Question 1

Fixed overhead does not have separate price and quantity variances.

Accepted Answer

Fixed overhead is not based on direct usage or production, hence there is no separate price or quantity variance. The total fixed overhead variance is simply the difference between the actual fixed overhead expense incurred and the budgeted or expected fixed overhead expense.

Question 2

The flexible budget can be used as a benchmark for evaluating performance after the fact,as part of the control process.

Accepted Answer

The flexible budget can be used to compare actual results to what was planned for in the budget, and can help managers identify areas in which they overspent or underspent. This information can then be used to adjust future budgets and make decisions regarding resource allocation.

Question 3

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

Accepted Answer

The fixed overhead volume variance is the difference between budgeted fixed overhead and applied fixed overhead based on actual production volume. It is not related to actual sales volume.

Question 4

Standard cost systems depend on which two types of standards?

Accepted Answer

Standard cost system relies on two types of standards i.e., quantity standards and price standards. Quantity standards specify the amount of input required to produce one unit of output, while price standards specify a predetermined cost per unit of input. The combination of these two standards forms the standard cost against which actual costs are compared.

Question 5

A price standard is the price that should be paid per output unit for the input.

Accepted Answer

A price standard is the expected or planned cost per unit of input, not output. The expected cost per unit of output is known as a cost standard.

Question 6

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

Accepted Answer

The answer of A spending variance is calculated by comparing...

Question 7

When preparing a flexible budget,fixed costs should remain the same as on the master budget.

Accepted Answer

Fixed costs are costs that do not vary with changes in activity level or production volume, and therefore they should remain the same on both the master budget and the flexible budget. Only variable costs are expected to vary with changes in production volume, so they need to be adjusted accordingly in the flexible budget.

Question 8

The production manager is typically responsible for the direct labor rate variance.

Accepted Answer

The direct labor rate variance is primarily influenced by the human resources or payroll department, as they negotiate wages and set pay rates, not the production manager who is responsible for operational efficiency and output.

Question 9

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.

Accepted Answer

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

Question 10

Which of the following types of standards can be achieved only under perfect conditions?

Accepted Answer

Ideal standards are set based on perfect or ideal conditions, assuming no obstacles or inefficiencies exist. They are difficult to achieve under normal operating conditions, let alone when there are any issues or obstacles, making them the most challenging to attain.

Question 11

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

Accepted Answer

Actually, attainable standards are important for motivating individuals, but if they are too easily attainable, they may not challenge individuals enough to work hard and improve. It's important to find a balance between attainability and challenge to maximize motivation and productivity.

Question 12

A standard cost system records costs at their actual amounts.

Accepted Answer

A standard cost system records costs at predetermined "standard" amounts, not their actual amounts. These standard costs are based on expected or budgeted amounts, and serve as a benchmark for measuring actual performance and variances.

Question 13

A standard cost system initially records manufacturing costs at the standard rather than the actual amount.

Accepted Answer

A standard cost system sets predetermined standards for manufacturing costs based on expected levels of efficiency and resource usage. These standards are then used to record costs during production, rather than recording the actual costs incurred. This allows for easier comparison of actual costs to expected costs and helps identify areas for improvement in the manufacturing process.

Question 14

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

Accepted Answer

The direct materials quantity variance is the difference between the actual quantity and the standard quantity of materials multiplied by the standard price, not the actual price.

Question 15

The standard costs are summarized on a:

Accepted Answer

Standard costs are summarized on a standard cost card, which includes the expected quantities and prices of direct materials, direct labor, and overhead costs for each unit of production. A static cost card refers to a fixed budget or plan, and a flexible budget card shows costs based on different levels of activity. A standard static card is not a commonly used term in accounting.

Question 16

Which of the following statements is correct about the way managers set standards for employees?

Accepted Answer

When setting standards, managers should include a reasonable amount of downtime for preventable maintenance, employee breaks, and training. This is because employees need time to rest and recharge, and machinery and equipment need routine maintenance to avoid breakdowns and prolong their lifespan. Including reasonable downtime in the standards can help prevent burnout, maintain equipment, and ultimately improve overall productivity in the long run.

Question 17

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

Accepted Answer

A quantity standard is the expected amount of input (such as materials, labor, or time) that should be used to produce a single unit of the product or service. It helps to ensure consistency in the manufacturing or delivery process and can be used to monitor efficiency and costs.

Question 18

To foster continuous improvement,standards should ________ over time.

Accepted Answer

To foster continuous improvement, standards should increase in difficulty over time. This creates a challenge for individuals or organizations to strive for higher goals and constantly improve their processes and products/services. If standards remain stable or decrease in difficulty, there is no motivation to improve and complacency may set in. Making standards ideal may not be feasible or practical, as there is always room for improvement.

Question 19

An ideal standard is one that can be achieved only under perfect conditions.

Accepted Answer

An ideal standard sets the highest possible benchmark and assumes perfection. It is not necessarily achievable in reality or under normal conditions.

Question 20

A standard cost card shows what the company spent to produce each unit of product.

Accepted Answer

A standard cost card shows the expected or budgeted cost to produce each unit of product, not the actual cost already incurred by the company.

Quiz 9: Standard Costing and Variance Analysis