Question 1

If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at $17, the rate variance was $1,200 favorable.

Accepted Answer

The rate variance formula is (Actual rate - Standard rate) x Actual hours.

Using the given information: 
- Standard rate = $15
- Actual rate = $17
- Actual hours = 600

Rate variance = ($17 - $15) x 600 = $1,200 unfavorable.

Therefore, the answer is B) False.

Question 2

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $1,000 unfavorable.

Accepted Answer

The formula to calculate direct materials quantity variance is:

(DSQ - AQ) x SP

Where DSQ is the standard quantity of direct materials, AQ is the actual quantity of direct materials, and SP is the standard price of direct materials.

Using the given information, we can calculate the direct materials quantity variance:

(1,000 - 800) x $11 = $2,200 unfavorable

Therefore, the correct answer is B) False, as the direct materials quantity variance is $2,200 unfavorable, not $1,000.

Question 3

Standard costs are determined by multiplying expected price by expected quantity.

Accepted Answer

Standard costs are determined by calculating the expected cost of producing a unit of product or service, which is typically determined by multiplying the expected price of the inputs by the expected quantity of inputs needed to produce a unit.

Question 4

The variance from standard for factory overhead resulting from incurring a total amount of factory overhead cost that is greater or less than the amount budgeted for the level of operations achieved is termed controllable variance.

Accepted Answer

This statement correctly defines the controllable variance for factory overhead.

Question 5

If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 600 hours at $17, the rate variance was $1,200 unfavorable.

Accepted Answer

The answer of If the standard to produce a given...

Question 6

If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600 units at $13, the direct materials quantity variance was $5,200 favorable.

Accepted Answer

The direct materials quantity variance is calculated as (Standard quantity - Actual quantity) x Standard price. Using the given information:

- Standard quantity = 2,000 units
- Actual quantity = 1,600 units
- Standard price = $12 per unit

Therefore, the direct materials quantity variance should be:

(2,000 - 1,600) x $12 = $4,800 favorable

The given answer of $5,200 favorable is not possible with the given information and is therefore false.

Question 7

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 favorable.

Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity, which in this case would be (12 - 11) x 800 = $800 unfavorable.

Question 8

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 unfavorable.

Accepted Answer

The answer of If the standard to produce a given...

Question 9

A favorable cost variance occurs when actual cost is less than budgeted cost at actual volumes.

Accepted Answer

A favorable cost variance is indeed when the actual cost is less than the budgeted cost.

Question 10

Standards are designed to evaluate price and quantity variances separately.

Accepted Answer

This is true. Standards are predetermined benchmarks or targets against which actual performance is compared. They are designed to evaluate price and quantity variances separately, allowing management to identify the cause of any deviations from the set standards. Price variances result from differences in the actual price paid for a material or the actual wage rate paid for labor compared to the standard price or rate, while quantity variances result from differences in the actual amount of material used or the actual number of labor hours worked compared to the standard quantity or hours.

Question 11

The variance from standard for factory overhead cost resulting from operating at a level above or below 100% of normal capacity is termed volume variance.

Accepted Answer

This statement is true. The variance in factory overhead costs due to operating at a level different from the normal capacity is called volume variance.

Question 12

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $2,200 unfavorable.

Accepted Answer

The calculation for direct materials quantity variance is:

AQ x (SP - AP)

Where AQ is the actual quantity of direct materials used, SP is the standard price per unit of direct materials, and AP is the actual price per unit of direct materials.

Using the given information:

AQ = 800 units
SP = $11 per unit
AP = $12 per unit

So, the calculation would be:

800 x ($11 - $12) = $-800

This means the direct materials quantity variance is $800 unfavorable, not $2,200. Therefore, option B is the correct answer.

Question 13

If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 500 hours at $17, the time variance was $1,700 unfavorable.

Accepted Answer

The given information is about the labor rate variance, not the time variance. The correct formula to calculate the time variance is (Standard time allowed - Actual time taken) x Standard labor rate. Therefore, we do not have enough information to calculate the time variance.

Question 14

If the standard to produce a given amount of product is 600 direct labor hours at $17 and the actual was 500 hours at $15, the time variance was $1,500 unfavorable.

Accepted Answer

To calculate the time variance, we need to find the difference between the standard hours and actual hours multiplied by the standard rate:

Time variance = (Standard hours - Actual hours) * Standard rate

Time variance = (600 - 500) * 17 = $1,700 unfavorable

Therefore, the correct answer is B, not A.

Question 15

The direct labor time variance measures the efficiency of the direct labor force.

Accepted Answer

The direct labor time variance compares the actual direct labor hours worked to the standard hours that should have been worked, in order to determine whether the labor force has worked efficiently or not. Therefore, it measures the efficiency of the direct labor force.

Question 16

Because accountants have financial expertise, they are the only ones that are able to set standard costs for the production area.

Accepted Answer

This statement is false. While accountants may have financial expertise, standard costs for the production area are typically set collaboratively between accountants, production managers, and other relevant stakeholders with expertise in the production process.

Question 17

Standards are more widely used for nonmanufacturing activities than for manufacturing activities.

Accepted Answer

Standards are widely used in both manufacturing and nonmanufacturing activities, but historically, they have been more closely associated with manufacturing due to the critical importance of consistency, quality, and interoperability in the production of goods.

Question 18

A budget performance report compares actual results with the budgeted amounts and reports differences for possible investigation.

Accepted Answer

A budget performance report is prepared to evaluate the actual financial performance of an organization against the budgeted amounts. It identifies the differences between actual results and budgeted amounts, analyzes the reasons for such variances, and suggests corrective actions to bring the performance in line with the budget. Therefore, the given statement is true.

Question 19

An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost.

Accepted Answer

An unfavorable cost variance occurs when actual costs exceed budgeted costs, not the other way around.

Question 20

While setting standards, managers should never allow for spoilage or machine breakdowns in their calculations.

Accepted Answer

It is important for managers to consider potential spoilage or machine breakdowns when setting standards, as these factors can impact production and efficiency. Failing to account for them could lead to unrealistic or unattainable standards.

Quiz 22: Performance Evaluation Using Variances From Standard Costs