Exam 4 (ch 9, 10, 12)

Lucky Corporation's purchasing manager obtained a special price on an aluminum alloy from a new supplier, resulting in a direct-material price variance of $9,500F. The alloy produced more waste than normal, as evidenced by a direct-material quantity variance of $2,000U, and was also difficult to use. This slowed worker efficiency, generating a $2,500U labor efficiency variance. To help remedy the situation, the production manager used senior line employees, which gave rise to a $900U labor rate variance. If overall product quality did not suffer, what variance amount is best used in judging the appropriateness of the purchasing manager's decision to acquire substandard material? A. $4,100F. B. $5,000F. C. $7,000F. D. $7,500F. E. $9,500F.

A. $4,100F.

The manufacturing cycle efficiency for PQR Company when the processing time is six hours and inspection, waiting, and move time are one hour each is: A. 0.67. B. 0.75. C. 0.78. D. 0.88. E. an amount other than those shown above.

A. 0.67.

Victoria, Inc., recently completed 52,000 units of a product that was expected to consume five pounds of direct material per finished unit. The standard price of the direct material was $9 per pound. If the firm purchased and consumed 268,000 pounds in manufacturing (cost = $2,304,800), the direct-materials quantity variance would be figured as: A. $72,000F. B. $72,000U. C. $107,200F. D. $107,200U. E. none of the above.

B. $72,000U.

In the calculation of manufacturing cycle efficiency, which of the following activities results in value-added time? A. Moving. B. Processing. C. Inspection. D. Waiting. E. All of the above.

B. Processing.

A favorable labor efficiency variance is created when: A. actual labor hours worked exceed standard hours allowed. B. actual hours worked are less than the standard hours allowed. C. actual wages paid are less than amounts that should have been paid. D. actual units produced exceed budgeted production levels. E. actual units produced exceed standard hours allowed.

B. actual hours worked are less than the standard hours allowed.

Cohen Corporation has a favorable materials quantity variance. Which department would likely be asked to explain the cause of this variance? A. Engineering. B. Purchasing. C. Production. D. Marketing. E. None, because the variance is favorable.

C. Production.

Consider the following statements: I. Behavioral scientists find that perfection standards often discourage employees and result in low worker morale. II. Practical standards are also known as attainable standards. III. Practical standards incorporate a certain amount of inefficiency such as that caused by an occasional machine breakdown. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. II and III. E. I, II, and III.

E. I, II, and III.

Which of the following variances are most similar with respect to the manner in which they are calculated? A. Labor rate variance and labor efficiency variance. B. Materials price variance and materials quantity variance. C. Materials price variance, materials quantity variance, and total materials variance. D. Materials price variance and labor efficiency variance. E. Materials quantity variance and labor efficiency variance.

E. Materials quantity variance and labor efficiency variance.

Cost standards for product no. C77: Direct material 3 pounds at $2.50 per pound $ 7.50 Direct labor 5 hours at $7.50 per hour 37.50 Actual results: Units produced 7,800 units Direct material purchased 26,000 pounds at $2.70 -> $70,200 Direct material used 23,100 pounds at $2.70 -> 62,370 Direct labor 40,100 hours at $7.30 -> 292,730 The direct-material quantity variance is: A. $750F. B. $750U. C. $6,500U. D. $7,250U. E. none of the above.

A. $750F.

To assess how customers perceive a company's products, management may study: A. the number of customer complaints. B. the number of warranty claims. C. the number of products returned. D. the cost of repairing returned products. E. all of the above measures.

E. all of the above measures.

If a company has an unfavorable direct-material quantity variance, then: A. the direct-material price variance is favorable. B. the total direct-material variance is unfavorable. C. the total direct-material variance is favorable. D. the direct-labor efficiency variance is unfavorable. E. any of the above variances can occur.

E. any of the above variances can occur.

Simms Corporation had a favorable direct-labor efficiency variance of $6,000 for the period just ended. The actual wage rate was $0.50 more than the standard rate of $12.00. If the company's standard hours allowed for actual production totaled 9,500, how many hours did the firm actually work? A. 9,000. B. 9,020. C. 9,980. D. 10,000. E. None of the above.

