Deck 9: Standard Costing: a Functional-Based Control Approach

Question 1

A yield variance occurs when the actual output is the same as the standard output.

Answer 1

False

Question 2

Developing standards for input prices and quantities allows for a more detailed understanding of flexible budget variances.

Answer 2

True

Question 3

All variances accounts are closed out at the end of the year.

Answer 3

True

Question 4

Standard costs are the amount that should be spent to produce a product or service.

Question 5

Standard costing is used in process industries because it's more difficult to utilize.

Question 6

The variable overhead efficiency variance measures the change in variable overhead consumption due to efficient or inefficient use of the activity driver used to assign overhead costs to products.

Question 7

In standard costing, overhead is applied to a product by debiting work in process and crediting variable and fixed overhead control accounts.

Question 8

A mix variance is created whenever the actual mix of inputs is equal to the standard mix.

Question 9

The most detailed method to compute overhead variances is the four-variance method.

Question 10

Both manufacturing and service firms may use standard costing systems.

Question 11

The standard cost sheet shows costs needed to make many units of output.

Question 12

the direct materials mix variance is the difference in the standard cost of actual inputs and the standard costs of inputs that should have been used.

Question 13

Unfavorable variances occur whenever actual prices or usage are less than standard prices or usage, and the opposite for a favorable variance.

Question 14

The direct materials usage variance is the sum of the actual quantities and the standard quantities of units.

Question 15

The total budget variances are categorized into price variances and usage variances.

Question 16

In computing efficiency variances, managers compute the standard quantity of materials used and the standard hours allowed.

Question 17

Price standards specify amounts and quantity standards specify prices.

Question 18

The direct materials price variance is the difference between actual and standard pricing.

Question 19

The unit quantity standards can be used to compute the total amount of inputs allowed for the actual output.

Question 20

The three-variance method requires dividing costs into fixed and variable amounts.

Question 21

A production __________ would most likely be responsible for an unfavorable variable overhead efficiency variance.

Question 22

The unit standard cost is

A)the product of the standard price times the standard quantity for each unit.
B)the price standard for each unit.
C)the actual cost for a standard product.
D)the amount of actual cost to produce a unit in a standardized process.

Question 23

All variances accounts are __________ at the end of the operating year.

Question 24

The standard cost sheet includes all of the following EXCEPT

A)the standard cost per unit.
B)the standard quantity allowed for actual production.
C)the standard price.
D)the standard quantity per unit.

Question 25

The __________ variance show the difference between actual output and expected output for a given amount of input.

Question 26

Variances indicate

A)the cause of the variance.
B)who is responsible for the variance.
C)that actual performance is not going according to plan.
D)when the variance should be investigated.

Question 27

In setting price standards, the purchasing manager must consider

A)freight.
B)quality.
C)discounts.
D)all of these.

Question 28

The document that shows the amount and cost of direct materials, direct labor, and overhead to make a unit of output is called the standard __________ .

Question 29

The standard cost sheet includes all of the following EXCEPT

A)the standard quantity per unit.
B)the standard material costs per unit.
C)the standard cost per unit.
D)the standard labor hours allowed for actual production.

Question 30

The following condition which demands maximum efficiency and can be achieved only if everything operates perfectly is called:

A)Ideal standards
B)Currently attainable standards
C)Budget standards
D)Personnel standards

Question 31

Quantity price standards

A)are standard price multiplied by standard quantity.
B)specify how much of the quantity of input should be used for the standard price.
C)specify how much should be paid for the quantity of input to be used.
D)specify how much of the quantity of input should be used for the actual price.

Question 32

The sum of the standard plus allowable deviation is called the upper __________ .

Question 33

The variances that focus on the difference between actual quantity and standard quantity are called the __________ variances.

Question 34

The condition where everything operates perfectly and demands maximum efficiency is called __________ .

Question 35

The factors where actual performance differs from planned are called: __________ .

Question 36

Which of the following is NOT true about Kaizen Standards?

