Deck 10: Standard Costing,Operational Performance Measures,and the Balanced Scorecard

Question 1

The Purchasing Department would normally begin an investigation regarding an unfavorable materials quantity variance.

Answer 1

False

Question 2

Consider the following statements:
I)The standard cost per unit of materials is used to calculate a materials price variance.
II)The standard cost per unit of materials is used to calculate a materials quantity variance.
III)The standard cost per unit of materials cannot be determined until the end of the period.
Which of the above statements is (are)true?

A)I only.
B)II only.
C)III only.
D)I and II.
E)I,II,and III.

Answer 2

D

Question 3

Most companies base the calculation of the material price variance on the:

A)quantity of direct materials purchased.
B)quantity of direct materials spoiled.
C)quantity of direct materials that should have been used in achieving actual production.
D)quantity of direct materials actually useD.
E)quantity of direct materials to be purchased during the next accounting period.
Units may not be the unit of measure for direct materials.

Answer 3

A

Question 4

A favorable labor efficiency variance is created when actual labor hours worked exceed standard hours allowed.

Question 5

Which of the following individuals is least likely to become involved in the setting of either direct material standards or direct labor standards?

A)The purchasing manager.
B)A production supervisor.
C)An engineer.
D)A machine operator.
E)A company's president.

Question 6

The typical balanced scorecard is best described as containing both financial and nonfinancial performance measures.

Question 7

Which of the following would be considered if a company desires to establish a series of practical manufacturing standards?

A)The productivity loss associated with a short-term worker slowdown.
B)Normal defect rates in an assembly process.
C)Highly unusual spoilage rates of direct materials.
D)Quantity discounts associated with purchases of direct materials.
E)Both "B" and "D."

Question 8

Variances are computed by taking the difference between which of the following?

A)Product cost and period cost.
B)Actual cost and differential cost.
C)Price factors and rate factors.
D)Actual cost and standard cost.
E)Product cost and standard cost.

Question 9

Normal defect rates in an assembly process would be considered if a company desires to establish a series of practical manufacturing standards.

Question 10

Which of the following are methods for setting standards?

A)Analysis of historical data and goal congruence.
B)Task analysis and matrix application forms.
C)Task analysis and the analysis of historical data.
D)Matrix application forms and analysis of historical data.
E)Goal congruence and task analysis.

Question 11

Which of the following is a predetermined estimated cost that can be used in the calculation of a variance?

A)Product cost.
B)Actual cost.
C)Standard cost.
D)Differential cost.
E)Marginal cost.

Question 12

The term "management by exception" is best defined as:

A)choosing exceptional managers.
B)controlling actions of subordinates through acceptance of management techniques.
C)investigating unfavorable variances.
Devoting management time to investigate significant variances.
E)controlling costs so that non-zero variances are treated as "exceptional."

Question 13

A perfection standard:

A)tends to motivate employees over a long period of time.
B)is attainable in an ideal operating environment.
C)would make allowances for normal amounts of scrap and waste.
D)is generally preferred by behavioral scientists.
E)will result in a number of favorable variances on a performance report.

Question 14

Which of the following choices correctly notes a characteristic associated with perfection standards and one associated with practical standards?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 15

Variances are computed by taking the difference between the product cost and standard cost.

Question 16

Which of the following choices correctly notes the use of the standard price per unit of direct material when calculating the materials price variance and the material quantity variance?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 17

Consider the following statements:
I)Behavioral scientists find that perfection standards often discourage employees and result in low worker morale.
II)Practical standards are also known as attainable standards.
III)Practical standards incorporate a certain amount of inefficiency such as that caused by an occasional machine breakdown.
Which of the above statements is (are)true?

A)I only.
B)II only.
C)III only.
D)II and III.
E)I,II,and III.

Question 18

Which of the following would not be considered if a company desires to establish a series of practical manufacturing standards?

A)Production time lost during unusual machinery breakdowns.
B)Normal worker fatigue.
C)Freight charges on incoming raw materials.
D)Production time lost during setup procedures for new manufacturing runs.
E)The historical 2% defect rate associated with raw material inputs.

Question 19

When the quantity of materials purchased is not equal to the quantity of material used,most companies base the calculation of the material quantity variance on the:

A)quantity of direct materials purchased.
B)quantity of direct materials spoiled.
C)quantity of direct materials that should have been used in achieving actual production.
D)quantity of direct materials actually useD.
E)Leave answer E as originally written.
Units may not be the unit of measure for direct materials.

