Observe high level of confidentiality over this document
This may serve as a test of mastery
Study not based on the answers but based on your learning/understanding before referring to the answers
provided.
Know first the concepts before opening this reviewer.
GOD BLESS!
STANDARD COSTING REVIEW MATERIALS:
D 1. The type of standard that is intended to represent challenging yet attainable results is:
A. theoretical standard
B. flexible budget standard
C. controllable cost standard
D. normal standard
E. expected actual standard
A 2. Standard costs are used for all of the following except:
A. income determination
B. controlling costs
C. measuring efficiencies
D. forming a basis for price setting
E. establishing budgets
C 3. Of the following variances, the one that is most useful in assessing the performance of the Purchasing
Department is the:
A. idle capacity variance
B. overhead price variance
C. materials purchase price variance
D. labor rate variance
E. materials price usage variance
B 4. The labor efficiency variance is computed as:
A. the difference between standard and actual rates, multiplied by standard hours
B. the difference between standard and actual hours, multiplied by standard rate
C. the difference between standard and actual rates, multiplied by actual hours
D. the difference between standard and actual hours, multiplied by the difference between standard
and actual rates
E. a percentage of the labor time variance
1
,2 Chapter 18
B 5. The method used to assure fairness in the rates paid for each operation performed by an employee is:
A. job costing
B. job rating
C. union contracting
D. the agreed-upon wages at the time of employment
E. labor rate variance analysis
D 6. Materials and labor cost standards are generally based on:
A. expected actual conditions, anticipated prices, and desired efficiency levels
B. theoretical conditions, present price levels, and desired efficiency levels
C. capacity conditions, anticipated prices, and desired efficiency levels
D. normal conditions, present price levels, and desired efficiency levels
E. theoretical conditions, anticipated prices, and theoretically attainable efficiency levels
D 7. The most effective standards are set following a careful study of products and operating conditions by
the:
A. Accounting Department, central management, and the Industrial Engineering Department
B. central management and the employees whose performance is being evaluated
C. Accounting Department and engineering staff
D. Industrial Engineering Department and the employees whose performance is being evaluated
E. central management and the Industrial Engineering Department
E 8. In analyzing factory overhead variances, the volume variance is the difference between the:
A. actual amount spent for overhead items during the period and the amount applied during the
period
B. variable efficiency variance and fixed efficiency variance
C. amount shown in the flexible budget and the amount shown in the master budget
D. master budget application rate and the flexible budget application rate, multiplied by actual
hours worked
E. budget allowance based on standard hours allowed for actual production for the period and the
amount of applied factory overhead during the period
D 9. The variance resulting from obtaining an output different from the one expected on the basis of input
is the:
A. mix variance
B. output variance
C. usage variance
D. yield variance
E. efficiency variance
A 10. In its reports to management, a company disclosed the presence of a fixed efficiency variance. The
procedure used to analyze variances was the:
A. four-variance method
B. mix and yield variances method
C. two-variance method
D. alternative three-variance method
E. three-variance method
,D 11. A purpose of standard costing is to:
A. allocate cost with more accuracy
B. eliminate the need for subjective decisions by management
C. determine the "break-even" production level
D. control costs
E. all of the above
A 12. Which one of the following is true concerning standard costs?
A. If properly used, standards can help motivate employees.
B. Unfavorable variances, material in amount, should be investigated, but large favorable
variances need not be investigated.
C. Standard costs are difficult to use with a process costing system.
D. Standard costs are estimates of costs attainable only under the most ideal conditions, but rarely
practicable.
E. All of the above
A 13. When computing variances from standard costs, the difference between actual and standard price
multiplied by actual quantity yields a:
A. price variance
B. volume variance
C. mix variance
D. yield variance
E. combined price-quantity variance
E 14. A company controls its production costs by comparing its actual monthly production costs with the
expected levels. Any significant deviations from expected levels are investigated and evaluated as a
basis for corrective actions. The quantitative technique that is most probably being used is:
A. time-series or trend regression analysis
B. correlation analysis
C. differential calculus
D. risk analysis
E. standard cost variance analysis
C 15. What type of direct material variances for price and usage will arise if the actual number of pounds of
materials used was less than standard pounds allowed but actual cost exceeds standard cost?