A)Kaizen standards are the standards used for continuous improvement.
B)Kaizen standards are a currently attainable standard that reflects planned improvement.
C)Kaizen standards are constantly changing.
D)Kaizen standards are the standards used in traditional costing systems.

Question 37

Price standards are the responsibility of

A)accounting.
B)purchasing.
C)personnel.
D)all of these.

Question 38

Which of the following is true of currently attainable standards?

A)Currently attainable standards demand maximum sales price.
B)Currently attainable standards can be achieved under efficient operating conditions.
C)Currently attainable standards do not allow for normal breakdowns, interruptions, and less than perfect skill.
D)Currently attainable standards demand maximum efficiency.

Question 39

The costing that establishes price and quantity standards for inputs is called __________ costing.

Question 40

__________ standards are the standards used for continuous improvement.

Question 41

Montana Company uses a standard costing system. The following information pertains to direct labor costs for the month of February: $$\begin{array} { l l } \text { Standard direct labor rate per hour } & \$ 15.00 \\\text { Actual direct labor rate per hour } & \$ 13.50 \\\text { Labor rate variance } & \$ 18,000 \text { favorable } \\\text { Actual output } & 1,000 \text { units } \\\text { Standard hours all owed for actual production } & 10,000 \text { hours }\end{array}$$ How many actual labor hours were worked during February for Montana Company?

A)10,000
B)12,000
C)1,200
D)2,000

Question 42

Malkovich Company uses a standard costing system. The following information pertains to direct materials for the month of July: $\begin{array}{ll}\text { Standard price per lb. } & \$ 18.00 \\\text { Actual purchase price per lb. } & \$ 16.50 \\\text { Quantity purchased } & 3,100 \mathrm{lbs} . \\\text { Quantity used } & 2,950 \mathrm{lbs} \\\text { Standard quantity allowed for actual output } & 3,000 \mathrm{lbs} \\\text { Actual output } & 1,000 \text { units }\end{array}$ Malkovich Company reports its material price variances at the time of purchase.
What is the material usage variance for Malkovich Company?

A)$2,850 (F)
B)$1,950 (F)
C)$900 (F)
D)$900 (U)

Question 43

Montana Company uses a standard costing system. The following information pertains to direct labor costs for the month of February: $$\begin{array} { l l } \text { Standard direct labor rate per hour } & \$ 15.00 \\\text { Actual direct labor rate per hour } & \$ 13.50 \\\text { Labor rate variance } & \$ 18,000 \text { favorable } \\\text { Actual output } & 1,000 \text { units } \\\text { Standard hours all owed for actual production } & 10,000 \text { hours }\end{array}$$ What is the total labor budget variance for Montana Company?

A)$18,000 (F)
B)$12,000 (U)
C)$18,000 (U)
D)$12,000 (F)

Question 44

Bodacious Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows: $\begin{array} { l l l l } \text { Materials: } & & \text { Standard } & \text { Actual } \\ \text { Standard: } & 200 \text { pounds at } \$ 3.00 \text { per pound } & \$ 600 & \\ \text { Actual: } & 220 \text { pounds at } \$ 2.85 \text { per pound } & & \$ 627 \\\\\text { Direct labor: } & \\ \text { Standard: } & 400 \text { pounds at } \$ 15.00 \text { per pound } & \$ 600 & \\ \text { Actual: } & 368 \text { pounds at } \$ 16.50 \text { per pound } & & \$ 6,027 \end{array}$ What is the labor efficiency variance for Bodacious Corporation?

A)$480 (U)
B)$480 (F)
C)$552 (U)
D)$552 (F)

Question 45

If the standard quantity (SQ), actual quantity (AQ), standard price (SP), and actual price (AP) are 350 units, 400 units, $12, and $13 respectively, then the total budget variance is _____.

A)$1,000 favorable
B)$250 favorable
C)$250 unfavorable
D)$1,000 unfavorable

Question 46

Which of the following equations measures the direct labor rate variance?