Question 20

A standard cost:

A)is the "true" cost of a unit of production.
B)is a budget for the production of one unit of a product or service.
C)can be useful in calculating equivalent units.
D)is normally the average cost within an industry.
E)is almost always the actual cost from previous years.

Question 21

If a company has an unfavorable direct-material quantity variance,then:

A)the direct-material price variance is favorable.
B)the total direct-material variance is unfavorable.
C)the total direct-material variance is favorable.
D)the direct-labor efficiency variance is unfavorable.
E)any of the above variances can occur.

Question 22

Denver Enterprises recently used 14,000 labor hours to produce 7,500 completed units.According to manufacturing specifications,each unit is anticipated to take two hours to complete.The company's actual payroll cost amounted to $158,200.If the standard labor cost per hour is $11,Denver's labor efficiency variance is:

A)$11,000U.
B)$11,000F.
C)$11,300U.
D)$11,300F.
E)None of thesE.

Question 23

A favorable labor rate variance is created when:

A)actual labor hours worked exceed standard hours allowed.
B)actual hours worked are less than standard hours allowed.
C)actual wages paid are less than amounts that should have been paid for the number of hours worked.
D)actual units produced exceed budgeted production levels.
E)actual units produced exceed standard hours allowed.

Question 24

On the basis of this information,determine Alexis's labor rate variance and labor efficiency variance.

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 25

Which of the following variances are most similar with respect to the manner in which they are calculated?

A)Labor rate variance and labor efficiency variance.
B)Material price variance and material quantity variance.
C)Material price variance,material quantity variance,and total material variance.
D)Material price variance and labor efficiency variance.
E)Material quantity variance and labor efficiency variancE.

Question 26

Which of the following variances are most similar with respect to the manner in which they are calculated?

A)Labor rate variance and labor efficiency variance.
B)Material price variance and material quantity variance.
C)Material price variance,material quantity variance,and total material variance.
D)Material price variance and labor rate variance.
E)Material price variance and labor efficiency variancE.

Question 27

Dover Enterprises recently used 14,000 labor hours to produce 7,500 completed units.According to manufacturing specifications,each unit is anticipated to take two hours to complete.The company's actual payroll cost amounted to $158,200.If the standard labor cost per hour is $11,Dover's labor rate variance is:

A)$4,200U.
B)$4,000F.
C)$4,300U.
D)$4,300F.
E)None of thesE.

Question 28

Which of the following correctly lists all the information needed to calculate a labor rate variance?

A)Standard labor rate and actual hours worked.
B)Actual hours worked and actual units produced.
C)Standard labor rate,actual labor rate,and actual units produced.
D)Actual labor rate and actual hours workeD.
E)Actual labor rate,standard labor rate,and actual hours worked.

Question 29

An unfavorable labor efficiency variance is created when:

A)actual labor hours worked exceed standard hours allowed.
B)actual hours worked are less than standard hours allowed.
C)actual wages paid are less than amounts that should have been paid.
D)actual units produced exceed budgeted production levels.
E)actual units produced exceed standard hours allowed.

Question 30

A favorable labor efficiency variance is created when:

A)actual labor hours worked exceed standard hours allowed.
B)actual hours worked are less than standard hours allowed.
C)actual wages paid are less than amounts that should have been paid.
D)actual units produced exceed budgeted production levels.
E)actual units produced exceed standard hours allowed.

Question 31

Consider the following information:
Direct material purchased and used,80,000 gallons
Standard quantity of direct material allowed for May production,76,000 gallons
Actual cost of direct materials purchased and used,$176,000
Unfavorable direct-material quantity variance,$9,400
The direct-material price variance is:

A)$11,400F.
B)$11,400U.
C)$12,000F.
D)$12,000U.
E)None of thesE.

Question 32

On the basis of this information,determine Alexis's total labor variance.

A)$15,880U
B)$9,720F
C)$15,720F
D)$9,720U
E)$15,880F

Question 33

The direct-material quantity variance is:

A)$1,000F.
B)$1,000U.
C)$1,040F.
D)$1,040U.
E)$2,000F.

Question 34

Which of the following variances cannot occur together during the same accounting period?

