Question

True or False

Enter a T or an F in the blank to indicate whether the

statement is true or false.

___ 1. Practical standards are generally viewed as

better than ideal standards for motivating employees.

___ 2. Ideal standards allow for machine break-

down time and other normal inefficiencies.

___ 3. In determining a material price standard,

any freight or handling costs should be excluded.

___ 4. The standard rate for variable overhead

consists of the variable portion of the predetermined

overhead rate.

___ 5. Raw materials price variances should be

computed and reported only when materials are placed

into production.

___ 6. Variances similar to price and quantity va-

riances can be computed for materials, labor, and

overhead.

___ 7. Waste on the production line will result in

a materials price variance.

___ 8. If the actual price or quantity exceeds the

standard price or quantity, the variance is unfavorable.

___ 9. Labor rate variances are largely out of the

control of management.

___ 10. Managers should thoroughly investigate all

differences (variances) between standard cost and ac-

tual cost.

___ 11. In a company with fixed labor, an undue

focus on labor efficiency variances may result in the

production of needless inventories.

___ 12. The use of standard costs simplifies bookkeeping.

___ 13. An unfavorable variance would be recorded as a

debit in the general ledger.

Answer 1

1. Practical standards are generally viewed as better than ideal standards for motivating employees.

Answer:- True

Reason:- Ideal standards assumes perfect conditions like zero breakdowns, zero breaks etc. This is very tough to attain and very demotivating for employees. Practical standards are more practical and acheivable, thus motivating employees.

2. Ideal standards allow for machine break-down time and other normal inefficiencies.

Answer:- False

Reason:- Ideal standards assumes perfect conditions like zero breakdowns, zero breaks etc.

3. In determining a material price standard,any freight or handling costs should be excluded.

Answer:- Fasle

Reason:- Direct freight and handling costs are to be included

4. The standard rate for variable overhead consists of the variable portion of the predetermined overhead rate.

Answer:- True

Reason:- Formulae being Standard variable overhead / Standard activity

5. Raw materials price variances should be computed and reported only when materials are placed into production.

Answer:- False

Reason:- Can be computed after purchase and before starting production.

6. Variances similar to price and quantity variances can be computed for materials, labor, and overhead.

Answer:- False

Reason:- Overhead variance is divided into fixed and variable variances and are not similar to material nad labour

7. Waste on the production line will result in a materials price variance.

Answer:- False

Reason:- Material price variance are calculated on actual purchase quantity

8. If the actual price or quantity exceeds the standard price or quantity, the variance is unfavorable.

Answer:- True

Reason:- Because expense more than expected

9. Labor rate variances are largely out of the control of management.

Answer:- True

Reason:- Mainly determined by external market

10. Managers should thoroughly investigate all differences (variances) between standard cost and actual cost.

Answer:- False

Reason:- Small differences are possible in any scenarios, they need not be investigated

11. In a company with fixed labor, an undue focus on labor efficiency variances may result in the production of needless inventories.

Answer:- True

Reason:- Because more output produced to reach efficiency

12. The use of standard costs simplifies bookkeeping.

Answer:- True

Reason:- Because seperate aspects of each job (like material, labour etc) can be independently analyzed. Simple than FIFO, LIFO etc.

13. An unfavorable variance would be recorded as a debit in the general ledger.

Answer:- True

Reason:- Unfavourable variance is an extra expense and as you know expenses are debited.