Question 1

The actual quantity of input at the actual price less the actual quantity of input at the standard price is the price variance.

Accepted Answer

Price variance is calculated by taking the difference between the actual cost of a material and the standard cost, multiplied by the actual quantity of material used.

Question 2

The standard cost per unit of output for a particular input is calculated by multiplying the standard price per unit by the standard number of units produced.

Accepted Answer

The standard cost per unit of output is calculated by multiplying the standard price per unit of input by the standard quantity of input allowed for one unit of output.

Question 3

To compute the standard direct labour hours allowed,multiply the unit labour standard by the standard output.

Accepted Answer

The answer of To compute the standard direct labour hours...

Question 4

To determine whether variances are significant,managers set control limits,which represent the acceptable range,plus or minus an allowable deviation.

Accepted Answer

Managers set control limits to determine whether variances are significant, and these limits represent the acceptable range with an allowable deviation.

Question 5

The standard cost sheet provides the input standards needed to compute the total amount of inputs allowed for the actual output,an essential component in computing efficiency variances.

Accepted Answer

The standard cost sheet provides input standards which are used to calculate the total amount of inputs allowed for the actual output, making it an important factor in calculating efficiency variances.

Question 6

A favourable usage variance would occur when the actual usage of inputs is greater than the standard usage.

Accepted Answer

A favorable usage variance occurs when the actual usage of inputs is less than the standard usage, indicating efficiency.

Question 7

Currently attainable standards can be achieved under efficient operating conditions.

Accepted Answer

Attainable standards are those that can be achieved under efficient operating conditions.

Question 8

The sum of the material price and material usage variances will add up to the total materials variance only if the materials purchased is equal to the materials used.

Accepted Answer

The material price variance reflects the difference between the actual price paid for materials and the budgeted price, while the material usage variance reflects the difference between the actual quantity of materials used and the budgeted quantity. Therefore, the sum of these variances will give us the total materials variance only if the materials purchased is equal to the materials used. Otherwise, there may be other factors involved in the total materials variance, such as waste or spoilage.

Question 9

Managers develop price standards when they determine what amount should be paid for the quantity of input to be used.

Accepted Answer

Managers develop price standards based on the amount they should pay for the quantity of input needed to produce goods or services. This helps them to estimate the cost of production accurately and determine the selling price of the product.

Question 10

The unit standard quantity of inputs is vital to the computation of total amount of inputs allowed for the actual output and efficiency variances.

Accepted Answer

The unit standard quantity of inputs is used to determine the total standard quantity of inputs that should have been used for the actual output, which is then compared to the actual quantity of inputs used to calculate the input efficiency variance. Without the unit standard quantity of inputs, it would not be possible to accurately calculate this variance.

Question 11

A favourable price variance occurs whenever the actual prices are greater than the standard prices.

Accepted Answer

A favourable price variance occurs whenever the actual prices are less than the standard prices.

Question 12

The standard quantity of materials allowed can be calculated by multiplying the unit quantity standard by the actual output.

Accepted Answer

This statement is true. The standard quantity of materials allowed is calculated by multiplying the unit quantity standard (the amount of materials required to produce one unit of output) by the actual output.

Question 13

If a process-costing system uses standard costing to assign product costs,there is no need to compute a unit cost for each equivalent unit cost category since a standard unit cost would exist for each category.

Accepted Answer

In a standard costing system, predetermined unit costs are used to assign costs to equivalent units, eliminating the need to compute a unit cost for each equivalent unit category.

Question 14

Managers develop quantity standards when they decide what amount of input should be used per unit of output.

Accepted Answer

Managers do develop quantity standards as part of their decision-making process, as these standards help determine how much input (e.g. materials, labor) should be used per unit of output to ensure efficient and effective production processes.

Question 15

The total budget variance is the difference between the actual cost of the input and its actual cost.

Accepted Answer

The total budget variance is the difference between the actual cost and the budgeted cost, not the actual cost and its actual cost.

Question 16

The actual quantity of input at the standard price less than the standard quantity of input at the actual price equals the usage variance.

Accepted Answer

The actual quantity of input at the standard price less than the standard quantity of input at the actual price equals the price variance, not the usage variance. The usage variance is determined by the difference between the standard quantity of input and the actual quantity of input used, multiplied by the standard price per unit.

Question 17

The quantity of each input that should be used to produce one unit of output is documented on the standard cost sheet.

Accepted Answer

Standard cost sheet includes information about the quantities and costs of input materials, labor, and overhead required to produce one unit of output. Therefore, the quantity of each input that should be used to produce one unit of output is documented on the standard cost sheet.

Question 18

The benefits of operational control,however,may not extend to the manufacturing environments that are emphasizing continuous improvement and just-in-time (JIT)purchasing and manufacturing.

Accepted Answer

Operational control may prioritize efficiency and standardized processes, whereas continuous improvement and JIT require flexibility and adaptability. In such environments, a more decentralized approach to decision-making and problem-solving may be more effective.

Question 19

One reason for adopting a standard cost system is to make product costing easier.

Accepted Answer

Standard cost system provides pre-determined costs for materials, labor and overheads, which simplifies the process of calculating product costs. This helps in budgeting, variance analysis, and decision making.

Question 20

Standard costs are developed for direct materials,direct labour,and variable overhead only.

Accepted Answer

Standard costs can be developed for direct materials, direct labor, variable overhead, and also for fixed overhead, not just for variable costs.

Quiz 10: Standard Costing: a Managerial Control Tool