Chapter 10: Standard Costing

Cintron Company produces high-quality leather belts. The Boise plant uses a standard costing system with the following standards for materials (leather strips) and direct labor. Standard Prices Price per Leather Strip (Direct Materials) $5 Price per Labor Hour $12 July Data Number of Belts Produced 26,577 Number of Leather Strips Purchased 111,934 Number of Labor Hours Used 23,341 Actual Price per Leather Strip $5 Actual Price per Labor Hour $13 Standard Quantity of Materials Allowed (given production) 119,833 Standard Quantity of Labor Allowed (given production) 26,220 There are no beginning or ending inventories for direct materials. For direct labor, what is the efficiency variance?

-34,548.00 ± 10 Response Feedback: (Actual Quantity - Standard Quantity Allowed) * Standard Rate

Cintron Company produces high-quality leather belts. The Boise plant uses a standard costing system with the following standards for materials (leather strips) and direct labor. Standard Prices Price per Leather Strip (Direct Materials) $2 Price per Labor Hour $13 July Data Number of Belts Produced 21,903 Number of Leather Strips Purchased 119,062 Number of Labor Hours Used 18,169 Actual Price per Leather Strip $5 Actual Price per Labor Hour $9 Standard Quantity of Materials Allowed (given production) 112,126 Standard Quantity of Labor Allowed (given production) 16,321 There are no beginning or ending inventories for direct materials. For direct labor, what is the total budget variance?

-48,652.00 ± 10 Response Feedback: (Actual Price * Actual Number of Labor Hours) - (Standard Price * Standard Quantity of Labor Allowed)

Cintron Company produces high-quality leather belts. The Boise plant uses a standard costing system with the following standards for materials (leather strips) and direct labor. Standard Prices Price per Leather Strip (Direct Materials) $4 Price per Labor Hour $12 July Data Number of Belts Produced 35,231 Number of Leather Strips Purchased 114,985 Number of Labor Hours Used 18,978 Actual Price per Leather Strip $3 Actual Price per Labor Hour $10 Standard Quantity of Materials Allowed (given production) 100,738 Standard Quantity of Labor Allowed (given production) 17,328 There are no beginning or ending inventories for direct materials. For direct materials, what is the total budget variance?

-57,997.00 ± 10 Response Feedback: (Actual Price * Actual Number of Strips) - (Standard Price * Standard Quantity of Strips Allowed) (3 x 114,985) - (4 x 100738) = -57,997

Cintron Company produces high-quality leather belts. The Boise plant uses a standard costing system with the following standards for materials (leather strips) and direct labor. Standard Price Standard Usage Leather Strips (Direct Materials) $5 3 strips Direct Labor $ 0.75 12 hours July Data Number of Belts Produced 39,019 Number of Leather Strips Purchased 119,149 Number of Labor Hours Used 23,819 Actual Price per Leather Strip $4 Actual Price per Labor Hour $ 13 There are no beginning or ending inventories for direct materials. For direct materials, what is the standard quantity allowed?

117,057.00 Response Feedback: Materials Standard Usage * Number of Belts Produced 39,019 x 3 = 117,057

Cintron Company produces high-quality leather belts. The Boise plant uses a standard costing system with the following standards for materials (leather strips) and direct labor. Standard Prices Price per Leather Strip (Direct Materials) $ 2.43 Price per Labor Hour $9.73 July Data Number of Belts Produced 25,319 Number of Leather Strips Purchased 107,652 Number of Labor Hours Used 21,539 Actual Price per Leather Strip $4.28 Actual Price per Labor Hour $13.14 Standard Quantity of Materials Allowed (given production) 95,604 Standard Quantity of Labor Allowed (given production) 22,976 There are no beginning or ending inventories for direct materials. For direct materials, what is the price variance?