A. 9,000.

Which of the following would not be considered if a company desires to establish a series of practical manufacturing standards? A. Production time lost during unusual machinery breakdowns. B. Normal worker fatigue. C. Freight charges on incoming raw materials. D. Production time lost during setup procedures for new manufacturing runs. E. The historical 2% defect rate associated with raw material inputs.

A. Production time lost during unusual machinery breakdowns.

Which of the following choices correctly notes the use of the standard price per unit of direct material when calculating the materials price variance and the materials quantity variance? Price Variance Quantity Variance A. Used Always used B. Used Occasionally used C. Used Not used D. Not used Always used E. Not used Not used

A. Used Always used

Most companies base the calculation of the materials price variance on the: A. number of units purchased. B. number of units spoiled. C. number of units that should have been used. D. number of units actually used. E. number of units to be purchased during the next accounting period.

A. number of units purchased.

To improve its manufacturing efficiency, companies should strive toward increasing __________ time as a percentage of processing time + inspection time + waiting time + move time. The blank is: A. processing time. B. lead time. C. waiting time. D. move time. E. inspection time.

A. processing time.

The following data relate to product no. 89 of Des Moines Corporation: Direct material standard: 3 square feet at $2.50 per square foot Direct material purchases: 30,000 square feet at $2.60 per square foot Direct material consumed: 29,200 square feet Manufacturing activity, product no. 89: 9,600 units completed The direct-material quantity variance is: A. $1,000F. B. $1,000U. C. $1,040F. D. $1,040U. E. $2,000F.

B. $1,000U

Holland Enterprises recently used 20,000 labor hours to produce 8,300 completed units. According to manufacturing specifications, each unit is anticipated to take 2.5 hours to complete. The company's actual payroll cost amounted to $370,000. If the standard labor cost per hour is $18, Holland's labor rate variance is: A. $10,000F. B. $10,000U. C. $10,375F. D. $10,375U. E. none of the above.

B. $10,000U.

Denver Enterprises recently used 14,000 labor hours to produce 7,500 completed units. According to manufacturing specifications, each unit is anticipated to take two hours to complete. The company's actual payroll cost amounted to $158,200. If the standard labor cost per hour is $11, Denver's labor efficiency variance is: A. $11,000U. B. $11,000F. C. $11,300U. D. $11,300F. E. none of the above.

B. $11,000F.

A perfection standard: A. tends to motivate employees over a long period of time. B. is attainable in an ideal operating environment. C. would make allowances for normal amounts of scrap and waste. D. is generally preferred by behavioral scientists. E. will result in a number of favorable variances on a performance report.

B. is attainable in an ideal operating environment.

Lead indicators guide management to: A. take actions now that will have positive effects on organizational performance now. B. take actions now that will have positive effects on organizational performance in the future. C. take actions in the future that will have positive effects on organizational performance now. D. take actions in the past that will have positive effects on organizational performance in the future. E. pursue identical strategies as those implemented with lag indicators.

B. take actions now that will have positive effects on organizational performance in the future.

An increasingly popular approach that integrates financial and customer performance measures with measures in the areas of internal operations and learning and growth is known as: A. the integrated performance measurement tool (IPMT). B. the balanced scorecard. C. gain sharing. D. cycle efficiency. E. overall quality assessment (OQA).

B. the balanced scorecard.

Courtney purchased and consumed 50,000 gallons of direct material that was used in the production of 11,000 finished units of product. According to engineering specifications, each finished unit had a manufacturing standard of five gallons. If a review of Courtney's accounting records at the end of the period disclosed a material price variance of $5,000U and a material quantity variance of $3,000F, determine the actual price paid for a gallon of direct material. A. $0.50. B. $0.60. C. $0.70. D. An amount other than those shown above. E. Not enough information to judge.

