unit 8 concepts

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. T or F?

False

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

False

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

False

The variable overhead variance is affected by input price changes only. T or F?

False

Activity flexible budgeting is the prediction of what activity costs will be as production output changes. T or F?

Fasle

In keep-or-drop decisions, both the segment's contribution margin and its segment margin are useful in evaluating the performance of the segment. T or F?

True

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

True

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

True

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

True

Responsibility for variable overhead spending and efficiency variances is generally assigned to production departments. T or F?

True

The actual quantity of input at the actual price less the actual quantity of input at the standard price is the price variance. T or F?

True

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

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. T or F?

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. T of F?

True

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

True

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

True

Assume that the expectations on the static budget were met. We can conclude that a. the static budget was ill conceived. b. the effectiveness of the manager is not in question. c. the manager is very efficient. d. there is no need for a flexible budget. e. None of these.

b

Responsibility for the variable overhead spending variance is usually assigned to a. the purchasing department. b. the production department. c. the engineering department. d. the personnel department. e. None of these.

b

The major differences between functional and activity-based budgeting are found within which of the following categories? a. overhead b. selling c. administration d. All of these. e. None of these.

d

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

Static budgets are the best benchmarks for preparing a performance report. T or F?

False

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

False

The first step in making a short-run decision is to identify alternatives as possible solutions to the problem. T or F?

False

An unfavorable price variance occurs whenever the actual prices are greater than the standard prices. T or F?

True

Currently attainable standards can be achieved under efficient operating conditions. T or F?

True

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. Rationale: Although the benefits of operational control may not extend to these manufacturing environments, variances can still be computed and presented in reports to higher-level managers so they can monitor the financial dimension.

A static budget is a budget for a particular level of activity. T or F?

F

An activity-based budgetary approach can be used to emphasize cost increases through the reduction of wasteful activities and improving the efficiency of necessary activities. T or F?

False

An after-the-fact flexible budget allows managers to generate financial results from a number of potential scenarios. T or F?

False

Ideal standards can be achieved under efficient operating conditions. T or F?

False

One reason for adopting a standard cost system is to make product costing easier. T or F?

False

Resources that are acquired in advance of usage are flexible resources. T or F?

False

Standard costs are developed for direct materials, direct labor, and variable overhead only. T of F?

False

Standard costs are developed for direct materials, direct labor, and variable overhead only. T or F?

False

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

True

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

True

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 T or F?

True

An activity-based budgetary approach can be used to emphasize cost reduction and process management. T or F?

True

A performance report using activity flexible budgeting compares a. budgeted costs for actual activity usage levels with the actual activity costs. b. actual activity costs with budgeted overhead costs. c. actual overhead costs with the budgeted activity costs for actual activity usage levels. d. the static activity budget costs with the budgeted activity costs for the actual activity usage levels. e. None of these.

a

A static budget is best used to a. measure whether or not a manager accomplishes his or her goals. b. compare expected costs at the actual level of activity with the actual costs. c. assess how well costs were controlled during the year. d. determine managerial efficiency. e. None of these.

a

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

a

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

The standard fixed overhead rate is often calculated as a. budgeted fixed overhead divided by practical capacity measured in standard hours. b. actual fixed overhead divided by practical capacity measured in standard hours. c. budgeted fixed overhead divided by actual hours. d. budgeted fixed overhead divided by practical capacity measured in actual hours. e. None of these.

a

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.

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 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.

To create a meaningful performance report, a. actual costs are compared with the prior year's actual costs. b. actual costs are compared with the expected costs at the same level of activity. c. actual costs are calculated as a percentage of sales. d. actual costs are compared with the expected costs found in the static budget. e. expected costs of the static budget are compared with the expected costs of the flexible budget.

b

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

b

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.

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.

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. 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. d. An unfavorable materials usage variance could result from not efficiently utilizing raw materials, thus causing waste. e. An unfavorable labor efficiency variance can be caused by machine downtime, and poor quality materials.

c

Future costs that differ across alternatives are a. product costs. b. variable costs. c. relevant costs. d. opportunity costs. e. sunk costs.

c

In an activity flexible budget, the fixed cost component typically corresponds to a. resources that vary with direct labor hours. b. resources that vary as the activity output changes. c. resources acquired in advance of usage. d. resources acquired as needed. e. None of these.

c

Inefficient usage of labor implies a(n) a. favorable variable overhead spending variance. b. unfavorable variable overhead spending variance. c. unfavorable variable overhead efficiency variance. d. favorable variable overhead efficiency variance. e. unfavorable variable overhead efficiency variance and an unfavorable variable overhead spending variance.

c

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

The variable overhead efficiency variance claims to measure a. changes in spending efficiency. b. productive efficiency. c. changes in variable overhead costs because of the efficient (inefficient) use of the cost driver. d. changes in variable overhead costs attributable to inefficient purchase of variable inputs. e. None of these.

c

Which budget is used to assess managerial efficiency? a. static budget b. cash budget c. flexible budget d. sales budget e. production budget

c

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. Answers: 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

activity-based budgeting a. builds a budget for each function. b. identifies only the overhead activity. c. classifies costs as variable or fixed with respect to the activity output measure. d. All of these. e. None of these.

c

In budgeting at the activity level, the cost behavior of each activity is defined with respect to a. direct labor hours. b. machine hours. c. the activity output measure. d. the activity's resource driver. e. None of these.

c.

A budget prepared for a particular level of activity is a(n) a. ABB budget. b. flexible budget. c. variable budget. d. static budget. e. operational budget.

d

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

d

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

The act of choosing among alternatives with an immediate or limited end in view is termed a. assessing feasible alternative. b. strategic decision making. c. constructing a decision model. d. short-run decision making. e. None of these.

d

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

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

The two variances for variable overhead are a. spending and budget variances. b. budget and volume variances. c. spending and volume variances. d. spending and efficiency variances. e. volume and efficiency variances.

d

a static budget a. is considered a good choice for benchmarks in preparing a performance report. b. computes expected costs for a range of activity levels. c. compares actual costs with budgeted costs. d. is prepared for a particular level of activity. e. None of these are correct.

d

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.

The standard quantity of materials allowed is computed by the equation

d.

A before-the-fact flexible budget a. calculates expected costs for various levels of activity. b. allows managers to deal with uncertainty. c. can be used to generate results for a number of plausible scenarios. d. is a useful planning tool. e. All of these.

e

A decision in which a manager needs to determine whether a product line (or segment) should continue or be eliminated is what kind of decision? a. make-or-buy b. relevant c. sell-or-process-further d. special-order e. keep-or-drop

e

An after-the-fact flexible budget a. is a budget for the actual level of activity. b. is used for performance reports. c. calculates what costs should have been for the actual level of activity. d. is used to compare expected costs with actual costs. e. All of these.

e

Which budget should be used to determine managerial effectiveness? a. after-the-fact flexible budget b. before-the-fact flexible budget c. financial budget d. cash budget e. static budget

e

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

e

Which of the following is not true concerning direct materials variances? a. Separate materials variances can be computed for each type of material used. b. The materials price variance uses the actual quantity of materials purchased rather than the actual quantity of materials used. c. 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. d. The materials usage variance uses the actual quantity of materials used. e. The materials price variance always uses the actual quantity of materials used rather than the actual quantity of materials purchased.

e

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