Principles of Managerial Accounting - Chapter 23 Study Guide

Accounting systems that use standards for product costs are called variable cost systems.

False

An unfavorable cost variance occurs when the standard cost exceeds the actual cost.

False

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual direct materials used are 800 units at $12, the direct materials quantity variance is $2,200 unfavorable.

False

If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual direct materials used are 1,600 units at $13, the direct materials quantity variance is $5,200 favorable.

False

Standard costs should always be revised when they differ from actual costs.

False

The fact that workers are unable to meet a properly determined direct labor standard is sufficient cause to change the standard.

False

Standard costs are divided into which of the following components?

standard price and standard quantity

Lucy Corporation purchased and used 129,000 board feet of lumber in production at a total cost of $1,548,000. Original production had been budgeted for 22,000 units with a standard materials quantity of 5.7 board feet per unit and a standard price of $12 per board foot. Actual production was 23,500 units.

$0 Actual Price = Total Cost ÷ Actual Lumber Purchased and Used in Production = $1,548,000 ÷ 129,000 board feet = $12 Direct Materials Price Variance = ($12 - $12) × 129,000 board feet = $0 × 129,000 board feet = $0

Myers Corporation has the following data related to direct materials costs for November: actual costs for 5,000 pounds of material at $4.50 and standard costs for 4,800 pounds of material at $5.10 per pound. The direct materials quantity variance is

$1,020 unfavorable

Myers Corporation has the following data related to direct materials costs for November: actual cost for 4,700 pounds of material at $5.30 per pound and standard cost for 4,440 pounds of material at $6.30 per pound. The direct materials price variance is

$4,700 favorable Direct Materials Price Variance = (Actual Price − Standard Price) × Actual Quantity = ($5.30 − $6.30) × 4,700 pounds = $(1.00) × 4,700 pounds = $(4,700) Favorable Variance

The standard costs and actual costs for direct materials for the manufacture of 2,700 actual units of product are as follows: Standard Costs Direct materials 1,040 kilograms at $8.50 Actual Costs Direct materials 2,700 kilograms at $8.25 The direct materials price variance is

$675 favorable

Financial reporting systems that are guided by the principle of exceptions focus attention on variances from standard costs.

True

Standards are performance goals used to evaluate and control operations.

True

The difference between the standard cost of a product and its actual cost is called a cost variance.

True

The standard cost is how much a product should cost to manufacture.

True

Which of the following conditions normally would indicate that standard costs should be revised?

all of these choices The Engineering Department has revised product specifications in responding to customer suggestions. The average price of raw materials increased from $4.68 per pound to $4.82 per pound. The company has signed a new union contract that increases the factory wages on average by $3.50 an hour.

A report that summarizes actual costs, standard costs, and the differences for the units produced is called a

budget performance report

The total manufacturing cost variance consists of

direct materials cost variance, direct labor cost variance, and factory overhead cost variance

The standard price and quantity of direct materials are separated because

direct materials prices are controlled by the purchasing department and quantity used is controlled by the production department

Standards that represent levels of operation that can be attained with reasonable effort are called _____ standards.

normal