199,156.20 ± 10 Response Feedback: (Actual Price - Standard Price) * Actual Number of Strips (4.28-2.43) x 107,652

Abba Company produces sails for boats. The Houston plant uses a standard costing system with the following standards for materials (cloth) and direct labor. Standards Cloth (Direct Materials) Standard Price $ 2 Direct Labor Standard Rate $ 10 December Data Number of Sails Produced 21,127 Cloth (Direct Materials) Actual Price $ 4 Actual Usage 107,419 square yards Standard Quantity Allowed (given production) 104,021 square yards Direct Labor Actual Rate $ 13 Actual Usage 21,291 hours Standard Quantity Allowed (given production) 18,246 hours There are no beginning or ending inventories for direct materials. For direct materials, what is the total cost that should be incurred?

208,042.00 Response Feedback: Standard Quantity of Materials Allowed * Standard Price 104,021 x 2 = 208,042

Cintron Company produces high-quality leather belts. The Boise plant uses a standard costing system with the following standards for materials (leather strips) and direct labor. Standard Prices Price per Leather Strip (Direct Materials) $2 Price per Labor Hour $12 July Data Number of Belts Produced 27,944 Number of Leather Strips Purchased 115,367 Number of Labor Hours Used 21,456 Actual Price per Leather Strip $4 Actual Price per Labor Hour $11 Standard Quantity of Materials Allowed (given production) 82,294 Standard Quantity of Labor Allowed (given production) 20,586 There are no beginning or ending inventories for direct materials. For direct materials, what is the usage variance?

66,146.00 ± 10 Response Feedback: (Actual Quantity - Standard Quantity Allowed) * Standard Price (115,367-82,294) x 2

Cintron Company produces high-quality leather belts. The Boise plant uses a standard costing system with the following standards for materials (leather strips) and direct labor. Standard Prices Price per Leather Strip (Direct Materials) $ 4.6 Price per Labor Hour $ 9.25 July Data Number of Belts Produced 39,896 Number of Leather Strips Purchased 102,381 Number of Labor Hours Used 24,755 Actual Price per Leather Strip $2.8 Actual Price per Labor Hour $11.94 Standard Quantity of Materials Allowed (given production) 88,526 Standard Quantity of Labor Allowed (given production) 21,863 There are no beginning or ending inventories for direct materials. For direct labor, what is the rate variance?

66,590.95 Response Feedback: (Actual Rate - Standard Rate) * Actual Number of Labor Hours

Ideal standards can be achieved under efficient operating conditions. True False

False

One reason for adopting a standard cost system is to make product costing easier. True False

False

Standard costs are developed for direct materials, direct labor, and variable overhead only. True False

False

The benefits of operational control under a standard cost system can extend to all manufacturing environments. True False

False

The materials price variance is computed using the actual quantity of materials used, and the materials usage variance is computed using the actual quantity of materials purchased. True False

False

The standard quantity of materials allowed can be calculated by multiplying the unit labor standard by the actual output. True False

False

The standard unit cost is developed before the standard costs for direct materials, direct labor, and overhead can be set. True False

False

Max Company has developed the following standards for one of its products. Direct materials: 15 pounds × $16 per pound Direct labor: 4 hours × $24 per hour Variable overhead: 4 hours × $14 per hour The following activity occurred during the month of October: Materials purchased: 10,000 pounds costing $170,000 Materials used: 7,200 pounds Units produced: 500 units Direct labor: 2,300 hours at $23.60/hour The company records materials price variances at the time of purchase. The direct materials price variance is a. $50,000 F. b. $50,000 U. c. $10,000 F. d. $10,000 U.