C. $0.70.

Cost standards for product no. C77: Direct material 3 pounds at $2.50 per pound $ 7.50 Direct labor 5 hours at $7.50 per hour 37.50 Actual results: Units produced 7,800 units Direct material purchased 26,000 pounds at $2.70 -> $70,200 Direct material used 23,100 pounds at $2.70 -> 62,370 Direct labor 40,100 hours at $7.30 -> 292,730 The direct-labor rate variance is: A. $7,800F. B. $7,950F. C. $8,020F. D. $8,000U. E. none of the above.

C. $8,020F.

Cost standards for product no. C77: Direct material 3 pounds at $2.50 per pound $ 7.50 Direct labor 5 hours at $7.50 per hour 37.50 Actual results: Units produced 7,800 units Direct material purchased 26,000 pounds at $2.70 -> $70,200 Direct material used 23,100 pounds at $2.70 -> 62,370 Direct labor 40,100 hours at $7.30 -> 292,730 The standard hours allowed for the work performed are: A. 5. B. 5.14. C. 39,000. D. 40,100. E. none of the above.

C. 39,000.

Rogers, Inc., had an unfavorable labor efficiency variance and an unfavorable materials quantity variance. Which department might be held accountable for these variances? A. Purchasing, because bad materials can harm labor efficiency. B. Production, because inefficient workers may use more materials than allowed. C. Purchasing and/or production. D. Marketing. E. Shipping.

C. Purchasing and/or production.

Which of the following journal entries definitely contains an error? A. Raw-Material Inventory 200,000 Direct-Material Price Variance 5,000 Accounts Payable 205,000 B. Raw-Material Inventory 38,000 Direct-Material Price Variance 2,000 Accounts Payable 36,000 C. Raw-Material Inventory 156,000 Direct-Material Price Variance 8,000 Work-in-Process Inventory 148,000 D. Work-in-Process Inventory 67,000 Direct-Material Quantity Variance 3,000 Raw-Material Inventory 70,000 E. Work-in-Process Inventory 79,000 Direct-Material Quantity Variance 4,000 Raw-Material Inventory 75,000

C. Raw-Material Inventory 156,000 Direct-Material Price Variance 8,000 Work-in-Process Inventory 148,000

Which of the following is a predetermined estimated cost that can be used in the calculation of a variance? A. Product cost. B. Actual cost. C. Standard cost. D. Differential cost. E. Marginal cost.

C. Standard cost.

Which of the following are methods for setting standards? A. Analysis of historical data. B. Task analysis. C. Task analysis and the analysis of historical data. D. Matrix application forms. E. Goal congruence.

C. Task analysis and the analysis of historical data.

The individual generally responsible for the direct-material price variance is the: A. sales manager. B. production supervisor. C. purchasing manager. D. finance manager. E. head of the human resources department.

C. purchasing manager.

Solo Corporation recently purchased 25,000 gallons of direct material at $5.60 per gallon. Usage by the end of the period amounted to 23,000 gallons. If the standard cost is $6.00 per gallon and the company believes in computing variances at the earliest point possible, the direct-material price variance would be calculated as: A. $800F. B. $9,200F. C. $9,200U. D. $10,000F. E. $10,000U.

D. $10,000F.

Alex Company recently completed 10,600 units of its single product, consuming 32,000 labor hours that cost the firm $480,000. According to manufacturing specifications, each unit should have required 3 hours of labor time at $15.40 per hour. On the basis of this information, determine Alex's labor rate variance and labor efficiency variance. Rate Efficiency A. $12,720F $3,000F B. $12,720F $3,000U C. $12,800F $3,080F D. $12,800F $3,080U E. $12,800U $3,080U

D. $12,800F $3,080U

Cost standards for product no. C77: Direct material 3 pounds at $2.50 per pound $ 7.50 Direct labor 5 hours at $7.50 per hour 37.50 Actual results: Units produced 7,800 units Direct material purchased 26,000 pounds at $2.70 -> $70,200 Direct material used 23,100 pounds at $2.70 -> 62,370 Direct labor 40,100 hours at $7.30 -> 292,730 The direct-material price variance is: A. $4,620F. B. $4,620U. C. $5,200F. D. $5,200U. E. none of the above.

