Ch 7 Standard Costing and Variance Analysis MCQ's

The overhead variance calculated as total budgeted overhead at the actual input production level minus total budgeted overhead at the standard hours allowed for actual output is the A. efficiency variance. B. spending variance. C. volume variance. D. budget variance.

A. efficiency variance. (Actual input - standard hours allowed for actual input)

Variance analysis for overhead normally focuses on A. efficiency variances for machinery and indirect production costs. B. volume variances for fixed overhead costs. C. the controllable variance as a lump-sum amount. D. the difference between budgeted and applied variable overhead.

A. efficiency variances for machinery and indirect production costs.

The efficiency variance computed on a three-variance approach is A. equal to the efficiency variance computed on the four-variance approach. B. equal to the variable overhead spending variance plus the efficiency variance computed on the four-variance approach. C. computed as the difference between applied variable overhead and actual variable overhead. D. computed as actual variable overhead minus the flexible budget for variable overhead based on actual hours worked.

A. equal to the efficiency variance computed on the four-variance approach.

A company using very tight (high) standards in a standard cost system should expect that A. no incentive bonus will be paid. B. most variances will be unfavorable. C. employees will be strongly motivated to attain the standards. D. costs will be controlled better than if lower standards were used.

B. most variances will be unfavorable.

Fixed overhead costs are A. best controlled on a unit-by-unit basis of products produced. B. mostly incurred to provide the capacity to produce and are best controlled on a total basis at the time they are originally negotiated. C. constant on a per-unit basis at all different activity levels within the relevant range. D. best controlled as to spending during the production process.

B. mostly incurred to provide the capacity to produce and are best controlled on a total basis at the time they are originally negotiated.

A bill of material does not include A. quantity of component inputs. B. price of component inputs. C. quality of component inputs. D. type of product output.

B. price of component inputs.

When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields a A. combined price-quantity variance. B. price variance. C. quantity variance . D. mix variance.

B. price variance. (AP-SP)XAQ

A purpose of standard costing is to A. replace budgets and budgeting. B. simplify costing procedures. C. eliminate the need for actual costing for external reporting purposes. D. eliminate the need to account for year-end underapplied or overapplied manufacturing overhead.

B. simplify costing procedures.

A primary purpose of using a standard cost system is A. to make things easier for managers in the production facility. B. to provide a distinct measure of cost control. C. to minimize the cost per unit of production. D. b and c are correct.

B. to provide a distinct measure of cost control.

Bailey Corporation. incurred 2,300 direct labor hours to produce 600 units of product. Each unit should take 4 direct labor hours. Bailey Corporation applies variable overhead to production on a direct labor hour basis. The variable overhead efficiency variance A. will be unfavorable. B. will be favorable. C. will depend upon the capacity measure selected to assign overhead to production. D. is impossible to determine without additional information.

B. will be favorable.

87. The term "standard hours allowed" measures A. budgeted output at actual hours. B. budgeted output at standard hours. C. actual output at standard hours. D. actual output at actual hours.

C. actual output at standard hours.

A standard cost system may be used in A. job order costing, but not process costing. B. process costing, but not job order costing. C. either job order costing or process costing. D. neither job order costing nor process costing

C. either job order costing or process costing.

In a standard cost system, when production is greater than the estimated unit or denominator level of activity, there will be a(n) A. unfavorable capacity variance. B. favorable material and labor usage variance. C. favorable volume variance. D. unfavorable manufacturing overhead variance.

C. favorable volume variance.

The use of separate variable and fixed overhead rates is better than a combined rate because such a system A. is less expensive to operate and maintain. B. does not result in underapplied or overapplied overhead. C. is more effective in assigning overhead costs to products. D. is easier to develop.

C. is more effective in assigning overhead costs to products.

Total actual overhead minus total budgeted overhead at the actual input production level equals the A. variable overhead spending variance. B. total overhead efficiency variance. C. total overhead spending variance. D. total overhead volume variance.

