Chapter 11 Questions

Which of the following is incorrect about variance reports? A. They facilitate "management by exception." B. They should only be sent to the top level of management. C. They should be prepared as soon as possible. D. They may vary in form, content, and frequency among companies.

They should only be sent to the top level of management.

True or False: The use of an inexperienced worker instead of an experienced employee can result in a favorable labor price variance but probably an unfavorable quantity variance.

True

Which of the following is correct about the total overhead variance? A. Budgeted overhead and overhead applied are the same. B. Total actual overhead is composed of variable overhead, fixed overhead, and period costs. C. Standard hours actually worked are used in computing the variance. D. Standard hours allowed for the work done is the measure used in computing the variance.

Standard hours allowed for the work done is the measure used in computing the variance.

In producing product AA, 6,300 pounds of direct materials were used at a cost of $1.10 per pound. The standard was 6,000 pounds at $1.00 per pound. The direct materials quantity variance is: A. $330 unfavorable. B. $300 unfavorable. C. $600 unfavorable. D. $630 unfavorable.

$300 unfavorable. (6,300 x 1) - (6,000 x 1)

A company has observed a favorably trending direct materials quantity variance. The company is reviewing its costs to determine if it should make any changes in materials purchases. What action should this company take? A. Change to higher quality materials and raise the standard price B. Begin purchasing lower quality materials at a lower market price C. Begin purchasing lower quality materials at the current standard price D. Continue purchasing the materials it has been purchasing and lower the standard quantity

Continue purchasing the materials it has been purchasing and lower the standard quantity

Which of the following would not be an objective used in the customer perspective of the balanced scorecard approach? A. Percentage of customers who would recommend product to a friend. B. Customer retention. C. Brand recognition. D. Earnings per share.

Earnings per share.

Which of the following is incorrect about a standard cost accounting system? A. It is applicable to job order costing. B. It is applicable to process costing. C. It reports only favorable variances. D. It keeps separate accounts for each variance.

It reports only favorable variances.

A company has a favorable labor price variance and an unfavorable labor quantity variance. What could be causing these variances? A. The company is using low-skilled workers who take less time to produce a unit of product. B. The company is using highly skilled workers who take less time to produce a unit of product. C. The company is using low-skilled workers who take a longer time to produce a unit of product. D. The company is using highly skilled workers who take a longer time to produce a unit of product.

The company is using low-skilled workers who take a longer time to produce a unit of product.

A company determined they had a favorable materials price variance and an unfavorable materials quantity variance. What could be the cause of these variances? A. The company may have purchased cheaper materials and used fewer materials in production. B. The company may have purchased more expensive materials and used fewer materials in production. C. The company may have purchased cheaper materials that may have caused production to waste more materials than expected. D. The company may have purchased more expensive materials that may have caused production to use fewer materials than expected.

The company may have purchased cheaper materials that may have caused production to waste more materials than expected.

The setting of standards is: A. a managerial accounting decision. B. a management decision. C. a worker decision. D. preferably set at the ideal level of performance.

a management decision.

The formula for computing the total overhead variance is: A. actual overhead less overhead applied. B. overhead budgeted less overhead applied. C. actual overhead less overhead budgeted. D. No correct answer is given.

actual overhead less overhead applied.

Normal standards: A. allow for rest periods, machine breakdowns, and setup time. B. represent levels of performance under perfect operating conditions. C. are rarely used because managers believe they lower workforce morale. D. are more likely than ideal standards to result in unethical practices.

allow for rest periods, machine breakdowns, and setup time.

Standard costs: A. are imposed by governmental agencies. B. are predetermined unit costs which companies use as measures of performance. C. can be used by manufacturing companies but not by service or not-for-profit companies. D. All of the above.

are predetermined unit costs which companies use as measures of performance.

In using variance reports to evaluate cost control, management normally looks into: A. all variances. B. favorable variances only. C. unfavorable variances only. D. both favorable and unfavorable variances that exceed a predetermined quantitative measure such as a percentage or dollar amount.

both favorable and unfavorable variances that exceed a predetermined quantitative measure such as a percentage or dollar amount.

Standards differ from budgets in that: A. budgets but not standards may be used in valuing inventories. B. budgets but not standards may be journalized and posted. C. budgets are a total amount and standards are a unit amount. D. only budgets contribute to management planning and control.

budgets are a total amount and standards are a unit amount.

The advantages of standard costs include all of the following except: A. management by exception may be used. B. management planning is facilitated. C. they may simplify the costing of inventories. D. management must use a static budget.

management must use a static budget.

If the labor quantity variance is unfavorable and the cause is inefficient use of direct labor, the responsibility rests with the A. sales department. B. production department. C. budget office. D. controller's department.

production department.

In producing product ZZ, 14,800 direct labor hours were used at a rate of $8.20 per hour. The standard was 15,000 hours at $8.00 per hour. Based on these data, the direct labor: A. quantity variance is $1,600 favorable. B. quantity variance is $1,600 unfavorable. C. price variance is $3,000 favorable. D. price variance is $3,000 unfavorable.

quantity variance is $1,600 favorable. (14,800 x 8) - (15,000 x 8)

Generally accepted accounting principles allow a company to: A. report inventory at standard cost but cost of goods sold must be reported at actual cost. B. report cost of goods sold at standard cost but inventory must be reported at actual cost. C. report inventory and cost of goods sold at standard cost as long as there are no significant differences between actual and standard cost. D. report inventory and cost of goods sold only at actual costs; standard costing is never permitted.

report inventory and cost of goods sold at standard cost as long as there are no significant differences between actual and standard cost.

An unfavorable labor quantity variance may be caused by A. worker fatigue or carelessness. B. misallocation of workers. C. paying workers higher wages than expected. D. higher pay rates mandated by union contracts.

worker fatigue or carelessness.