A)Unfavorable labor rate variance and favorable labor efficiency variance.
B)Unfavorable labor efficiency variance and favorable material quantity variance.
C)Favorable labor rate variance and unfavorable total labor variance.
D)Favorable labor efficiency variance and favorable material quantity variance.
E)None of these,because all of these variance combinations are possiblE.

Question 35

An unfavorable labor rate variance is created when:

A)actual labor hours worked exceed standard hours allowed.
B)actual hours worked are less than standard hours allowed.
C)actual wages paid are less than amounts that should have been paid.
D)actual units produced exceed budgeted production levels.
E)actual wages paid exceed amounts that should have been paid for the number of hours worked.

Question 36

The direct-material price variance is:

A)$2,880U.
B)$2,920F.
C)$2,920U.
D)$3,000F.
E)$3,000U.

Question 37

Dana,Inc.recently completed 56,000 units of a product that was expected to consume four pounds of direct material per finished unit.The standard price of the direct material was $8.50 per pound.If the firm purchased and consumed 228,000 pounds in manufacturing (cost = $1,881,000),the direct-material quantity variance would be figured as:

A)$34,000U.
B)$34,000F.
C)$57,000U.
D)$57,000F.
E)None of thesE.

Question 38

Soloman Corporation recently purchased 25,000 gallons of direct material at $5.60 per gallon.Usage by the end of the period amounted to 23,000 gallons.If the standard cost is $6.00 per gallon and the company believes in computing variances at the earliest point possible,the direct-material price variance would be calculated as:

A)$800F.
B)$9,200F.
C)$9,200U.
D)$10,000F.
E)$10,000U.

Question 39

Courtney purchased and consumed 50,000 gallons of direct material that was used in the production of 11,000 finished units of product.According to engineering specifications,each finished unit had a manufacturing standard of five gallons.If a review of Courtney's accounting records at the end of the period disclosed a material price variance of $5,000U and a material quantity variance of $3,000F,determine the actual price paid for a gallon of direct material.

A)$0.50.
B)$0.60.
C)$0.70.
D)An amount other than those shown above.
E)Not enough information to judgE.

Question 40

Newbill Enterprises recently used 24,000 labor hours to produce 8,600 completed units.According to manufacturing specifications,each unit is anticipated to take 2.75 hours to complete.The company's actual payroll cost amounted to $456,000.If the standard labor cost per hour is $19.20,Newhart's labor rate variance is:

A)$1,920U.
B)$1,920F.
C)$4,800U.
D)$4,800F.
E)None of thesE.

Question 41

The individual generally responsible for the direct-material price variance is the:

A)sales manager.
B)production supervisor.
C)purchasing manager.
D)finance manager.
E)head of the human resources department.

Question 42

A statistical control chart is best used for determining:

A)direct-material price variances.
B)direct-labor variances.
C)whether a variance is favorable or unfavorable.
D)who should be held accountable for specific variances.
E)whether a particular variance should be investigated.

Question 43

Consider the following information:
The direct-labor rate variance is:

A)$17,250U.
B)$20,700U.
C)$20,700F.
D)$21,000F.
E)None of thesE.

Question 44

Which of the following combinations of direct-material variances might prompt management to undertake a detailed variance investigation?

A)Price,unfavorable;quantity,unfavorable.
B)Price,unfavorable;quantity,favorable.
C)Price,favorable;quantity,unfavorable.
D)Price favorable;quantity,favorable.
E)All of thesE.

Question 45

The direct-material price variance is:

A)$4,620F.
B)$4,620U.
C)$5,200F.
D)$5,200U.
E)None of thesE.

Question 46

The direct-labor rate variance is:

A)$7,800F.
B)$7,950F.
C)$8,020F.
D)$8,000U.
E)None of thesE.

Question 47

Taylor's direct-labor efficiency variance was

A)$2,900F.
B)$2,900U.
C)$2,960F.
D)$2,960U.
E)None of thesE.

Question 48

The direct-labor efficiency variance is:

A)$8,000F.
B)$8,000U.
C)$8,250F.
D)$8,250U.
E)None of thesE.

Question 49

Sammons Corporation had a favorable direct-labor efficiency variance of $6,000 for the period just ended.The actual wage rate was $0.50 more than the standard rate of $12.00.If the company's standard hours allowed for actual production totaled 9,500,how many hours did the firm actually work?

A)9,000.
B)9,020.
C)9,980.
D)10,000.
E)None of thesE.

Question 50

Which department would normally begin an investigation regarding an unfavorable materials quantity variance?

