COST FINAL

Actual fixed overhead minus budgeted fixed overhead equals the a. fixed overhead volume variance. b. fixed overhead spending variance. c. noncontrollable variance. d. controllable variance.

B

All costs that are incurred between the split-off point and the point of sale are known as a. sunk costs. b. incremental separate costs. c. joint cost. d. committed costs.

B

A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance if a. the mix of workers used in the production process was more experienced than the normal mix. b. the mix of workers used in the production process was less experienced than the normal mix. c. workers from another part of the plant were used due to an extra heavy production schedule. d. the purchasing agent acquired very high quality material that resulted in less spoilage.

A

If two or more products share a common process before they are separated, the joint costs should be assigned in a manner that a. assigns a proportionate amount of the total cost to each product on a quantitative basis. b. maximizes total earnings. c. minimizes variations in unit production costs. d. does not introduce an element of estimation into the process of accumulating costs for each product.

A

In a lumber mill, which of the following would most likely be considered a primary product? a. 2 ´ 4 studs b. sawdust c. wood chips d. tree bark

A

Joint costs are allocated to joint products to a. obtain a cost per unit for financial statement purposes. b. provide accurate management information on production costs of each type of product. c. compute variances from expected costs for each joint product. d. allow the use of high-low analysis by the company.

A

Not-for-profit organizations are required by the _______ to allocate joint costs. a. AICPA b. FASB c. CASB d. GASB

A

The definition of a sunk cost is a. a cost that cannot be recovered regardless of what happens. b. a cost that relates to money poured into the ground. c. considered the original cost of an item. d. also known as an opportunity cost.

A

The efficiency variance computed on a three-variance approach is a. equal to the variable overhead efficiency variance computed on the four-variance approach. b. equal to the variable overhead spending variance plus the variable overhead efficiency variance computed on the four-variance approach. c. computed as the difference between applied variable overhead and actual variable overhead. d. computed as actual variable overhead minus the flexible budget for variable overhead based on actual hours worked.

A

Joint cost allocation is useful for a. decision making. b. product costing. c. control. d. evaluating managers' performance.

B

A variable overhead spending variance is caused by a. using more or fewer actual hours than the standard hours allowed for the production achieved. b. paying a higher/lower average actual overhead price per unit of the activity base than the standard price allowed per unit of the activity base. c. larger/smaller waste and shrinkage associated with the resources involved than expected. d. both b and c are causes.

D

An unfavorable fixed overhead volume variance is most often caused by a. actual fixed overhead incurred exceeding budgeted fixed overhead. b. an over-application of fixed overhead to production. c. an increase in the level of the finished inventory. d. normal capacity exceeding actual production levels.

D

If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n) a. favorable variable overhead spending variance exists. b. favorable variable overhead efficiency variance exists. c. favorable volume variance exists. d. unfavorable volume variance exists.

B

Joint costs are allocated to which of the following products? By-products Scrap a. yes yes b. yes no c. no no d. no yes

C

A company may set predetermined overhead rates based on normal, expected annual, or theoretical capacity. At the end of a period, the fixed overhead spending variance would a. be the same regardless of the capacity level selected. b. be the largest if theoretical capacity had been selected. c. be the smallest if theoretical capacity had been selected. d. not occur if actual capacity were the same as the capacity level selected.

A

A company wishing to isolate variances at the point closest to the point of responsibility will determine its material price variance when a. material is purchased. b. material is issued to production. c. material is used in production. d. production is completed.

A

The material price variance (computed at point of purchase) is a. the difference between the actual cost of material purchased and the standard cost of material purchased. b. the difference between the actual cost of material purchased and the standard cost of material used. c. primarily the responsibility of the production manager. d. both a and c.

A

The overhead variance calculated as total budgeted overhead at the actual input production level minus total budgeted overhead at the standard hours allowed for actual output is the a. efficiency variance. b. spending variance. c. volume variance. d. budget variance.

A

The sum of the labor mix and labor yield variances equals a. the labor efficiency variance. b. the total labor variance. c. the labor rate variance. d. nothing because these two variances cannot be added since they use different costs.

