Deck 25: Standard Costs and Balanced Scorecard

Question 1

A direct labor price standard is frequently called the direct labor efficiency standard.

Answer 1

False

Question 2

Ideal standards will generally result in favorable variances for the company.

Answer 2

False

Question 3

Standard costs may be incorporated into the accounts in the general ledger.

Answer 3

True

Question 4

Normal standards should be rigorous but attainable.

Question 5

A materials quantity variance is calculated as the difference between the standard direct materials price and the actual direct materials price multiplied by the actual quantity of direct materials used.

Question 6

A variance is the difference between actual costs and standard costs.

Question 7

Setting standard costs is relatively simple because it is done entirely by accountants.

Question 8

If actual costs are less than standard costs the variance is favorable.

Question 9

Standard cost is the industry average cost for a particular item.

Question 10

An advantage of standard costs is that they simplify costing of inventories and reduce clerical costs.

Question 11

The standard predetermined overhead rate must be based on direct labor hours as the standard activity index.

Question 12

A standard is a unit amount whereas a budget is a total amount.

Question 13

Inventories cannot be valued at standard cost in financial statements.

Question 14

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

Question 15

Normal standards incorporate normal contingencies of production into the standards.

Question 16

Actual costs that vary from standard costs always indicate inefficiencies.

Question 17

Once set normal standards should not be changed during the year.

Question 18

In developing a standard cost for direct materials a price factor and a quantity factor must be considered.

Question 19

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

Question 20

Standard cost cards are the subsidiary ledger for the Work in Process account in a standard cost system.

Question 21

The overhead controllable variance relates primarily to fixed overhead costs.

Question 22

The materials price variance is normally caused by the production department.

Question 23

In using variance reports top management normally looks carefully at every variance.

Question 24

What is a standard cost?

A) The total number of units times the budgeted amount expected
B) Any amount that appears on a budget
C) The total amount that appears on the budget for product costs
D) The amount management thinks should be incurred to produce a good or service

Question 25

The overhead volume variance relates only to fixed overhead costs.

Question 26

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

Question 27

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

Question 28

The use of standard costs in inventory costing is prohibited in financial statements.

Question 29

The overhead controllable variance is the difference between the actual overhead costs incurred and the budgeted costs for the standard hours allowed.

Question 30

The materials price standard is based on the purchasing department's best estimate of the cost of raw materials.

Question 31

The total overhead variance is the difference between actual overhead costs and overhead costs applied to work done.

Question 32

There could be instances where the production department is responsible for a direct materials price variance.

Question 33

The use of an inexperienced worker instead of an experienced employee can result in a favorable labor price variance but probably an unfavorable quantity variance.

Question 34

In concept standards and budgets are essentially the same.

Question 35

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.

Question 36

Standards may be useful in setting selling prices for finished goods.

Question 37

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

Question 38

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.

Question 39

The starting point for determining the causes of an unfavorable materials price variance is the purchasing department.

Question 40

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.

Question 41

If a company is concerned with the potential negative effects of establishing standards it should

A) set loose standards that are easy to fulfill.
B) offer wage incentives to those meeting standards.
C) not employ any standards.
D) set tight standards in order to motivate people.

Question 42

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

A) the application of manufacturing overhead.
B) direct labor budgets.
C) direct materials budgets.
D) cash budget data.

Question 43

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.

Question 44

Using standard costs

A) can make management planning more difficult.
B) promotes greater economy.
C) does not help in setting prices.
D) weakens management control.

Question 45

The final decision as to what standard costs should be is the responsibility of

A) the quality control engineer.
B) the managerial accountants.
C) the purchasing agent.
D) management.

Question 46

Marburg Co. expects direct materials cost of $6 per unit for 100000 units (a total of $600000 of direct materials costs). Marburg's standard direct materials cost and budgeted direct materials cost is $\begin{array} { l c c } && \text { Standard } &&&&& \text { Budgeted } \\\end{array}$

A) $\begin{array} { l c c } & \$ 6 \text { per unit } &&&& \$ 600,000 \text { per year } \\\end{array}$
B) $\begin{array} { l c c } & \$ 6 \text { per unit } &&&& \$ 6 \text { per unit } \\\end{array}$
C) $\begin{array} { l c c } & \$ 600,000 \text { per year } & \$ 6 \text { per unit } \\\end{array}$
D) $\begin{array} { l c c } & \$ 600,000 \text { per year } & \$ 600,000 \text { per year }\end{array}$

Question 47

Using standard costs

A) makes employees less "cost-conscious."
B) provides a basis for evaluating cost control.
C) makes management by exception more difficult.
D) increases clerical costs.

Question 48

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 shareholders is required.

Question 49

The two levels that standards may be set at are

A) normal and fully efficient.
B) normal and ideal.
C) ideal and less efficient.
D) fully efficient and fully effective.

Question 50

A standard which represents an efficient level of performance that is attainable under expected operating conditions is called a(n)

A) ideal standard.
B) loose standard.
C) tight standard.
D) normal standard.

Question 51

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 answers are correct.

Question 52

The labor time requirements for standards may be determined by the

A) sales manager.
B) product manager.
C) industrial engineers.
D) payroll department manager.

Question 53

Standard costs may be used by

A) universities.
B) governmental agencies.
C) charitable organizations.
D) All of these answers are correct.

Question 54

The most rigorous of all standards is the

A) normal standard.
B) realistic standard.
C) ideal standard.
D) conceivable standard.

Question 55

A standard differs from a budget because a standard

A) is a predetermined cost.
B) contributes to management planning and control.
C) is a unit amount.
D) none of these; a standard does not differ from a budget.

Question 56

Which of the following statements about standard costs is false?