A)Quality control.
B)Purchasing.
C)Engineering.
D)Production.
E)Receiving.

Question 51

The direct-labor rate variance is:

A)$8,900F.
B)$8,900U.
C)$9,000F.
D)$9,000U.
E)None of thesE.

Question 52

Consider the following statements about variance investigation:
I)Variance investigation involves a look at only unfavorable variances.
II)Variance investigation is typically based on a cost-benefit analysis.
III)Variance investigation is often performed by establishing guidelines similar to the following: Investigate variances that are greater than $X or greater than Y% of standard cost.
Which of the above statements is (are)true?

A)I only.
B)II only.
C)III only.
D)II and III.
E)I,II,and III.

Question 53

Taylor's direct-material price variance was:

A)$16,050F.
B)$16,050U.
C)$16,800F.
D)$16,800U.
E)None of thesE.

Question 54

The direct-labor efficiency variance is:

A)$7,000F.
B)$7,000U.
C)$7,100F.
D)$7,100U.
E)None of thesE.

Question 55

The standard hours allowed for the work performed are:

A)5.
B)5.14.
C)39,000.
D)40,100.
E)None of thesE.

Question 56

Taylor's direct-labor rate variance was

A)$6,600F.
B)$6,600U.
C)$2,960F.
D)$2,960U.
E)None of thesE.

Question 57

When considering whether to investigate a variance,managers should consider all of the following except the variance's:

A)size.
B)pattern of recurrence.
C)trends over time.
D)nature,namely,whether it is favorable or unfavorable.
E)controllability.

Question 58

A production supervisor generally has little influence over the:

A)direct-material quantity variance.
B)direct-labor efficiency variance.
C)direct-material price variance.
D)number of units produceD.
E)All of these items.

Question 59

Taylor's direct-material quantity variance was:

A)$7,800F.
B)$16,800F.
C)$7,800U.
D)$16,800U.
E)None of thesE.

Question 60

The direct-material quantity variance is:

A)$750F.
B)$750U.
C)$6,500U.
D)$7,250U.
E)None of thesE.

Question 61

Justin Company recently purchased materials from a new supplier at a very attractive price.The materials were found to be of poor quality,and the company's laborers struggled significantly as they shaped the materials into finished product.In a desperation move to make up for some of the time lost,the manufacturing supervisor brought in more-senior employees from another part of the plant.Which of the following variances would have a high probability of arising from this situation?

A)Material price variance,favorable.
B)Material quantity variance,unfavorable.
C)Labor rate variance,unfavorable.
D)Labor efficiency variance,unfavorable.
E)All of thesE.

Question 62

The manufacturing cycle efficiency for PQR Company when the processing time is six hours and inspection,waiting,and move time are one hour each is:

A)0.67.
B)0.75.
C)0.78.
D)0.88.
E)an amount other than those shown abovE.

Question 63

A direct-labor efficiency variance cannot be caused by:

A)inexperienced employees.
B)poor quality raw materials.
C)employee inefficiency.
D)an out-of-date labor time standarD.
E)producing fewer finished units than originally planned.

Question 64

Standard costs:

A)allow a manager to assess the efficiency of operations.
B)allow a company to practice management by exception.
C)provide management with a basis for performance evaluations.
D)if set correctly,can provide a motivational tool for employees.
E)All of the above

Question 65

The typical balanced scorecard is best described as containing:

A)financial performance measures.
B)nonfinancial performance measures.
C)neither financial nor nonfinancial performance measures.
D)both financial and nonfinancial performance measures.
E)either financial or nonfinancial performance measures but not both.
Two correct answers!
"D" is also a correct answer,albeit not as thorough.(See your own T/F question #5).

Question 66

To assess how customers perceive a company's products,management may study:

A)the number of customer complaints.
B)the number of warranty claims.
C)the number of products returned.
D)the cost of repairing returned products.
E)All of these measures.

Question 67

Lead indicators guide management to:

A)take actions now that will have positive effects on organizational performance now.
B)take actions now that will have positive effects on organizational performance in the future.
C)take actions in the future that will have positive effects on organizational performance now.
D)take actions in the past that will have positive effects on organizational performance in the future.
E)pursue identical strategies as those implemented with lag indicators.

Question 68

When using a balanced scorecard,a company's market share is typically classified as an element of the firm's:

A)financial performance measures.
B)customer performance measures.
C)learning and growth performance measures.
D)internal-operations performance measures.
E)interdisciplinary performance measures.

