Cost Chapter 7 (Standard Costing and Variance Analysis)

A large labor efficiency variance is prorated to which of the following at year-end?

COGS inv, WIP inv, FG inv

A company has a favorable variable overhead spending variance, an unfavorable variable overhead efficiency variance, and underapplied variable overhead at the end of a period. The journal entry to record these variances and close the variable overhead control account will show which of the following?

Debit: VOH efficiency var Credit: VOH spending var Credit: VMOH

Which of the following are considered controllable variances?

VOH spending and total OH budget

The term standard hours allowed measures

actual output at standard hours

The material price variance (computed at point of purchase) is

the difference between the actual cost of material purchased and the standard cost of material purchased

A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance if

the mix of workers used in the production process was more experienced than the normal mix

A primary purpose of using a standard cost system is

to provide a distinct measure of cost control

Total actual overhead minus total budgeted overhead at the actual input production level equals the

total overhead spending variance

Which of the following statements regarding standard cost systems is true?

Favorable variances are not necessarily good variances

Management would generally expect unfavorable variances if standards were based on which of the following capacity measures?

Ideal

A total variance is best defined as the difference between total

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

A favorable fixed overhead spending variance indicates that

actual fixed overhead is less than budgeted fixed overhead

At the end of a period, a significant material quantity variance should be

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

Under the two-variance approach, the volume variance is computed by subtracting _________ based on standard input allowed for the production achieved from budgeted overhead

applied overhead

A company may set predetermined overhead rates based on normal, expected annual, or theoretical capacity. At the end of a period, the fixed overhead spending variance would

be the same regardless of the capacity level selected

A variable overhead spending variance is caused by

both b and c are causes paying a higher/lower average actual overhead price per unit of the activity base than the standard price allowed per unit of the activity base. & larger/smaller waste and shrinkage associated with the resources involved than expected

In analyzing manufacturing overhead variances, the volume variance is the difference between the

budget allowance based on standard hours allowed for actual production for the period and the amount budgeted to be applied during the period

Standard costs

can, if properly used, help motivate employees

Analyzing overhead variances will not help in

determining why variances occurred

The standard cost card contains quantities and costs for

direct material, direct labor, and overhead

The overhead variance calculated as total budgeted overhead at the actual input production level minus total budgeted overhead at the standard hours allowed for actual output is the

efficiency variance.

Variance analysis for overhead normally focuses on

efficiency variances for machinery and indirect production costs

A standard cost system may be used in

either job order costing or process costing.

The efficiency variance computed on a three-variance approach is

equal to the variable overhead efficiency variance computed on the four-variance approach

Which of the following capacity levels has traditionally been used to compute the fixed overhead application rate?

expected annual

If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n)

favorable variable overhead efficiency variance exists

In a standard cost system, when production is greater than the estimated unit or denominator level of activity, there will be a(n)

favorable volume variance

Actual fixed overhead minus budgeted fixed overhead equals the

fixed overhead spending variance

The variance least significant for purposes of controlling costs is the

fixed overhead volume variance

The variance most useful in evaluating plant utilization is the

fixed overhead volume variance

In a just-in-time inventory system,

ideal standards become expected standards

The use of separate variable and fixed overhead rates is better than a combined rate because such a system

is more effective in assigning overhead costs to products

The total labor variance can be subdivided into all of the following except

learning curve variance

A company wishing to isolate variances at the point closest to the point of responsibility will determine its material price variance when

material is purchased

A company using very tight (high) standards in a standard cost system should expect that

most variances will be unfavorable

Fixed overhead costs are

mostly incurred to provide the capacity to produce and are best controlled on a total basis at the time they are originally negotiated.

The sum of the material price variance (calculated at point of purchase) and material quantity variance equals

no meaningful number

An unfavorable fixed overhead volume variance is most often caused by

normal capacity exceeding actual production levels

The standard predominantly used in Western cultures for motivational purposes is a(n) _____________________ standard.

practical

Which of the following standards can commonly be reached or slightly exceeded by workers in a motivated work environment?

practical and expected annual

A bill of material does not include

price of component inputs

When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields a

price variance

Standard costs may be used for

product costing, planning and controlling

A favorable fixed overhead volume variance occurs if

production is greater than planned

If all sub-variances are calculated for labor, which of the following cannot be determined?

reason for the labor variances

A purpose of standard costing is to

simplify costing procedures

An operations flow document

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

standard costs based on production output.

Which of the following factors should not be considered when deciding whether to investigate a variance?

whether the variance is favorable or unfavorable

Gallagher Corporation. incurred 2,300 direct labor hours to produce 600 units of product. Each unit should take 4 direct labor hours. Gallagher Corporation applies variable overhead to production on a direct labor hour basis. The variable overhead efficiency variance

will be favorable

The fixed overhead application rate is a function of a predetermined activity level. If standard hours allowed for good output equal the predetermined activity level for a given period, the volume variance will be

zero