Rationale: $170,000 − (10,000 × $16) = $10,000 U

Seaside Company produces picture frames. During the year 190,000 picture frames were produced. Materials and labor standards for producing the picture frames are as follows: Direct materials (2 pieces of wood @ $2.25) $4.50 Direct labor (2 hours @ $10) $20.00 Seaside purchased and used 400,000 pieces of wood at $2.00 each and its actual labor hours were 360,000 hours at a wage rate of $10.50. Refer to Figure 10-5. What is the materials usage variance? a.$45,000 U b.$45,000 F c.$112,500 U d.$112,500 F

Rationale: ($2.25 × 400,000) - ($2.25 × 380,000) $45,000 U

Roberts Company uses a standard costing system. The following information pertains to direct materials for the July: Standard price per lb. $18.00 Actual purchase price per lb. $16.50 Quantity purchased 3,100 lbs. Quantity used 2,950 lbs. Standard quantity allowed for actual output 3,000 lbs. Actual output 1,000 units Roberts Company reports its material price variances at the time of purchase. What is the material usage variance for Roberts Company? a. $900 U b. $1,950 F c. $900 F d. $2,850 F

Rationale: (2,950 − 3,000) × $18 = $900 F

James Company manufactures t-shirts. During the year, it manufactured 250,000 t-shirts, using 2 hours of direct labor at a rate of $8.50 per hour. The materials and labor standards for manufacturing the t-shirts are: Direct materials (6 yards of fabric @ $3 per yard) $18 Direct labor (2.4 hours @ $8.00 per hour) 17 It took James 1,400,000 yards at $2.50 per yard to make the 250,000 t-shirts. Refer to Figure 10-9. What is James' labor rate variance? a. $190,625 F b. $250,000 U c. $193,750 U d. $250,000 F

Rationale: (AR - SR) × AH ($8.50 - $8.00) × 500,000 $250,000 U AH = 500,000 = 250,000 × 2

Extreme Builders constructs houses. The standard labor rate is $25 per hour and the standard number of hours is 15,000 hours per home. During the year, it constructed 12 homes using 18,000 labor hours per home and a rate of $28 per hour. Refer to Figure 10-6. Calculate the labor efficiency variance. a. $900,000 F b. $1,008,000 U c. $900,000 U d. $1,008,000 F

Rationale: LEV = (AH - SH) × SR (216,000 - 180,000) × $25 $900,000 U

Seaside Company produces picture frames. During the year 190,000 picture frames were produced. Materials and labor standards for producing the picture frames are as follows: Direct materials (2 pieces of wood @ $2.25) $4.50 Direct labor (2 hours @ $10) $20.00 Seaside purchased and used 400,000 pieces of wood at $2.00 each and its actual labor hours were 360,000 hours at a wage rate of $10.50. Refer to Figure 10-5. What is Seaside's labor rate variance? a. $225,000 U b. $217,500 F c. $180,000 F d. $180,000 U

Rationale: LRV = (AR - SR) × AH ($10.50 - $10.00) × 360,000 $180,000 U

Extreme Builders constructs houses. The standard labor rate is $25 per hour and the standard number of hours is 15,000 hours per home. During the year, it constructed 12 homes using 18,000 labor hours per home and a rate of $28 per hour. Refer to Figure 10-6. Calculate the Extreme Builders' labor rate variance. a. $540,000 F b. $540,000 U c. $648,000 U d. $648,000 F

Rationale: LRV = (AR - SR) × AH ($28 - $25) × 216,000 $648,000 U

James Company manufactures t-shirts. During the year, it manufactured 250,000 t-shirts, using 2 hours of direct labor at a rate of $8.50 per hour. The materials and labor standards for manufacturing the t-shirts are: Direct materials (6 yards of fabric @ $3 per yard) $18 Direct labor (2.4 hours @ $8.00 per hour) 17 It took James 1,400,000 yards at $2.50 per yard to make the 250,000 t-shirts. Refer to Figure 10-9. What is James' materials price variance assuming that materials purchased equals materials used? a. $700,000 U b. $700,000 F c. $750,00 U d. $750,000 F

Rationale: MPV = (AP - SP) × AQ ($2.50 - $3.00) × 1,400,000 $700,000 F

Seaside Company produces picture frames. During the year 190,000 picture frames were produced. Materials and labor standards for producing the picture frames are as follows: Direct materials (2 pieces of wood @ $2.25) $4.50 Direct labor (2 hours @ $10) $20.00 Seaside purchased and used 400,000 pieces of wood at $2.00 each and its actual labor hours were 360,000 hours at a wage rate of $10.50. Refer to Figure 10-5. What is the materials price variance? a. $112,500 U b. $170,000 U c. $135,000 F d. $100,000 F

