Question 1

Employee behavior may be adversely affected when standard cost variances are used as part of the employee reward structure.

Accepted Answer

Using standard cost variances as part of the employee reward structure can lead to adverse behaviors such as cutting corners, reducing quality, or manipulating numbers to meet targets, which can negatively impact overall company performance and morale.

Question 2

Perfection standards can be defined as standards that are "tight but attainable."

Accepted Answer

Perfection standards are often defined as standards that are theoretically unattainable, aiming for a level of performance that is without any defects or errors, which is practically impossible to achieve consistently.

Question 3

Favorable variances need not be investigated because they do not cost the company money.

Accepted Answer

Favorable variances should still be investigated to understand the underlying reasons, ensure they are sustainable, and identify any potential negative impacts or missed opportunities.

Question 4

Standards should be determined only by the accounting staff.

Accepted Answer

Standards should be determined by a combination of accounting staff, management, and possibly external stakeholders to ensure they meet the needs of the business and comply with regulatory requirements.

Question 5

The team involved in task analysis might include production engineers, production supervisors, cost managers, and sales managers.

Accepted Answer

The answer of The team involved in task analysis might...

Question 6

Perfection standards may encourage employees to sacrifice product quality to achieve lower costs.

Accepted Answer

Perfection standards can lead to employees cutting corners to meet the high standards, which can result in lower product quality.

Question 7

Practical standards assume the process is as efficient as possible under normal operating conditions.

Accepted Answer

Practical standards are designed with the assumption that the process will operate under a state of efficiency that is achievable under normal working conditions, taking into account minor disruptions and variations that are typical in a real-world environment.

Question 8

Standard costing systems provide information that can help managers reduce costs.

Accepted Answer

The answer of Standard costing systems provide information that can...

Question 9

When computing the direct-material price variance, it is not important to distinguish between the quantity purchased and the quantity used.

Accepted Answer

When computing the direct-material price variance, it is important to distinguish between the quantity purchased and the quantity used because the price variance is calculated based on the amount purchased, not the amount used, to isolate the variance caused by purchasing decisions from usage efficiency.

Question 10

A manager will be interested in investigating material price variances where the price of the material is set by an international market and tied into a long-term contract.

Accepted Answer

Material price variances are more relevant for investigation when prices are not fixed by long-term contracts, as managers have little control over prices set by international markets and long-term agreements.

Question 11

Statistical quality control charts plot cost variances across time and compare them with multiples of the standard deviation.

Accepted Answer

Statistical quality control charts plot cost variances across time and compare them with multiples of the standard deviation.

Question 12

Standard Costing is not appropriate in service-industry firms

Accepted Answer

Standard costing can be applied in service-industry firms for budgeting and performance evaluation, adapting to measure costs of service processes.

Question 13

Firms using standard costing systems do not use standards for product costing.

Accepted Answer

Firms using standard costing systems use predetermined costs or standards for product costing to estimate the cost of production and to analyze variances between actual costs and standard costs.

Question 14

Bar codes are one of the ways by which standard costing systems can help link the use of information technology to several business processes.

Accepted Answer

Bar codes facilitate the tracking of inventory and assets, which is a critical component of standard costing systems, allowing for the efficient and accurate collection of data related to various business processes.

Question 15

To compute the direct labor rate variance, you take the difference between the actual and standard rate and multiply that amount by the standard hours allowed

Accepted Answer

To compute the direct labor rate variance, you take the difference between the actual and standard rate and multiply that amount by the actual hours worked, not the standard hours allowed.

Question 16

A standard cost is a budget for the production of one unit of product or service.

Accepted Answer

A standard cost is indeed a predetermined or budgeted cost for producing a single unit of product or service, serving as a benchmark for evaluating actual production costs.

Question 17

When computing the direct material quantity variance, it is important to use the quantity actually used, rather than the quantity purchased.

Accepted Answer

The direct material quantity variance measures the difference between the actual quantity of material used in production and the standard quantity expected to be used. It focuses on the efficiency of material usage rather than the quantity purchased.

Question 18

Because a key objective of cost management systems is the elimination of non-value-added costs, standards need to be revised frequently in order to remain valid for cost control purposes.

Accepted Answer

Standards need to be revised frequently to ensure they reflect current operating conditions and to eliminate non-value-added costs, maintaining their validity for cost control and management purposes.

Question 19

A standard cost serves as a benchmark in the budgetary control system.

Accepted Answer

A standard cost is used as a predetermined cost estimate against which actual costs are compared, serving as a benchmark for measuring performance and efficiency in a budgetary control system.

Question 20

Kaizen costing is the process of cost reduction during the manufacturing phase of a product.

Accepted Answer

Kaizen costing focuses on continuous cost reduction and improvement in the manufacturing phase, emphasizing efficiency and waste reduction.

Quiz 16: Standard Costing, Variance Analysis, and Kaizen Costing

Employee behavior may be adversely affected when standard cost variances are used as part of the employee reward structure.

Perfection standards can be defined as standards that are "tight but attainable."

Favorable variances need not be investigated because they do not cost the company money.

Standards should be determined only by the accounting staff.

The team involved in task analysis might include production engineers, production supervisors, cost managers, and sales managers.

Perfection standards may encourage employees to sacrifice product quality to achieve lower costs.

Practical standards assume the process is as efficient as possible under normal operating conditions.

Standard costing systems provide information that can help managers reduce costs.

When computing the direct-material price variance, it is not important to distinguish between the quantity purchased and the quantity used.

A manager will be interested in investigating material price variances where the price of the material is set by an international market and tied into a long-term contract.

Statistical quality control charts plot cost variances across time and compare them with multiples of the standard deviation.

Standard Costing is not appropriate in service-industry firms

Firms using standard costing systems do not use standards for product costing.

Bar codes are one of the ways by which standard costing systems can help link the use of information technology to several business processes.

To compute the direct labor rate variance, you take the difference between the actual and standard rate and multiply that amount by the standard hours allowed

A standard cost is a budget for the production of one unit of product or service.

When computing the direct material quantity variance, it is important to use the quantity actually used, rather than the quantity purchased.

Because a key objective of cost management systems is the elimination of non-value-added costs, standards need to be revised frequently in order to remain valid for cost control purposes.

A standard cost serves as a benchmark in the budgetary control system.

Kaizen costing is the process of cost reduction during the manufacturing phase of a product.