Question 69

Listed below are five variances (and possible causes)that are under review by management of Knox Company.Which of the following is least likely to cause the variance indicated?

A)The need to ship goods acquired from a distant supplier via FedEx rather than via truck;material price variance.
B)The need to complete goods on a timely basis during a period of high absenteeism;labor rate variance.
C)A work-team that is very unhappy with its supervisor;labor efficiency variance.
D)The need to close a plant for two days because of blizzard conditions;material quantity variance,part no.542.
E)A malfunctioning piece of manufacturing equipment;labor efficiency variancE.

Question 70

An increasingly popular approach that integrates financial and customer performance measures with measures in the areas of internal operations and learning and growth is known as:

A)the integrated performance measurement tool (IPMT).
B)the balanced scorecard.
C)gain sharing.
D)cycle efficiency.
E)overall quality assessment (OQA).

Question 71

The management philosophy known as theory of constraints is most closely tied to:

A)cash management.
B)contribution margin analysis.
C)job costing systems.
D)standard costing systems.
E)organizational bottlenecks.

Question 72

Rogillo,Inc.had an unfavorable labor efficiency variance and an unfavorable materials quantity variance.Which department might be held accountable for these variances?

A)Purchasing,because bad materials can harm labor efficiency.
B)Production,because inefficient workers may use more materials than allowed.
C)Marketing.
D)Shipping.
E)Both A and/or B are possiblE.

Question 73

A direct-material quantity variance can be caused by all of the following except:

A)improper employee training.
B)changes in sales volume.
C)acquisition of materials that are below standard quality.
D)adjustment problems with machines.
E)disgruntled workers.

Question 74

To improve its manufacturing efficiency,companies should strive toward increasing __________ time as a percentage of processing time + inspection time + waiting time + move time.The blank is:

A)processing time.
B)lead time.
C)waiting time.
D)move time.
E)inspection timE.

Question 75

Which of the following is a criticism of standard costing,as applied to today's manufacturing environment?

A)Standards tend to be relevant for only a short period of time because of shorter product life cycles.
B)Variance information is usually aggregated (i.e. ,combined)rather than associated with a particular batch of goods or a specific product line.
C)Traditional standard costing has a fairly narrow orientation,failing to focus on broader issues such as the overall costs of ownership.
D)Standard costing pays considerable attention to labor cost and labor efficiency,which are becoming a relatively unimportant factor of production.
E)All of these are valid criticisms.

Question 76

In the calculation of manufacturing cycle efficiency,which of the following activities results in value-added time?

A)Moving.
B)Processing.
C)Inspection.
D)Waiting.
E)All of thesE.

Question 77

Cohlsen Corporation has a favorable materials quantity variance.Which department would likely be asked to explain the cause of this variance?

A)Engineering.
B)Purchasing.
C)Production.
D)Marketing.
E)None,because the variance is favorablE.

Question 78

Lucie Corporation's purchasing manager obtained a special price on an aluminum alloy from a new supplier,resulting in a direct-material price variance of $9,500F.The alloy produced more waste than normal,as evidenced by a direct-material quantity variance of $2,000U,and was also difficult to use.This slowed worker efficiency,generating a $2,500U labor efficiency variance.To help remedy the situation,the production manager used senior line employees,which gave rise to a $900U labor rate variance.If overall product quality did not suffer,what variance amount is best used in judging the appropriateness of the purchasing manager's decision to acquire substandard material?

A)$4,100F.
B)$5,000F.
C)$7,000F.
D)$7,500F.
E)$9,500F.

Question 79

Swedish Cruise Lines (SCL),which operates in a very competitive marketplace,is considering four categories of performance measures: (1)profitability measures,(2)customer-satisfaction measures,(3)efficiency and quality measures,and (4)learning and growth measures.The company assigns one manager to each ship in its fleet to oversee the ship's general operations.If SCL desired to adopt a balanced-scorecard approach,which measures should the firm use in the evaluation of its managers?

A)1.
B)1,2.
C)2,3.
D)1,2,4.
E)1,2,3,4.

Question 80

Which of the following would not be a concern of a company that desires to compete in a global manufacturing arena?

A)Number of new products introduced.
B)Manufacturing cycle efficiency.
C)Number of customer complaints.
D)Number of on-time deliveries.
E)All of these would be concerns.