Rationale: MPV = (AP - SP) × AQ (2.00 - $2.25) × 400,000 $100,000 F

Abba Company produces sails for boats. The Houston plant uses a standard costing system with the following standards for materials (cloth) and direct labor. Standards Cloth (Direct Materials) Standard Price Standard Usage Direct Labor Standard Rate Standard Usage December Data Number of Sails Produced Cloth (Direct Materials) Actual Price Actual Usage Direct Labor Actual Rate Actual Usage There are no beginning or ending inventories for direct materials. For direct labor, what is the standard quantity allowed?

Response Feedback: Labor Standard Usage * Number of Sails Produced

Abba Company produces sails for boats. The Houston plant uses a standard costing system with the following standards for materials (cloth) and direct labor. Standards Cloth (Direct Materials) Standard Price Direct Labor Standard Rate December Data Number of Sails Produced Cloth (Direct Materials) Actual Price Actual Usage Standard Quantity Allowed (given production) Direct Labor Actual Rate Actual Usage Standard Quantity Allowed (given production) There are no beginning or ending inventories for direct materials. For direct labor, what is the total cost that should be incurred?

Response Feedback: Standard Quantity of Labor Allowed * Standard Rate

An acceptable range is established in order to determine if whether variances are significant. The acceptable range is the standard, plus or minus an allowable deviation. True False

True

An unfavorable price variance occurs whenever the actual prices are greater than the standard prices. True False

True

An unfavorable usage variance would occur when the actual usage of inputs is greater than the standard usage. True False

True

Currently attainable standards can be achieved under efficient operating conditions. True False

True

Currently attainable standards offer the most behavioral benefits because higher performance levels are attained through challenging, yet achievable, standards. True False

True

Engineering studies are often too rigorous and may not be achievable by operating personnel. True False

True

For better control, the materials price variance is computed using actual quantity of materials purchased. True False

True

Ideal standards can be achieved only if everything operates perfectly, meaning that they do not allow for any machine breakdowns, slack, etc. True False

True

In setting standards, historical experience should be used with caution because it can perpetuate operating inefficiencies. True False

True

Managers develop price standards when they determine what amount should be paid for the quantity of input to be used. True False

True

Managers develop quantity standards when they decide what amount of input should be used per unit of output. True False

True

The actual quantity of input at the actual price less the actual quantity of input at the standard price is the price variance. True False

True

The actual quantity of input at the standard price less than the standard quantity of input at the standard price equals the usage variance. True False

True

The quantity of each input that should be used to produce one unit of output is documented on the standard cost sheet. True False

True

The standard cost sheet provides the input standards needed to compute the total amount of inputs allowed for the actual output, an essential component in computing efficiency variances. True False

True

The sum of the labor rate and labor efficiency variances will always add up to the total labor variance. True False

True

The total budget variance is the difference between the actual cost of the input and its planned cost. True False

True

To compute the standard direct labor hours allowed, multiply the unit labor standard by the actual output. True False

True

James Company manufactures t-shirts. During the year, it manufactured 250,000 t-shirts, using 2 hours of direct labor at a rate of $8.50 per hour. The materials and labor standards for manufacturing the t-shirts are: Direct materials (6 yards of fabric @ $3 per yard) $18 Direct labor (2.4 hours @ $8.00 per hour) 17 It took James 1,400,000 yards at $2.50 per yard to make the 250,000 t-shirts. Refer to Figure 10-9. What is James' materials usage variance? a. $300,000 F b. $250,000 F c. $300,000 U d. $250,000 U

