Deck 24: Standard Cost Systems

Question 1

The level of production plays an important role in determining cost standards.

Answer 1

True

Question 2

A favorable materials price variance indicates that actual prices paid in acquiring materials were more than standard prices.

Answer 2

False

Question 3

Standard costs actually are ideal costs per unit.

Answer 3

False

Question 4

A materials quantity variance is the standard price multiplied by standard quantity,less actual quantity.

Question 5

A materials price variance is arrived at by taking standard quantity multiplied by actual price,less standard price.

Question 6

A good standard cost system should always generate unfavorable variances.

Question 7

In a standard cost system actual costs are recorded in Material,Direct Labor,and Overhead accounts,but standard costs are charged to Work in Process.

Question 8

In setting standard costs,management's expectations are that the standard costs will always be met.

Question 9

The materials price variance is calculated by multiplying the difference between actual unit price and standard unit price by the standard units purchased.

Question 10

A labor efficiency variance relates to the number of hours actually worked,compared to the standard hours.

Question 11

A standard cost is the per unit cost actually incurred under normal operating conditions.

Question 12

A standard cost is predetermined,that is,determined before actual costs of the current period have been computed.

Question 13

Standard costs are typically reviewed once per year.

Question 14

A favorable variance would be credited to a cost variance account.

Question 15

Standard cost systems are generally compatible with job cost systems or with process cost systems.

Question 16

In setting standards,management's level of performance expectation must be something less than ideal.

Question 17

In a standard cost system,actual costs are charged to work in process as they are incurred.

Question 18

Standard costs are established only for direct labor and direct materials.

Question 19

The use of excessive quantities of material in manufacturing a product causes an unfavorable materials quantity variance.

Question 20

In most companies using standard cost procedures,the costs charged to Work in Process,Finished Goods,and Cost of Goods Sold are the actual costs,not the standard costs.

Question 21

A total cost variance for materials can be caused by differences in the quantity used,or in the price paid,but not by both.

Question 22

Standard costs:

A)May be used in job order cost systems but not in process cost accounting systems.
B)Should be revised upward when actual costs are higher than expected because of waste and inefficiency.
C)Are the same for all companies in a given industry.
D)Are the costs that should be incurred to produce a product under normal conditions.

Question 23

An unfavorable cost variance will be debited to a cost variance account.

Question 24

The presence of fixed costs in manufacturing overhead causes the actual amount of manufacturing overhead per unit of output to vary,depending on the actual production volume attained.

Question 25

A difference between a standard cost and an actual cost would be recorded in the Work in Process account.

Question 26

The company's CEO is the only person who analyzes costs variances.

Question 27

Which statement is true regarding a standard cost system?

A)Both actual and standard costs are used.
B)Only standard costs are used.
C)If variances occur,then something negative in the operations has occurred.
D)Standards are used only when actual amounts are not available.

Question 28

A standard cost is the per-unit cost incurred under:

A)Ideal operating conditions.
B)Perfect operating conditions.
C)Normal,but efficient operating conditions.
D)Minimally acceptable operating conditions.

Question 29

The purchasing manager is often included in evaluating cost variances.

Question 30

[The following information applies to the questions displayed below.]
The Starbright Corporation has compiled the following data.The company intends to use this information to develop standard costs per unit for its single product:
Direct materials = $50 per ton
Direct labor = $12.75 per hour
Variable manufacturing overhead = $5 per direct labor hour
Fixed manufacturing overhead = $18,700
Expected production = 1,700 units
Each unit of the company's single product requires 2.5 tons of direct materials and 22.5 hours to manufacture.
What is the standard cost for direct materials per unit for Starbright's single product?

A)$50 per unit
B)$100 per unit
C)$150 per unit
D)$125 per unit

Question 31

A favorable variance occurs when actual costs are less than standard costs.

Question 32

A variance is said to be unfavorable when actual costs exceed standard costs.

Question 33

A spending variance results from incurring more overhead costs than allowed for the actual level of activity achieved.

Question 34

In evaluating cost variances,the accounting department determines whether variances are favorable or unfavorable.

Question 35

External auditors are often called upon to evaluate cost variances.

Question 36

Which of the following is not an advantage of using a standard cost system?

A)It eliminates the need for analysis of variances.
B)It facilitates establishing an effective system of responsibility accounting.
C)It requires an analysis of all aspects of operations.
D)It helps management control costs.

Question 37

An important advantage of a standard cost system is that standard costs:

A)Cause financial statements to be more comparable because different companies cost their inventories in the same manner.
B)Can be determined with great precision so that inventories are valued with complete accuracy.
C)Cause a lower net income,resulting in lower income taxes.
D)Focus attention on trouble spots and facilitate prompt corrective action.

