Question 1

Question 1  Standards differ from budgets in that    a.  budgets but not standards may be journalized and posted.      b.  budgets are a total amount and standards are a unit amount.      c.  only budgets contribute to management planning and control.      d.  budgets but not standards may be used in valuing inventories.

Accepted Answer

b.  budgets are a total amount and standards are a unit amount.

Question 2

Question 2  All of the following are correct statements about a standard except it is    a.  a unit amount.      b.  concerned with each individual cost component in the budget.      c.  a total amount.      d.  all of these options are correct.

Accepted Answer

c.  a total amount.

Question 3

Question 3  All of the following are advantages of standard costs except they    a.  simplify costing in inventories.      b.  facilitate management planning.      c.  are useful in setting selling prices.      d.  increase net income.

Accepted Answer

d.  increase net income.

Question 4

Question 4  The setting of standards is    a.  a worker decision.      b.  preferably set at the ideal level of performance.      c.  a management decision.      d.  a managerial accounting decision.

Accepted Answer

c.  a management decision.

Question 5

Question 5  The direct materials price standard should include an amount for all of the following except    a.  storing costs.      b.  normal spoilage costs.      c.  handling costs.      d.  receiving costs.

Accepted Answer

b.  normal spoilage costs.

Question 6

Question 6  In producing product AA, 6,300 pounds of direct materials were used at a cost of $1.10 per pound. The standard was 6,000 pounds at $1.00 per pound. The direct materials quantity variance is    a.  $300 unfavorable.      b.  $600 unfavorable.      c.  $330 unfavorable.      d.  $630 unfavorable.

Accepted Answer

a.  $300 unfavorable.

Question 7

Question 7  (SO4) The formula for the labor price variance is    a.  (AH x SR) less (AH x SR).      b.  (AH x SR) less (SH x SR).      c.  (AH x AR) less (AH x SR).      d.  (AH x AR) less (SH x SR).

Accepted Answer

c.  (AH x AR) less (AH x SR).

Question 8

Question 8  The standard rate of pay is $10 per direct labor hour. If the actual direct labor payroll was $39,200 for 4,000 direct labor hours worked, the direct labor price variance is    a.  $1,000 favorable.      b.  $800 unfavorable.      c.  $800 favorable.      d.  $1,000 unfavorable.

Accepted Answer

c.  $800 favorable.

Question 9

Question 9  The formula for computing the total overhead variance is    a.  actual overhead less overhead applied.      b.  overhead budgeted less overhead applied.      c.  actual overhead less overhead budgeted.      d.  none of the answers is correct.

Accepted Answer

a.  actual overhead less overhead applied.

Question 10

Question 10  Which statement is true concerning the balanced scorecard?    a.  It links performance measures to a company\'s strategic goals.      b.  It uses four financial measures to evaluate performance.      c.  It sets objectives in order to create the largest amount of profit.      d.  It evaluates performance using standard costs to effectively incorporate all areas of the organization.

Accepted Answer

a.  It links performance measures to a company\'s strategic goals.

Question 11

Question 11  Santana Company produces tanning lotion. The following information is provided concerning its standard cost system for the year:     Standard Data  Actual Data  Budgeted production  4,500     Actual production  4,400  Budgeted fixed overhead  $6.30 per labor hour     Labor worked  1,600 hours totaling $24,000  Budgeted variable overhead  $4.50 per labor hour     Actual overhead  $19,600  Labor  24 mins. @ $12 per hr.              How much is the overhead controllable variance?    a.  $160U.      b.  $2,320U.      c.  $592U.      d.  $340U.

Accepted Answer

d.  $340U.

Question 12

Question 12  The overhead controllable variance is the difference between    a.  budgeted overhead and applied overhead.      b.  actual overhead and applied overhead.      c.  actual overhead and budgeted overhead.      d.  none of these options.

Accepted Answer

c.  actual overhead and budgeted overhead.