a. $300,0000 F ​

James Company manufactures t-shirts. During the year, it manufactured 250,000 t-shirts, using 2 hours of direct labor at a rate of $8.50 per hour. The materials and labor standards for manufacturing the t-shirts are: Direct materials (6 yards of fabric @ $3 per yard) $18 Direct labor (2.4 hours @ $8.00 per hour) 17 It took James 1,400,000 yards at $2.50 per yard to make the 250,000 t-shirts. Refer to Figure 10-9. What is James' labor efficiency variance? a. $800,000 F b. $850,000 F c. $800,000 U d. $850,000 U

a. $800,000 F

The materials usage variance is calculated by the equation a. (Standard Price × Actual Quantity) − (Standard Price × Standard Quantity). b. (Standard Price × Standard Quantity) + (Standard Price × Actual Quantity). c. (Actual Price × Actual Quantity) − (Standard Price × Actual Quantity). d. (Actual Price × Standard Quantity) + (Actual Quantity × Standard Price). e. None of these.

a. (Standard Price × Actual Quantity) − (Standard Price × Standard Quantity).

Flying High Company manufactures model airplanes. During the month, it manufactured 10,000 airplanes. Each one used an average of 6.5 direct labor hours and an average of 1.5 sheets of aluminum. It normally manufactures 7,500 airplanes. Materials and labor standards for making the airplanes are: Direct Materials (1 sheet of aluminum @ $10.00) $10.00 Direct Materials (other accessories @ $8.75) 8.75 Direct Labor (6 hours @ $7.00) 42.00 Refer to Figure 10-1. Compute the standard hours allowed for a volume of 10,000 airplanes. a. 60,000 hours b. 70,000 hours c. 420,000 hours d. 65,000 hours

a. 60,000 hours SH = Unit labor standard × Actual output SH = 6 × 10,000 = 60,000.

Which of the following is true regarding variances? a. Unfavorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage. b. Favorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage. c. Unfavorable variances are always credits. d. Favorable variances are always debits. e. None of these.

a. Unfavorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage.

Standard cost systems can enhance operational control through the use of a. efficiency variances which indicate the need for corrective action. b. price variances which indicate the need for better spending control. c. standard costs which indicate the desired cost of a unit of input. d. actual costs which indicate the price received for units sold. e. All of these.

a. efficiency variances which indicate the need for corrective action.

All of the following are true regarding variance investigation except a. every variance is investigated. b. managers must consider whether a variance will recur. c. variances are not investigated unless they are large enough to be of a concern. d. it is difficult to assess the costs and benefits of variance analysis on a case-by-case basis. e. the investigation should be undertaken only if the anticipated benefits are greater than the expected costs.

a. every variance is investigated.

The production data needed to calculate the standard unit cost as well as the underlying details for the standard cost per unit are provided in a. the standard cost sheet. b. the standard production budget. c. the balance sheet. d. the standard work-in-process account. e. None of these.

a. the standard cost sheet.

Standard hours allowed are computed using the equation a. unit labor standard × actual output. b. unit labor standard × standard output. c. unit labor standard × actual input. d. unit labor standard × standard input. e. not shown here.

a. unit labor standard × actual output.

Which of the following is not an advantage of standard costing over normal costing and actual costing? a. A greater capacity for control. b. Ability to easily distinguish the FIFO and weighted average methods of accounting for beginning inventory costs. c. Computing a unit cost for each equivalent unit cost category is not necessary. d. Providing for readily available unit cost information. e. All of these are advantages of standard costing.

b. Ability to easily distinguish the FIFO and weighted average methods of accounting for beginning inventory costs.

Which of the following is not true concerning direct materials variances? a. The materials price variance uses the actual quantity of materials purchased rather than the actual quantity of materials used. b. The materials price variance always uses the actual quantity of materials used rather than the actual quantity of materials purchased. c. The materials usage variance uses the actual quantity of materials used. d. Separate materials variances can be computed for each type of material used. e. The sum of the price and usage variances will add up to the total materials variance only if the materials purchased is equal to the materials used.

b. The materials price variance always uses the actual quantity of materials used rather than the actual quantity of materials purchased.