Question 38

[The following information applies to the questions displayed below.]
The Starbright Corporation has compiled the following data.The company intends to use this information to develop standard costs per unit for its single product:
Direct materials = $50 per ton
Direct labor = $12.75 per hour
Variable manufacturing overhead = $5 per direct labor hour
Fixed manufacturing overhead = $18,700
Expected production = 1,700 units
Each unit of the company's single product requires 2.5 tons of direct materials and 22.5 hours to manufacture.
What is the standard cost for direct labor per unit for Starbright's single product? (Round your answer to the nearest dollar. )

A)$100 per unit
B)$287 per unit
C)$180 per unit
D)$285 per unit

Question 39

In a system designed to measure cost variances,goods transferred from the Work in Process account to the Finished Goods Inventory are valued at:

A)Actual cost.
B)Market value.
C)Standard cost.
D)The lower of actual cost or market value.

Question 40

It is possible for the overhead volume variance to be favorable and the overhead spending variance to be unfavorable.

Question 41

When standard costs are used in a cost accounting system:

A)A favorable cost variance results when standard amounts are less than actual costs.
B)Cost variances are shown in the year-end balance sheet as assets,if favorable,or as liabilities,if unfavorable.
C)Costs charged to the Work in Process Inventory,Finished Goods Inventory,and Cost of Goods Sold accounts are actual costs.
D)Costs charged to the Work in Process Inventory,Finished Goods Inventory,and Cost of Goods Sold accounts are at standard costs.

Question 42

In establishing standard costs for labor,management must look at all of the following except:

A)Time allowed to produce each product.
B)Direct labor requirements for each product.
C)The wage rate of a direct laborer.
D)The quantity of materials for each product.

Question 43

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit,then the journal entry to record the cost of materials used includes:

A)A debit to Work in Process Inventory of $11,400.
B)A debit to Work in Process Inventory of $12,675.
C)A debit to Materials Price variance of $2,850.
D)A credit to Materials Price variance of $1,575.

Question 44

[The following information applies to the questions displayed below.]
The Starbright Corporation has compiled the following data.The company intends to use this information to develop standard costs per unit for its single product:
Direct materials = $50 per ton
Direct labor = $12.75 per hour
Variable manufacturing overhead = $5 per direct labor hour
Fixed manufacturing overhead = $18,700
Expected production = 1,700 units
Each unit of the company's single product requires 2.5 tons of direct materials and 22.5 hours to manufacture.
What is the standard total manufacturing overhead cost?

A)$191,250
B)$18,700
C)$487,900
D)$209,950

Question 45

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit,then the materials price variance is:

A)$2,850 Favorable.
B)$1,575 Unfavorable.
C)$1,275 Favorable.
D)$2,850 Unfavorable.

Question 46

There will be a favorable materials price variance if:

A)The standard price per unit is less than the actual price per unit.
B)The standard price per unit is greater than the actual price per unit.
C)The actual quantity purchased is greater than expected.
D)The actual quantity purchased is less than expected.

Question 47

[The following information applies to the questions displayed below.]
James Inc.'s flexible budget for June,based upon actual output,called for the use of 10,500 pounds of materials at a standard cost of $7.40 per pound.The Production Department actually used 10,700 pounds of materials costing $7.10 per pound during June.
The materials quantity variance for James's June operations is:

A)$3,150 favorable.
B)$3,210 unfavorable.
C)$1,480 unfavorable.
D)$3,210 favorable.

Question 48

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit,then the materials quantity variance is:

A)$2,850 Favorable.
B)$1,575 Unfavorable.
C)$1,275 Favorable.
D)$2,850 Unfavorable.

Question 49

Controlling the materials price variance is usually the responsibility of:

A)The purchasing agent.
B)The marketing director.
C)The production supervisor.
D)The cost accountant.

Question 50

If actual direct labor cost was $7,560 and standard labor cost was $7,000,the journal entry to record this would include:

A)A credit to the labor rate variance account of $560 and a credit to Direct Labor of $7,000.
B)A debit to the labor rate variance account of $560 and a debit to Direct Labor of $7,000.
C)A credit to the labor rate variance account of $560 and a debit to Direct Labor of $7,560.
D)A debit to the labor rate variance account of $560 and a credit to Direct Labor of $7,560.

Question 51

Using more direct labor hours for units produced than the amount allowed by the standard results in:

A)An unfavorable total labor variance.
B)An unfavorable labor efficiency variance,regardless of the wage rate paid to employees.
C)An unfavorable labor efficiency variance only if the wage rate is higher than standard cost allowed.
D)A favorable labor rate variance,because the hourly wage rate is automatically reduced when workers operate less efficiently.

