Question 1

Standard costs may be used by
A)universities.
B)governmental agencies.
C)charitable organizations.
D)all of these.

Accepted Answer

Standard costs may be used by universities, governmental agencies, charitable organizations and many other types of organizations to help set budgets, evaluate performance, and make informed decisions.

Question 2

Budget data are NOT journalized in cost accounting systems with the exception of
A)the application of manufacturing overhead.
B)direct labour budgets.
C)direct materials budgets.
D)cash budget data.

Accepted Answer

In cost accounting systems, budget data are typically not journalized except for the application of manufacturing overhead, which involves allocating estimated overhead costs to products based on a predetermined rate.

Question 3

A credit to a Materials Quantity Variance account indicates that the actual quantity of direct materials used was greater than the standard quantity of direct materials allowed.

Accepted Answer

A credit to a Materials Quantity Variance account indicates that the actual quantity of direct materials used was less than the standard quantity of direct materials allowed for the production achieved.

Question 4

An unfavourable labour quantity variance indicates that the actual number of direct labour hours worked was greater than the number of direct labour hours that should have been worked for the output attained.

Accepted Answer

An unfavourable labour quantity variance occurs when the actual number of direct labour hours worked exceeds the number of direct labour hours that should have been worked for the output achieved.

Question 5

Standard cost + price variance + quantity variance = budgeted cost.

Accepted Answer

The correct formula is Standard cost = Budgeted cost, and the price variance and quantity variance are used to analyze the reasons for the difference between the actual cost and the standard cost.

Question 6

The customer perspective on the balance scorecard includes financial measures of performance.

Accepted Answer

The customer perspective on the balanced scorecard focuses on non-financial measures of performance, such as customer satisfaction, retention, and loyalty.

Question 7

A standard cost system may be used with a job order cost system but not a process cost system.

Accepted Answer

A standard cost system can be used with both job order and process cost systems. In fact, it is commonly used in manufacturing companies to help manage and control costs.

Question 8

Which of the following statements is FALSE?
A)A standard cost is more accurate than a budgeted cost.
B)A standard is a unit amount.
C)In concept, standards and budgets are essentially the same.
D)The standard cost of a product is equivalent to the budgeted cost per unit of product.

Accepted Answer

A budgeted cost is a prediction, while a standard cost is a predetermined cost that is used as a benchmark for actual costs. A standard cost can be more accurate than a budgeted cost because it takes into account actual costs of materials and labor.

Question 9

The difference between a budget and a standard is that
A)a budget expresses what costs were, while a standard expresses what costs should be.
B)a budget expresses management's plans, while a standard reflects what actually happened.
C)a budget expresses a total amount while a standard expresses a unit amount.
D)standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system.

Accepted Answer

A budget typically outlines the overall financial plans of a business, including total revenues and expenditures for a specific period. On the other hand, a standard refers to a cost or revenue that should be achieved per unit; it is a benchmark or a specific criterion against which actual results can be measured. This distinction highlights that budgets deal with total amounts, while standards focus on specific, per-unit amounts.

Question 10

A standard cost is
A)a cost which is paid for a group of similar products.
B)the average cost in an industry.
C)a predetermined cost.
D)the historical cost of producing a product last year.

Accepted Answer

A standard cost is a predetermined cost that is used as a benchmark or target for measuring actual costs in a business. It is an estimated cost that a company expects to incur to produce a product or service, based on its past experience and future plans.

Question 11

Variance analysis facilitates the principle of "management by exception."

Accepted Answer

Variance analysis involves comparing actual performance to planned or expected performance, and identifying significant differences or variances. This allows managers to focus their attention on areas where there are unexpected or significant deviations from the plan, and take corrective action as needed. This aligns with the principle of "management by exception," which involves focusing on significant deviations from the norm, rather than spending time on routine or expected activities.

Question 12

Standard costs
A)may show past cost experience.
B)help establish expected future costs.
C)are the budgeted costs per unit in the present.
D)all of these.

Accepted Answer

Standard costs are based on past cost experience and are used to establish expected future costs. They also serve as the budgeted costs per unit in the present. Therefore, all of these statements are true.

Question 13

The learning and growth perspective on the balanced scorecard includes measures monitoring product development, production, delivery, and after-sale service.

Accepted Answer

The learning and growth perspective focuses on employee training, information systems, and organizational culture to support continuous improvement and innovation, not directly on product development, production, delivery, and after-sale service.

Question 14

It is possible that a company's financial statements may report inventories at
A)budgeted costs.
B)standard costs.
C)both budgeted and standard costs.
D)none of these.

Accepted Answer

The answer of It is possible that a company's financial...

Question 15

A debit to the Overhead Volume Variance account indicates that the standard hours allowed for the output produced was greater than the standard hours at normal capacity.

Accepted Answer

A debit to the Overhead Volume Variance account indicates that the actual production volume was less than the expected (or standard) production volume, not specifically related to the comparison of standard hours allowed versus standard hours at normal capacity.

Question 16

If production exceeds normal capacity, the overhead volume variance will be favourable.

Accepted Answer

If production exceeds normal capacity, fixed overhead costs will remain the same, but they will be spread over a larger number of units, resulting in a lower overhead cost per unit. This leads to a favourable overhead volume variance.

Question 17

A two-variance analysis of overhead consists of a spending variance and a volume variance.

Accepted Answer

A two-variance analysis of overhead is commonly used in cost accounting to understand the differences between budgeted and actual overhead costs. The spending variance measures how much of the total variance is due to a difference in actual spending compared to the budgeted amount, while the volume variance measures the difference in overhead costs due to changes in activity levels. Therefore, the statement is true.

Question 18

The total overhead budget variance relates primarily to fixed overhead costs.

Accepted Answer

The total overhead budget variance includes both variable and fixed overhead costs, not just fixed overhead costs.

Question 19

If standard costs are incorporated into the accounting system,
A)it may simplify the costing of inventories and reduce clerical costs.
B)it can eliminate the need for the budgeting process.
C)the accounting system will produce information which is less relevant than the historical cost accounting system.
D)approval of the stockholders is required.

Accepted Answer

Standard costs can simplify the costing of inventories and reduce clerical costs by providing pre-determined costs for materials, labor, and overhead. This can make it easier to calculate the cost of goods sold and the value of ending inventory. It does not eliminate the need for the budgeting process, as standards must be set based on expected costs and performance. The information produced by standard costing can be just as relevant as historical cost accounting, as it provides a basis for comparing actual costs with expected costs. Approval from stockholders is not required for incorporating standard costs into the accounting system.

Question 20

The fixed overhead volume variance relates only to fixed overhead costs.

Accepted Answer

The fixed overhead volume variance only relates to fixed overhead costs, representing the difference between the actual fixed overhead costs incurred and the budgeted fixed overhead costs based on the actual production volume.

Quiz 12: Standard Costs and Balanced Scorecard

Standard costs may be used by

Budget data are NOT journalized in cost accounting systems with the exception of

A credit to a Materials Quantity Variance account indicates that the actual quantity of direct materials used was greater than the standard quantity of direct materials allowed.

An unfavourable labour quantity variance indicates that the actual number of direct labour hours worked was greater than the number of direct labour hours that should have been worked for the output attained.

Standard cost + price variance + quantity variance = budgeted cost.

The customer perspective on the balance scorecard includes financial measures of performance.

A standard cost system may be used with a job order cost system but not a process cost system.

Which of the following statements is FALSE?

The difference between a budget and a standard is that

A standard cost is