A) Properly set standards should promote efficiency.
B) Standard costs facilitate management planning.
C) Standards should not be used in "management by exception."
D) Standard costs can simplify the costing of inventories.

Question 57

Ideal standards

A) are rigorous but attainable.
B) are the standards generally used in a master budget.
C) reflect optimal performance under perfect operating conditions.
D) will always motivate employees to achieve the maximum output.

Question 58

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.

Question 59

Which of the following is not considered an advantage of using standard costs?

A) Standard costs can reduce clerical costs.
B) Standard costs can be useful in setting prices for finished goods.
C) Standard costs can be used as a means of finding fault with performance.
D) Standard costs can make employees "cost-conscious."

Question 60

Standard costs

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

Question 61

The direct materials quantity standard should

A) exclude unavoidable waste.
B) exclude quality considerations.
C) allow for normal spoilage.
D) always be expressed as an ideal standard.

Question 62

Most companies that use standards set them at

A) the normal level.
B) a conceivable level.
C) the ideal level.
D) last year's level.

Question 63

Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds respectively. The purchase price is $2 per pound but a 2% discount is usually taken. Freight costs are $.10 per pound and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit and the allowance for rest periods and setup is .2 hours and .1 hours respectively.

- The standard direct labor hours per unit is

A) 1 hour.
B) 1.1 hours.
C) 1.2 hours.
D) 1.3 hours.

Question 64

Allowance for spoilage is part of the direct

A) materials price standard.
B) materials quantity standard.
C) labor price standard.
D) labor quantity standard.

Question 65

The standard predetermined overhead rate used in setting the standard overhead cost is determined by dividing

A) budgeted overhead costs by an expected standard activity index.
B) actual overhead costs by an expected standard activity index.
C) budgeted overhead costs by actual activity.
D) actual overhead costs by actual activity.

Question 66

The direct materials quantity standard would not be expressed in

A) pounds.
B) barrels.
C) dollars.
D) board feet.

Question 67

The cost of freight-in

A) is to be included in the standard cost of direct materials.
B) is considered a selling expense.
C) should have a separate standard apart from direct materials.
D) should not be included in a standard cost system.

Question 68

The standard direct materials quantity does not include allowances for

A) unavoidable waste.
B) normal spoilage.
C) unexpected spoilage.
D) all of the above are included.

Question 69

Which of the following statements is true?

A) Variances are the differences between total actual costs and total standard costs.
B) When actual costs exceed standard costs the variance is favorable.
C) An unfavorable variance results when actual costs are decreasing but standards are not changed.
D) All of the above are true.

Question 70

Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds respectively. The purchase price is $2 per pound but a 2% discount is usually taken. Freight costs are $.10 per pound and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit and the allowance for rest periods and setup is .2 hours and .1 hours respectively.

- The standard direct labor rate per hour is

A) $ 12.00.
B) $ 12.30.
C) $15.60.
D) $15.90.

Question 71

Unfavorable materials price and quantity variances are generally the responsibility of the $\begin{array} { l l l } & &&&&& { \text { Price } } &&&&&&& \text { Quantity } \\\end{array}$

A) $\begin{array} { l l l } & \text { Purchasing department } & \text { Purchasing Department } \\\end{array}$
B) $\begin{array} { l l l } & \text { Purchasing department } & \text { Production Department } \\\end{array}$
C) $\begin{array} { l l l } & \text { Production department } & \text { Production Department } \\\end{array}$
D) $\begin{array} { l l l } & \text { Production Department } & \text { Purchasing Department }\end{array}$

Question 72

The direct labor quantity standard is sometimes called the direct labor

A) volume standard.
B) effectiveness standard.
C) efficiency standard.
D) quality standard.

Question 73

A managerial accountant
1) does not participate in the standard setting process.
2) provides knowledge of cost behaviors in the standard setting process.
3) provides input of historical costs to the standard setting process.

A) 1
B) 2
C) 3
D) 2 and 3

Question 74

Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds respectively. The purchase price is $2 per pound but a 2% discount is usually taken. Freight costs are $.10 per pound and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit and the allowance for rest periods and setup is .2 hours and .1 hours respectively.

-The standard direct materials price per pound is

A) $1.96.
B) $2.00.
C) $2.13
D) $2.17

Question 75

An unfavorable materials quantity variance would occur if

A) more materials were purchased than were used.
B) actual pounds of materials used were less than the standard pounds allowed.
C) actual labor hours used were greater than the standard labor hours allowed.
D) actual pounds of materials used were greater than the standard pounds allowed.

Question 76

A manufacturing company would include setup and downtime in their direct

A) materials price standard.
B) materials quantity standard.
C) labor price standard.
D) labor quantity standard.

Question 77

The total standard cost to produce one unit of product is shown

A) at the bottom of the income statement.
B) at the bottom of the balance sheet.
C) on the standard cost card.
D) in the Work in Process Inventory account.

Question 78

Hofburg's standard quantities for 1 unit of product include 2 pounds of materials and 1.5 labor hours. The standard rates are $2 per pound and $7 per hour. The standard overhead rate is $8 per direct labor hour. The total standard cost of Hofburg's product is

A) $14.50.
B) $17.00.
C) $22.50.
D) $26.50.

Question 79

Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds respectively. The purchase price is $2 per pound but a 2% discount is usually taken. Freight costs are $.10 per pound and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit and the allowance for rest periods and setup is .2 hours and .1 hours respectively.

- The standard direct materials quantity per unit is

A) 2.6 pounds.
B) 2.7 pounds.
C) 2.9 pounds.
D) 3.0 pounds.

Question 80

Allowances should not be made in the direct labor quantity standard for

A) wasted time.
B) rest periods.
C) cleanup.
D) machine downtime.