Question 13

Question 13  A standard cost is    a.  a predetermined cost.  b.  the average cost in an industry.  c.  a cost which is paid for a group of similar products.  d.  the historical cost of producing a product last year.

Accepted Answer

a.  a predetermined cost.

Question 14

Question 14  Standard costs may be used by    a.  universities.  b.  governmental agencies.  c.  charitable organizations.  d.  all of these answers are correct.

Accepted Answer

d.  all of these answers are correct.

Question 15

Question 16  It is possible that a company\'s financial statements may report inventories at    a.  budgeted costs.  b.  standard costs.  c.  both budgeted and standard costs.  d.  none of these answers are correct.

Accepted Answer

b.  standard costs.

Question 16

Question 17  If standard costs are incorporated into the accounting system,    a.  the accounting system will produce information which is less relevant than the historical cost accounting system.  b.  it may simplify the costing of inventories and reduce clerical costs.  c.  it can eliminate the need for the budgeting process.  d.  approval of the shareholders is required.

Accepted Answer

b.  it may simplify the costing of inventories and reduce clerical costs.

Question 17

Question 18  Which of the following is not considered an advantage of using standard costs?    a.  Standard costs can make employees \"cost-conscious.\"  b.  Standard costs can be used as a means of finding fault with performance.  c.  Standard costs can be useful in setting prices for finished goods.  d.  Standard costs can reduce clerical costs.

Accepted Answer

b.  Standard costs can be used as a means of finding fault with performance.

Question 18

Question 19  Ideal standards    a.  will always motivate employees to achieve the maximum output.  b.  reflect optimal performance under perfect operating conditions.  c.  are rigorous but attainable.  d.  are the standards generally used in a master budget.

Accepted Answer

b.  reflect optimal performance under perfect operating conditions.

Question 19

Question 20  The two levels that standards may be set at are    a.  normal and ideal.  b.  fully efficient and fully effective.  c.  normal and fully efficient.  d.  ideal and less efficient.

Accepted Answer

a..  normal and ideal.

Question 20

Question 21  The cost of freight-in    a.  should have a separate standard apart from direct materials.  b.  is to be included in the standard cost of direct materials.  c.  is considered a selling expense.  d.  should not be included in a standard cost system.

Accepted Answer

b.  is to be included in the standard cost of direct materials.

Question 21

Question 22  A manufacturing company would include setup and downtime in their direct    a.  labor price standard.  b.  materials price standard.  c.  labor quantity standard.  d.  materials quantity standard.

Accepted Answer

c.  labor quantity standard.

Question 22

Question 23  An unfavorable materials quantity variance would occur if    a.  actual pounds of materials used were less than the standard pounds allowed.  b.  actual labor hours used were greater than the standard labor hours allowed.  c.  actual pounds of materials used were greater than the standard pounds allowed.  d.  more materials were purchased than were used.

Accepted Answer

c.  actual pounds of materials used were greater than the standard pounds allowed.

Question 23

Question 24  Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is .2 hours and .1 hours, respectively.     The standard direct labor rate per hour is    a.  $15.90.  b.  $ 12.30.  c.  $ 12.00.  d.  $15.60.

Accepted Answer

a.  $15.90.

Question 24

Question 25  Allowances should not be made in the direct labor quantity standard for    a.  cleanup.  b.  machine downtime.  c.  rest periods.  d.  wasted time.

Accepted Answer

d.  wasted time.

Question 25

Question 26  Which of the following statements is true?    a.  Variances are the differences between total actual costs and total standard costs.  b.  When actual costs exceed standard costs, the variance is favorable.  c.  An unfavorable variance results when actual costs are decreasing but standards are not changed.  d.  All of the above are true.

Accepted Answer

a.  Variances are the differences between total actual costs and total standard costs.

Question 26

Question 27  The total overhead variance is the difference between the    a.  actual overhead costs and overhead costs applied based on standard hours allowed.  b.  the actual overhead costs and the standard direct labor costs.  c.  actual overhead costs and overhead costs applied based on actual hours.  d.  overhead costs applied based on actual hours and overhead costs applied based on standard hours allowed.