Usage Price
A. unfavorable favorable
B. favorable favorable
C. favorable unfavorable
D. unfavorable unfavorable
E. none none
B 16. If a company follows a practice of isolating variances at the earliest time, the appropriate time to
isolate and recognize a direct materials price variance would be when:
A. the purchase order is originated
B. materials are purchased
C. materials are issued
D. the materials requisition is prepared
E. materials are used in production
, A 17. Which of the following would least likely cause an unfavorable materials quantity (usage) variance?
A. labor that possesses skills equal to those required by the standards
B. scheduling of substantial overtime
C. a mix of direct materials that does not conform to plan
D. materials that do not meet specifications
E. machinery that has not been maintained properly
D 18. Information about Sargent Company's direct material costs is as follows:
Standard unit price $3.60
Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450
Materials purchase price varianceCunfavorable $240
What was the actual purchase price per unit, rounded to the nearest penny?
A. $3.06
B. $3.11
C. $3.45
D. $3.75
E. $3.60
SUPPORTING CALCULATION:
$240 = 1,600 (x - $3.60)
1,600 x = $240 + $5,760
x = $3.75
C 19. Using the following symbols, which formula represents the calculation of the labor rate variance?
AH = Actual hours
SH = Standard hours allowed for actual production
AR = Actual rate
SR = Standard rate
A. SR(AH - SH)
B. AR(AH - SH)
C. AH(AR - SR)
D. SH(AR - SR)
E. SH(SR - AR)
D 20. When a change in the manufacturing process reduces the number of direct labor hours and standards
are unchanged, the resulting variance will be:
A. an unfavorable labor usage variance
B. an unfavorable labor rate variance
C. a favorable labor rate variance
D. a favorable labor usage variance
E. both (C) and (D) above
This may serve as a test of mastery
Study not based on the answers but based on your learning/understanding before referring to the answers
provided.
Know first the concepts before opening this reviewer.
GOD BLESS!
STANDARD COSTING REVIEW MATERIALS:
D 1. The type of standard that is intended to represent challenging yet attainable results is:
A. theoretical standard
B. flexible budget standard
C. controllable cost standard
D. normal standard
E. expected actual standard
A 2. Standard costs are used for all of the following except:
A. income determination
B. controlling costs
C. measuring efficiencies
D. forming a basis for price setting
E. establishing budgets
C 3. Of the following variances, the one that is most useful in assessing the performance of the Purchasing
Department is the:
A. idle capacity variance
B. overhead price variance
C. materials purchase price variance
D. labor rate variance
E. materials price usage variance
B 4. The labor efficiency variance is computed as:
A. the difference between standard and actual rates, multiplied by standard hours
B. the difference between standard and actual hours, multiplied by standard rate
C. the difference between standard and actual rates, multiplied by actual hours
D. the difference between standard and actual hours, multiplied by the difference between standard
and actual rates
E. a percentage of the labor time variance
1
,2 Chapter 18
B 5. The method used to assure fairness in the rates paid for each operation performed by an employee is:
A. job costing
B. job rating
C. union contracting
D. the agreed-upon wages at the time of employment
E. labor rate variance analysis
D 6. Materials and labor cost standards are generally based on:
A. expected actual conditions, anticipated prices, and desired efficiency levels
B. theoretical conditions, present price levels, and desired efficiency levels
C. capacity conditions, anticipated prices, and desired efficiency levels
D. normal conditions, present price levels, and desired efficiency levels
E. theoretical conditions, anticipated prices, and theoretically attainable efficiency levels
D 7. The most effective standards are set following a careful study of products and operating conditions by
the:
A. Accounting Department, central management, and the Industrial Engineering Department
B. central management and the employees whose performance is being evaluated
C. Accounting Department and engineering staff
D. Industrial Engineering Department and the employees whose performance is being evaluated
E. central management and the Industrial Engineering Department