A

Variance analysis for overhead normally focuses on a. efficiency variances for machinery and indirect production costs. b. volume variances for fixed overhead costs. c. the controllable variance as a lump-sum amount. d. the difference between budgeted and applied variable overhead.

A

Incremental separate costs are defined as all costs incurred between ___________ and the point of sale. a. inception b. split-off point c. transfer to finished goods inventory d. point of addition of disposal costs

B

Scrap is defined as a a. finished unit of product that has no sales value. b. residual of the production process that has limited sales value. c. residual of the production process that can be reworked for sale as an irregular unit of product. d. residual of the production process that has no sales value.

B

The sum of the material mix and material yield variances equals a. the material purchase price variance. b. the material quantity variance. c. the total material variance. d. none of the above.

B

When allocating joint process cost based on tons of output, all products will a. be salable at split-off. b. have the same joint cost per ton. c. have a sales value greater than their costs. d. have no disposal costs at the split-off point.

B

When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields a a. combined price-quantity variance. b. price variance. c. quantity variance. d. mix variance.

B

A standard cost system may be used in a. job order costing, but not process costing. b. process costing, but not job order costing. c. either job order costing or process costing. d. neither job order costing nor process costing.

C

The net realizable value approach mandates that the NRV of the by-products/scrap be treated as a. an increase in joint costs. b. a sunk cost. c. a reduction of joint costs. d. a cost that can be ignored totally.

C

The standard predominantly used in Western cultures for motivational purposes is a(n) _____________________ standard. a. expected annual b. ideal c. practical d. theoretical

C

The total labor variance can be subdivided into all of the following except a. rate variance. b. yield variance. c. learning curve variance. d. mix variance.

C

Under an acceptable method of costing by-products, inventory costs of the by-product are based on the portion of the joint production cost allocated to the by-product a. but any subsequent processing cost is debited to the cost of the main product. b. but any subsequent processing cost is debited to revenue of the main product. c. plus any subsequent processing cost. d. minus any subsequent processing cost.

C

Which of the following is a commonly used joint cost allocation method? a. high-low method b. regression analysis c. approximated sales value at split-off method d. weighted average quantity technique

C

A product may be processed beyond the split-off point if management believes that a. its marketability will be enhanced. b. the incremental cost of further processing will be less than the incremental revenue of further processing. c. the joint cost assigned to it is not already greater than its prospective selling price. d. both a and b.

D

Which of the following would not be considered a sunk cost? a. direct material cost b. direct labor cost c. joint cost d. building cost

D

An operations flow document a. tracks the cost and quantity of material through an operation. b. tracks the network of control points from receipt of a customer's order through the delivery of the finished product. c. specifies tasks to make a unit and the times allowed for each task. d. charts the shortest path by which to arrange machines for completing products.

C

Analyzing overhead variances will not help in a. controlling costs. b. evaluating performance. c. determining why variances occurred. d. planning costs for future production cycles.

C

At the end of a period, a significant material quantity variance should be a. closed to Cost of Goods Sold. b. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods Sold. c. allocated among Work in Process, Finished Goods, and Cost of Goods Sold. d. carried forward as a balance sheet account to the next period.

C

Standard costs a. are estimates of costs attainable only under the most ideal conditions. b. are difficult to use with a process costing system. c. can, if properly used, help motivate employees. d. require that significant unfavorable variances be investigated, but do not require that significant favorable variances be investigated.

C

The method of pricing by-products/scrap where no value is assigned to these items until they are sold is known as the a. net realizable value at split-off point method. b. sales value at split-off method. c. realized value approach. d. approximated net realizable value at split-off method.

C

The use of separate variable and fixed overhead rates is better than a combined rate because such a system a. is less expensive to operate and maintain. b. does not result in underapplied or overapplied overhead. c. is more effective in assigning overhead costs to products. d. is easier to develop.

C

Total actual overhead minus total budgeted overhead at the actual input production level equals the a. variable overhead spending variance. b. total overhead efficiency variance. c. total overhead spending variance. d. total overhead volume variance.