Accepted Answer

a.  actual overhead costs and overhead costs applied based on standard hours allowed.

Question 27

Question 28  Which one of the following describes the total overhead variance?    a.  The difference between the overhead applied and the flexible budget amount.  b.  The difference between what was actually incurred and the total production budget.  c.  The difference between what was actually incurred and the flexible budget amount.  d.  The difference between what was actually incurred and overhead applied.

Accepted Answer

d.  The difference between what was actually incurred and overhead applied.

Question 28

Question 29  Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of labor at a total cost of $46,970. Dillon\'s total labor variance is    a.  $800 U.  b.  $1,030 F.  c.  $1,930 F.  d.  $1,030 U.

Accepted Answer

b.  $1,030 F.

Question 29

Question 30  Which of the following is true?    a.  The form and content of variance reports vary considerably among companies, but the frequency is always weekly.  b.  The form, content, and frequency of variance reports vary considerably among companies.  c.  The form and content of variance reports are consistent among companies, but the frequency varies.  d.  The form, content, and frequency of variance reports do not vary among companies.

Accepted Answer

b.  The form, content, and frequency of variance reports vary considerably among companies.

Question 30

Question 31  In using variance reports, management looks for    a.  competitors\' costs in comparison to the company\'s costs.  b.  more efficient ways of valuing inventories.  c.  total assets invested.  d.  significant variances.

Accepted Answer

d.  significant variances.

Question 31

Question 32  Income statements prepared internally for management often show cost of goods sold at standard cost and variances are    a.  deducted as other expenses and revenues.  b.  added to cost of goods sold.  c.  closed directly to retained earnings.  d.  separately disclosed.

Accepted Answer

d.  separately disclosed.

Question 32

Question 33  In Zero Company\'s income statement, they report actual gross profit of $52,500 and the following variances:     Materials price  $ 420 F  Materials quantity  600 F  Labor price  420 U  Labor quantity  1,000 F  Overhead  900 F     Zero would report gross profit at standard of    a.  $53,340.  b.  $46,660.  c.  $50,000.  d.  $47,500.

Accepted Answer

c.  $50,000.

Question 33

Question 34  The customer perspective of the balanced scorecard approach    a.  evaluates the internal operating processes critical to the success of the organization.  b.  evaluates how well the company develops and retains its employees.  c.  evaluates the company from the viewpoint of those people who buy its products or services.  d.  is the most traditional view of the company.

Accepted Answer

c.  evaluates the company from the viewpoint of those people who buy its products or services.

Question 34

Question 35  Debit balances in variance accounts represent    a.  favorable for quantity variances; unfavorable for price variances.  b.  unfavorable variances.  c.  favorable variances.  d.  favorable for price variances; unfavorable for quantity variances.

Accepted Answer

b.  unfavorable variances.

Question 35

Question 36  The overhead volume variance is    a.  actual overhead less overhead budgeted for standard hours allowed.  b.  overhead budgeted for actual hours less applied overhead.  c.  the fixed overhead rate times the difference between normal capacity hours and standard hours allowed.  d.  actual overhead less overhead budgeted for actual hours.

Accepted Answer

c.  the fixed overhead rate times the difference between normal capacity hours and standard hours allowed.

Question 36

Question 37  Budgeted overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $310,000 of overhead was incurred in working 63,000 hours when 64,000 standard hours were allowed. The overhead volume variance is    a.  $5,000 favorable.  b.  $11,000 favorable.  c.  $10,000 favorable.  d.  $8,000 favorable.

Accepted Answer

d.  $8,000 favorable.

Question 37

Question 38  If the standard hours allowed are less than the standard hours at normal capacity,    a.  variable overhead costs will be underapplied.  b.  the overhead volume variance will be unfavorable.  c.  variable overhead costs will be overapplied.  d.  the overhead controllable variance will be favorable.