C. total overhead spending variance.

A total variance is best defined as the difference between total A. actual cost and total cost applied for the standard output of the period. B. standard cost and total cost applied to production. C. actual cost and total standard cost of the actual input of the period. D. actual cost and total cost applied for the actual output of the period.

D. actual cost and total cost applied for the actual output of the period.

A favorable fixed overhead spending variance indicates that A. budgeted fixed overhead is less than actual fixed overhead. B. budgeted fixed overhead is greater than applied fixed overhead. C. applied fixed overhead is greater than budgeted fixed overhead. D. actual fixed overhead is less than budgeted fixed overhead.

D. actual fixed overhead is less than budgeted fixed overhead.

Standard costs may be used for A. product costing. B. planning. C. controlling. D. all of the above.

D. all of the above

Actual fixed overhead minus budgeted fixed overhead equals the A. fixed overhead volume variance. B. fixed overhead spending variance. C. noncontrollable variance. D. controllable variance.

...B. fixed overhead spending variance.

Which of the following statements regarding standard cost systems is true? A. Favorable variances are not necessarily good variances. B. Managers will investigate all variances from standard. C. The production supervisor is generally responsible for material price variances. D. Standard costs cannot be used for planning purposes since costs normally change in the future.

A. Favorable variances are not necessarily good variances.

Under the two-variance approach, the volume variance is computed by subtracting ____ based on standard input allowed for the production achieved from budgeted overhead. A. applied overhead B. actual overhead C. budgeted fixed overhead plus actual variable overhead D. budgeted variable overhead

A. applied overhead

A company may set predetermined overhead rates based on normal, expected annual, or theoretical capacity. At the end of a period, the fixed overhead spending variance would A. be the same regardless of the capacity level selected. B. be the largest if theoretical capacity had been selected. C. be the smallest if theoretical capacity had been selected. D. not occur if actual capacity were the same as the capacity level selected.

A. be the same regardless of the capacity level selected

Which of the following capacity levels has traditionally been used to compute the fixed overhead application rate? A. expected annual B. normal C. theoretical D. prior year

A. expected annual

A company wishing to isolate variances at the point closest to the point of responsibility will determine its material price variance when A. material is purchased. B. material is issued to production. C. material is used in production. D. production is completed.

A. material is purchased.

. The material price variance (computed at point of purchase) is A. the difference between the actual cost of material purchased and the standard cost of material purchased. B. the difference between the actual cost of material purchased and the standard cost of material used. C. primarily the responsibility of the production manager. D. both a and c.

A. the difference between the actual cost of material purchased and the standard cost of material purchased. (AP-SP)XAQ

A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance if A. the mix of workers used in the production process was more experienced than the normal mix. B. the mix of workers used in the production process was less experienced than the normal mix. C. workers from another part of the plant were used due to an extra heavy production schedule. D. the purchasing agent acquired very high-quality material that resulted in less spoilage.

A. the mix of workers used in the production process was more experienced than the normal mix. meaning they had to pay more in wages because they are experienced/educated but efficiency increased

The fixed overhead application rate is a function of a predetermined activity level. If standard hours allowed for good output equal the predetermined activity level for a given period, the volume variance will be A. zero. B. favorable. C. unfavorable. D. either favorable or unfavorable, depending on the budgeted overhead.

A. zero.

. If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n) A. favorable variable overhead spending variance exists. B. favorable variable overhead efficiency variance exists. C. favorable volume variance exists. D. unfavorable volume variance exists.

B. favorable variable overhead efficiency variance exists. VOH efficiency looks at DLH

In a just-in-time inventory system, A. practical standards become ideal standards. B. ideal standards become expected standards. C. variances will not occur because of the zero-defects basis of JIT. D. standard costing cannot be used.

B. ideal standards become expected standards.

At the end of a period, a significant material quantity variance should be A. closed to Cost of Goods Sold. B. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods Sold. C. allocated among Work in Process, Finished Goods, and Cost of Goods Sold. D. carried forward as a balance sheet account to the next period.