C

Which of the following is a false statement about scrap and by-products? a. Both by-products and scrap are salable. b. A by-product has a higher sales value than does scrap. c. By-products and scrap are the primary reason that management undertakes the joint process. d. Both scrap and by-products are incidental outputs to the joint process.

C

Which of the following statements is true regarding by-products or scrap? a. Process costing is the only method that should result in by-products or scrap. b. Job order costing systems will never have by-products or scrap. c. Job order costing systems may have instances where by-products or scrap result from the production process. d. Process costing will never have by-products or scrap from the production process.

C

While preparing a salad, you remove the core of a head of lettuce. This core would be classified as a. defective. b. shrinkage. c. waste. d. scrap.

C

Standard costs may be used for a. product costing. b. planning. c. controlling. d. all of the above.

D

The standard cost card contains quantities and costs for a. direct material only. b. direct labor only. c. direct material and direct labor only. d. direct material, direct labor, and overhead.

D

Which of the following capacity levels has traditionally been used to compute the fixed overhead application rate? a. expected annual b. normal c. theoretical d. prior year

A

In a just-in-time inventory system, a. practical standards become ideal standards. b. ideal standards become expected standards. c. variances will not occur because of the zero-defects basis of JIT. d. standard costing cannot be used.

B

If all sub-variances are calculated for labor, which of the following cannot be determined? a. labor rate variance b. actual hours of labor used c. reason for the labor variances d. efficiency of the labor force

C

In analyzing manufacturing overhead variances, the volume variance is the difference between the a. amount shown in the flexible budget and the amount shown in the debit side of the overhead control account. b. predetermined overhead application rate and the flexible budget application rate times actual hours worked. c. budget allowance based on standard hours allowed for actual production for the period and the amount budgeted to be applied during the period. d. actual amount spent for overhead items during the period and the overhead amount applied to production during the period.

C

The term standard hours allowed measures a. budgeted output at actual hours. b. budgeted output at standard hours. c. actual output at standard hours. d. actual output at actual hours.

C

A favorable fixed overhead spending variance indicates that a. budgeted fixed overhead is less than actual fixed overhead. b. budgeted fixed overhead is greater than applied fixed overhead. c. applied fixed overhead is greater than budgeted fixed overhead. d. actual fixed overhead is less than budgeted fixed overhead.

D

A favorable fixed overhead volume variance occurs if a. there is a favorable labor efficiency variance. b. there is a favorable labor rate variance. c. production is less than planned. d. production is greater than planned.

D

A purpose of standard costing is to a. replace budgets and budgeting. b. simplify costing procedures. c. eliminate the need for actual costing for external reporting purposes. d. eliminate the need to account for year-end underapplied or overapplied manufacturing overhead.

D

A total variance is best defined as the difference between total a. actual cost and total cost applied for the standard output of the period. b. standard cost and total cost applied to production. c. actual cost and total standard cost of the actual input of the period. d. actual cost and total cost applied for the actual output of the period.

D

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 reduce or eliminate future occurrences of the variance d. whether the variance is favorable or unfavorable

D

The fixed overhead application rate is a function of a predetermined activity level. If standard hours allowed for good output equal the predetermined activity level for a given period, the volume variance will be a. zero. b. favorable. c. unfavorable. d. either favorable or unfavorable, depending on the budgeted overhead.

A

Under the two-variance approach, the volume variance is computed by subtracting _________ based on standard input allowed for the production achieved from budgeted overhead. a. applied overhead b. actual overhead c. budgeted fixed overhead plus actual variable overhead d. budgeted variable overhead

A

Which of the following components of production are allocable as joint costs when a single manufacturing process produces several salable products? a. direct material, direct labor, and overhead b. direct material and direct labor only c. direct labor and overhead only d. overhead and direct material only

A

Which of the following statements regarding standard cost systems is true? a. Favorable variances are not necessarily good variances. b. Managers will investigate all variances from standard. c. The production supervisor is generally responsible for material price variances. d. Standard costs cannot be used for planning purposes since costs normally change in the future.

A

A bill of material does not include a. quantity of component inputs. b. price of component inputs. c. quality of component inputs. d. type of product output.

