Ch 7 Standard Costs and Variances

The sales volume variance equals A. A static budget amount minus a flexible budget operating income B. Actual operating income minus flexible budget operating income C. Budgeted unit price minus actual price, times the actual units produced Budgeted unit price times the difference between actual inputs and expected inputs for the actual output level achieved

A. A static budget amount minus a flexible budget operating income

The flexible budget variance in operating income is A. Actual operating income minus flexible budget operating income B. Budgeted unit price times the difference between actual inputs and budgeted inputs for the actual activity level achieved C. A flexible budget amount minus a static budget amount D. Actual unit price minus budgeted unit price, times the actual units produced

A. Actual operating income minus flexible budget operating income

A difference between standard costs used for cost control and the budgeted costs of the same manufacturing effort can exist because A. Standard costs represent what costs should be, whereas budgeted costs are expected actual costs B. Budgeted costs are historical costs, whereas standard costs are based on engineering studies C. Budgeted costs include some slack, whereas standard costs do not D. Standard costs include some slack, whereas budgeted costs do not

A. Standard costs represent what costs should be, whereas budgeted costs are expected actual costs

Companies in what type of industry may use a standard cost sytem for cost control? Mass Production Industry Service Industry A. Yes Yes B. Yes No C. No No D. No Yes

A. Yes Yes

When a manager is concerned with monitoring total cost, total revenue, and net profit conditioned upon the level of productivity, an accountant would normally recommend Flexible Budgeting Standard Costing A. Yes Yes B. Yes No C. No Yes D. No No

A. Yes Yes

Which one of the following statements pertaining to practical standards is false? 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 adjustments to the production standards if an old machine is replaced by a newer, faster machine C. Under practical standards, 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

B. A firm using practical standards has no reason to make any midyear adjustments to the production standards if an old machine is replaced by a newer, faster machine

Which of the following is a 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

B. Control costs

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 not job-order costing

B. Either job-order costing or process costing

The difference between the actual costs incurred and the costs that should have been incurred given the actual output achieved is the A. Production volume variance B. Flexible budget variance C. Sales volume variance D. Standard cost variance

B. Flexible budget variance

Standard costing will produce the same income before extraordinary items as actual costing when standard cost variances are assigned to A. Work-in-process and finished goods inventories B. An income of expense accounts C. Cost of goods sold and inventories D. Cost of goods sold

C. Cost of goods sold and inventories

When standard costs are used in a process costing systee m, how, if at all, are equivalent units of production (EUP) involved or used in the cost report at standard? A. Equivalent units are not used B. Equivalent units are computed using a special approach C. The actual equivalent units are multiplied by the standard cost per unit D. The standard equivalent units are multiplies by the actual cost per unit

C. The actual equivalent units are multiplied by the standard cost per unit

In analyzing company operations, the controller of the corporation found a $250,000 favorable flexible-budget revenue variance. The variance was calculated by comparing the actual results with the flexible budget. This variance can be wholly explained by A. The total flexible budget variance B. The total sales volume variance C. The total static budget variance D. Changes in unit selling prices

D. Changes in unit selling prices

Listed below are four names for different kinds of standards associated with a standard cost system. Which one describes the labor costs that should be incurred under efficient operating conditions? A. Ideal B. Basic C. Maximum-efficiency D. Currently attainable

D. Currently attainable

The best basis upon which cost standards should be set to measure controllable production inefficiencies is A. Engineering standards based on ideal performance B. Normal capacity C. Recent average historical performance D. Engineering standards based on attainable performance

D. Engineering standards based on attainable performance

Which one of the following statements about ideal standards is false? 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

D. Ideal standards can be used for cash budgeting or product costing

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 eliminate future occurrences of the variance D. Whether the variance is favorable or unfavorable

D. Whether the variance is favorable or unfavorable

The budget for a given cost during a given period was $80,000. The actual cost for the period was $72,000. Considering these facts, the plant manager has done a better-than-expected job in controlling the cost if A. The cost is variable and actual production was 90% of budgeted production B. The cost is variable and actual production equaled budgeted production C. The cost is variable and actual production was 80% of budgeted production D. The cost is a discretionary fixed cost and actual production equaled budgeted production

B. The cost is variable and actual production equaled budgeted production