D. $5,200U.

Cost standards for product no. C77: Direct material 3 pounds at $2.50 per pound $ 7.50 Direct labor 5 hours at $7.50 per hour 37.50 Actual results: Units produced 7,800 units Direct material purchased 26,000 pounds at $2.70 -> $70,200 Direct material used 23,100 pounds at $2.70 -> 62,370 Direct labor 40,100 hours at $7.30 -> 292,730 The direct-labor efficiency variance is: A. $8,000F. B. $8,000U. C. $8,250F. D. $8,250U. E. none of the above.

D. $8,250U.

The following data relate to product no. 33 of La Quinta Corporation: Direct labor standard: 5 hours at $14 per hour Direct labor used in production: 45,000 hours at a cost of $639,000 Manufacturing activity, product no. 33: 8,900 units completed The direct-labor rate variance is: A. $8,900F. B. $8,900U. C. $9,000F. D. $9,000U. E. none of the above.

D. $9,000U.

Variances are computed by taking the difference between which of the following? A. Product cost and period cost. B. Actual cost and differential cost. C. Price factors and rate factors. D. Actual cost and standard cost. E. Product cost and standard cost.

D. Actual cost and standard cost.

At the end of the accounting period, most companies close variance accounts to: A. Raw-Material Inventory. B. Work-in-Process Inventory. C. Finished-Goods Inventory. D. Cost of Goods Sold. E. Income Summary.

D. Cost of Goods Sold.

In which department would an investigation normally begin regarding an unfavorable materials quantity variance? A. Quality control. B. Purchasing. C. Engineering. D. Production. E. Receiving.

D. Production.

A production supervisor generally has little influence over the: A. direct-material quantity variance. B. direct-labor rate variance. C. direct-labor efficiency variance. D. direct-material price variance. E. number of units produced.

D. direct-material price variance.

When considering whether to investigate a variance, managers should consider all of the following except the variance's: A. size. B. pattern of recurrence. C. trends over time. D. nature, namely, whether it is favorable or unfavorable. E. controllability.

D. nature, namely, whether it is favorable or unfavorable

The following data relate to product no. 89 of Des Moines Corporation: Direct material standard: 3 square feet at $2.50 per square foot Direct material purchases: 30,000 square feet at $2.60 per square foot Direct material consumed: 29,200 square feet Manufacturing activity, product no. 89: 9,600 units completed The direct-material price variance is: A. $2,880U. B. $2,920F. C. $2,920U. D. $3,000F. E. $3,000U.

E. $3,000U.

Consider the following information: Actual direct labor hours 34,500 Standard direct labor hours 35,000 Total actual direct labor cost $241,500 Direct-labor efficiency variance, favorable $3,200 The direct-labor rate variance is: A. $17,250U. B. $20,700U. C. $20,700F. D. $21,000F. E. none of the above.

B. $20,700U.

The following data relate to product no. 33 of La Quinta Corporation: Direct labor standard: 5 hours at $14 per hour Direct labor used in production: 45,000 hours at a cost of $639,000 Manufacturing activity, product no. 33: 8,900 units completed The direct-labor efficiency variance is: A. $7,000F. B. $7,000U. C. $7,100F. D. $7,100U. E. none of the above.

B. $7,000U.

Which of the following choices correctly notes a characteristic associated with perfection standards and one associated with practical standards? Perfection Standards; Practical Standards A. Attainable in an ideal environment; Incorporate abnormal occurrences when setting quantity and efficiency targets B. Result in many unfavorable variances; Are often attainable by workers C. Tend to boost worker morale; Generally preferred by behavioral scientists D. Generally, are easily achieved by workers; Result in both favorable and unfavorable variances E. Generally preferred by behavioral scientists; Are easier to achieve than perfection standards

B. Result in many unfavorable variances; Are often attainable by workers

A direct-material quantity variance can be caused by all of the following except: A. improper employee training. B. changes in sales volume. C. acquisition of materials at a very attractive price. D. adjustment problems with machines. E. disgruntled workers.

