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WorksheetsStandard Costing Quiz
Total questions: 31
Worksheet time: 16mins
Management scrutinizes variances because
Management desires to detect such variances to be able to plan for promotions.
Management needs to determine the benefits forgone by such variances.
It is desirable under conventional knowledge on good management.
Management recognizes the need to know why variances happen to be able to make corrective actions and fairly reward good performers.
You used predetermined overhead rates and the resulting variances when compared with the results using the actual rates were substantial. Production data indicated that volumes were lower than the plan by a large difference. This situation can be due to:
Products being simultaneously manufactured in single rums
Overhead cost being recorded as planned
overhead being substantially composed of fixed cost
overhead cost being substantially composed of variable cost
Which one of the following variances is of least significance from a behavioral control perspective?
Unfavorable materials quantity variance amounting to 20% of the quantity allowed for the output attained
Unfavorable labor efficiency variance amounting to 10% more than the budgeted hours for the output attained.
Favorable materials price variance obtained by purchasing raw material from a new vendor.
Fixed factory overhead volume variance resulting from management decision midway through the fiscal year to reduce its budgeted output by 20%.
Which of the following standard costing variances would be least controllable by a production supervisor?
Overhead volume.
Overhead efficiency.
Labor Efficiency
Materials Usage
What is the normal year-end treatment of immaterial variances recognized in a cost accounting system using standard costs?
Reclassified as deferred charges until all related production is sold.
Allocated among cost of goods manufactured and ending work-in-process
Closed to the cost of goods sold in the period in which they arose.
Capitalized as a cost of ending finished goods inventory.
Which of the following is not an acceptable treatment of factory overhead variances at an interim reporting date?
Apportion the total only among work-in-process and finished goods inventories on hand at the end of the interim reporting period.
Apportion the total only between that part of the current period's production remaining in inventories at the end of the period and that part sold during the period.
Carry forward the total to be offset by opposite balances in later periods
Charge or credit the total to the cost of goods sold during the period.
The conventional break-even chart adopted by businessmen and accountants does not take for granted that
Some costs are semi-variable.
production is not equal to sales.
there is a significant amount of change in inventories.
the sales mix ratio of the products being sold changes within the relevant range.
Which of the following is not correct?
At break-even
profit equals zero
gross profit equals zero
sales equals total cost
fixed cost equals contribution margin
Cost-volume-profit analysis assumes that over the relevant range total
Revenues are linear
Cost are unchanged
Variable Cost are nonlinear
Fixed costs are nonlinear
Which one describes the labor costs that should be incurred under efficient operating conditions?
Ideal
Basic
Maximum-efficiency
Currently attainable
How is labor rate variance computed?
A. The difference between standard and actual rates, times standard hours.
B. The difference between standard and actual hours, times actual rate.
C. The difference between standard and actual rates, times actual hours.
D. The difference between standard and actual hours, times the difference between standard and actual rates.
It is the excess of sales price over the related variable cost, contributing to the recovery of fixed expenses.
Gross margin
Margin of safety
Contribution margin
Gross profit
The absolute minimum cost that would be possible under the best operating conditions is a description of which type of standard cost?
A. Currently attainable (expected).
B. Theoretical.
C. Normal.
D. Practical.
A standard cost system may be used in
A. Job-order costing but not process costing.
B. Either job-order costing or process costing.
C. Process costing but not job-order costing.
D. Neither process costing nor job-order costing
The difference between the actual labor rate multiplied by the actual hours worked and the standard labor rate multiplied by the standard labor hours is the
Total labor variance
Labor rate variance
Labor usage variance
Labor efficiency variance
If factory overhead is applied on the basis of units of output, the variable factory overhead efficiency variance will be
Zero
Favorable, if output exceeds the budgeted level
Unfavorable, if output is less than the budgeted level
A function on the direct labor efficiency variance
Which one of the following statements pertaining to practical standards is incorrect?
A. Practical standards can be used for product costing and cash budgeting.
B. A firm using practical standards has no reason to make any midyear adjustment to the production standard if an old machine is replaced by a newer, faster machine.
C. Under practical standard, exceptions from standards are less likely, Consequently, managers will be better able to practice management by exception.
D. Practical standards are more likely to be attained by workers making diligent efforts.
Under the three-variance method for analyzing factory overhead, the difference between the actual factory overhead and the budget allowance based on actual input is the
Efficiency variance
Spending variance
Volume variance
Idle capacity variance
Variable factory overhead is applied on the basis of standard direct labor hours. If for a given period, the direct labor efficiency variance is unfavorable, the variable factory overhead efficiency variance will be
Favorable
Unfavorable
Zero
The same amount as the labor efficiency variance
At the breakeven point, the contribution margin equals total
Variable costs
Sales revenues
Selling and administrative costs
Fixed costs
The best basis upon which standard cost should be set to measure controllable production inefficiencies is
Engineering standards based on ideal performance.
Normal capacity.
Engineering standards based on attainable performance.
Practical capacity.
At break even point, fixed costs are always
Less than contribution margin
Equal to contribution margin
More than variable costs
More than the contribution margin
A difference between standard costs used for cost control and the budgeted costs of the same manufacturing effort
A. Can exist because standard costs represent what costs should be whereas budgeted costs are expected actual costs
B. Can exist because budgeted costs are historical costs, whereas standard costs are based on engineering studies.
C. Can exist because budgeted costs include some slack, whereas standard costs do not
D. Cannot exist because the amounts should be the same.
Cost-volume profit analysis assumes that over the relevant range
Variable cost are nonlinear
Fixed cost are nonlinear
Selling prices are unchanged
Total costs are unchanged
Which one of the following statements about ideal standards is incorrect?
A. Ideal standards are also called theoretical or maximum-efficiency standards.
B. Ideal standards do not make provisions for workers with different degrees of experience and skill levels.
C. Ideal standards make no allowance for waste spoilage, and machine breakdowns.
D. Ideal standards can be used for cash budgeting or product costing (cma)
Which of the following factors should not be considered when deciding whether to investigate a variance?
A. Magnitude of the variance and the costs of investigation.
B. Trend of the variance over time.
C. Likelihood that an investigation will eliminate future occurrences of the variance.
D. Whether the variance is favorable or unfavorable.
Which of the following is the purpose of standard costing?
A. Determine breakeven production level.
B. Control costs.
C. Eliminate the need for subjective decisions by management.
D. Allocate cost with more accuracy.
A spending variance for variable factory overhead based on direct labor hours is the difference between actual variable factory overhead and the variable factory overhead that should have been incurred for the actual hours worked. This variance results from
Price and quantity differences for factory overhead costs
Price differences for factory overhead costs
Quantity differences for factory overhead costs
Differences caused by variations in production volume
Which one of the following is true concerning standard costs?
A. Standard costs are es true concerning stadiable only under the most ideal conditions, but rarely practicable
B. Standard costs are difficult to use with a process costingsystem.
C. If properly used, standards can help motivate employees.
D. Unfavorable variance, material in amount should be investigated, but large favorable variance need not be investigated.
The alternative that would increase the contribution margin per unit the most is a
10% decrease in unit variable cost
10% increase in selling price
10% decrease in fixed costs
10% decrease in selling price
Cost-volume-profit analysis is most essential in the determination of the
relationship between revenues and costs at various levels of operations
volume of operation in order to break-even
variable costs necessary to equal fixed costs
production level that is equal to sales