E 8. In analyzing factory overhead variances, the volume variance is the difference between the:
A. actual amount spent for overhead items during the period and the amount applied during the
period
B. variable efficiency variance and fixed efficiency variance
C. amount shown in the flexible budget and the amount shown in the master budget
D. master budget application rate and the flexible budget application rate, multiplied by actual
hours worked
E. budget allowance based on standard hours allowed for actual production for the period and the
amount of applied factory overhead during the period
D 9. The variance resulting from obtaining an output different from the one expected on the basis of input
is the:
A. mix variance
B. output variance
C. usage variance
D. yield variance
E. efficiency variance
A 10. In its reports to management, a company disclosed the presence of a fixed efficiency variance. The
procedure used to analyze variances was the:
A. four-variance method
B. mix and yield variances method
C. two-variance method
D. alternative three-variance method
E. three-variance method
,D 11. A purpose of standard costing is to:
A. allocate cost with more accuracy
B. eliminate the need for subjective decisions by management
C. determine the "break-even" production level
D. control costs
E. all of the above
A 12. Which one of the following is true concerning standard costs?
A. If properly used, standards can help motivate employees.
B. Unfavorable variances, material in amount, should be investigated, but large favorable
variances need not be investigated.
C. Standard costs are difficult to use with a process costing system.
D. Standard costs are estimates of costs attainable only under the most ideal conditions, but rarely
practicable.
E. All of the above
A 13. When computing variances from standard costs, the difference between actual and standard price
multiplied by actual quantity yields a:
A. price variance
B. volume variance
C. mix variance
D. yield variance
E. combined price-quantity variance
E 14. A company controls its production costs by comparing its actual monthly production costs with the
expected levels. Any significant deviations from expected levels are investigated and evaluated as a
basis for corrective actions. The quantitative technique that is most probably being used is:
A. time-series or trend regression analysis
B. correlation analysis
C. differential calculus
D. risk analysis
E. standard cost variance analysis
C 15. What type of direct material variances for price and usage will arise if the actual number of pounds of
materials used was less than standard pounds allowed but actual cost exceeds standard cost?
Usage Price
A. unfavorable favorable
B. favorable favorable
C. favorable unfavorable
D. unfavorable unfavorable
E. none none
B 16. If a company follows a practice of isolating variances at the earliest time, the appropriate time to
isolate and recognize a direct materials price variance would be when:
A. the purchase order is originated
B. materials are purchased
C. materials are issued
D. the materials requisition is prepared
E. materials are used in production
, A 17. Which of the following would least likely cause an unfavorable materials quantity (usage) variance?
A. labor that possesses skills equal to those required by the standards
B. scheduling of substantial overtime
C. a mix of direct materials that does not conform to plan
D. materials that do not meet specifications
E. machinery that has not been maintained properly
D 18. Information about Sargent Company's direct material costs is as follows:
Standard unit price $3.60
Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450
Materials purchase price varianceCunfavorable $240
What was the actual purchase price per unit, rounded to the nearest penny?
A. $3.06
B. $3.11
C. $3.45
D. $3.75
E. $3.60
SUPPORTING CALCULATION:
$240 = 1,600 (x - $3.60)
1,600 x = $240 + $5,760
x = $3.75
C 19. Using the following symbols, which formula represents the calculation of the labor rate variance?
AH = Actual hours
SH = Standard hours allowed for actual production
AR = Actual rate
SR = Standard rate
A. SR(AH - SH)
B. AR(AH - SH)
C. AH(AR - SR)
D. SH(AR - SR)
E. SH(SR - AR)
D 20. When a change in the manufacturing process reduces the number of direct labor hours and standards
are unchanged, the resulting variance will be:
A. an unfavorable labor usage variance
B. an unfavorable labor rate variance
C. a favorable labor rate variance
D. a favorable labor usage variance
E. both (C) and (D) above
