Accounting 1020 (Chapter 22)
Normal standards: (a) allow for rest periods, machine breakdowns and set-up time (b) reprsent levels of performance under perfect operating agreements (c) are rarely used becuase managers believe they lower worforce morale (d) are more likely than ideal standards to result in unethical practices
(a) allow for rest periods, machine breakdowns and set-up time
In producing product ZZ, 14,800 direct labor hours were used at a rate of $8.20 per hour. The standard was 15,000 hours at $8.00/hr. Based on this data, the direct labor (a) quantity variance is $1,600 favorable (b) quantity variance is $1,600 unfavorable (c) price variance is $2,960 favorable (d) price variance is $3,000 unfavorable
(a) quantity variance is $1,600 favorable [(14,800 * $8,oo) - (15,000 * $8.00)]
labor price variance =
(actual hours x actual rate) - (actual hours x standard rate)
total labor variance =
(actual hours x actual rate) - (standard hours x standard rate)
labor quantity variance =
(actual hours x standard rate) - (standard hours x standard rate)
materials price variance =
(actual quantity x actual price) - (actual quantity x standard price)
total materials variance =
(actual quantity x actual price) - (standard quantity x sstandard price)
materials quantity variance
(actual quantity x standard price) - (standard quantity x standard price)
In producing product AA, 6,300 lbs of direct materials wer used at a cost of $1.10 per lb. The standard was 6,000 at $1.00 per lb. The direct materials quantity variance is (a) $330 unfavorable (b) $300 unfavorable (c) $600 unfavorable (d) 630 unfavorable
(b) $300 unfavorable [(6,300 * $1,oo) - (6,000 * $1.00)]
Which of the following is INCORRECT about variance reports? (a) they facilitate "management exception" (b) They should only be sent to th top level of management (c) they should be prepared as soon as possible (d) they may vary in form, content, and frequency among companies
(b) They should only be sent to th top level of management
The setting of standards is (a) a managerial accounting decision (b) a management decision (c) a worker decision (d) preferably set at the ideal level of performance
(b) a management decision
Standard costs: (a) are imposed by governmental agencies (b) are predetermined unit costs which companies use as measures of performance (c) can only be used by manufacturing companies but mot by service or not-for-profit companies (d) all of the above
(b) are predetermined unit costs which companies use as measures of performance
Each of the following formulas is correct except for: (a) Labor price variance = (actual hours * actual rate) - (actual hours * standard rate) (b) Total overehad variance = actual overhead - overhead applied (c) Materials price variance = (actual quantity * actual price) - (standard quantity * standard price) (d) Labor quantity variance = (actual hours * standard rate) - (standard hours * standard rate)
(c) Materials price variance = (actual quantity * actual price) - (standard quantity * standard price)
Standards differ from budgets in that (a) budgets, but not standards, may be used in valuing invenetories (b) budgets, but not standards, may be journalized and posted (c) budgets are a total amount an standars are a unit amount (d) Only budgets contribute to management planning and control
(c) budgets are a total amount an standars are a unit amount
The formula to compute the overhead volume variance is: (a) fixed overhead rate * (standard hours - actual hours) (b) fixed overhead rate * (normal capacity hours - actual hours) (c) fixed overhead rate * (normal capacity hours - standard hours allowed) (d) (variable overhead rate + fixed overhead rate) x (normal capacity horus - standard hours allowed)
(c) fixed overhead rate * (normal capacity hours - standard hours allowed)
Which of the following is INCORRECT about a standard cost accounting system? (a) It is applicable to job order costing (b) it is applicable to process costing (c) it reports only favorable variances (d) it keeps separate accounts for each variance
(c) it reports only favorable variances
GAAP allow a company to: (a) report inventory at standard cost but COGS must be reported at actual cost (b) report COGS at standard cost but inventory must be reported at actual cost (c) report inventory and COGS at standard cost as long as there are no signifigant differences between actual and standard cost (d) report inventory and COGS only at actual costs; standard costing is never permitted
(c) report inventory and COGS at standard cost as long as there are no signifigant differences between actual and standard cost
In using variance reports to evaulate cost control, managment normally looks into (a) all variances (b) favorable variances only (c) unfavorable variances only (d) both favaorable and unfavorable variances that exceed a predetermined quantitative measure such as % or $ amt
(d) both favaorable and unfavorable variances that exceed a predetermined quantitative measure such as % or $ amt
Which of the following would NOT be an objective used in the customer perspective of the balanced scorecard approach? (a) % of customers who would recommend product to a friend (b) customer retention (c) brand recognition (d) earnings per share
(d) earnings per share
The advantages of standard costs include all of the following EXCEPT (a) management by exception may be used (b) management planning is facilitated (c) they many simlify the costing of inventories (d) managment must use a static budget
(d) managment must use a static budget
The formula for computing hte total overhead variance is (a) the actual overhead [less] overhead applied (b) overhead budgeted [less] overhead applied (c) actual overhead [less] overhead budgeted (d) no correct answer given
(d) no correct answer given