A)(SR × AH) − (SR × SH)
B)(AR × SH) − (SR × AH)
C)(AR × AH) − (SR × AH)
D)none of these

Question 47

During November, 10,000 units were produced. The standard quantity of material allowed per unit was 10 pounds at a standard cost of $3 per pound. If there was an unfavorable usage variance of $18,750 for November, the actual quantity of materials used must be

A)23,438 pounds.
B)93,750 pounds.
C)31,875 pounds.
D)106,250 pounds.

Question 48

Standard costing

A)establishes price and quantity standards for inputs.
B)provides journal entry support.
C)is not used in unit costing.
D)none of these.

Question 49

During January, 7,175 direct labor hours were worked at a standard cost of $20 per hour. If the direct labor rate variance for January was $17,500 favorable, the actual cost per direct labor hour must be

A)$20.50.
B)$25.50.
C)$23.00.
D)$17.56.

Question 50

During September, 40,000 units were produced. The standard quantity of material allowed per unit was 5 pounds at a standard cost of $2.50 per pound. If there was a favorable usage variance of $25,000 for September, the actual quantity of materials used must have been

A)210,000 pounds.
B)190,000 pounds.
C)105,000 pounds.
D)95,000 pounds.

Question 51

Firecracker Company has developed the following standards for one of its products. $\begin{array}{ll}\text { Direct materials: } & 15 \text { pounds } \times \$ 16 \text { per pound } \\\text { Direct labor: } & 4 \text { hours } \times \$ 24 \text { per hour } \\\text { Variable manufacturing overhead: } & 4 \text { hours } \times \$ 14 \text { per hour }\end{array}$
$\text { The following activity occurred during the month of October: }$

$\begin{array}{ll}\text { Materials purchased: } & 10,000 \text { pounds costing } \$ 170,000 \\\text { Materials used: } & 7,200 \text { pounds } \\\text { Units produced: } & 500 \text { units } \\\text { Direct labor: } & 2,300 \text { hours at } \$ 23.60 / \text { hour } \\\text { Actual variable manufacturing overhead: } & \$ 30,000\end{array}$ The company records materials price variances at the time of purchase. The direct materials price variance is

A)$50,000 favorable.
B)$50,000 unfavorable.
C)$10,000 favorable.
D)$10,000 unfavorable.

Question 52

Vin Corporation has the following data related to 100 units of final product: $\begin{array} { l } \text {Materials: }\\ \text {Standard: }& \text { 300 pounds at \( \$ 3.00 \) per pound}\\ \text { Actual:}& \text {280 pounds at \( \$ 2.75 \) per pound }\\\end{array}$

What is the material usage variance for Vin Corporation?

A)$60 favorable
B)$60 unfavorable
C)$55 favorable
D)$55 unfavorable

Question 53

Diaz Company has developed the following standards for one of its products: $\begin{array}{ll}\text { Direct materials } & 3.50 \text { pounds } \times \$ 4 \text { per pound } \\\text { Direct labor } & 1 \text { hour } \times \$ 12 \text { per hour } \\\text { Variable manufacturing overhead } & 1 \text { hour } \times \$ 6 \text { per hour }\end{array}$

$\text { The following activity occurred during the month of April: }$

$\begin{array}{ll}\text { Materials purchased } & 2,000 \text { pounds costing } \$ 22,500 \\\text { Materials used } & 1,600 \text { pounds } \\\text { Units produced } & 250 \text { units } \\\text { Direct labor } & 550 \text { hours at } \$ 12.50 \text { per hour } \\\text { Actual variable manufacturing overhead: } & \$ 2,500\end{array}$ The company records materials price variances at the time of purchase.
The total variable standard cost is:

A)$31,875.
B)$6,000.
C)$8,000.
D)$15,500.