B. changes in sales volume.

When using a balanced scorecard, a company's market share is typically classified as an element of the firm's: A. financial performance measures. B. customer performance measures. C. learning and growth performance measures. D. internal-operations performance measures. E. interdisciplinary performance measures.

B. customer performance measures.

A standard cost: A. is the "true" cost of a unit of production. B. is a budget for the production of one unit of a product or service. C. can be useful in calculating equivalent units. D. is normally the average cost within an industry. E. is almost always the actual cost from previous years.

B. is a budget for the production of one unit of a product or service.

Consider the following information: Direct material purchased and used, 80,000 gallons Standard quantity of direct material allowed for May production, 76,000 gallons Actual cost of direct materials purchased and used, $176,000 Unfavorable direct-material quantity variance, $9,400 The direct-material price variance is: A. $11,400F. B. $11,400U. C. $12,000F. D. $12,000U. E. none of the above.

C. $12,000F.

Consider the following statements: I. The standard cost per unit of materials is used to calculate a materials price variance. II. The standard cost per unit of materials is used to calculate a materials quantity variance. III. The standard cost per unit of materials cannot be determined until the end of the period. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and II. E. I, II, and III.

D. I and II.

Consider the following statements about variance investigation: I. Variance investigation involves a look at only unfavorable variances. II. Variance investigation is typically based on a cost-benefit analysis. III. Variance investigation is often performed by establishing guidelines similar to the following: Investigate variances that are greater than $X or greater than Y% of standard cost. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. II and III. E. I, II, and III.

D. II and III.

Listed below are five variances (and possible causes) that are under review by management of Knox Company. Which of the following is least likely to cause the variance indicated? A. The need to ship goods acquired from a distant supplier via FedEx rather than via truck; material price variance. B. The need to complete goods on a timely basis during a period of high absenteeism; labor rate variance. C. A work-team that is very unhappy with its supervisor; labor efficiency variance. D. The need to close a plant for two days because of blizzard conditions; material quantity variance, part no. 542. E. A malfunctioning piece of manufacturing equipment; labor efficiency variance.

D. The need to close a plant for two days because of blizzard conditions; material quantity variance, part no. 542.

The term "management by exception" is best defined as: A. choosing exceptional managers. B. controlling actions of subordinates through acceptance of management techniques. C. investigating unfavorable variances. D. devoting management time to investigate significant variances. E. controlling costs so that non-zero variances are treated as "exceptional"

D. devoting management time to investigate significant variances.

Swedish Cruise Lines (SCL), which operates in a very competitive marketplace, is considering four categories of performance measures: (1) profitability measures, (2) customer-satisfaction measures, (3) efficiency and quality measures, and (4) learning and growth measures. The company assigns one manger to each ship in its fleet to oversee the ship's general operations. If SCL desired to adopt a balanced-scorecard approach, which measures should the firm use in the evaluation of its managers? A. 1. B. 1, 2. C. 2, 3. D. 1, 2, 4. E. 1, 2, 3, 4.

E. 1, 2, 3, 4.

Which of the following individuals is least likely to become involved in the setting of either direct material standards or direct labor standards? A. The purchasing manager. B. A production supervisor. C. An engineer. D. A machine operator. E. A company's president.

E. A company's president.

Which of the following correctly lists all the information needed to calculate a labor rate variance? A. Standard labor rate and actual hours worked. B. Actual hours worked and actual units produced. C. Standard labor rate, actual labor rate, and actual units produced. D. Actual labor rate and actual hours worked. E. Actual labor rate, standard labor rate, and actual hours worked.

E. Actual labor rate, standard labor rate, and actual hours worked.

Which of the following is a criticism of standard costing, as applied to today's manufacturing environment? A. Automated manufacturing processes are very consistent in meeting production specifications, making variances very small and relatively unimportant. B. Variance information is usually aggregated (i.e., combined) rather than associated with a particular batch of goods or a specific product line. C. Traditional standard costing fails to focus on key business issues such as customer service and bringing products to market faster than the competition. D. Standard costing pays considerable attention to labor cost and labor efficiency, which are becoming a relatively unimportant factor of production. E. All of the above are valid criticisms.

