categories are used, the monetary impact of using a higher or lower number of hours than a standard allows is referred to as a labor yield variance.

Question 49

Ideal standards are an effective means of controlling variances and motivating workers.

Question 50

When multiple labor categories are used, the financial effect of using a different mix of workers in a production process is referred to as a labor yield variance.

Question 51

The difference between total actual cost incurred and total standard cost applied is referred to as _________________________.

Question 52

When multiple labor categories are used, the financial effect of using a different mix of workers in a production process is referred to as a labor mix variance.

Question 53

The effect of substituting a non-standard mix of materials during the production process is referred to as a material mix variance.

Question 54

Practical standards are the most effective standards for controlling and motivating workers.

Question 55

The effect of substituting a non-standard mix of materials during the production process is referred to as a material yield variance.

Question 56

When multiple labor categories are used, the monetary impact of using a higher or lower number of hours than a standard allows is referred to as a labor mix variance.

Question 57

Ideal standards do not allow for normal operating delays or human limitations.

Question 58

Ideal standards generally yield favorable variances.

Question 59

Expected standards generally yield unfavorable variances.

Question 60

In a totally automated organization, using theoretical capacity will generally provide the lowest fixed overhead application rate.

Question 61

The difference between budgeted variable overhead for actual hours and standard overhead is the __________________________________________________.

Question 62

Standards that reflect what is expected to occur are referred to as ______________________________.

Question 63

The standard cost card contains quantities and costs for

A) direct material only.
B) direct labor only.
C) direct material and direct labor only.
D) direct material, direct labor, and overhead.

Question 64

The difference between budgeted and applied fixed factory overhead is referred to as a __________________________________________________.

Question 65

The difference between standard quantity allowed and quantity used for a unit of output is known as an ______________________________.

Question 66

A standard cost system may be used in

A) job order costing, but not process costing.
B) process costing, but not job order costing.
C) either job order costing or process costing.
D) neither job order costing nor process costing.

Question 67

In a standard cost system, Work in Process Inventory is ordinarily debited with

A) actual costs of material and labor and a predetermined overhead cost for overhead.
B) standard costs based on the level of input activity (such as direct labor hours worked).
C) standard costs based on production output.
D) actual costs of material, labor, and overhead.

Question 68

The difference between actual and budgeted fixed factory overhead is referred to as a __________________________________________________.

Question 69

The two components of total material/labor variance are ______________________________ and ___________________________________

Question 70

When multiple materials are used, the difference between the total quantity and the standard quantity of output when a nonstandard mix of materials is used is known as the _________________________ variance.

Question 71

The difference between what was paid for inputs and what should have been paid for inputs is referred to as a _________________________.

Question 72

A primary purpose of using a standard cost system is

A) to make things easier for managers in the production facility.
B) to provide a distinct measure of cost control.
C) to minimize the cost per unit of production.
D) b and c are correct.

Question 73

Which of the following statements regarding standard cost systems is true?

A) Favorable variances are not necessarily good variances.
B) Managers will investigate all variances from standard.
C) The production supervisor is generally responsible for material price variances.
D) Standard costs cannot be used for planning purposes since costs normally change in the future.

Question 74

Standards that provide for no human limitations or operating delays are referred to as ______________________________.

Question 75

The difference between actual variable overhead and budgeted variable overhead based upon actual hours is referred to as the _______________________________________________________.

Question 76

When multiple materials are used, the effect of substituting a non-standard mix of materials during the production process is referred to as a ____________________ variance.

Question 77

Standards that are attainable with reasonable effort are referred to as ___________________________________.

Question 78

When multiple labor categories are used, the financial effect of using a different mix of workers in a production process is referred to as a _________________________ variance.

Question 79

When multiple labor categories are used, the monetary impact of using a higher or lower number of hours than a standard allows is referred to as a ______________________________ variance.

Question 80

Standards that allow for waste and inefficiency are referred to as ______________________________.