Question 54

Malkovich Company uses a standard costing system. The following information pertains to direct materials for the month of July: $\begin{array}{ll}\text { Standard price per lb. } & \$ 18.00 \\\text { Actual purchase price per lb. } & \$ 16.50 \\\text { Quantity purchased } & 3,100 \mathrm{lbs} . \\\text { Quantity used } & 2,950 \mathrm{lbs} \\\text { Standard quantity allowed for actual output } & 3,000 \mathrm{lbs} \\\text { Actual output } & 1,000 \text { units }\end{array}$ Malkovich Company reports its material price variances at the time of purchase.
What is the standard quantity of direct materials per unit for Malkovich Company?

A)3.50 lbs.
B)3.00 lbs.
C)3.10 lbs.
D)3.25 lbs.

Question 55

During June, 16,000 pounds of materials were purchased at a cost of $6 per pound. If there was a favorable direct materials price variance of $3,000 in June, the standard cost per pound must be _____. (Round to two decimal places.)

A)$6.19
B)$5.81
C)$6.00
D)$0.19

Question 56

Brooks Company uses a standard costing system. The following information pertains to direct materials for the month of June: $\begin{array}{ll}\text { Standard price per lb. } & \$ 15.00 \\\text { Actual purchase price per lb. } & \$ 14.50 \\\text { Quantity purchased } & 3,150 \mathrm{lbs} \\\text { Quantity used } & 2,980 \mathrm{lbs} \\\text { Standard quantity allowed for actual output } & 3,000 \mathrm{lbs} \\\text { Actual output } & 1,000 \text { units }\end{array}$ Brooks Company reports its material price variances at the time of purchase.
What is the journal entry to record material purchases?

A)Materials 47,250 Materials Price Variance1,575
Accounts Payable 45,675
B)Materials 47,165 Materials Price Variance1,490
Accounts Payable 45,675
C)Materials 47,175 Materials Price Variance1,500
Accounts Payable 45,675
D)Materials 44,100 Materials Price Variance1,575
Accounts Payable 45,675

Question 57

During October, 10,000 direct labor hours were worked at a standard cost of $10 per hour. If the direct labor rate variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be

A)$10.40.
B)$10.00.
C)$9.60.
D)$9.20.

Question 58

Price/rate variances focus on the differences between

A)actual and standard inputs multiplied by actual prices.
B)actual and standard unit prices of an input multiplied by the actual quantity of inputs.
C)actual and standard inputs multiplied by standard prices.
D)actual and standard unit prices of an input multiplied by the budgeted quantity of inputs.

Question 59

Bender Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows: $\begin{array} { l } \text { Materials:}&& \text {Standard }& \text {Actual }\\ \text { Standard:}& \text {210 pounds at \( \$ 3.00 \) per pound }&\$630\\ \text {Actual: }& \text {240 pounds at \( \$ 2.85 \) per pound }&&\$684\\\\ \text {Direct labor: } \text { Standard: 400 hours at \( \$ 15.00 \) per hour}&6,000\\ \text {Actual: 368 hours at \( \$ 16.50 \) per hour }&&6,072\end{array}$
What is the material price variance for Bender Corporation?

A)$30 (U)
B)$90 (F)
C)$36 (U)
D)$36 (F)

Question 60

Which of the following equations measures a price variance?

A)AQ × (AP − SP)
B)SP × (AQ − SQ)
C)SQ × (AP − SP)
D)(AQ − SQ) × (AP − SP)

Question 61

Using more highly skilled direct laborers might affect which of the following variances?

A)direct materials usage variance
B)direct labor efficiency variance
C)variable manufacturing overhead efficiency variance
D)all of these

Question 62

Which of the following factors would cause an unfavorable labor rate variance?

A)using higher quality materials
B)using low-efficiency workers
C)using more unskilled workers
D)using more highly skilled workers

Question 63

The standard plus the allowable deviation is called the:

A)standard quantity
B)standard price
C)upper control limit
D)total budget variance

Question 64

If variable manufacturing overhead is applied based on direct labor hours and there is an unfavorable direct labor efficiency variance

A)the direct materials usage variance will be unfavorable.
B)the direct labor rate variance will be favorable.
C)the variable manufacturing overhead efficiency variance will be unfavorable.
D)the variable manufacturing overhead spending variance will be unfavorable.