E. All of the above are valid criticisms.

Which of the following would not be a concern of a company that desires to compete in a global manufacturing arena? A. Number of new products introduced. B. Manufacturing cycle efficiency. C. Number of customer complaints. D. Number of on-time deliveries. E. All of the above would be concerns.

E. All of the above would be concerns.

Justin Company recently purchased materials from a new supplier at a very attractive price. The materials were found to be of poor quality, and the company's laborers struggled significantly as they shaped the materials into finished product. In a desperation move to make up for some of the time lost, the manufacturing supervisor brought in more-senior employees from another part of the plant. Which of the following variances would have a high probability of arising from this situation? A. Material price variance, favorable. B. Material quantity variance, unfavorable. C. Labor rate variance, unfavorable. D. Labor efficiency variance, unfavorable. E. All of the above.

E. All of the above.

Which of the following combinations of direct-material variances might prompt management to undertake a detailed variance investigation? A. Price, unfavorable; quantity, unfavorable. B. Price, unfavorable; quantity, favorable. C. Price, favorable; quantity, unfavorable. D. Price favorable; quantity, favorable. E. All of the above.

E. All of the above.

Which of the following perspectives is influenced by a company's vision and strategy? A. Financial. B. Customer. C. Internal operations. D. Learning and growth. E. All of the above.

E. All of the above.

Which of the following would be considered if a company desires to establish a series of practical manufacturing standards? A. The productivity loss associated with a short-term worker slowdown. B. Normal defect rates in an assembly process. C. Highly unusual spoilage rates with direct materials. D. Quantity discounts associated with purchases of direct materials. E. Both "B" and "D"

E. Both "B" and "D"

Which of the following is not a valid way to adapt standard cost systems to today's manufacturing environment? A. Emphasize material and overhead costs. B. Use more non-traditional cost drivers such as number of setups or number of engineering change orders. C. Update standards more frequently to adjust for the elimination of non-value-added costs. D. Use additional nonfinancial measures for performance evaluation and control. E. Devote more resources to the tracking of direct labor cost.

E. Devote more resources to the tracking of direct labor cost.

Which of the following variances cannot occur together during the same accounting period? A. Unfavorable labor rate variance and favorable labor efficiency variance. B. Unfavorable labor efficiency variance and favorable materials quantity variance. C. Favorable labor rate variance and unfavorable total labor variance. D. Favorable labor efficiency variance and favorable materials quantity variance. E. None of the above, as all of these variance combinations are possible.

E. None of the above, as all of these variance combinations are possible.

When using a balanced scorecard, which of the following is typically classified as an internal-operations performance measure? A. Cash flow. B. Number of customer complaints. C. Employee training hours. D. Number of employee suggestions. E. Number of suppliers used.

E. Number of suppliers used.

The typical balanced scorecard is best described as containing: A. financial performance measures. B. nonfinancial performance measures. C. neither financial nor nonfinancial performance measures. D. both financial and nonfinancial performance measures. E. both financial and nonfinancial performance measures, the latter often covering a broad range of perspectives such as customers, internal operations, and learning and growth.

E. both financial and nonfinancial performance measures, the latter often covering a broad range of perspectives such as customers, internal operations, and learning and growth.

A direct-labor efficiency variance cannot be caused by: A. inexperienced employees. B. poor quality raw materials. C. employee inefficiency. D. an out-of-date labor time standard. E. producing fewer finished units than originally planned.

E. producing fewer finished units than originally planned.

A statistical control chart is best used for determining: A. direct-material price variances. B. direct-labor variances. C. whether a variance is favorable or unfavorable. D. who should be held accountable for specific variances. E. whether a particular variance should be investigated.

E. whether a particular variance should be investigated.

Standard costs: A. allow a manager to assess the efficiency of operations. B. allow a company to practice management by exception. C. provide management with a basis for performance evaluations. D. if set correctly, can provide a motivational tool for employees. E. will provide all of the above benefits for a company.

E. will provide all of the above benefits for a company.