Deck 29: Controlling Manufacturing Costs: Standard Costs

Question 1

Material budgets are calculated by multiplying units to be produced by the expected unit cost of direct materials.

Answer 1

True

Question 2

In order to analyze the differences between actual costs and standard costs, it is necessary to identify the fixed and variable components of semi-variable costs.

Answer 2

True

Question 3

A fixed budget is one that shows only one level of activity.

Answer 3

True

Question 4

The cost per unit of direct materials changes as output changes.

Question 5

A flexible budget shows budgeted costs at several different levels of activity.

Question 6

Weaver Corporation has a three-year contract with a security firm that sets hourly wage rates for the firm at $10 per hour. At 7,000 units of output, factory security costs were $14,000. Production is expected to increase next year to a level of 10,000 units and the security costs are expected to remain the same. The security costs are an example of fixed factory costs.

Question 7

As the volume of output decreases, the fixed cost per unit of output increases.

Question 8

Budgeting for manufacturing overhead is the easiest of total product costs to calculate as its cost behavior is fixed.

Question 9

Semi-variable costs vary in direct proportion to the volume of activity or production.

Question 10

If a price variance for materials is unfavorable, the quantity variance for materials also must be unfavorable.

Question 11

If the standard cost for an item exceeds the actual cost, the variance is favorable.

Question 12

Direct materials and direct labor are examples of costs that tend to vary directly with the volume of output.

Question 13

To measure manufacturing efficiency, it is necessary to first identify costs behavior and separate cost into their behavioral components.

Question 14

A fixed budget includes only fixed manufacturing costs.

Question 15

If the predetermined overhead application rate is a percentage of labor cost, then a favorable labor time variance will be accompanied by a favorable manufacturing overhead variance.

Question 16

Semi-variable costs are sometimes called mixed costs.

Question 17

A key purpose of a manufacturing cost budget is to provide a basis for measuring performance.

Question 18

A price variance for an item is the difference between its actual price and its standard price multiplied by the standard quantity.

Question 19

A budget performance report compares actual costs for a period with the budgeted costs for that period.

Question 20

The manufacturing cost budget will include both variable and fixed manufacturing costs.

Question 21

The purchasing department can determine the standard quantity per unit of each type of raw material required to manufacture a product.

Question 22

Variance analysis is a tool used by management to pinpoint inefficiencies in the manufacturing process.

Question 23

A flexible budget that is prepared based on the actual activity level achieved in a period provides a more precise measure of efficiency and control when evaluating actual costs.

Question 24

The production manager is accountable for all material quantity variances as defective product and scrap is a result of inexperienced workers.

Question 25

Standard costs reflect what costs should be for the units of product manufactured during the period under the normal efficient operating conditions.

Question 26

The cost per unit does not change as output changes.

Question 27

Costs are expected to behave in a similar manner within a relevant range of activity.

Question 28

Costs that do not vary in total during a period even though the volume of manufacturing activity changes are called costs.

Question 29

Usually, a well-run manufacturing company prepares only annual manufacturing cost budgets.

Question 30

The high-low point method results can be misleading if the activity is not reflective of the normal activity.

Question 31

Management expresses its operating plan in monetary units by completing a(n) .

Question 32

The controllable overhead variance compares the actual overhead costs incurred with what the costs should have been for the units produced.

Question 33

Costs that tend to change in total directly with the volume of manufacturing activity are called
costs.

Question 34

The price variance for an item is the difference between its actual price and its standard price, multiplied by the quantity.

Question 35

The difference between the actual cost of an item and the standard cost of an items is called the-----------.

Question 36

The quantity variance for an item is the difference between its actual quantity and its standard quantity, multiplied by the cost of the item.

Question 37

Regression analysis is a more sophisticated technique than the high-low method and as such, often leads to higher confidence in the projected costs.

Question 38

Two variances associated with analyzing manufacturing overhead costs are the production volume variance and the flexible budget variance.

Question 39

If the actual cost of an item is lower than the standard cost, a(n)price variance will be recognized.