Question 65

A variable overhead efficiency variance could be caused by

A)using a poor quality material that needs more labor time to meet production standards.
B)not taking a quantity discount.
C)paying more than the standard rate for labor.
D)price increases on the materials.

Question 66

Which is NOT an acceptable method of disposing of variances?

A)closing them to cost of goods sold
B)closing them to raw materials, work-in-process, and finished goods
C)closing them to work-in-process, finished goods, and cost of goods sold
D)all are acceptable methods

Question 67

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}\text { Direct materials: } & 10 \text { pounds } \times \$ 3 \text { per pound } \\\text { Direct labor: } & 2.5 \text { hours } \times \$ 8 \text { per hour } \\\text { Variable manufacturing overhead: } & 2.5 \text { hours } \times \$ 2 \text { per hour }\end{array}$

$\text { The following activity occurred during the month of June: }$

$\begin{array}{ll}\text { Materials purchased: } & 125,000 \text { pounds at } \$ 2.60 \text { per pound } \\\text { Materials used: } & 110,000 \text { pounds } \\\text { Units produced: } & 10,000 \text { units } \\\text { Direct labor: } & 24,000 \text { hours at } \$ 7.50 \text { per hour } \\\text { Actual variable manufacturing overhead: } & \$ 51,000\end{array}$ The company records materials price variances at the time of purchase.
The direct labor rate variance is

A)$12,000 favorable.
B)$8,000 favorable.
C)$12,000 unfavorable.
D)$8,000 unfavorable.

Question 68

As a general rule, an investigation of a variance should be undertaken only if the

A)variance is isolated
B)anticipated benefits are greater than the expected costs.
C)variance is negative.
D)variance is positive.

Question 69

Colina Production Company uses a standard costing system. The following information pertains to the current year. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array} { l } \text { Actual production}&5,500 units\\ \text {Actual factory overhead costs \( (\$ 16,500 \) is fixed) }&\$ 40,125 \\ \text {Actual direct labor costs ( 11,250 hours) }&\$ 131,625\\ \text {Standard direct labor for 5,500 units: }&\\ \text { Standard hours allowed}&11,000 hours\\ \text {Labor rate }&\$ 12.00\\\end{array}$


The factory overhead rate is based on an activity level of 10,000 direct labor hours.
Standard cost data for 5,000 units is as follows:

$\begin{array} { l } \text { Variable factory overhead}&\$22,500\\ \text {Fixed factory overhead }&13,500\\ \text {Total factory overhead }&\$36,000\\\end{array}$
What is the variable overhead efficiency variance for Colina Production Company?

A)$562.50 (F)
B)$3,000.00 (U)
C)$1,687.50 (F)
D)$562.50 (U)

Question 70

Which of the following factors would cause an unfavorable material quantity variance?

A)using poorly maintained machinery
B)using higher quality materials
C)using more highly skilled workers
D)receiving discounts for purchasing larger than normal quantities

Question 71

Colina Production Company uses a standard costing system. The following information pertains to the current year. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}\text { Actual production } & 5,500 \text { units } \\\text { Actual factory overhead costs ( } \$ 16,500 \text { is fixed) } & \$ 40,125 \\\text { Actual direct labor costs }(11,250 \text { hours) } & \$ 131,625 \\\text { Standard direct labor for } 5,500 \text { units: } & \\\text { Standard hours allowed } & 11,000 \text { hours } \\\text { Labor rate } & \$ 12.00\end{array}$
The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000 units is as follows:
$\begin{array}{lr}\text { Variable factory overhead } & \$ 22,500 \\\text { Fixed factory overhead } & 13,500 \\\text { Total factory overhead } & \mathbf{\underline { 36 , 0 0 0 }}\end{array}$ What is the fixed overhead volume variance for Colina Production Company?