C. allocated among Work in Process, Finished Goods, and Cost of Goods Sold.

In analyzing manufacturing overhead variances, the volume variance is the difference between the A. amount shown in the flexible budget and the amount shown in the debit side of the overhead control account. B. predetermined overhead application rate and the flexible budget application rate times actual hours worked. C. budget allowance based on standard hours allowed for actual production for the period and the amount budgeted to be applied during the period . D. actual amount spent for overhead items during the period and the overhead amount applied to production during the period.

C. budget allowance based on standard hours allowed for actual production for the period and the amount budgeted to be applied during the period

Standard costs A. are estimates of costs attainable only under the most ideal conditions. B. are difficult to use with a process costing system. C. can, if properly used, help motivate employees. D. require that significant unfavorable variances be investigated, but do not require that significant favorable variances be investigated.

C. can, if properly used, help motivate employees.

The total labor variance can be subdivided into all of the following except A. rate variance. B. yield variance. C. learning curve variance. D. mix variance.

C. learning curve variance.

The standard predominantly used in Western cultures for motivational purposes is a(n) ____ standard. A. expected annual B. ideal C. practical D. theoretical

C. practical

An operations flow document A. tracks the cost and quantity of material through an operation. B. tracks the network of control points from receipt of a customer's order through the delivery of the finished product. C. specifies tasks to make a unit and the times allowed for each task. D. charts the shortest path by which to arrange machines for completing products.

C. specifies tasks to make a unit and the times allowed for each task.

In a standard cost system, Work in Process Inventory is ordinarily debited with A. actual costs of material and labor and a predetermined overhead cost for overhead. B. standard costs based on the level of input activity (such as direct labor hours worked). C. standard costs based on production output. D. actual costs of material, labor, and overhead.

C. standard costs based on production output.

A variable overhead spending variance is caused by A. using more or fewer actual hours than the standard hours allowed for the production achieved. B. paying a higher/lower average actual overhead price per unit of the activity base than the standard price allowed per unit of the activity base. C. larger/smaller waste and shrinkage associated with the resources involved than expected. D. both b and c are causes.

D. both b and c are causes. paying a higher/lower average actual overhead price per unit of the activity base than the standard price allowed per unit of the activity base. larger/smaller waste and shrinkage associated with the resources involved than expected.

The standard cost card contains quantities and costs for A. direct material only. B. direct labor only. C. direct material and direct labor only. D. direct material, direct labor, and overhead.

D. direct material, direct labor, and overhead.

The variance least significant for purposes of controlling costs is the A. material quantity variance. B. variable overhead efficiency variance. C. fixed overhead spending variance. D. fixed overhead volume variance.

D. fixed overhead volume variance.

The variance most useful in evaluating plant utilization is the A. variable overhead spending variance . B. fixed overhead spending variance. C. variable overhead efficiency variance. D. fixed overhead volume variance.

D. fixed overhead volume variance.

The sum of the material price variance (calculated at point of purchase) and material quantity variance equals A. the total cost variance. B. the material mix variance. C. the material yield variance. D. no meaningful number.

D. no meaningful number.

An unfavorable fixed overhead volume variance is most often caused by A. actual fixed overhead incurred exceeding budgeted fixed overhead. B. an over-application of fixed overhead to production. C. an increase in the level of the finished inventory. D. normal capacity exceeding actual production levels.

D. normal capacity exceeding actual production levels.

A favorable fixed overhead volume variance occurs if A. there is a favorable labor efficiency variance. B. there is a favorable labor rate variance. C. production is less than planned. D. production is greater than planned.

D. production is greater than planned.

Which of the following factors should not be considered when deciding whether to investigate a variance? A. magnitude of the variance B. trend of the variances over time C. likelihood that an investigation will reduce or eliminate future occurrences of the variance D. whether the variance is favorable or unfavorable

D. whether the variance is favorable or unfavorable