Question 40

The setting of standard wage rates is usually a function of the Human Resources department.

Question 41

A fixed budget is a meaningful way to evaluate manufacturing performance if the activity level used for the budget is

A)more than actual.
B)less than actual.
C)similar to actual.
D)a reasonable/logical activity measure.

Question 42

Which of the following costs are generally semi-variable?

A)repairs and maintenance
B)depreciation
C)clerical salaries
D)property taxes

Question 43

The range of activity at which the factory is likely to operate is referred to as the range of activity.

Question 44

To separate the semi-variable costs into their fixed and variable components, one can use which of the following methods?

A)labor variance method
B)high-low point method
C)relevant range of activity method
D)material variance method

Question 45

Petersen Company produces a single product with the following production and average cost data:


-
The best estimate of total cost at an activity level of 7,250 units is:

A)$424,500
B)$453,125
C)$505,125
D)$458,250

Question 46

An increase in the activity level will result in:

A)an increase in fixed unit cost.
B)an increase in unit variable cost.
C)a decrease in unit variable cost.
D)decrease in fixed unit cost.

Question 47

Costs in excess of established standards are .

Question 48

The labor time (efficiency)variance and the labor variance together make up the total labor variance.

Question 49

A budget that shows expected costs at more than one level of activity is called a(n)
budget.

Question 50

Which of the following would NOT be considered a fixed manufacturing cost?

A)depreciation using straight-line.
B)insurance.
C)utilities.
D)taxes.

Question 51

Costs that vary in some degree with the volume of activity, but not in direct proportion to it are called costs.

Question 52

A budget that shows expected costs at only one level of production activity is called a(n)
budget.

Question 53

Deducting the total variable cost from the total cost results in the

A)overhead.
B)manufacturing cost.
C)fixed cost.
D)semivariable cost.

Question 54

The difference between the total standard cost and the total actual cost is the .

Question 55

Petersen Company produces a single product with the following production and average cost data:


-
The best estimate of the variable cost per unit is:

A)$62.50 per unit
B)$69.00 per unit
C)$70.15 per unit
D)$69.53 per unit

Question 56

Costs that reflect what costs should be for the units of product manufactured during the period under normal efficient operating conditions are called costs.

Question 57

Petersen Company produces a single product with the following production and average cost data:


-
The best estimate of the monthly fixed cost is:

A)$37,000
B)$43,000
C)$52,000
D)$70,000

Question 58

As the volume of output increases, the cost per unit of output decreases.

Question 59

A decrease in the activity level will result in:

A)a decrease in fixed unit cost.
B)a decrease in total fixed cost.
C)total fixed cost remaining constant.
D)a decrease in unit variable cost.

Question 60

A simple method used to analyze the fixed and variable components in semi-variable costs is called the point method.

Question 61

Reelmates manufactures fishing poles. In a recent month, the company budgeted production of 2,000 poles. Actual production was 2,200. According to the standard cost card, each pole requires 3 feet of fiberglass rod at a cost of $9 per foot. Reelmates used 6,500 feet of rod at a net cost of $65,000 for the period.

-
The total material variance was:

A)$6,500 favorable.
B)$900 unfavorable.
C)$900 favorable.
D)$5,600 unfavorable.

Question 62

The cost of utilities consumed in the factory is a good example of

A)a semi-variable cost.
B)a fixed cost.
C)a variable cost.
D)a standard cost.

Question 63

An unfavorable price variance for materials means that

A)the actual cost of the materials was more than the standard cost.
B)more materials were used in production than anticipated.
C)more labor hours were required to work with the materials than expected.
D)the actual cost of the materials was more than the budgeted amount.

Question 64

As the level of activity increases, the total variable costs for the period

A)decrease.
B)increase.
C)do not change.
D)may increase or decrease.

Question 65

Which variance is controllable by the purchasing manager?

A)standard overhead variance.
B)labor rate variance.
C)material price variance.
D)material usage variance.