B

A company using very tight (high) standards in a standard cost system should expect that a. no incentive bonus will be paid. b. most variances will be unfavorable. c. employees will be strongly motivated to attain the standards. d. costs will be controlled better than if lower standards were used.

B

A primary purpose of using a standard cost system is a. to make things easier for managers in the production facility. b. to provide a distinct measure of cost control. c. to minimize the cost per unit of production. d. b and c are correct.

B

Approximated net realizable value at split-off for joint products is computed as a. selling price at split-off minus further processing and disposal costs. b. final selling price minus further processing and disposal costs. c. selling price at split-off minus allocated joint processing costs. d. final selling price minus a normal profit margin.

B

By-products are a. allocated a portion of joint production cost. b. not sufficient alone, in terms of sales value, for management to justify undertaking the joint process. c. also known as scrap. d. the primary reason management undertook the production process.

B

Fixed overhead costs are a. best controlled on a unit-by-unit basis of products produced. b. mostly incurred to provide the capacity to produce and are best controlled on a total basis at the time they are originally negotiated. c. constant on a per-unit basis at all different activity levels within the relevant range. d. best controlled as to spending during the production process.

B

Gallagher Corporation. incurred 2,300 direct labor hours to produce 600 units of product. Each unit should take 4 direct labor hours. Gallagher Corporation applies variable overhead to production on a direct labor hour basis. The variable overhead efficiency variance a. will be unfavorable. b. will be favorable. c. will depend upon the capacity measure selected to assign overhead to production. d. is impossible to determine without additional information.

B

If a company obtains two salable products from the refining of one ore, the refining process should be accounted for as a(n) a. mixed cost process. b. joint process. c. extractive process. d. reduction process.

B

In a standard cost system, Work in Process Inventory is ordinarily debited with a. actual costs of material and labor and a predetermined overhead cost for overhead. b. standard costs based on the level of input activity (such as direct labor hours worked). c. standard costs based on production output. d. actual costs of material, labor, and overhead.

C

In a standard cost system, when production is greater than the estimated unit or denominator level of activity, there will be a(n) a. unfavorable capacity variance. b. favorable material and labor usage variance. c. favorable volume variance. d. unfavorable manufacturing overhead variance.

C

Each of the following is a method to allocate joint costs except a. relative sales value. b. relative net realizable value. c. relative weight, volume, or linear measure. d. average unit cost.

D

Fisher Company produces three products from a joint process. The products can be sold at split-off or processed further. In deciding whether to sell at split-off or process further, management should a. allocate the joint cost to the products based on relative sales value prior to making the decision. b. allocate the joint cost to the products based on a physical quantity measure prior to making the decision. c. subtract the joint cost from the total sales value of the products before determining relative sales value and making the decision. d. ignore the joint cost in making the decision.

D

For purposes of allocating joint costs to joint products using the relative sales value at split-off method, the costs beyond split-off a. are allocated in the same manner as the joint costs. b. are deducted from the relative sales value at split-off. c. are deducted from the sales value at the point of sale. d. do not affect the allocation of the joint costs.

D

Joint costs are most frequently allocated based upon relative a. profitability. b. conversion costs. c. prime costs. d. sales value.

D

Joint costs are useful for a. setting the selling price of a product. b. determining whether to continue producing an item. c. evaluating management by means of a responsibility reporting system. d. determining inventory cost for accounting purposes.

D

The split-off point is the point at which a. output is first identifiable as individual products. b. joint costs are allocated to joint products. c. some products may first be sold. d. all of the above.

D

The sum of the material price variance (calculated at point of purchase) and material quantity variance equals a. the total cost variance. b. the material mix variance. c. the material yield variance. d. no meaningful number.

D

The variance least significant for purposes of controlling costs is the a. material quantity variance. b. variable overhead efficiency variance. c. fixed overhead spending variance. d. fixed overhead volume variance.

D

The variance most useful in evaluating plant utilization is the a. variable overhead spending variance. b. fixed overhead spending variance. c. variable overhead efficiency variance. d. fixed overhead volume variance.

D

Waste created by a production process is a. accounted for in the same manner as defective units. b. accounted for as an abnormal loss. c. material that can be sold as an irregular product. d. discarded rather than sold.

D