unit 8 concepts

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.

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

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 False

true

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

true

T/F Engineering studies are often too rigorous and may not be achievable by operating personnel

true

The labor efficiency variance is calculated by the equation

(Actual Hours × Standard Rate) − (Standard Hours × Standard Rate).

The materials price variance is computed using the equation

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

The labor rate variance is computed by

(Actual Rate × Actual Hours) − (Standard Rate × Actual Hours).

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.

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

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. Ability to easily distinguish the FIFO and weighted average methods of accounting for beginning inventory costs.

Which of the following is not true regarding engineering studies? a. They can determine the most efficient way to operate. b. They are often achievable by operating personnel. c. They provide very rigorous guidelines. d. All of these statements are true. e. More than two of these statements are true.

b. They are often achievable by operating personnel.

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

Which of the following is true regarding historical experience in standard setting? a. It provides very rigorous guidelines. b. Operating personnel may not be able to achieve operating standards based on historical experience. c. It should be used with caution because it can perpetuate inefficiencies. d. Standards based on historical experience are better than standards based on engineering studies. e. None of these.

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

Standard cost systems are adopted a. to improve planning and control. b. to facilitate product costing. c. to improve planning and control, and to facilitate product costing. d. to enhance the operational control of firms that emphasize continuous improvement. e. for all of these reasons.

C. to improve planning and control, and to facilitate product costing.

T/F? 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 materials price variance is computed using the actual quantity of materials purchased, and the materials usage variance is computed using the actual quantity of materials used.

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 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.

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

True

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

True

Which of the following is true regarding variances? a. Unfavorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage. b. Favorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage. c. Unfavorable variances are always credits. d. Favorable variances are always debits. e. None of these.

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

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. efficiency variances which indicate the need for corrective action.

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 cost sheet.

Standard hours allowed are computed using the equation a. unit labor standard × actual output. b. unit labor standard × standard output. c. unit labor standard × actual input. d. unit labor standard × standard input. e. not shown here.

a. unit labor standard × actual output.

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

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

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. the investigation should be undertaken only if the anticipated benefits are greater than the expected costs. c. every variance is investigated. d. managers must consider whether a variance will recur. e. it is difficult to assess the costs and benefits of variance analysis on a case-by-case basis.

c. every variance is investigated.

Standards based on the amount of input that should be used per unit of output are called a. price standards. b. kaizen standards. c. quantity standards. d. ideal standards. e. currently attainable standards.

c.quantity standards.

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. All of these.

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

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

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. all of the manufacturing inputs.

The sources of quantitative standards include a. historical experience. b. engineering studies c. input from operating personnel. d. historical experience, engineering studies, and input from operating personnel e. None of these.

d. historical experience, engineering studies, and input from operating personnel

T/F 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 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. unit quantity standard × actual output.

Which of the following is true regarding currently attainable standards? a. They can be achieved under efficient operating conditions. b. Allowance is made for normal breakdowns, interruptions, etc. c. They are challenging but achievable. d. They tend to achieve higher performance levels from personnel. e. All of these.

e. All of these.

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

false

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

false

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

false

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

false

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

false

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

false

Currently attainable standards can be achieved under efficient operating conditions. True False

true

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

true

T/F 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

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

true

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

true

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

true

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

true