Question 1

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

Accepted Answer

The formula for price/rate variance is (AP - SP) x AQ, where AP is the actual price/rate, SP is the standard price/rate, and AQ is the actual quantity. The formula involves subtracting the standard price/rate from the actual price/rate and multiplying the result by the actual quantity to determine the price/rate variance.

Question 2

Specifications for materials are compiled on a bill of materials.

Accepted Answer

The statement is correct. A bill of materials is a document that lists all the materials needed to manufacture a product, including specifications for each material such as quantity, quality, size, and other details.

Question 3

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

Accepted Answer

This statement is true. The labor rate variance is calculated by subtracting the actual wage rate paid to employees from the standard wage rate for all hours worked, and multiplying that difference by the number of hours worked.

Question 4

Specifications for materials are compiled on a purchase requisition.

Accepted Answer

Specifications for materials are typically compiled on a purchase order, not a purchase requisition. A purchase requisition is a request to procure goods or services, while a purchase order is the document that specifies the details of the purchase.

Question 5

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

Accepted Answer

This statement correctly defines the usage variance. It is the difference between the actual quantity of inputs used and the standard or budgeted quantity allowed for the output produced during a specific period.

Question 6

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

Accepted Answer

The answer of The total variance can provide useful information...

Question 7

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

Accepted Answer

The materials price variance is calculated using the quantity of materials purchased, not the quantity used in production.

Question 8

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

Accepted Answer

The total variance only tells us the overall variance in costs but does not specify the reasons why the costs differ. To determine the source of cost differences, we need to analyze the individual components of the variance such as price variance, quantity variance, or efficiency variance.

Question 9

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

Accepted Answer

The price variance reflects the difference between the actual cost of inputs and the standard cost of those inputs; it does not measure the quantity of inputs used versus the standard quantity allowed.

Question 10

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

Accepted Answer

An operations flow document is a detailed description of all the steps necessary to manufacture one unit of a product, including the acquisition of raw materials, processing, assembly, inspection, and packaging. It is used to ensure consistency in the manufacturing process and to identify areas where efficiency can be improved.

Question 11

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

Accepted Answer

The usage variance reflects the difference between the actual quantity of inputs used and the standard quantity expected to be used for the output, not the difference in prices.

Question 12

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

Accepted Answer

The point of purchase model uses the quantity of materials purchased to calculate the materials price variance. This variance is calculated by comparing the actual price paid for the materials to the standard price that was set for those materials. The variance represents the difference between these two prices, and it can be analyzed to help managers understand why there are differences between the expected costs of production and the actual costs that were incurred.

Question 13

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

Accepted Answer

The definition of price variance is the difference between the actual price paid for inputs and the standard price for those inputs. Therefore, the statement is true.

Question 14

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

Accepted Answer

A standard cost card is developed after developing manufacturing standards for direct materials, direct labor, and factory overhead. The standard cost card is a document that shows the standard costs for a product, including the standard quantity and price for each input, as well as the standard labor hours and rate for each product.

Question 15

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

Accepted Answer

This statement is true. The labor efficiency variance measures the difference between the standard hours allowed for the production achieved and the actual hours worked.

Question 16

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

Accepted Answer

The formula for usage variance is (AQ - SQ) * SP, where AQ is actual quantity, SQ is standard quantity, and SP is standard price.

Question 17

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

Accepted Answer

The difference between actual wages paid and standard wages is the labor rate variance, not the labor efficiency variance. Labor efficiency variance measures the difference in hours worked versus hours expected.

Question 18

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

Accepted Answer

A standard cost card is a document containing the standard cost details for each unit of a product, derived from the standards set for direct materials, direct labor, and factory overhead.

Question 19

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

Accepted Answer

This statement is true. The formula for usage variance is calculated by subtracting the standard quantity (SQ) from the actual quantity (AQ) and multiplying the result by the standard price (SP). Therefore, the correct formula for usage variance is (AQ - SQ)* SP.

Question 20

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

Accepted Answer

The formula for price/rate variance is (AP - SP) * AQ, where AP is the actual price per unit, SP is the standard price per unit, and AQ is the actual quantity of input used.

Quiz 7: Standard Costing and Variance Analysis