Question 52

[The following information applies to the questions displayed below.]
James Inc.'s flexible budget for June,based upon actual output,called for the use of 10,500 pounds of materials at a standard cost of $7.40 per pound.The Production Department actually used 10,700 pounds of materials costing $7.10 per pound during June.
James's materials price variance for June is:

A)$3,150 unfavorable.
B)$3,150 favorable.
C)$3,210 unfavorable.
D)$3,210 favorable.

Question 53

The calculation of the labor rate variance is:

A)Standard Rate × (Standard Hours − Actual Hours).
B)Standard Hours × (Standard Rate − Actual Rate).
C)Actual Hours × (Standard Rate − Actual Rate).
D)Actual Rate × (Standard Hours − Actual Hours).

Question 54

Controlling the materials quantity variance is usually the responsibility of:

A)The cost accountant.
B)The purchasing agent.
C)The marketing director.
D)The production supervisor.

Question 55

If the actual amount of direct materials used in production was less than the standard amount allowed for units produced,there was:

A)A favorable materials price variance.
B)A favorable total materials variance.
C)A favorable materials quantity variance.
D)An unfavorable materials quantity variance.

Question 56

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit,then the total materials cost variance is:

A)$2,850 Favorable.
B)$1,575 Unfavorable.
C)$1,275 Favorable.
D)$2,850 Unfavorable.

Question 57

There is an unfavorable labor efficiency variance when:

A)Actual hours are greater than standard hours.
B)Actual hours are less than standard hours.
C)The standard rate per hour is greater than the actual rate per hour.
D)The standard rate per hour is less than the actual rate per hour.

Question 58

The calculation of the labor efficiency variance is:

A)Standard Hourly Rate × (Standard Hours − Actual Hours).
B)Standard Hours × (Standard Rate − Actual Rate).
C)Actual Hours × (Standard Rate − Actual Rate).
D)Actual Rate × (Standard Hours − Actual Hours).

Question 59

If the hourly wage rate actually paid during January is higher than the standard rate,the result is:

A)An unfavorable labor rate variance.
B)A favorable labor rate variance.
C)An unfavorable labor efficiency variance.
D)A favorable total labor variance.

Question 60

If the actual cost per pound of direct material is less than the standard cost per pound,there is:

A)A favorable materials price variance.
B)An unfavorable materials price variance.
C)A favorable materials quantity variance.
D)A favorable total materials variance.

Question 61

[The following information applies to the questions displayed below.]
James Inc.'s flexible budget for June,based upon actual output,called for the use of 10,500 pounds of materials at a standard cost of $7.40 per pound.The Production Department actually used 10,700 pounds of materials costing $7.10 per pound during June.
Greenleaf's flexible budget for June,based on actual output,called for the use of 10,000 square feet of materials at a standard cost of $9.90 per square foot.Company records show that the actual price paid for the materials used in June was $9.70 per square foot,and that the direct materials price variance for the month was $2,090 favorable.The materials quantity variance for Greenleaf's June operations was:

A)$1,000 favorable.
B)$4,455 unfavorable.
C)$4,365 favorable.
D)Impossible to determine from the data given.

Question 62

A large favorable variance from standard costs at the end of the year should be:

A)Carried forward to the next fiscal year.
B)Shown as other income in the income statement.
C)Added to cost of goods sold in the income statement.
D)Allocated between ending inventories and cost of goods sold.

Question 63

[The following information applies to the questions displayed below.]
Roman Mfg.'s July production involved actual direct labor costs of $46,287 for 3,700 direct labor hours.The budget for the July level of production called for 3,800 direct labor hours at $12.50 per hour,using a standard cost system.
With respect to labor costs,Roman's production manager is responsible for:

A)Any labor rate variance as well as any labor efficiency variance.
B)Only a labor rate variance.
C)Only a labor efficiency variance.
D)Only unfavorable labor variances.

Question 64

[The following information applies to the questions displayed below.]
Eagle Company uses a standard cost system that has provided the following data:

The direct labor rate variance for the period was:

A)$425 favorable.
B)$360 favorable.
C)$360 unfavorable.
D)$425 unfavorable.

Question 65

[The following information applies to the questions displayed below.]
James Inc.'s flexible budget for June,based upon actual output,called for the use of 10,500 pounds of materials at a standard cost of $7.40 per pound.The Production Department actually used 10,700 pounds of materials costing $7.10 per pound during June.
The journal entry to record the cost of direct materials used in June includes each of the following except:

A)A debit to Work in Process Inventory of $77,700.
B)A credit to Materials Price Variance of $3,210.
C)A credit to Direct Materials Inventory of $77,700.
D)A debit to Materials Quantity Variance of $1,480.