Question 66

Reelmates manufactures fishing poles. In a recent month, the company budgeted production of 2,000 poles. Actual production was 2,200. According to the standard cost card, each pole requires 3 feet of fiberglass rod at a cost of $9 per foot. Reelmates used 6,500 feet of rod at a net cost of $65,000 for the period.

-
The material usage variance was:

A)$6,500 favorable.
B)$900 unfavorable.
C)$900 favorable.
D)$5,600 unfavorable.

Question 67

Direct factory labor is usually considered to be

A)a semi-variable cost.
B)a fixed cost.
C)a variable cost.
D)a mixed cost.

Question 68

Which variance is controllable by the production manager?

A)standard overhead variance.
B)labor usage variance.
C)labor rate variance.
D)material price variance.

Question 69

The quantity variance for an item is the difference between its actual quantity and its standard quantity multiplied by

A)the actual cost of the item.
B)the standard cost of the item.
C)the price variance.
D)the budgeted amount for the item.

Question 70

A budget prepared using several differing levels of activity is a

A)fixed budget.
B)manufacturing cost budget.
C)flexible budget.
D)budget performance report.

Question 71

As the level of activity increases, the variable cost per unit of activity

A)increases.
B)decreases.
C)may increase or decrease.
D)does not change.

Question 72

The labor standard for a product was 5.5 hours at a wage rate of $9 per hour. The firm produced 1,020 units of the item. Labor costs totaled $50,414 and 5,540 hours of labor were used. An analysis of labor costs would indicate

A)a $554 favorable labor rate variance.
B)a $630 unfavorable labor time variance.
C)a $554 unfavorable labor rate variance.
D)a $630 favorable labor time variance.

Question 73

The labor standard for a product was 5.5 hours at a wage rate of $9 per hour. The firm produced 1,020 units of the item. Labor costs totaled $50,414 and 5,540 hours of labor were used. An analysis of labor costs would indicate

A)a $554 favorable labor time variance.
B)a $554 unfavorable labor time variance.
C)a $630 unfavorable labor rate variance.
D)a $630 favorable labor rate variance.

Question 74

The materials price variance for an item is the difference between its actual price and its standard cost

A)divided by the actual quantity.
B)multiplied by the standard quantity allowed.
C)multiplied by the difference between the actual quantity and the standard quantity.
D)multiplied by the actual quantity used.

Question 75

WinterRec uses a standard cost system. The following data is available for November:

The actual direct labor rate for November is:

A)$9.25 per hour.
B)$9.63 per hour.
C)$9.40 per hour.
D)$9.00 per hour.

Question 76

A material usage variance is calculated as:

A)(actual price - standard price)x actual quantity of inputs.
B)(actual price - standard price)x standard quantity of inputs.
C)(actual quantity - standard quantity)x actual price
D)(actual quantity - standard quantity)x standard price.

Question 77

SweetBerry Ice-creams uses a standard cost system. The following data is available for June:
$\begin{array}{llr}\text { Actual output } & \$ 6,000 \text { gallons } \\\text { Standard material cost } & \$ 8 \text { gallon } \\\text { Standard quantity allowed per gallon } & \$ 1 \text { gallon } \\\text { Material price variance } & \$ 630 \text { Unfavorable } \\\text { Material usage variance } & \$ 2,400 \text { Unfavorable }\end{array}$
The actual material cost for June was:

A)$48,000.
B)$50,400.
C)$49,770.
D)$51,030.

Question 78

The salary of the factory supervisor is a good example of

A)a variable cost.
B)a standard cost.
C)a semi-variable cost.
D)a fixed cost.

Question 79

As the level of activity increases, the fixed cost per unit of activity

A)increases.
B)does not change.
C)decreases.
D)may increase or decrease.

Question 80

The general model for computing a price variance is:

A)(actual price - standard price)x standard quantity of inputs.
B)(actual price - standard price)x actual quantity of inputs.
C)(actual quantity of inputs - standard quantity of units)x standard price.
D)(actual quantity - standard quantity)x actual price.