Which of the following is CORRECT about the total overhead variance? (a) "budgeted overhead" and "budgeted overhead applied" are the same (b) Total actual overhead is composed of variable overhead, fixed overhead and period the costs (c) stsandard hours actually worked are used in computing the variance (d) standard hours allowed for the work done is the measure used in computing the variance
(d) standard hours allowed for the work done is the measure used in computing the variance
customer perspectives - example of objectives
1. % of customers who would recommend product 2. customer retention 3. response time per customer request 4. brand recognition 5. customer service expense per customer
many factors that affect the price paid for raw materials include
1. availability of quantity and cash discounts 2 quantity of materials requested 3. delivery method used
advantages of standard costs
1. facilitate management planning 2. promote greater economy 3. useful in setting selling prices 4. contribute to management control 5. useful in highlighting variances in management
labor price variances result from (2) factors
1. paying workers different wages than expected 2. misallocation of workers
internal process perspectives - example of objectives
1. percentage of defect-free products 2. stock outs 3. labor utilization rates 4. waste reduction 5. planning accuracy
learning and grwoth perspectives - example of objectives
1. percentage of employees leaving in less than one year 2. number of corss-trained employees 3. ethics violations 4. training hours 5. reportable accidents
financial perspectives - example of objectives
1. return on assets 2. net income 3. credit rating 4. share price 5. profit per employe
Standard cost accounting system
A double-entery system of accounting in which standard caots are used in making enteries and variances are recognized in the accounts
Financial perspective
A viewpoint employed in the balanced scorecard to evaluate a company's performance using financial measures
Learning and growth perspective
A viewpoint employed in the balanced scorecard to evaluate ow wall a company develops and retains its employees.
Customer perspective
A viewpoint employed in the balanced scorecard to evaluate the company from the perspective of those poeple who buy and use its products or services
Internal process perspective
A viewpont empoyed in the balanced scorecard to evaluate the effectiveness and efficiency of a company's value chain
Balanced scorecard
An approach that incorporates financial and non-financial measures in an integrated system that links performance measurement and a company's strategic goals
Standard pre-determined overhead rate
An overhead rate determined by dividing budgeted overhead costs by an expected standard activity index
Standard costs
Pre-determined unit costs which companies use as measures of performance
Normal standards
Standards based on an efficent level of performance that are attainable under expected operating conditions
Ideal standards
Standards based on the optimum level of performance under perfect operating conditions
Normal capacity
The average activity output that a company should experience over the long run
Direct materials price standard
The cost per unit of direct materials that should be incurred.
Total labor variance
The difference between actual hours [multiplied by] the actual rate and standard hours [multplied by] the standard rate for labor
Labor quantity variance
The difference between actual hours [multiplied by] the standrd rate and standard hours [multiplied by] the standard rate for labor
Overhead controllable variance
The difference between actual overhead incurred and overhead budgeted for the standard hours allowed
Overhead volume variance
The difference between normal capacity hours and standard houros allowed [multiplied by] the fixed overhead rate
Labor price variance
The difference between the actual hours [multiplied by] the standard rate and the actual hours [multiplied] by the standard rate for labor
Materials quantity variance
The difference between the actual quanity [multiplied by] the standard price and the standard quantity [multiplied by] the standard price for materials
Total overhead variance
The difference between the actual quantity [multipied by] the actual price and the standard quantity [multipied by] the standard price of materials
Variance
The difference between total actual costs and total standard costs
Materials Price variance
The differerence betwen the actual quantity [multiplied by] the actual price and the actual quantity [multiplied by] the standard price for materials
Standard hours allowed
The hours that should have been worked for the units produced
Direct materials quantity standard
The quanity of direct materials that hsould be used per unit of finished goods
Direct labor price standard
The rate per hour that should be incurred for direct labor
Direct labor quantity standard
The time that should be required to make one unit of product
overhead controllable variance =
actual overhead - overhead budgeted
total overhead variance =
actual overhead [minus] overhead applied
overhead rate per direct labor hour =
amount [divided by] standard direct labor hours
labor quantity variances relate to the
efficiency of workers
the starting point for determining the causes of significant materials quantity variance is in the ____ department
production
normal standards should be set as
rigorous but attainable
the standard direct materials cost per unit is the
standard direct materials price [multiplied by] the standard direct materials quantity
standard cost =
standard quantity [multiplied] standard price
regulations
standards imposed by government agencies
materials price variance begins at
the purchasing department
the standard cost should be based on
the purchasing department's cost of raw materials
the standard direct labor cost per unit =
the standard direct labor rate [multiplied by] the standard direct labor hours
budget
total amount
standard is defined as a _____
unit amount
mis-allocation of workers refers to
using skilled workers in place of unskilled workers and vice/versa