Accepted Answer

b.  the overhead volume variance will be unfavorable.

Question 38

Question 39  What does the controllable variance measure?    a.  The efficiency of using variable overhead resources.  b.  Whether a company incurred more or less fixed overhead costs compared to the amount of overhead applied.  c.  Whether a company incurred more or less overhead costs than allowed.  d.  Whether the production manager is able to control the production facility.

Accepted Answer

c.  Whether a company incurred more or less overhead costs than allowed.

Question 39

Question 40  The following information was taken from the annual manufacturing overhead cost budget of Fergie Manufacturing.     Variable manufacturing overhead costs  $92,400  Fixed manufacturing overhead costs  $55,440  Normal production level in labor hours  30,800  Normal production level in units  5,775  Standard labor hours per unit  4     During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Fergie\'s total overhead rate is    a.  $6.40.  b.  $6.53.  c.  $2.40.  d.  $4.00.

Accepted Answer

a.  $6.40.

Question 40

Question 41  The following information was taken from the annual manufacturing overhead cost budget of Fergie Manufacturing.     Variable manufacturing overhead costs  $92,400  Fixed manufacturing overhead costs  $55,440  Normal production level in labor hours  30,800  Normal production level in units  5,775  Standard labor hours per unit  4     During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Fergie\'s volume overhead variance is    a.  $7,840 U.  b.  $22,400 U.  c.  $6,160 U.  d.  $1,680 U.

Accepted Answer

d.  $1,680 U.

Question 41

Question 42  All of the following are advantages of standard costs except they    a.  simplify costing in inventories.  b.  increase net income.  c.  facilitate management planning.  d.  are useful in setting selling prices.

Accepted Answer

b.  increase net income.

Question 42

Question 43  The standard unit cost is used in the calculation of which of the following variances?     Materials Price Variance     Materials Quantity Variance       a.    Yes     Yes      b.    Yes     No      c.    No     No      d.    No     Yes

Accepted Answer

a.    Yes     Yes

Question 43

Question 44  Which department is usually responsible for a labor price variance attributable to misallocation of workers?    a.  Purchasing  b.  Engineering  c.  Quality control  d.  Production

Accepted Answer

d.  Production

Question 44

Question 45  The formula for computing the overhead volume variance is    a.  fixed overhead rate times (actual hours less standard hours allowed).  b.  variable overhead rate times (actual hours less standard hours allowed).  c.  fixed overhead rate times (normal capacity hours less standard hours allowed).  d.  variable overhead rate times (normal capacity hours less standard hours allowed).

Accepted Answer

c.  fixed overhead rate times (normal capacity hours less standard hours allowed).

Question 45

Question 46  The per unit standards for direct materials are 2 gallons at $4 per gallon. Last month, 5,600 gallons of direct materials that actually cost $21,200 were used to produce 3,000 units of product. The direct materials quantity variance for last month was    a.  $1,600 unfavorable.      b.  $1,200 favorable.      c.  $2,800 unfavorable.      d.  $1,600 favorable.

Accepted Answer

d.  $1,600 favorable.

Question 46

Question 47  The formula for computing the total overhead variance is    a.  actual overhead less overhead applied.      b.  overhead budgeted less overhead applied.      c.  actual overhead less overhead budgeted.      d.  none of the answers is correct.

Accepted Answer

a.  actual overhead less overhead applied.

Question 47

Question 48  Santana Company produces tanning lotion. The following information is provided concerning its standard cost system for the year:     Standard Data   Actual Data  Budgeted production  4,500     Actual production  4,400  Budgeted fixed overhead  $6.30 per labor hour     Labor worked  1,600 hours totaling $24,000  Budgeted variable overhead  $4.50 per labor hour     Actual overhead  $19,600  Labor  24 mins. @ $12 per hr.              How much is the overhead controllable variance?    a.  $340U.      b.  $592U.      c.  $2,320U.      d.  $160U.

Accepted Answer

b.  $592U.

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