Question 1

The budget that is based on a single estimate of sales volume is called a static budget.This is the definition of a static budget.

Accepted Answer

This is the correct definition of static budget.

Question 2

Easily attainable standards are the best for motivating individuals to work hard.Tight but attainable standards are the best for motivating individuals to work hard.

Accepted Answer

Tight but attainable standards are generally more effective for motivation as they challenge individuals to stretch their abilities and achieve more, while easily attainable standards may not provide enough incentive for effort.

Question 3

A standard cost system initially records manufacturing costs at the standard rather than the actual amount.In a standard cost system,costs are initially recorded at standard amounts,and are adjusted to actual amounts through variances.

Accepted Answer

In a standard cost system, costs are initially recorded at standard amounts and are later adjusted to actual amounts through variances.

Question 4

A standard cost card shows what the company spent to produce each unit of product.The standard cost card shows what the company should spend to produce a single unit of product based on expected production and sales for the coming period.

Accepted Answer

A standard cost card shows the expected cost of producing a single unit of product based on predetermined standards, not based on expected production and sales for the coming period.

Question 5

A price standard is the price that should be paid per output unit for the input.A price standard is the price that should be paid for a specific quantity of input,not per output unit.

Accepted Answer

A price standard is the price that should be paid per output unit for the input. It is not for a specific quantity of input.

Question 6

The production manager is typically responsible for the direct labor rate variance.It is difficult to hold an individual manager responsible for the direct labor rate variance because many factors can influence the wage rate.

Accepted Answer

The answer of The production manager is typically responsible for...

Question 7

The flexible budget can be used as a benchmark for evaluating performance after the fact,as part of the control process.The flexible budget can be used as part of the planning process to predict how the budget will change under various scenarios.The flexible budget can also be used as a benchmark for evaluating performance after the fact as part of the control process.

Accepted Answer

The statement accurately describes the different uses of a flexible budget.

Question 8

The variable overhead rate variance is the difference between the actual variable overhead rate and the standard variable overhead rate multiplied by the actual value of the cost driver.This is the formula for the variable overhead rate variance.

Accepted Answer

This is the correct formula for the variable overhead rate variance.

Question 9

The price variance for direct labor is called the direct labor rate variance.Because the price of direct labor is called the direct labor rate,the price variance for labor is called the direct labor rate variance.

Accepted Answer

This statement is correct. The price variance for direct labor is indeed called the direct labor rate variance since the price of direct labor is measured as the labor rate.

Question 10

When preparing a flexible budget,fixed costs should remain the same as on the master budget.Fixed costs remain the same regardless of volume,which is the only change that occurs from master to flexible budget.

Accepted Answer

Fixed costs do not change with volume, therefore in a flexible budget they should remain the same as in the master budget. Only variable costs should be adjusted based on the level of activity.

Question 11

A budget depends upon the level of output as well as the input standards.A budget depends on both input standards and output level.

Accepted Answer

A budget takes into account both the input standards (such as materials and labor costs) and the desired level of output in order to accurately estimate expenses and revenues.

Question 12

Fixed overhead does not have separate price and quantity variances.The model used to analyze variable costs does not apply to fixed overhead,so the fixed overhead spending variance cannot be broken down into price and quantity variances.

Accepted Answer

Fixed overhead does not have separate price and quantity variances, so the fixed overhead spending variance cannot be broken down into price and quantity variances.

Question 13

The production manager is typically responsible for the direct material quantity variance.How direct materials are used is the responsibility of the production manager.

Accepted Answer

The production manager is responsible for the direct material quantity variance, which is the difference between the actual quantity of direct materials used in production and the standard quantity of direct materials that should have been used. However, it is the responsibility of the manufacturing engineer or process engineer to determine how materials are used in the production process.

Question 14

A standard cost system records cost at their actual amounts.A standard cost system records cost at standard rather than actual amounts.

Accepted Answer

A standard cost system records costs at predetermined standard amounts, not actual amounts, to help manage and control costs.

Question 15

The direct material quantity variance is the difference between the actual quantity and the standard quantity of materials multiplied by the actual price.The quantity variance is the difference between the actual quantity and the standard quantity of materials multiplied by the standard price.

Accepted Answer

The statement mistakenly switched the definitions for direct material quantity variance and direct material price variance. The direct material quantity variance is the difference between the actual quantity and the standard quantity of materials multiplied by the standard price, while the direct material price variance is the difference between the actual price and the standard price of materials multiplied by the actual quantity.

Question 16

The fixed overhead volume variance is the difference between actual production volume and actual sales volume.The fixed overhead volume variance is the difference between applied fixed overhead and budgeted fixed overhead.

Accepted Answer

The first sentence is incorrect, as the fixed overhead volume variance is the difference between the budgeted fixed overhead and the fixed overhead applied to production. The second sentence is correct in stating that the fixed overhead volume variance is the difference between applied and budgeted fixed overhead.

Question 17

A quantity standard is the amount of input that should go into a single unit of the product.This is the definition of a quantity standard.

Accepted Answer

The statement accurately describes the definition of a quantity standard.

Question 18

A spending variance is calculated by comparing actual costs with the static budget.A spending variance is calculated by comparing actual costs with the flexible budget.

Accepted Answer

A spending variance is calculated by comparing actual costs with the flexible budget, not the static budget. The flexible budget is adjusted for changes in activity levels, while the static budget remains fixed regardless of activity levels.

Question 19

An ideal standard is one which can be achieved only under perfect conditions.This is the definition of an ideal standard.

Accepted Answer

This is the correct definition of an ideal standard. It represents a goal or benchmark that can only be reached if everything is perfect, which is often not practical or realistic.

Question 20

In a standard cost system,overhead is applied per unit by multiplying the standard overhead rate times the standard quantity of the cost driver.This is a key difference between the standard cost system and the normal cost system - overhead is applied based on the standard quantity of the cost driver rather than the actual quantity.

Accepted Answer

In a standard cost system, overhead is applied based on the standard quantity of the cost driver rather than the actual quantity. This is a key difference between the standard cost system and the normal cost system.

Quiz 9: Standard Costing and Variances