Which of the following is not true regarding engineering studies? a. They can determine the most efficient way to operate. b. They are often achievable by operating personnel. c. They provide very rigorous guidelines. d. All of these statements are true. e. More than two of these statements are true.

b. They are often achievable by operating personnel.

Price standards are based on a. the amount of input that should be used per unit of output. b. the amount that should be paid for the total quantity of input to be used. c. the amount that should be paid per unit of output. d. the amount that should be paid per unit of input purchased. e. None of these.

b. the amount that should be paid for the total quantity of input to be used.

The labor efficiency variance is calculated by the equation a. (Standard Hours × Actual Hours) − (Actual Hours × Standard Rate). b. (Actual Rate × Actual Hours) − (Standard Rate × Actual Hours). c. (Actual Hours × Standard Rate) − (Standard Hours × Standard Rate). d. (Standard Hours × Actual Rate) − (Actual Hours × Actual Rate). e. None of these.

c. (Actual Hours × Standard Rate) − (Standard Hours × Standard Rate).

All of the following are true except a. A favorable materials price variance could result from purchasing identical materials from another supplier at a lower price. b. An unfavorable labor efficiency variance can be caused by machine downtime, and poor quality materials. c. A favorable labor rate variance could result from lower wage workers quitting. d. An unfavorable materials usage variance could result from not efficiently utilizing raw materials, thus causing waste. e. A favorable labor efficiency variance could result from using higher quality materials that result in fewer inspections.

c. A favorable labor rate variance could result from lower wage workers quitting.

Which of the following is true concerning the materials price variance? a. It is the difference between the actual and standard unit price of an input multiplied by the number of inputs used. b. It is the difference between the actual and standard unit price of an output multiplied by the number of inputs used. c. It is the difference between the actual and standard unit price of an input multiplied by the number of inputs purchased. d. It is the difference between the actual and standard unit price of an output multiplied by the number of inputs purchased. e. None of these.

c. It is the difference between the actual and standard unit price of an input multiplied by the number of inputs purchased.

Which of the following is true regarding historical experience in standard setting? a. It provides very rigorous guidelines. b. Operating personnel may not be able to achieve operating standards based on historical experience. c. It should be used with caution because it can perpetuate inefficiencies. d. Standards based on historical experience are better than standards based on engineering studies. e. None of these.

c. It should be used with caution because it can perpetuate inefficiencies.

Which of the following is true regarding standard cost systems in manufacturing environments that emphasize continuous improvement and just-in-time manufacturing and purchasing? a. The standard cost system enhances the operational control. b. The materials price variance may encourage the purchasing department to buy in smaller quantities to reduce inventories. c. Variances can be computed and presented in reports to higher-level managers. d. The operational level will benefit from the detailed computation of variances. e. None of these.

c. Variances can be computed and presented in reports to higher-level managers.

Standard cost systems are adopted a. to improve planning and control. b. to facilitate product costing. c. to improve planning and control, and to facilitate product costing. d. to enhance the operational control of firms that emphasize continuous improvement. e. for all of these reasons.

c. to improve planning and control, and to facilitate product costing.

Highland Company's standard cost is $250,000. The allowable deviation is ±10%. Its actual costs for six months are January $235,000 February 220,000 March 245,000 April 265,000 May 270,000 June 280,000 Refer to Figure 10-2. The upper and lower control limits are, respectively, a. $250,000 and $225,000 b. $275,000 and $250,000 c. $305,000 and $195,000 d. $275,000 and $225,000

d. $275,000 and $225,000 The upper control limit is $275,000 [$250,000 + ($250,000 × 10%)]. The lower control limit is $225,000 [$250,000 − ($250,000 × 10%)].

