Deck 29: Controlling Manufacturing Costs: Standard Costs

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

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 8

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

Question 9

A fixed budget includes only fixed manufacturing costs.

Question 10

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.

Question 11

Semi-variable costs are sometimes called mixed costs.

Question 12

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

Question 13

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

Question 14

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.With an expected increase in production next year to a level of 10,000 units,the anticipated security costs are expected to remain the same.The security costs are an example of fixed factory costs.

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

Management expresses its operating plan in monetary units when it completes a(n)____________________.

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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 34

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

Question 35

The ____________________ cost per unit does not change as output changes.

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

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

Question 38

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

Question 39

The difference between the actual cost of an item and its standard cost is called a(n)___________________.

Question 40

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

Question 41

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

Question 42

A decrease in activity level will result in:

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

Question 43

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

Question 44

An increase in activity level will result in:

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

Question 45

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

Question 46

Costs in excess of established standards are ___________________.

Question 47

Use the high-low point method to determine variable cost per unit:

A) $0.60 per unit.
B) $0.80 per unit.
C) $1.00 per unit.
D) $1.20 per unit.

Question 48

Use the high-low point method to determine total costs if 16,000 units are produced.

A) $20,000
B) $22,800
C) $30,000
D) $32,800

Question 49

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

Question 50

Which of the following costs are generally semi-variable?

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

Question 51

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

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

Question 52

Use the high-low point method to determine total fixed cost:

A) $20,000.
B) $28,000.
C) $16,000.
D) $24,000.

Question 53

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) $36.00 per unit
B) $57.00 per unit
C) $15.00 per unit
D) $42.00 per unit

Question 54

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 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

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

Question 60

Petersen Company produces a single product with the following production and average cost data: The best estimate of the monthly fixed cost is:

A) $45,000
B) $120,000
C) $177,000
D) $135,000

Question 61

The salary of the factory supervisor is a good example of

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

Question 62

The general model for computing a price variance is:

A) difference in unit price × actual quantity of inputs.
B) difference in unit price × standard quantity of inputs.
C) standard price × (actual quantity of inputs - standard quantity allowed for units of output).
D) actual price × difference in quantity of inputs.

Question 63

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

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

Question 64

SweetBerry Ice-creams uses a standard cost system.The following data is available for June: The actual material cost for June was:

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

Question 65

The labor standard for a product was five hours at a wage rate of $8 per hour.The firm produced 900 units of the item.Labor costs totaled $35,250 and 4,700 hours of labor were used.An analysis of labor costs would indicate

A) a $750 favorable labor time variance.
B) a $1,600 unfavorable labor time variance.
C) a $750 unfavorable labor rate variance.
D) a $1,600 favorable labor rate variance.

Question 66

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

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

Question 67

Examples of fixed manufacturing costs include all of the following except:

A) depreciation.
B) utilities.
C) insurance.
D) taxes.

Question 68

The labor standard for a product was five hours at a wage rate of $8 per hour.The firm produced 900 units of the item.Labor costs totaled $35,250 and 4,700 hours of labor were used.An analysis of labor costs would indicate

A) a $750 favorable labor time variance.
B) a $1,600 favorable labor time variance.
C) a $2,350 unfavorable labor rate variance.
D) a $2,350 favorable labor rate variance.

Question 69

Which variance is controllable by the purchasing manager?

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

Question 70

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) $433,250
C) $439,500
D) $458,250

Question 71

An unfavorable price variance for materials means that

A) the actual cost of the materials was more than the budgeted amount.
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 standard cost.

Question 72

A material usage variance is calculated as:

A) the difference in unit price × actual quantity of inputs.
B) the difference in unit price × standard quantity of inputs.
C) standard price × (actual quantity of inputs - standard quantity allowed for units of output).
D) actual price × difference in quantity of inputs.

Question 73

Direct factory labor is usually considered to be

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

Question 74

WinterRec uses a standard cost system.The following data is available for November: The actual direct labor rate for November is:

A) $8 per hour.
B) $7.60 per hour.
C) $8.40 per hour.
D) $8.20 per hour.

Question 75

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

Question 76

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

Question 77

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

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

Question 78

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

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

Question 79

A budget prepared using several differing levels of activity is a

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

Question 80

Which variance is controllable by the production manager?

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