A)$3,600 (F)
B)$1,350 (F)
C)$4,125 (U)
D)$1,350 (U)

Question 72

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}\text { Direct materials: } & 10 \text { pounds } \times \$ 3 \text { per pound } \\\text { Direct labor: } & 2.5 \text { hours } \times \$ 8 \text { per hour } \\\text { Variable manufacturing overhead: } & 2.5 \text { hours } \times \$ 2 \text { per hour }\end{array}$

$\text { The following activity occurred during the month of June: }$

$\begin{array}{ll}\text { Materials purchased: } & 125,000 \text { pounds at } \$ 2.60 \text { per pound } \\\text { Materials used: } & 110,000 \text { pounds } \\\text { Units produced: } & 10,000 \text { units } \\\text { Direct labor: } & 24,000 \text { hours at } \$ 7.50 \text { per hour } \\\text { Actual variable manufacturing overhead: } & \$ 51,000\end{array}$ The company records materials price variances at the time of purchase.
The direct labor efficiency variance is

A)$8,000 unfavorable.
B)$8,000 favorable.
C)$20,000 unfavorable.
D)$20,000 favorable.

Question 73

Harrangue Company's standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured.
What is the variable overhead efficiency variance for March for Harrangue?

A)$2,200 (U)
B)$2,200 (F)
C)$1,200 (U)
D)$600 (U)

Question 74

A materials price variance would NOT be caused by

A)ordering the wrong quality of materials.
B)ordering from the wrong supplier.
C)not taking a quantity discount.
D)requiring laborers to work overtime.

Question 75

Harrangue Company's standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured.
What is the total variable overhead variance for March for Harrangue?

A)$2,200 (U)
B)$600 (U)
C)$1,000 (U)
D)$1,200 (U)

Question 76

Which of the following is true about the variable overhead spending variance?

A)The variable overhead spending variance measures the aggregate effect of differences in the actual variable overhead rate and the standard variable overhead rate.
B)The variable overhead spending variance measures the change in variable overhead consumption that occurs because of efficient (or inefficient) use of direct labor.
C)The variable overhead spending variance is calculated by deducting actual direct labor hours used from standard direct labor hours that should have been used.
D)The variable overhead spending variance is calculated by deducting actual variable overhead from standard variable overhead.

Question 77

Which of the following people is most likely responsible for an unfavorable variable overhead efficiency variance?

A)production supervisor
B)accountant
C)personnel director
D)supplier

Question 78

A five-percent wage increase for all factory employees would affect which of the following variances?

A)direct materials price variance
B)direct labor rate variance
C)direct labor efficiency variance
D)variable manufacturing overhead efficiency variance

Question 79

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}\text { Direct materials: } & 10 \text { pounds } \times \$ 3 \text { per pound } \\\text { Direct labor: } & 2.5 \text { hours } \times \$ 8 \text { per hour } \\\text { Variable manufacturing overhead: } & 2.5 \text { hours } \times \$ 2 \text { per hour }\end{array}$
$\text { The following activity occurred during the month of June: }$
$\begin{array}{ll}\text { Materials purchased: } & 125,000 \text { pounds at } \$ 2.60 \text { per pound } \\\text { Materials used: } & 110,000 \text { pounds } \\\text { Units produced: } & 10,000 \text { units } \\\text { Direct labor: } & 24,000 \text { hours at } \$ 7.50 \text { per hour } \\\text { Actual variable manufacturing overhead: } & \$ 51,000\end{array}$ The company records materials price variances at the time of purchase.
The variable manufacturing overhead efficiency variance is

A)$1,000 favorable.
B)$2,000 favorable.
C)$1,000 unfavorable.
D)$3,000 unfavorable.

Question 80

The standard overhead cost assigned to each unit of product manufactured is called the

A)total manufacturing cost.
B)predetermined overhead cost.
C)applied overhead cost.
D)estimated overhead cost.