MA Ch-15 to 16

What is an attainable standard?

• A standard which includes no allowance for losses, waste and inefficiencies. It represents the level of performance which is attainable under perfect operating conditions

• A standard which includes some allowance for losses, waste and inefficiencies. It represents the level of performance which is attainable under efficient operating conditions

• A standard which is based on currently attainable operating conditions 

• A standard which is kept unchanged, to show the trend in costs

A company is in the process of setting standard unit costs for next period. Product J uses two types of material, P and S. 7 kg of material P and 3 kg of material S are needed, at a standard price of $4 per kg and $9 per kg respectively.

Direct labour will cost $7 per hour and each unit of J requires 5 hours of labour

Production overheads are to be recovered at the rate of $6 per direct labour hour, and general overhead is to be absorbed at a rate of ten per cent of production cost.

What is the standard prime cost for one unit of product J?

• $90

• $80

• $70

• $60

Which of the following statements is correct?

• The operating standards set for production should be the most ideal possible

• he operating standards set for production should be the minimal level

• The operating standards set for production should be the attainable level

• The operating standards set for production should be the maximum level

A company manufactures a carbonated drink, which is sold in 1 litre bottles. During the bottling process there is a 20% loss of liquid input due to spillage and evaporation. What is the standard usage of liquid per bottle (to two decimal places)?

• 1.25 liters

• 1.23 liters

• 1.22 liters

• 1.21 liters

Which of the following best describes management by exception?

• Using management reports to highlight exceptionally good performance, so that favourable results can be built upon to improve future outcomes

• Sending management reports only to those managers who are able to act on the information contained within the reports

• Focusing management reports on areas which require attention and ignoring those which appear to be performing within acceptable limits

• Focusing management reports on areas which are performing just outside acceptable limits

Standard costing provides which of the following?

(i) Targets and measures of performance

(ii) Information for budgeting

(iii) Simplification of inventory control systems

(iv) Actual future costs

• (i), (ii) and (iii) only

• (ii), (iii) and (iv) only

• (i), (iii) and (iv) only

• (i), (ii) and (iv) only

A unit of product L requires 9 active labour hours for completion. The performance standard for product L allows for ten per cent of total labour time to be idle, due to machine downtime. The standard wage rate is $9 per hour.

What is the standard labour cost per unit of product L?

• $90.00

• $80.00

• $70.00

• $60.00

A company manufactures a single product L, for which the standard material cost is as follows.

Material 14 kg * $3 $ per unit

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During July, 800 units of L were manufactured, 12,000 kg of material were purchased for $33,600, of which 11,500 kg were issued to production. SM Co values all inventory at standard cost.

What are the material price and usage variances for July?

• price $2,300 (F) usage $900 (A)

• price $2,300 (F) usage $300 (A)

• price $2,400 (F) usage $900 (A)

• price $2,400 (F) usage $840 (A)

A company expected to produce 200 units of its product, the Bone, in 20X3. In fact 260 units were produced. The standard labour cost per unit was $70 (10 hours at a rate of $7 per hour). The actual labour cost was $18,600 and the labour force worked 2,200 hours although they were paid for 2,300 hours.

What is the direct labour rate variance for the company in 20X3?

• $400 (A)

• $2,500 (F)

• $2,500 (A)

• $3,200 (A)

A company expected to produce 200 units of its product, the Bone, in 20X3. In fact 260 units were produced. The standard labour cost per unit was $70 (10 hours at a rate of $7 per hour). The actual labour cost was $18,600 and the labour force worked 2,200 hours although they were paid for 2,300 hours

What is the direct labour efficiency variance for the company in 20X3?

• $400 (A)

• $2,100 (F)

• $2,800 (A)

• $2,800 (F)