ACCT 2301 Unit 8

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

False

Which of the following is not true concerning control limits?

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

The materials usage variance is calculated by the equation

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

Which of the following is true concerning the materials price variance?

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?

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

Which of the following is not true concerning direct materials variances?

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?

They are often achievable by operating personnel.

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

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

True

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

True

Currently attainable standards can be achieved under efficient operating conditions.

True

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

True

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

True

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

True

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

True

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

True

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

True

The materials price variance is computed using the equation

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

All of the following are true except

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

Which of the following is not true regarding the use of materials variance information?

All of these are true: -The production manager is concerned with minimizing scrap, waste, and rework. -The purchasing agent has the responsibility for controlling the materials price variance. -The production manager is generally responsible for materials usage. -The purchasing department is responsible for acquiring quality materials.

Which of the following is true regarding currently attainable standards?

All of these: -They can be achieved under efficient operating conditions. -Allowance is made for normal breakdowns, interruptions, etc. -They are challenging but achievable. -They tend to achieve higher performance levels from personnel.

Ideal standards

All of these: -do not allow for machine breakdowns, slack, or lack of skill (even momentarily). -demand maximum efficiency. -can be achieved only if everything operates perfectly.

Ideal standards can be achieved under efficient operating conditions.

False

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

False

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

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.

False

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

False

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

False

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

True

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

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

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

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

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

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

True

Which of the following is true regarding variances?

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

Which of the following is true regarding standard cost systems in manufacturing environments that emphasize continuous improvement and just-in-time manufacturing and purchasing?

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

The standard cost system differs from the actual cost system in the assignment of

all of the manufacturing inputs.

Standard cost systems can enhance operational control through the use of

efficiency variances which indicate the need for corrective action.

The sources of quantitative standards include

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

quantity standards.

Price standards are based on

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

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

the standard cost sheet.

Standard hours allowed are computed using the equation

unit labor standard × actual output.

The standard quantity of materials allowed is computed by the equation

unit quantity standard × actual output.