ACCT666 - Chapter 10

When standard costing is used, costs recorded at standard include ______.

-direct labor -direct materials

Standard costing ______.

-facilitates management by exception -serves as a sensible benchmark against which to measure actual costs

Determining variance significance involves ______.

-management experience -management judgment -using agreed upon guidelines

The production manager of John-John, Inc. was able to purchase a high-quality material at a significantly discounted price. The workers completed the product assembly more quickly than in the past. Given this scenario, the ______ variances are likely to be affected.

-materials price -labor efficiency

Actual output is used for variance calculations because ______.

-performance should be evaluated based upon what costs should be given the output produced -it focuses on the direct materials cost and direct labor cost that should have been incurred for the level of output produced -budgeted output although useful for planning is outdated for analyzing performance

When multiple materials are used in a product ______.

-quantity and price variances are computed for each type of material -the sum of all the material price and quantity variances is the material variance

Participation in setting of cost standards ______.

-should result in better cost standards -result in a higher commitment to meeting standards

The direct labor standard includes ______.

-the hourly cost of direct labor, including fringe benefits -the amount of time it normally takes to make one unit of product

The use of historical data in standard cost setting should be adjusted for changes in ______.

-the production process -product requirements -price levels

True or false: Only manufacturing firms use standard costing.

False

True or false: When a production process involves several types of labor, weighted rate and efficiency variances are calculated.

False

Which of the following statements about management by exception is false?

Managers look into the causes of all variances.

Which of the following statements regarding critical value is false?

Variances less than critical value are investigated.

A standard cost is __.

a company's best estimate of the cost to produce a single unit

The standard direct material quantity is the total ______.

amount of direct materials normally required to produce one unit of finished product, including an allowance for normal waste/inefficiency

Practical standards ______.

assume a production process that is efficient under normal operating conditions

When using a standard-costing system ______.

direct materials and direct labor are added to work-in process at standard cost

Entering into a long-term contract for the acquisition of materials is likely to be done to control the ______ variance.

direct materials price

The two direct labor variances are called direct labor rate and direct labor ________.

efficiency

The variance that measures the number of hours worked compared to the number of hours allowed for the actual output is called the direct-labor ______ variance.

efficiency

The purpose of a statistical control chart is to help ______.

eliminate from investigation those variances that are randomly caused

A disadvantage of an ideal standard is ______.

employees may sacrifice quality to achieve the lowest possible product cost

Historical data is best used to set standards for a(n) ______.

existing product with no anticipated changes

Using standard costs ______.

facilitates management by exception

When a company expects to spend more than it actually spends there will be a(n) _______ varaince,

favorable

When a company expects to spend more than it actually spends there will be a(n) __________ variance.

favorable or favourable

An advantage of a practical standard is it ______.

keeps employees motivated by providing tight, but attainable goals

A favorable variance is the result of a company spending __________ (more/less) than planned.

less

The process of following up on only significant cost variances is called __________ ____________ _________.

management by exception

The type of organization most likely to benefit from standard costing is ______.

manufacturing firms with a stable production process

The choice to purchase a lower quality material for use in production would have a favorable effect on the ______ variance.

materials price

An allowance for waste/inefficiences is part of the direct ______ standard

materials quantity

An unfavorable variance occurs if ______.

more labor hours are used than allowed by the standard

A normal adjustment to production cost standards is required for ______.

normal spoilage

An example of a standard set by a service organization is the ______.

number of customers served per hour

The standard direct labor quantity is the ______.

number of direct labor hours normally required to produce one unit of finished product

A standard that can only be attained under the best of circumstances is called a(n) ____________standard.

perfection

A standard that assumes a production process under normal operating conditions is referred to as a(n) _________ standard.

practical or attainable

A standard that assumes a production process under normal operating conditions is referred to as a(n) __________ standard

practical or attainable

The difference between actual cost and standard cost for materials is the direct materials ______ variance.

price

The purpose of management by exception includes all of the following except ______.

providing a basis for incentive compensation

The variance that provides a more immediate evaluation of the purchasing manager's success or failure is the direct materials ______ variance.

purchase price

The managerial accountant alone ______ determine standards.

should never

A company's best estimate of the cost to produce a single unit is called a(n) __ cost.

standard

In order to control costs, the benchmark against which actual costs are compared is ______ output.

standard cost for actual

An example of a positive effect of standard costing on employee behavior would be ______.

the additional efforts expended to become more effective and efficient in the time spent to produce the product

The direct materials price variance is ______.

the difference between actual material cost and standard material cost for actual output

True or false: The decision to use inferior quality materials can have an effect on both labor and material variances.

true

When the standard cost is less than the actual cost, there will be a(n) ________ variance.

unfavorable