Standard costing

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. Favorable variances are not necessarily good variances.

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 under-applied or over-applied manufacturing overhead.

b. simplify costing procedures.

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. actual cost and total cost applied for the actual output of the period.

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

d. all of the above

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. direct material, direct labor, and overhead.

A large labor efficiency variance is prorated to which of the following at year-end? WIP FG Cost of Goods Sold

yes all

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. bill of material does not include

b. price of component inputs.

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. to provide a distinct measure of cost control.

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. actual output at standard hours.

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. allocated among Work in Process, Finished Goods, and Cost of Goods Sold.

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. can, if properly used, help motivate employees.

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. either job order costing or process costing.

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. specifies tasks to make a unit and the times allowed for each task.

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. a standard cost system, Work in Process Inventory is ordinarily debited with

c. standard costs based on production output.

14. 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. whether the variance is favorable or unfavorable