Question 66

Favorable standard cost variances are normally closed at the end of the period by:

A)Crediting the variance account and debiting Cost of Goods Sold.
B)Debiting the variance account and crediting Cost of Goods Sold.
C)Debiting the variance account and crediting Work in Process.
D)Crediting the variance account and debiting Work in Process.

Question 67

Which of the following is the most likely explanation for the types of labor variances resulting from Roman's July operations?

A)Management used workers who received a higher wage and worked more efficiently.
B)Management reduced the wage rates in July,which caused the workers to deliberately slow down productivity.
C)Management used less experienced workers whose lower wage rate more than offset their lower productivity.
D)Management paid workers more than standard hourly rates,but the excess pay did not result in increased productivity.

Question 68

Roman's labor efficiency variance for July is:

A)$1,250 favorable.
B)$1,190 favorable.
C)$1,213 unfavorable.
D)$37 unfavorable.

Question 69

[The following information applies to the questions displayed below.]
Maple Company's flexible budget,based upon the number of equivalent units produced,called for the use of 5,000 square yards of fabric at a standard cost of $2.45 per square yard.The Production Department actually used 5,200 square yards costing $2.35 per square yard during June.
The materials quantity variance for Maple Company for June is:

A)$990 favorable.
B)$520 unfavorable.
C)$490 unfavorable.
D)$520 favorable.

Question 70

The journal entry to record the cost of direct labor used in this period includes:

A)A debit to Work in Process Inventory of $2,880.
B)A debit to Work in Process Inventory of $2,560.
C)A credit to Direct Labor Rate Variance of $320.
D)A credit to Direct Labor Rate Variance of $360.

Question 71

Roman's labor rate variance for July is:

A)$1,250 favorable.
B)$1,213 favorable.
C)$37 unfavorable.
D)$1,213 unfavorable.

Question 72

The use of inexpensive,low quality,materials often results in:

A)A favorable materials quantity variance.
B)A favorable labor rate variance.
C)An unfavorable materials quantity variance.
D)An unfavorable materials price variance.

Question 73

In a standard cost system,finished goods are reported in:

A)The balance sheet at standard cost.
B)The balance sheet at actual cost.
C)The income statement at standard cost.
D)The income statement at actual cost.

Question 74

Excessive overtime hours worked by direct labor workers often results in:

A)An unfavorable labor rate variance.
B)A favorable labor rate variance.
C)A favorable materials price variance.
D)An unfavorable materials price variance.

Question 75

[The following information applies to the questions displayed below.]
Maple Company's flexible budget,based upon the number of equivalent units produced,called for the use of 5,000 square yards of fabric at a standard cost of $2.45 per square yard.The Production Department actually used 5,200 square yards costing $2.35 per square yard during June.
The journal entry to record the cost of direct materials used in June includes:

A)A debit to Work in Process Inventory of $12,220.
B)A credit to Materials Price Variance of $520.
C)A debit to Materials Price Variance of $520.
D)A credit to Direct Materials Inventory of $12,250.

Question 76

Unfavorable standard cost variances are normally closed at the end of the period by:

A)Debiting the variance account and crediting Cost of Goods Sold.
B)Crediting the variance account and debiting Cost of Goods Sold.
C)Debiting the variance account and crediting Work in Process.
D)Crediting the variance account and debiting Work in Process.

Question 77

[The following information applies to the questions displayed below.]
Maple Company's flexible budget,based upon the number of equivalent units produced,called for the use of 5,000 square yards of fabric at a standard cost of $2.45 per square yard.The Production Department actually used 5,200 square yards costing $2.35 per square yard during June.
The materials price variance for Maple Company for June is:

A)$520 favorable.
B)$990 favorable.
C)$30 unfavorable.
D)$520 unfavorable.

Question 78

With respect to materials costs,the supervisor of the Production Department should be held responsible for:

A)A favorable cost variance of $520.
B)A favorable cost variance of $990.
C)An unfavorable cost variance of $550.
D)An unfavorable cost variance of $490.

Question 79

[The following information applies to the questions displayed below.]
Eagle Company uses a standard cost system that has provided the following data:

The direct labor efficiency variance for the period was:

A)$360 favorable.
B)$360 unfavorable.
C)$320 favorable.
D)$320 unfavorable.

Question 80

EJB Company used a "normal" production level of 10,000 units to determine the standard per-unit cost of manufacturing overhead.Which of the following is not true?

A)There is no overhead volume variance for a given month if actual production that month is 10,000 units.
B)When actual production exceeds 10,000 units,use of standard costs results in a favorable overhead volume variance.
C)When actual production is less than 10,000 units,use of standard costs results in an unfavorable total overhead variance.
D)Overhead variances arising as a result of producing more or less than 10,000 units do not indicate either strong or poor performance by the Production Department.