Acme Company's standard cost is $500,000. The allowable deviation is ±10%. Its actual costs for three months are January $520,000 February $550,000 March $575,000 The upper and lower control limits are, respectively, a. $575,000 and $520,000 b. $500,000 and $450,000 c. $550,000 and $500,000 d. $550,000 and $450,000

d. $550,000 and $450,000 The upper control limit is $550,000 [$500,000 + ($500,000 × 10%)]. The lower control limit is $450,000 [$500,000 − ($500,000 × 10%)].

Bortello Corporation produces high-quality leather boots. The company has a standard cost system and has set the following standards for materials and labor: Leather (12 strips @ $20) $240 Direct labor (10 hours @ $12) $120 Total prime cost $360 During the year Bortello produced 125 boots. Actual leather purchased was 1,700 strips, at $16 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour. Refer to Figure 10-3. Compute the materials price variance and the materials usage variance, respectively. a. $6,800 U and $4,000 F b. $9,000 F and $1,200 U c. $9,300 U and $1,500 F d. $6,800 F and $4,000 U

d. $6,800 F and $4,000 U

The materials price variance is computed using the equation a. (Actual Price × Actual Quantity) − (Standard Price × Standard Quantity). b. (Standard Price × Actual Quantity) − (Actual Price × Actual Quantity). c. (Standard Price × Standard Quantity) − (Actual Price × Actual Quantity). d. (Actual Price × Actual Quantity) − (Standard Price × Actual Quantity). e. None of these.

d. (Actual Price × Actual Quantity) − (Standard Price × Actual Quantity).

The labor rate variance is computed by a. (Actual Rate × Actual Hours) − (Standard Rate × Standard Hours). b. (Standard Rate × Actual Rate) − (Actual Rate × Actual Hours). c. (Actual Rate × Standard Hours) − (Standard Rate × Actual Hours). d. (Actual Rate × Actual Hours) − (Standard Rate × Actual Hours). e. None of these.

d. (Actual Rate × Actual Hours) − (Standard Rate × Actual Hours).

Ideal standards a. do not allow for machine breakdowns, slack, or lack of skill (even momentarily). b. demand maximum efficiency. c. can be achieved only if everything operates perfectly. d. All of these. e. None of these.

d. All of these.

Which of the following is not true concerning control limits? a. Variances that fall outside the control limits are investigated. b. Control limits are the top and bottom measures of the allowable range. c. The upper control limit is the standard plus the allowable deviation. d. In current practice, control limits are set objectively using standard formulas. e. The lower control limit is the standard minus the allowable deviation.

d. In current practice, control limits are set objectively using standard formulas.

The standard cost system differs from the actual cost system in the assignment of a. direct materials. b. direct labor. c. overhead. d. all of the manufacturing inputs. e. none of the manufacturing inputs.

d. all of the manufacturing inputs.

The sources of quantitative standards include a. historical experience. b. engineering studies. c. input from operating personnel. d. historical experience, engineering studies, and input from operating personnel. e. None of these.

d. historical experience, engineering studies, and input from operating personnel.

Standards based on the amount of input that should be used per unit of output are called a. ideal standards. b. price standards. c. kaizen standards. d. quantity standards. e. currently attainable standards.

d. quantity standards.

The standard quantity of materials allowed is computed by the equation a. unit quantity standard × standard output. b. unit quantity standard × actual input. c. unit quantity standard × standard input. d. unit quantity standard × actual output. e. not shown here.

d. unit quantity standard × actual output.

Which of the following is not true regarding the use of materials variance information? a. The purchasing agent has the responsibility for controlling the materials price variance. b. The production manager is generally responsible for materials usage. c. The production manager is concerned with minimizing scrap, waste, and rework. d. The purchasing department is responsible for acquiring quality materials. e. All of these are true.

e. All of these are true. `

Which of the following is true regarding currently attainable standards? a. They can be achieved under efficient operating conditions. b. Allowance is made for normal breakdowns, interruptions, etc. c. They are challenging but achievable. d. They tend to achieve higher performance levels from personnel. e. All of these.

e. All of these.